Document:

<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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         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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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

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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.

                                                                             76<PAGE>
                                                                    Exhibit 10.2

                      AMENDED AND RESTATED CREDIT AGREEMENT
                      -------------------------------------

         This Amended and Restated Credit Agreement is entered into as of the
24TH day of October, 2001 by and between ESCALADE, INCORPORATED, an Indiana
corporation (the "Company"), and BANK ONE, INDIANA, NA, a national banking
association with its principal office in Indianapolis, Indiana (the "Bank").

         WHEREAS, the Company and the Bank are parties to that certain Amended
and Restated Credit Agreement dated May 31, 1996, as amended from time to time
(the "Prior Agreement").

         WHEREAS, the Company has requested and the Bank has agreed to amend the
existing credit facilities previously extended to the Company by the Bank as
evidenced by the Prior Agreement.

         WHEREAS, the parties have executed this Amended and Restated Credit
Agreement to amend and restate in its entirety the Prior Agreement.

         NOW, THEREFORE, in consideration of the premises, the covenants and
agreements contained herein, and each act performed and to be performed
hereunder, the Company and the Bank agree as follows:

         Section 1. ACCOUNTING TERMS -- DEFINITIONS. All accounting and
financial terms used in this Agreement are used with the meanings such terms
would be given in accordance with generally accepted accounting principles
except as may be otherwise specifically provided in this Agreement. The
following terms have the meanings indicated when used in this Agreement with the
initial letter capitalized:

         -        "ADVANCE" means a disbursement of proceeds of the Revolving
                  Loan.

         -        "AGREEMENT" means this Credit Agreement between the Company
                  and the Bank, as it may from time to time be amended, restated
                  or otherwise modified.

         -        "APPLICABLE COMMISSION RATE" means that number of percentage
                  points which will, during any period of time, be used in
                  calculating the amount of Commission payable with respect to
                  each of the Standby Letters of Credit. Such number of
                  percentage points shall be determined by reference to the
                  Applicable Spread.

         -        "APPLICABLE ISSUANCE FEE RATE" means that number of percentage
                  points which will, during any period of time, be used in
                  calculating the Issuance Fee payable with respect to each of
                  the Commercial Letters of Credit. Such number of percentage
                  points shall be determined by reference to the Applicable
                  Spread.

         -        "APPLICABLE SPREAD" means that number of percentage points to
                  be taken into account in determining the Applicable Spread
                  which is used in computing the rate at which interest accrues
                  on the Loan and the Applicable Unused Fee Rate which is used
                  in calculating the Unused Fee, the Applicable Commission Rate
                  which is used in calculating the amount of Commission which is
                  payable with respect to Standby Letters of Credit, and the
                  Applicable

                                       1
<PAGE>

                  Issuance Fee Rate which is used in calculating the amount of
                  Issuance Fees payable with respect to Commercial Letters of
                  Credit, determined by reference to the Company's Leverage
                  Ratio in accordance with the following table:
<TABLE>
<CAPTION>

                                                                            UNUSED         APPLICABLE       APPLICABLE
   LEVEL        LEVERAGE RATIO                LIBOR          PRIME           FEE           COMMISSION        ISSUANCE
                                                                                              RATE           FEE RATE

<S>             <C>                          <C>           <C>              <C>            <C>              <C>
      V         greater than 2.50:1.00       +200bps        +0bps           +37.5bps       +137.5 bps       +62.5 bps

     IV              2.00 to 2.49:1.00       +175bps       -37.5bps         +25bps          +125 bps         +50 bps

     III             1.50 to 1.99:1.00       +150bps        -75bps          +25bps         +112.5 bps       +37.5 bps

     II              1.00 to 1.49:1.00       +125bps      -112.5bps         +25bps          +100 bps         +25 bps

      I            less than 1.00:1.00       +100bps       -150bps          +25bps          +87.5 bps       +12.5 bps
</TABLE>

                  Initially, from the date of this Agreement and until receipt
                  by the Bank of the Company's fourth quarter end financial
                  statements furnished after such date to the Bank pursuant to
                  the requirements of Section 5.b, the Applicable Spread shall
                  be determined assuming a Leverage Ratio of less than 1.50 to
                  1.00. Thereafter, the Applicable Spread shall be determined on
                  the basis of the financial statements of the Company for each
                  fiscal quarter furnished to the Bank pursuant to the
                  requirements of Section 5.b, with prospective effect for the
                  following fiscal quarter. Interest and Unused Fees will accrue
                  and be payable in any fiscal quarter on the basis of the
                  Applicable Spread in effect during the preceding fiscal
                  quarter until an adjustment is made under the provisions of
                  this definition. The Applicable Spread shall be adjusted on
                  the first interest payment date which follows receipt by the
                  Bank of the financial statements upon which such adjustment is
                  based, but such adjustment shall not be effective as to any
                  LIBOR-based Rate elected prior to the date of such adjustment
                  until the expiration of the period of time for which such
                  LIBOR-based Rate shall have been elected by the Company. In
                  the event that the Company fails to deliver the financial
                  statements and compliance certificates required under Section
                  5.b for any month which ends a fiscal quarter, then the
                  Applicable Spread shall be the largest spread shown on the
                  above table from the date such financial statements were
                  required to be delivered until the first interest payment date
                  which follows delivery to the Bank of such financial
                  statements. Commissions and Issuance Fees with respect to
                  Letters of Credit shall be determined from the Applicable
                  Spread in effect when the related Letter of Credit is issued
                  or renewed, and no adjustment shall be made to the amount of
                  Commission and Issuance Fees paid on account of a subsequent
                  change in the Applicable Spread, unless and until the
                  expiration date of the Letter of Credit is extended. It is
                  noted that the above table provides an Applicable Spread for a
                  ratio of total liabilities to Net Worth greater than that
                  which will be permissible under the terms of Section 5(g)(iv).
                  For the avoidance of doubt, it is agreed that it is the intent
                  of the parties that the Bank shall be free to exercise all
                  remedies otherwise provided for in this Agreement in the event
                  of the violation by the Company of the covenant stated in
                  Section 5.g.(ii), notwithstanding the accrual of interest upon
                  the Loan at a rate determined in accordance with this
                  definition.

                                       2
<PAGE>

         -        "APPLICABLE UNUSED FEE RATE" means any number of percentage
                  points which will, during any period of time, be used in
                  calculating the Unused Fee. Such number of percentage points
                  shall be determined by reference to the Applicable Spread.

         -        "APPLICATION FOR REVOLVING LOAN ADVANCE" or "APPLICATION"
                  means a written application of the Company for a disbursement
                  of proceeds of the Revolving Loan substantially in the form of
                  EXHIBIT "A" attached hereto.

         -        "AUTHORIZED OFFICER" means the Chairman, Chief Executive
                  Officer or the Chief Financial Officer of the Company or such
                  other officer whose authority to perform acts to be performed
                  only by an Authorized Officer under the terms of this
                  Agreement is evidenced to the Bank by a certified copy of an
                  appropriate resolution of the Board of Directors of the
                  Company.

         -        "BANK" is used as defined in the preamble.

         -        "BANKING DAY" means a day on which the principal office of the
                  Bank in the City of Indianapolis, Indiana, is open for the
                  purpose of conducting substantially all of the Bank's business
                  activities.

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

         -        "COMMERCIAL LETTER OF CREDIT" is used as defined in Section
                  2.b.

         -        "COMMISSION" is used as defined in Section 2.b.

         -        "COMMITMENT" means the agreement of the Bank to extend the
                  Revolving Loan to the Company until the Revolving Loan
                  Maturity Date, and if the context so requires, the term may
                  also refer to the maximum principal amount which is permitted
                  to be outstanding under the Revolving Loan at any time.

         -        "COMPANY" is used as defined in the Preamble.

         -        "CONSOLIDATED EBITDA" shall mean, with respect to any period
                  of time, an amount equal to the sum of (i) the consolidated
                  net income of the Company and the Subsidiaries determined with
                  respect to such time period plus (ii) to the extent deducted
                  in determining such consolidated net income, an amount equal
                  to the consolidated income tax, depreciation, amortization and
                  interest expense of the Company and the Subsidiaries and
                  determined with respect to such time period.

                  "CONSOLIDATED FUNDED DEBT" shall mean, with respect to any
                  specific period of time, the sum of the following, all of
                  which shall be determined on a consolidated basis for the
                  Company and the Subsidiaries: (i) the aggregate principal
                  amount of all indebtedness for borrowed money, including,
                  without limitation, the aggregate principal amount of all
                  indebtedness for the deferred purchase price of property and
                  services and the aggregate principal amount of all
                  indebtedness created and arising under all conditional sales
                  and

                                       3
<PAGE>

                                                                               4

                  title retention agreements, and (ii) the aggregate amount of
                  all obligations under all capital leases for which the Company
                  or and Subsidiary is liable.

         -        "ERISA" means the Employee Retirement Income Security Act of
                  1974, as amended.

         -        "EVENT OF DEFAULT" means any of the events described in
                  Section 8.

         -        "GUARANTY AGREEMENT" is used as defined in Section 4.d.

         -        "HAZARDOUS SUBSTANCE" means any hazardous or toxic substance
                  regulated by any federal, state or local statute or regulation
                  including but not limited to the Comprehensive Environmental
                  Response, Compensation and Liability Act, the Resource
                  Conservation and Recovery Act and the Toxic Substance Control
                  Act, or by any federal, state or local governmental agencies
                  having jurisdiction over the control of any such substance
                  including but not limited to the United States Environmental
                  Protection Agency.

         -        "ISSUANCE FEE" is used as defined in Section 2.b.

         -        "LETTER OF CREDIT" means a Standby Letter of Credit or
                  Commercial Letter of Credit as the context requires, and when
                  used in the plural form, refers to all such Letters of Credit.

         -        "LETTER OF CREDIT AGREEMENT" is used as defined in Section
                  5.k.

         -        "LEVERAGE RATIO" means the ratio, determined with reference to
                  any specified period of time, of (i) the Company's
                  Consolidated Funded Debt determined on the last day of such
                  period of time, to (ii) the Company's Consolidated EBITDA,
                  determined with respect to such period of time.

         -        "LIBOR-BASED RATE" means that per annum rate of interest which
                  is equal to the sum of the LIBOR Applicable Spread plus the
                  LIBOR Rate.

         -        "LIBOR RATE" means the offered rate for the period equal to or
                  next greater than the Interest Period for U.S. Dollar deposits
                  of not less than $1,000,000.00 as of 11:00 A.M. City of
                  London, England time two London Business Days prior to the
                  first day of the Interest Period as shown on the display
                  designated as "British Bankers Association Interest Settlement
                  Rates" on Reuters Screen FRBD, or such other screen as may
                  replace such screen on Reuters for the purpose of displaying
                  such rate. In the event that such rate is not available on
                  Reuters, then such offered rate shall be otherwise
                  independently determined by Bank from an alternate,
                  substantially similar independent source available to Bank or
                  shall be calculated by Bank by a substantially similar
                  methodology as that theretofore used to determine such offered
                  rate.

        -         "LOAN" means the Revolving Loan.

<PAGE>
                                                                               5

         -        "LOAN DOCUMENT" means any of this Agreement, the Revolving
                  Note, the Guaranty Agreement, and any other instrument or
                  document which evidences or secures the Loan or which
                  expresses an agreement as to terms applicable to the Loan, and
                  in the plural means any two or more of the Loan Documents, as
                  the context requires.

         -        "LONDON BUSINESS DAY" means any day other than a Saturday,
                  Sunday or a day on which banking institutions are generally
                  authorized or obligated by law or executive order to close in
                  the City of London, England.

         -        "NEGOTIATION FEE" is used as defined in Section 2.b.

         -        "NET WORTH" means the shareholders' equity of the Company.

         -        "NOTE" means the Revolving Note.

         -        "OBLIGATIONS" means all obligations of the Company in favor of
                  the Bank of every type and description, direct or indirect,
                  absolute or contingent, due or to become due, now existing or
                  hereafter arising, including but not limited to: (i) all of
                  such obligations on account of the Loan, including any
                  Advances made pursuant to any extension of the Commitment
                  beyond the initial Revolving Loan Maturity Date or pursuant to
                  any other amendment of this Agreement; (ii) all other
                  obligations arising under any Loan Document as amended from
                  time to time; and (iii) all other obligations, agreements,
                  including interest rate risk management agreements, or
                  indebtedness between the Company and the Bank in existence
                  from time to time.

         -        "OFFICER'S CERTIFICATE" means a certificate in the form
                  included as a part of EXHIBIT "A" attached hereto signed by
                  the chief executive officer or the chief financial officer of
                  the Company, confirming that all of the representations and
                  warranties contained in Section 3 of this Agreement are true
                  and correct as of the date of such certificate except as
                  specified therein and with the further exceptions that: (i)
                  the representation contained in Section 3.d shall be construed
                  so as to refer to the latest financial statements which have
                  been furnished to the Bank as of the date of any Officer's
                  Certificate, (ii) the representations contained in Section 3.k
                  (with respect to Hazardous Substances) will be construed so as
                  to apply not only to the Company, but also to any
                  Subsidiaries, whether now owned or hereafter acquired, (iii)
                  the representation contained in Section 3.l shall be deemed to
                  be amended to reflect the existence of any Subsidiary
                  hereafter formed or acquired by the Company with the consent
                  of the Bank, and (iv) all other representations will be
                  construed to have been amended to conform with any changes of
                  which the Company shall have previously given the Bank notice
                  in writing. The Certificate shall further confirm that no
                  Event of Default or Unmatured Event of Default shall have
                  occurred and be continuing as of the date of the Certificate
                  or shall describe any such event which shall have occurred and
                  be then continuing and the steps being taken by the Company to
                  correct it.

         -        "PLAN" means an employee pension benefit plan as defined in
                  ERISA.

<PAGE>
                                                                               6

         -        "PREPAYMENT PREMIUM" means the excess, if any, as determined
                  by the Bank of: (i) the present value at the time of
                  prepayment of the interest payments which would have been
                  payable on account of an amount prepaid from the date of
                  prepayment until the end of the period during which interest
                  would have accrued at an LIBOR-based Rate but for repayment
                  over (ii) the present value at the time of prepayment of
                  interest payments calculated at the rate (the "Reinvestment
                  Rate") which the bank then estimates it would receive upon
                  reinvesting the principal amount of the prepayment in an
                  obligation which presents a credit risk substantially similar
                  (as determined in accordance with the commercial credit rating
                  system then used by the Bank) to that which is then presented
                  by the Loan for a period approximately equal to the balance of
                  the period during which interest would accrue on the portion
                  of the Loan prepaid at an LIBOR-based Rate, but for
                  prepayment. The discount rate used by the Bank in determining
                  such present value shall be the Reinvestment Rate.

         -        "PRIME-BASED RATE" means any variable rate at which interest
                  may accrue on all or a portion of the Loan under the terms of
                  this Agreement, which rate is determined by reference to the
                  Prime Rate.

         -        "PRIME RATE" means a rate per annum equal to the prime rate of
                  interest announced from time to time by BANK ONE, INDIANA, NA
                  or its parent (which is not necessarily the lowest rate
                  charged to any customer), changing when and as said prime rate
                  changes.

         -        "REINVESTMENT RATE" is used as defined in this Section 1 in
                  the definition of Prepayment Penalty.

         -        "REVOLVING LOAN" is used as defined in Section 2.a(i).

         -        "REVOLVING LOAN MATURITY DATE" means initially March 31, 2006,
                  and hereafter any subsequent date to which the Commitment may
                  be extended by the Bank pursuant to the terms of Section
                  2.a(iv).

         -        "REVOLVING NOTE" is used as defined in Section 2.a(ii).

         -        "STANDBY LETTERS OF CREDIT" is used as defined in Section 2.b.

         -        "SUBSIDIARY" means any corporation, partnership, joint venture
                  or other business entity over which the Company exercises
                  control, provided that it shall be conclusively presumed that
                  the Company exercises control over any such entity 51% or more
                  of the equity interest in which is owned by the Company,
                  directly or indirectly.

         -        "UNMATURED EVENT OF DEFAULT" means any event specified in
                  Section 8, which is not initially an Event of Default, but
                  which would, if uncured, become an Event of Default with the
                  giving of notice or the passage of time or both.

         -        "UNUSED FEE" is used as defined in Section 2.d(v).

<PAGE>
                                                                               7

         Section 2. THE LOANS. Subject to all of the terms and conditions of
this Agreement, the Bank will make the Loans described in this Section to the
Company.

         a.       THE REVOLVING LOAN. The Bank will make a revolving loan to the
                  Company on the following terms and subject to the following
                  conditions:

                  (i)      The Commitment -- Use of Proceeds. From this date and
                           until the Revolving Loan Maturity Date, the Bank
                           agrees to make Advances (collectively, the "Revolving
                           Loan") under a revolving line of credit from time to
                           time to the Company of amounts not exceeding in the
                           aggregate at any time outstanding Twenty-Five Million
                           and No/100 Dollars ($25,000,000.00) (the
                           "Commitment"), as decreased from time to time as
                           hereinafter set forth, provided that all of the
                           conditions of lending stated in Section 7 of this
                           Agreement as being applicable to the Revolving Loan
                           have been fulfilled at the time of each Advance.
                           Proceeds of the Revolving Loan shall initially be
                           used to renew, extend the maturity of and restructure
                           the principal balance outstanding under the
                           "Revolving Loan" (as that term was defined in the
                           Prior Agreement), and hereafter may be used by the
                           Company only to fund working capital requirements.
                           The initial Commitment shall be available to the
                           Company until March 31, 2002, on which date and on
                           each March 31 thereafter until March 31, 2006, the
                           Commitment shall reduce by $5,000,000.00. In the
                           event Advances outstanding under the Revolving Loan
                           on such dates exceed the new Commitment amount, after
                           giving effect to the required reduction set forth
                           above, the Company shall, on such dates and without
                           demand, immediately repay such excess to the Bank.

                  (ii)     METHOD OF BORROWING. The obligation of the Company to
                           repay the Revolving Loan shall be evidenced by a
                           promissory note (the "Revolving Note") of the Company
                           in the form of EXHIBIT "B". So long as no Event of
                           Default or Unmatured Event of Default shall have
                           occurred and be continuing and until the Revolving
                           Loan Maturity Date, the Company may borrow, repay and
                           reborrow (subject to Section 2.a.(i) above) under the
                           Revolving Note on any Banking Day, provided that no
                           borrowing may cause the principal balance of the Loan
                           to exceed the Commitment or may result in an Event of
                           Default or an Unmatured Event of Default. Each
                           Advance under the Revolving Loan shall be conditioned
                           upon receipt by the Bank from the Company of an
                           Application for Revolving Loan Advance and an
                           Officer's Certificate, provided that the Bank may, at
                           its discretion, make a disbursement upon the oral
                           request of the Company made by an Authorized Officer,
                           or upon a request transmitted to the Bank by
                           telephone facsimile ("fax") machine, or by any other
                           form of written electronic communication (all such
                           requests for Advances being hereafter referred to as
                           "informal requests"). In so doing, the Bank may rely
                           on any informal request which shall have been
                           received by it in good faith from a person reasonably
                           believed to be an Authorized Officer. Each informal
                           request shall be promptly confirmed by a duly
                           executed Application and Officer's Certificate if the
                           Bank so requires and shall in and of itself
                           constitute the representation of the Company that no
                           Event of Default or Unmatured Event of Default has
                           occurred and is continuing or would result from the
                           making of the requested Advance and that

<PAGE>

                                                                               8

                           the making of the requested Advance shall not cause
                           the principal balance of the Revolving Loan to exceed
                           the current Commitment. All borrowings and
                           reborrowings and all repayments shall be in amounts
                           of not less than Twenty Five Thousand Dollars
                           ($25,000.00), except for repayment of the entire
                           principal balance of the Revolving Loan and except
                           for special prepayments of principal required under
                           the terms of Section 2.a.(i). Upon receipt of an
                           Application, or at the Bank's discretion upon receipt
                           of an informal request for an Advance and upon
                           compliance with any other conditions of lending
                           stated in Section 7 of this Agreement applicable to
                           the Revolving Loan, the Bank shall disburse the
                           amount of the requested Advance to the Company. All
                           Advances by the Bank and payments by the Company
                           shall be recorded by the Bank on its books and
                           records, and the principal amount outstanding from
                           time to time, plus interest payable thereon, shall be
                           determined by reference to the books and records of
                           the Bank. The Bank's books and records shall be
                           presumed PRIMA FACIE to be correct as to such
                           matters.

                  (iii)    INTEREST ON THE REVOLVING LOAN. The principal amount
                           of the Revolving Loan outstanding from time to time
                           shall bear interest until maturity of the Revolving
                           Note at a rate per annum equal to the Prime Rate plus
                           the Applicable Spread except that at the option of
                           the Company, exercised from time to time as provided
                           in Section 2.d.(i), interest may accrue prior to
                           maturity on the entire outstanding balance of the
                           Revolving Loan or on any portion thereof which is in
                           excess of $1,000,000.00 and as to which no
                           LIBOR-based Rate previously elected remains in
                           effect, at a LIBOR-based Rate for a period of 30, 90
                           or 180 days; provided that an election of a
                           LIBOR-based Rate for a period extending beyond the
                           Revolving Loan Maturity Date shall be permitted only
                           at the discretion of the Bank. Those elections of a
                           "LIBOR-based Rate" which have been made under the
                           "Revolving Loan" (as that term was defined in the
                           Prior Agreement) and which remain in effect on the
                           date of this Agreement, shall continue, under this
                           Agreement, to be in effect through the end of the
                           interest period for which elected. After maturity,
                           whether on the Revolving Loan Maturity Date or on
                           account of acceleration of maturity upon the
                           occurrence of an Event of Default, and until paid in
                           full, the Revolving Loan shall bear interest at a
                           rate equal to the Prime Rate plus two percent (2%)
                           plus the Applicable Spread, except as to any portion
                           of the Loan for which the Company may have elected an
                           LIBOR-based Rate for a period of time that has not
                           expired at maturity, such portion shall, during the
                           remainder of such period, bear interest at the
                           greater of the Prime Rate plus the Applicable Spread
                           plus two percent (2%) per annum or the LIBOR-based
                           Rate then in effect plus two percent (2%) per annum.
                           Accrued interest shall be due and payable monthly on
                           the last Banking Day of each month prior to maturity.
                           After maturity, interest shall be payable as accrued
                           and without demand.

                  (iv)     EXTENSIONS OF REVOLVING LOAN MATURITY DATE. The Bank
                           may, upon the request of the Company, but at the
                           Bank's sole discretion, extend the Revolving Loan
                           Maturity Date from time to time to such date or dates
                           as the Bank may elect by notice in writing to the
                           Company, and upon any such extension and upon

<PAGE>

                                                                               9
                           execution and delivery by the Company of a Revolving
                           Note reflecting the extended maturity date, the date
                           to which the Commitment is then extended will become
                           the "Revolving Loan Maturity Date" for purposes of
                           this Agreement.

                  (v)      UNUSED FEE. In addition to interest on the Revolving
                           Loan, the Company shall pay to the Bank a fee (the
                           "Unused Fee") for each partial or full calendar
                           quarter during which the Commitment is outstanding
                           equal to the Applicable Unused Fee Rate per annum of
                           the amount of the average daily excess of the
                           Commitment over the average daily principal balance
                           outstanding under the Revolving Loan. Unused fees for
                           each calendar quarter shall be due and payable within
                           ten (10) days following the Bank's submission of a
                           statement of the amount due. Such fees may be debited
                           by the Bank when due to any demand deposit account of
                           the Company carried with the Bank without further
                           authority.

                  (vi)     PROCEDURES FOR ELECTING LIBOR-BASED RATES -- CERTAIN
                           EFFECTS OF ELECTION. LIBOR-based Rates may be elected
                           only in accordance with the following procedures,
                           shall be subject to the following conditions and the
                           election of an LIBOR-based Rate shall have the
                           following consequences in addition to other
                           consequences stated in this Agreement:

                           A.       The LIBOR-based Rate may be elected only for
                                    Loans or portions of Loans in a minimum
                                    amount of $1,000,000.00.

                           B.       No LIBOR-based Rate may be elected at any
                                    time that an Event of Default or Unmatured
                                    Event of Default has occurred and is
                                    continuing.

                           C.       Voluntary prepayment prior to scheduled
                                    maturity of all or any portion of a Loan on
                                    which interest is accruing at a LIBOR-based
                                    Rate shall be subject to contemporaneous
                                    payment of the Prepayment Premium if, at the
                                    time of prepayment, the Reinvestment Rate is
                                    less than the LIBOR-based Rate at which
                                    interest accrues on the Loan. A Prepayment
                                    Premium shall also be due and payable on
                                    prepayment of all or any portion of the Loan
                                    prior to scheduled maturity because of
                                    acceleration of maturity on account of an
                                    Event of Default if, at the time of
                                    acceleration of maturity, the Reinvestment
                                    Rate is less than the LIBOR-based Rate at
                                    which interest is accruing on the Loan. If
                                    at the time of any voluntary or mandatory
                                    prepayment of any portion of the principal
                                    of any Loan, interest accrues at both a
                                    LIBOR-based Rate or Rates and at a
                                    LIBOR-based Rate on portions of the Loan,
                                    then any prepayment of principal will be
                                    applied first to portion of the Loan on
                                    which interest accrues at the LIBOR-based
                                    Rate and next to the portion or portions at
                                    which interest accrues at an LIBOR-based
                                    Rate or Rates, and if interest accrues on
                                    the Loan at more than one LIBOR-based Rate,
                                    first to that portion or those portions on
                                    which interest accrues at a Rate or Rates
                                    which results in no Prepayment Premium or
                                    the lowest Prepayment Premium or Premiums.

<PAGE>
                                                                              10

                           D.       On any Banking Day, the Company may request
                                    a quotation of the LIBOR-based Rate then in
                                    effect from the Bank. As soon as possible,
                                    and in any event before the close of
                                    business on the next following Banking Day,
                                    the Bank shall quote such LIBOR-based Rate.
                                    The Company shall then have until the end of
                                    the Banking Day on which such quotation is
                                    given or within such shorter time as the
                                    Bank may specify, to exercise its option to
                                    elect a LIBOR-based Rate quoted, subject to
                                    all other conditions and limitations stated
                                    in this Agreement. The period for which any
                                    LIBOR-based Rate is effective shall begin on
                                    the second Banking Day following the day on
                                    which the quotation is given.

                           E.       An election of a LIBOR-based Rate may be
                                    communicated to the Bank on behalf of the
                                    Company only by an Authorized Officer. Such
                                    election may be communicated by telephone,
                                    or by telephone facsimile (fax) machine or
                                    any other form of written electronic
                                    communication, or by a writing delivered to
                                    the Bank. At the request of the Bank, the
                                    Company shall confirm any election in
                                    writing and such written confirmation shall
                                    be signed by an Authorized Officer. The Bank
                                    shall be entitled to rely on any oral or
                                    written electronic communication of an
                                    election of a LIBOR-based Rate which is
                                    received by an appropriate Bank employee
                                    from anyone reasonably believed in good
                                    faith by such employee to be an Authorized
                                    Officer.

                           F.       The Bank may elect not to quote a
                                    LIBOR-based Rate on any day on which the
                                    Bank has determined that it is not practical
                                    to quote such rate because of the
                                    unavailability of sufficient funds to the
                                    Bank for appropriate terms at rates
                                    approximating the relevant London Interbank
                                    Offered Rate, or because of legal or
                                    regulatory changes which make it impractical
                                    or burdensome for the Bank to lend money at
                                    LIBOR-based Rate.

                           G.       If, as a result of any regulatory change,
                                    the basis of taxation of payments to the
                                    Bank of the principal of or any interest on
                                    any Loan bearing interest at a LIBOR-based
                                    Rate or any other amounts payable hereunder
                                    in respect thereof, other than taxes imposed
                                    on the overall net income of the Bank, is
                                    changed, or any reserve, special deposit, or
                                    similar requirement relating to any
                                    extensions of credit or other assets of or
                                    any deposits with or other liabilities of
                                    the Bank are imposed, modified, or deemed
                                    applicable, and the Bank reasonably
                                    determines that, by reason thereof, the cost
                                    to it of making, issuing, or maintaining any
                                    Loan at a LIBOR-based Rate is increased by
                                    an amount deemed by it to be material, then
                                    the Company shall pay promptly upon demand
                                    to the Bank such additional amounts as the
                                    Bank reasonably determines will compensate
                                    for such increased costs; provided, however,
                                    that the Company shall not be the only
                                    borrower of the Bank that is singled out
                                    from a group of similarly situated borrowers
                                    of the Bank subject to this

<PAGE>
                                                                              11

                                    type of provision that is requested to remit
                                    increased costs. Any determination by the
                                    Bank of increased costs of maintaining
                                    deposits made pursuant to the provisions of
                                    this section shall be final, absent manifest
                                    error.

                  (vii)    CALCULATION OF INTEREST. Interest on the Loan shall
                           be computed by applying the ratio of the annual
                           interest rate over a year of 360 days, multiplied by
                           the outstanding principal balance, multiplied by the
                           actual number of days the principal balance is
                           outstanding.

                  (viii)   MANNER OF PAYMENT - APPLICATION. Unless otherwise
                           agreed to, in writing, or otherwise required by
                           applicable law, payments will be applied first to
                           accrued, unpaid interest, then to principal, and any
                           remaining amount to any unpaid collection costs, late
                           charges and other charges, provided, however, upon
                           delinquency or other default, the Bank reserves the
                           right to apply payments among principal, interest,
                           late charges, collection costs and other charges at
                           its discretion. All prepayments shall be applied to
                           the indebtedness owing hereunder in such order and
                           manner as the Bank may from time to time determine in
                           its sole discretion.

                  (ix)     LATE PAYMENT. If any payment required under the Loan
                           is not paid within ten (10) days after such payment
                           is due, then, at the option of Bank, Company shall
                           pay a late charge equal to five percent (5.0%) of the
                           amount of such payment or $25.00, whichever is
                           greater, up to the maximum amount of $1500.00 per
                           late charge to compensate Bank for administrative
                           expenses and other costs of delinquent payments. This
                           late charge may be assessed without notice, shall be
                           immediately due and payable and shall be in addition
                           to all other rights and remedies available to Bank.

                  (x)      DEFAULT RATE OF INTEREST. Upon the occurrence of an
                           Event of Default and during the continuation thereof,
                           and after maturity, including maturity upon
                           acceleration, Bank, at its option, may, if permitted
                           under applicable law, do one or both of the
                           following: (i) increase the interest rate under the
                           Loan to the rate that is three percent (3%) above the
                           rate that would otherwise be payable thereunder, and
                           (ii) add any unpaid accrued interest to principal and
                           such sum will bear interest therefrom until paid at
                           the rate provided herein or under the Note (including
                           any increased rate). The interest rate under the Loan
                           will not exceed the maximum rate permitted by
                           applicable law under any circumstances.

                  (xi)     REIMBURSEMENT OF DOCUMENTATION FEES AND EXPENSES. The
                           Company, either upon execution of this Agreement or
                           promptly upon demand therefor, shall reimburse the
                           Bank for all reasonable out-of-pocket costs and
                           expenses of the Bank (including reasonable attorneys'
                           fees and legal expenses) incurred by it in connection
                           with the preparation and negotiation of this
                           Agreement and the other Loan Documents.

<PAGE>
                                                                              12

         b.       STANDBY AND COMMERCIAL LETTERS OF CREDIT. At any time that the
                  Company is entitled to an Advance under the Revolving Loan,
                  the Bank shall, upon the application of the Company or any
                  Subsidiary, issue for the account of the Company or any
                  Subsidiary, a standby or commercial letter of credit (each a
                  "Letter of Credit") in an amount not in excess of the maximum
                  Advance that the Company would then be entitled to obtain
                  under the Revolving Loan, provided that (A) the total amount
                  of Letters of Credit which are outstanding at any time shall
                  not exceed $2,000,000.00, (B) the issuance of any Letter of
                  Credit with a maturity date beyond the Revolving Loan Maturity
                  Date shall be entirely at the discretion of the Bank, (C) the
                  form of the requested Letter of Credit shall be satisfactory
                  to the Bank in the reasonable exercise of the Bank's
                  discretion, and (D) the Company or any Subsidiary, shall have
                  executed an application and reimbursement agreement for the
                  Letter of Credit (a "Reimbursement Agreement") in the Bank's
                  standard form. While any Letter of Credit is outstanding, the
                  maximum amount of Advances which may be outstanding under the
                  Revolving Loan shall be reduced by the maximum amount
                  available to be drawn under the Letter of Credit. The issuance
                  of each Commercial Letter of Credit shall be subject to the
                  payment by the applicant (the "Account Party") to the Bank of
                  a fee (an "Issuance Fee") which shall be equal to the
                  Applicable Issuance Fee Rate multiplied by the amount thereof,
                  which Issuance Fee shall be due and payable within ten (10)
                  days following the issuance of any Commercial Letter of
                  Credit. Upon presentation of each draft drawn under a
                  Commercial Letter of Credit to the Bank by the beneficiary
                  thereof, the Account Party shall also pay the Bank a fee (a
                  "Negotiation Fee"), which shall be an amount equal to the
                  greater of (i) one-eighth percent (1/8%) multiplied by the
                  amount drawn under such commercial Letter of Credit, or (ii)
                  $75.00. The issuance and each renewal of each Standby Letter
                  of Credit shall be subject to the payment by the Account Party
                  to the Bank of a fee (a "Commission"), which shall be equal to
                  the Applicable Commission Rate per annum (calculated on the
                  basis that an entire year's Commission is earned in 360 days)
                  multiplied by the amount thereof, which Commission shall be
                  due and payable within ten (10) days following the issuance or
                  renewal of any Standby Letter of Credit. The Company shall pay
                  the Bank's standard transaction fees with respect to any
                  transactions occurring on account of any Letter of Credit.
                  Transaction fees shall be payable upon completion of the
                  transaction as to which they are charged. All such
                  Commissions, Issuance Fees, Negotiation Fees and transaction
                  fees may be debited by the Bank to any deposit account of the
                  Company carried with the Bank without further authority.

         Section 3. REPRESENTATIONS AND WARRANTIES. To induce the Bank to make
the Loan, the Company represents and warrants to the Bank that:

         a.       ORGANIZATION OF THE COMPANY. The Company is a corporation
                  organized, existing and in good standing under the laws of the
                  State of Indiana. The Company is qualified to do business in
                  every jurisdiction in which: (i) the nature of the business
                  conducted or the character or location of properties owned or
                  leased, or the residences or activities of employees make such
                  qualification necessary, and (ii) failure so to qualify might
                  impair the title of the Company to material properties or the
                  Company's right to enforce material contracts or result in
                  exposure of the Company to liability for material penalties in
                  such jurisdiction. No jurisdiction in which the Company is not
                  qualified to do business has asserted that the Company is
                  required to be qualified therein. The principal

<PAGE>
                                                                              13

                  office of the Company is located at 817 Maxwell Avenue,
                  Evansville, Indiana 47706-0889. The Company does not conduct
                  any material operations or keep any material amounts of
                  property at any other location, except the following: 251
                  Wedcor Drive, Wabash, Indiana 46992; 520 East Baird Street,
                  Olney, Illinois 62450; 1022 West 24th Street, National City,
                  California 91950; 3462-3840 East 14th Street, Los Angeles,
                  California 90023-3819; 1950 Camino Martin, Carr Libre, 22709,
                  Tijuana, B.C. Mexico; and Centro Industrial IA Arboledas Local
                  No. 9, La Mesa, 22680, Tijuana, B.C. Mexico.

         b.       AUTHORIZATION; NO CONFLICT. The execution and delivery of this
                  Agreement, the borrowings hereunder, the execution and
                  delivery of all of the other Loan Documents and the
                  performance by the Company of its obligations under this
                  Agreement and all of the other Loan Documents are within the
                  Company's corporate powers, have been duly authorized by all
                  necessary corporate action, have received any required
                  governmental or regulatory agency approvals and do not and
                  will not contravene or conflict with any provision of law or
                  of the articles of incorporation or bylaws of the Company or
                  of any agreement binding upon the Company or its properties.

         c.       VALIDITY AND BINDING NATURE. This Agreement and all of the
                  other Loan Documents are the legal, valid and binding
                  obligations of the Company, enforceable against the Company in
                  accordance with their respective terms, except to the extent
                  that enforcement thereof may be limited by bankruptcy,
                  insolvency, reorganization, moratorium and other laws enacted
                  for the relief of debtors generally and other similar laws
                  affecting the enforcement of creditors' rights generally or by
                  equitable principles which may affect the availability of
                  specific performance and other equitable remedies.

         d.       FINANCIAL STATEMENTS. The Company has delivered to the Bank
                  its audited financial statements as of December 30, 2000, and
                  for the fiscal year of the Company then ended and its
                  unaudited interim financial statements as of September 8,
                  2001, and for the fiscal quarter and partial fiscal year then
                  ended. Such statements have been prepared in accordance with
                  generally accepted accounting principles consistently applied
                  except, as to the interim statements, for the absence of a
                  statement of cash flows, footnotes and adjustments normally
                  made at year end which are not material in amount. Such
                  statements present fairly the financial position of the
                  Company as of the dates thereof and the results of its
                  operations for the periods covered and since the date of the
                  latest of such statements there has been no material adverse
                  change in the financial position of the Company or in the
                  results of its operations.

         e.       LITIGATION AND CONTINGENT LIABILITIES. No litigation,
                  arbitration proceedings or governmental proceedings are
                  pending or threatened against the Company which would, if
                  adversely determined, materially and adversely affect its
                  financial position or continued operations. The Company has no
                  material contingent liabilities not provided for or disclosed
                  in the financial statements referred to in Section 3.d or in
                  the "Schedule of Exceptions" attached as EXHIBIT "D."

         f.       LIENS. None of the assets of the Company are subject to any
                  mortgage, pledge, title retention lien, or other lien,
                  encumbrance or security interest except for liens and security
                  interests described in the exceptions enumerated in Section
                  6.b.

         g.       EMPLOYEE BENEFIT PLANS. Each Plan maintained by the Company is
                  in material compliance with ERISA, the Code, and all
                  applicable rules and regulations adopted by

<PAGE>
                                                                              14

                  regulatory authorities pursuant thereto, and the Company has
                  filed all reports and returns required to be filed by ERISA,
                  the Code and such rules and regulations. No Plan maintained by
                  the Company and no trust created under any such Plan has
                  incurred any "accumulated funding deficiency" within the
                  meaning of Section 412(c)(1) of the Code, and the present
                  value of all benefits vested under each Plan did not exceed,
                  as of the last annual valuation date, the value of the assets
                  of the respective Plans allocable to such vested benefits. The
                  Company has no knowledge that any "reportable event" as
                  defined in ERISA has occurred with respect to any Plan.

         h.       PAYMENT OF TAXES. The Company has filed all federal, state and
                  local tax returns and tax related reports which the Company is
                  required to file by any statute or regulation and all taxes
                  and any tax related interest payments and penalties that are
                  due and payable have been paid, except for such as are being
                  contested in good faith and by appropriate proceedings and as
                  to which appropriate reserves have been established. Adequate
                  provision has been made for the payment when due of all tax
                  liabilities which have been incurred, but are not as yet due
                  and payable.

         i.       INVESTMENT COMPANY ACT. The Company is not an "investment
                  company" or a company "controlled" by an "investment company"
                  within the meaning of the Investment Company Act of 1940, as
                  amended.

         j.       REGULATION U. The Company is not engaged principally, or as
                  one of its important activities, in the business of extending
                  credit for the purpose of purchasing or carrying margin stock
                  within the meaning of Regulation U of the Board of Governors
                  of the Federal Reserve System. Not more than twenty-five
                  percent (25%) of the consolidated assets of the Company or of
                  any Subsidiary of the Company consists of margin stock, within
                  the contemplation of Regulation U, as amended.

         k.       HAZARDOUS SUBSTANCES. Except as disclosed on the "Schedule of
                  Exceptions" attached as EXHIBIT "D", to the best knowledge of
                  the Company after due inquiry and investigation; (i) there are
                  no underground storage tanks of any kind on any premises owned
                  or occupied by or under lease to the Company; (ii) there are
                  no tanks, drums or other containers of any kind on premises
                  owned or occupied by or under lease to the Company, the
                  contents of which are unknown to the Company; (iii) no
                  premises owned or occupied by or under lease to the Company
                  have ever been used, and as of the date of this Agreement, no
                  such premises are being used for any activities involving the
                  use, treatment, transportation, generation, storage or
                  disposal of any Hazardous Substances in reportable quantities,
                  and (iv) no Hazardous Substances in reportable quantities have
                  been released on any such premises nor is there any threat of
                  release of any Hazardous Substances in reportable quantities
                  on any such premises.

         l.       SUBSIDIARIES. The only Subsidiaries of the Company as of the
                  date of this Agreement are Harvard Sports, Inc., a California
                  corporation, Indian Industries, Inc., an Indiana corporation,
                  Martin Yale Industries, Inc., an Indiana corporation, Master
                  Products Manufacturing, Inc., a Delaware corporation, U.S.
                  Weight, Inc., an Illinois corporation, Indian Martin, AG, a
                  Switzerland corporation, EIM, a Nevada Corporation, and SOP
                  Services, a Nevada corporation.

<PAGE>
                                                                              15

         m.       USE OF PROCEEDS. No portion of any advance or loan made
                  hereunder shall be used directly or indirectly to purchase
                  ineligible securities, as defined by applicable regulations of
                  the Federal Reserve Board, underwritten by any affiliate of
                  Banc One Corporation during the underwriting period and for 30
                  days thereafter.

         Section 4. COLLATERAL FOR THE OBLIGATIONS. The Obligations are and will
continue to be supported by the unconditional unlimited guaranties of prompt
payment of Harvard Sports, Inc., Indian Industries, Inc., Martin Yale
Industries, Inc., each of which executed a Guaranty Agreement effective as of
May 31, 1996, Master Products Manufacturing, Inc., a California corporation
which executed a Guaranty Agreement effective as of June 17, 1997, and Indian
Martin, AG. Each such entity shall execute and deliver on the date hereof a
Reaffirmation of Guaranty in the form attached as EXHIBIT "E ". U.S. Weight,
Inc. and any other Subsidiary hereinafter formed or otherwise acquired by the
Company shall also guaranty the Obligations which guaranty shall be evidenced by
a Guaranty Agreement in the form of EXHIBIT "F ".

         Section 5. AFFIRMATIVE COVENANTS OF THE COMPANY. Until all Obligations
of the Company terminate or are paid and satisfied in full, and so long as the
Commitment or any Letter of Credit is outstanding, the Company shall strictly
observe the following covenants:

         a.       CORPORATE EXISTENCE. The Company shall preserve its corporate
                  existence.

         b.       REPORTS, CERTIFICATES AND OTHER INFORMATION. The Company shall
                  furnish to the Bank copies of the following financial
                  statements, certificates and other information:

                  (i)      ANNUAL STATEMENTS. As soon as available and in any
                           event within one hundred twenty (120) days after the
                           close of each fiscal year, consolidated and
                           consolidating financial statements of the Company and
                           its Subsidiaries for such fiscal year prepared and
                           presented in accordance with generally accepted
                           accounting principles, consistently applied (except
                           for changes in which the independent accountants of
                           the Company concur) in each case setting forth in
                           comparative form corresponding figures for the
                           preceding fiscal year, together with the audit
                           report, unqualified as to scope, of independent
                           certified public accountants approved by the Bank,
                           which approval shall not be unreasonably withheld.

                  (ii)     INTERIM STATEMENTS. As soon as available and in any
                           event within forty-five (45) days after the end of
                           each fiscal quarter, a copy of the consolidated and
                           consolidating interim financial statements of the
                           Company and its Subsidiaries, consisting at a minimum
                           of:

                           A.       the balance sheet as of the end of the
                                    quarter, and

                           B.       a statement of income for the quarter and
                                    for the partial or full fiscal year ended as
                                    of the end of the quarter,

<PAGE>
                                                                              16

                           all in reasonable detail and accompanied by the
                           written representation of the chief financial officer
                           of the Company that such financial statements have
                           been prepared in accordance with generally accepted
                           accounting principles (except that they need not
                           include a statement of cash flows and footnotes and
                           need not reflect adjustments normally made at year
                           end, if such adjustments are not material in amount),
                           consistently applied, (except for changes in which
                           the independent accountants of the Company concur)
                           and present fairly the financial position of the
                           Company and the results of its operation as of the
                           dates of such statements and for the fiscal periods
                           then ended. Notwithstanding any other provision of
                           this item (ii), the Company may, at its discretion,
                           omit a statement of cash flows from the financial
                           statements delivered in response hereto for any
                           interim period for which the Company does not prepare
                           such a statement.

                  (iii)    CERTIFICATES. Contemporaneously with the furnishing
                           of each set of financial statements provided for in
                           Sections 5.b(i) and 5.b(ii), an Officer's
                           Certificate.

                  (iv)     ORDERS. Prompt notice of any orders in any material
                           proceedings to which the Company is a party, issued
                           by any court or regulatory agency, federal or state,
                           and if the Bank should so request, a copy of any such
                           order.

                  (v)      NOTICE OF DEFAULT OR LITIGATION. Immediately upon
                           learning of the occurrence of an Event of Default or
                           Unmatured Event of Default, or the institution of or
                           any adverse determination in any litigation,
                           arbitration proceeding or governmental proceeding
                           which is material to the Company, or the occurrence
                           of any event which could have a material adverse
                           effect upon the Company, written notice thereof
                           describing the same and the steps being taken with
                           respect thereto.

                  (vi)     COMPLIANCE CERTIFICATES. Within forty-five (45) days
                           following each fiscal quarter end, a certificate of
                           the Chief Financial Officer or other appropriate
                           officer of the Company demonstrating compliance with
                           the financial covenants stated in Section 5.g and
                           compliance with the covenant limiting capital
                           expenditures of the Company stated in Section 6.k.
                           Such certificate shall relate the covenants to the
                           quarter-end figures and shall otherwise be in such
                           form and provide such detail as may be reasonably
                           satisfactory to the Bank.

                  (vii)    REGISTRATION STATEMENTS AND REPORTS. Promptly upon
                           filing with the Securities and Exchange Commission or
                           any state securities regulatory authority, copies of
                           all registration statements and all periodic and
                           special reports required or permitted to be filed
                           under federal or state securities laws and
                           regulations.

                  (viii)   OTHER INFORMATION. From time to time such other
                           information concerning the Company as the Bank may
                           reasonably request.

         c.       BOOKS, RECORDS AND INSPECTIONS. The Company shall maintain
                  complete and accurate books and records, and permit access
                  thereto by the Bank for purposes of inspection, copying and
                  audit, and the Company shall permit the Bank to inspect its
                  properties and operations at all reasonable times.

<PAGE>
                                                                              17

         d.       INSURANCE. The Company shall maintain such insurance as may be
                  required by law and such other insurance, to such extent and
                  against such hazards and liabilities, as is customarily
                  maintained by companies similarly situated. The Company agrees
                  to name the Bank as additional loss payee on any such
                  insurance policy under a standard lender's loss payable clause
                  and to provide a copy of any such policy to the Bank.

         e.       TAXES AND LIABILITIES. The Company shall pay when due all
                  taxes, license fees, assessments and other liabilities except
                  such as are being contested in good faith and by appropriate
                  proceedings and for which appropriate reserves have been
                  established.

         f.       COMPLIANCE WITH LEGAL AND REGULATORY REQUIREMENTS. The Company
                  shall maintain material compliance with the applicable
                  provisions of all federal, state and local statutes,
                  ordinances and regulations and any court orders or orders of
                  regulatory authorities issued thereunder.

         g.       FINANCIAL COVENANTS. The Company shall observe, on a
                  consolidated basis, each of the following financial covenants:

                  (i)      LEVERAGE RATIO. For each period of four consecutive
                           fiscal quarters of the Company ending during the
                           periods indicated in the table below, the Company
                           shall maintain a Leverage Ratio, at levels not
                           greater than 2.50 to 1.0.

                  (ii)     NET WORTH. The Company shall maintain its Net Worth,
                           determined on a consolidated basis, of not less than
                           an amount equal to Twenty Six Million One Hundred
                           Sixty Two Thousand and No/100 Dollars
                           ($26,162,000.00). At December 29, 2001 and at the
                           last day of each fiscal quarter end thereafter, the
                           Net Worth to be maintained by the Company on that
                           date and at all times thereafter until the last day
                           of the next quarter shall be increased by an amount
                           equal to seventy-five percent (75%) of the Company's
                           consolidated net profit for the fiscal quarter then
                           ended.

                  (iii)    DEBT SERVICE COVERAGE. For each period of four
                           consecutive fiscal quarters ending during the periods
                           indicated in the table below, the Company shall
                           maintain a debt service coverage ratio (hereinafter
                           defined), determined on a consolidated basis, of not
                           less than that indicated in the table below.
<TABLE>
<CAPTION>

                                            Period                              Ratio
                                            -----------------------------------------
                           <S>                                              <C>
                           from the date of this Agreement and
                                    until December 30, 2001                 1.10 to 1.0

                           at December 31 , 2001 and at all
                                    times thereafter                        1.20 to 1.0

</TABLE>

<PAGE>
                                                                              18

                           For purposes of this covenant, the phrase "debt
                           service coverage ratio" means the ratio of (A) the
                           sum of consolidated net income before taxes plus
                           interest expense plus depreciation and amortization
                           expense plus non-recurring and extraordinary charges,
                           all for the period for which the ratio is being
                           determined, over (B) the sum of scheduled debt
                           payments plus interest expense plus cash income taxes
                           plus capital expenditures which were not financed
                           plus stock repurchased and cash dividends made, all
                           for the period for which such ratio is being
                           determined.

         h.       PRIMARY BANKING RELATIONSHIP. The Company shall maintain its
                  primary concentration and deposit accounts with the Bank.

         i.       EMPLOYEE BENEFIT PLANS. The Company shall maintain and shall
                  cause any Subsidiary to maintain any Plan in material
                  compliance with ERISA, the Code, and all rules and regulations
                  of regulatory authorities pursuant thereto and shall file and
                  shall cause any Subsidiary to file all reports required to be
                  filed pursuant to ERISA, the Code, and such rules and
                  regulations.

         j.       HAZARDOUS SUBSTANCES. If the Company or any Subsidiary should
                  commence the use, treatment, transportation, generation,
                  storage or disposal of any Hazardous Substance in reportable
                  quantities in its operations in addition to those noted in
                  EXHIBIT "D ", the Company shall immediately notify the Bank of
                  the commencement of such activity with respect to each such
                  Hazardous Substance. The Company shall cause any Hazardous
                  Substances which are now or may hereafter be used or generated
                  in the operations of the Company or any Subsidiary in
                  reportable quantities to be accounted for and disposed of in
                  compliance with all applicable federal, state and local laws
                  and regulations. The Company shall notify the Bank immediately
                  upon obtaining knowledge that:

                  (i)      any premises which have at any time been owned or
                           occupied by or have been under lease to the Company
                           or any Subsidiary are the subject of an environmental
                           investigation by any federal, state or local
                           governmental agency having jurisdiction over the
                           regulation of any Hazardous Substances, the purpose
                           of which investigation is to quantify the levels of
                           Hazardous Substances located on such premises, or

                           the Company or any Subsidiary has been named or is
                           threatened to be named as a party responsible for the
                           possible contamination of any real property or ground
                           water with Hazardous Substances, including, but not
                           limited to the contamination of past and present
                           waste disposal sites.

                  If the Company or any Subsidiary is notified of any event
                  described at items (i) or (ii) above, the Company shall
                  immediately engage or cause the Subsidiary to engage a firm or
                  firms of engineers or environmental consultants appropriately
                  qualified to determine as quickly as practical the extent of
                  contamination and the potential financial liability of the
                  Company or the Subsidiary with respect thereto, and the Bank
                  shall be provided with a copy of any report prepared by such
                  firm or by any governmental agency as to such matters as soon
                  as any such report becomes available to the Company, and
                  Company

<PAGE>
                                                                              19

                  shall immediately establish reserves in the amount of the
                  potential financial liability of the Company or the Subsidiary
                  identified by such environmental consultants or engineers. The
                  selection of any engineers or environmental consultants
                  engaged pursuant to the requirements of this Section shall be
                  subject to the approval of the Bank, which approval shall not
                  be unreasonably withheld.

         k.       LETTER OF CREDIT AGREEMENT OBLIGATIONS. The Company shall
                  perform in a timely manner all of its obligations under the
                  terms of the Credit Agreement (the "Letter of Credit
                  Agreement") among the Company's Subsidiary, Martin Yale
                  Industries, Inc., an Indiana corporation, the Company and the
                  Bank, dated September 30, 1998, as amended, pursuant to which
                  the Bank has issued its Letter of Credit No. ST-110831 for the
                  account of Martin Yale Industries, Inc.; provided, however,
                  that so long as no Event of Default or Unmatured Event of
                  Default has occurred and is now continuing under the terms of
                  this Agreement as it may be amended from time to time, or so
                  long as the Bank in its sole discretion has expressly waived
                  in writing any existing Event of Default or Unmatured Event of
                  Default under this Agreement or has entered into a forbearance
                  agreement with respect thereto, then the Company shall be
                  considered for purposes of this Agreement and the Letter of
                  Credit Agreement to be in compliance with Sections 5.b, 5.h
                  and 6.j of the Letter of Credit Agreement.

         Section 6. NEGATIVE COVENANTS OF THE COMPANY. Until all Obligations of
the Company terminate or are paid and satisfied in full, and so long as the
Commitment or any Letter of Credit is outstanding, the Company shall strictly
observe the following covenants:

         a.       RESTRICTED PAYMENTS. If an Event of Default has occurred and
                  is continuing or would occur as a result of any of the
                  following, the Company shall not purchase or redeem any shares
                  of the capital stock of the Company or declare or pay any
                  dividends thereon except for dividends payable entirely in
                  capital stock; and the Company shall not make any other
                  distributions to shareholders as shareholders, or set aside
                  any funds for any such purpose, or prepay, purchase or redeem
                  any subordinated indebtedness of the Company.

         b.       LIENS. The Company shall not create or permit to exist any
                  mortgage, pledge, title retention lien or other lien,
                  encumbrance or security interest (all of which are hereafter
                  referred to in this subsection as a "lien" or "liens") with
                  respect to any property or assets now owned or hereafter
                  acquired except:

                  -        liens in favor of the Bank created pursuant to the
                           requirements of this Agreement or otherwise;

                  (ii)     any lien or deposit with any governmental agency
                           required or permitted to qualify the Company to
                           conduct business or exercise any privilege, franchise
                           or license, or to maintain self-insurance or to
                           obtain the benefits of or secure obligations under
                           any law pertaining to worker's compensation,
                           unemployment insurance, old age pensions, social
                           security or similar matters, or to obtain any stay or
                           discharge in any legal or administrative proceedings,
                           or any similar lien or deposit arising in the
                           ordinary course of business;

                  (iii)    any mechanic's, worker's, repairmen's, carrier's,
                           warehousemen's or other like liens arising in the
                           ordinary course of business for amounts not yet due
                           and for

<PAGE>
                                                                              20

                           the payment of which adequate reserves have been
                           established, or deposits made to obtain the release
                           of such liens;

                  (iv)     easements, licenses, minor irregularities in title or
                           minor encumbrances on or over any real property which
                           do not, in the judgment of the Bank, materially
                           detract from the value of such property or its
                           marketability or its usefulness in the business of
                           the Company;

                  (v)      liens for taxes and governmental charges which are
                           not yet due or which are being contested in good
                           faith and by appropriate proceedings and for which
                           appropriate reserves have been established;

                  (vi)     liens created by or resulting from any litigation or
                           legal proceeding which is being contested in good
                           faith and by appropriate proceedings and for which
                           appropriate reserves have been established;

                  (vii)    purchase money security interests in the property
                           acquired with the proceeds of such purchase money
                           indebtedness, provided that the aggregate principal
                           amount of all purchase money indebtedness secured by
                           all of such purchase money security interests shall
                           not at any time exceed the sum of $250,000.00; and

                  (vii)    those specific liens now existing described on the
                           "Schedule of Exceptions" attached as EXHIBIT "D"

         c.       GUARANTIES. The Company shall not be a guarantor or surety of,
                  or otherwise be responsible in any manner with respect to any
                  undertaking of any other person or entity, whether by guaranty
                  agreement or by agreement to purchase any obligations, stock,
                  assets, goods or services, or to supply or advance any funds,
                  assets, goods or services, or otherwise, except for:

                  (i)      guaranties in favor of the Bank;

                  (ii)     guaranties by endorsement of instruments for deposit
                           made in the ordinary course of business; and

                  (iii)    those specific existing guaranties listed in the
                           "Schedule of Exceptions" attached as EXHIBIT "D."

         d.       LOANS OR ADVANCES. The Company shall not make or permit to
                  exist any loans or advances to any other person or entity,
                  except for:

                  -        extensions of credit or credit accommodations to
                           customers or vendors made by the Company in the
                           ordinary course of its business as now conducted;

                  (ii)     reasonable salary advances to non-executive
                           employees, and other advances to agents and employees
                           for anticipated expenses to be incurred on behalf of
                           the Company in the course of discharging their
                           assigned duties; and

<PAGE>
                                                                              21

                  (iii)    the specific items listed in the "Schedule of
                           Exceptions" attached as EXHIBIT "D."

         e.       MERGERS, CONSOLIDATIONS, SALES, ACQUISITION OR FORMATION OF
                  SUBSIDIARIES. The Company shall not be a party to any
                  consolidation or to any merger and shall not purchase the
                  capital stock of or otherwise acquire any equity interest in
                  any other business entity, unless at the time of such
                  consolidation, merger or acquisition no Event of Default or
                  Unmatured Event of Default has occurred or is continuing or
                  would occur as a result of such consolidation, merger or
                  acquisition, and provided that the Company is the surviving
                  entity in the case of any consolidation or merger. The Company
                  shall not sell, transfer, convey or lease all or any material
                  part of its assets, except in the ordinary course of business,
                  or sell or assign with or without recourse any receivables.
                  The Company shall not cause to be created or otherwise acquire
                  any Subsidiary, unless such Subsidiary, contemporaneously with
                  its becoming a Subsidiary, executes and delivers to Bank a
                  Guaranty Agreement with respect to the Obligations in the form
                  of EXHIBIT "F".

         f.       MARGIN STOCK. The Company shall not use or cause or permit the
                  proceeds of the Loan to be used, either directly or
                  indirectly, for the purpose, whether immediate, incidental or
                  ultimate, of purchasing or carrying any margin stock within
                  the meaning of Regulation U of the Board of Governors of the
                  Federal Reserve System, as amended from time to time.

         g.       OTHER AGREEMENTS. The Company shall not enter into any
                  agreement containing any provision which would be violated or
                  breached in material respect by the performance of its
                  obligations under this Agreement or under any other Loan
                  Document.

         h.       JUDGMENTS. The Company shall not permit any uninsured judgment
                  or monetary penalty rendered against it in any judicial or
                  administrative proceeding to remain unsatisfied for a period
                  in excess of forty-five (45) days unless such judgment or
                  penalty is being contested in good faith by appropriate
                  proceedings and execution upon such judgment has been stayed,
                  and unless an appropriate reserve has been established with
                  respect thereto.

         i.       PRINCIPAL OFFICE. The Company shall not change the location of
                  its principal office unless it gives not less than ten (10)
                  days prior written notice of such change to the Bank.

         j.       HAZARDOUS SUBSTANCES. The Company shall not allow or permit to
                  continue the release or threatened release of any Hazardous
                  Substance on any premises owned or occupied by or under lease
                  to the Company or any Subsidiary.

         k.       DEBT. The Company shall not incur nor permit to exist any
                  indebtedness for borrowed money except to the Bank and except
                  for those existing obligations disclosed on the "Schedule of
                  Exceptions" attached as EXHIBIT "D " For purposes of this
                  covenant, the phrase "indebtedness for borrowed money," shall
                  be construed to include capital lease obligations.

<PAGE>
                                                                              22

         Section 7. CONDITIONS OF LENDING. The obligation of the Bank to make
any Advance shall be subject to fulfillment of each of the following conditions
precedent:

         a.       NO DEFAULT. No Event of Default or Unmatured Event of Default
                  shall have occurred and be continuing, and the representations
                  and warranties of the Company contained in Section 3 shall be
                  true and correct as of the date of this Agreement and as of
                  the date of each Advance, except that after the date of this
                  Agreement: (i) the representations contained in Section 3.d
                  will be construed so as to refer to the latest financial
                  statements furnished to the Bank by the Company pursuant to
                  the requirements of this Agreement, (ii) the representations
                  contained in Section 3.k (with respect to Hazardous
                  Substances) will be construed so as to apply not only to the
                  Company, but also to any Subsidiaries, (iii) the
                  representation contained in Section 3.l will be construed so
                  as to except any Subsidiary which may hereafter be formed or
                  acquired by the Company with the consent of the Bank, and (iv)
                  all other representations will be construed to have been
                  amended to conform with any changes of which the Bank shall
                  previously have been given notice in writing by the Company.

         b.       DOCUMENTS TO BE FURNISHED AT CLOSING. The Bank shall have
                  received contemporaneously with the execution of this
                  Agreement, the following, each duly executed, currently dated
                  and in form and substance satisfactory to the Bank:

                  (i)      The Revolving Note.

                  (ii)     The Reaffirmations of Guaranty.

                  (iii)    The Guaranty Agreement.

                  (iv)     A certified copy of a Resolution of the Board of
                           Directors of the Company authorizing the execution,
                           delivery and performance, respectively, of this
                           Agreement and the other Loan Documents provided for
                           in this Agreement to which the Company is a party.

                  (v)      A certificate of the Secretary of the Company
                           certifying the names of the officer or officers
                           authorized to sign this Agreement and the other Loan
                           Documents provided for in this Agreement to which the
                           Company is a party, together with a sample of the
                           true signature of each such officer.

                  (vi)     A certified copy of a Resolution of the board of
                           directors of U.S. Weight, Inc. authorizing the
                           execution, delivery and performance of the Guaranty
                           Agreement.

                  (vii)    Currently dated certificates of existence of the
                           Company and U.S. Weight, Inc. issued by the Secretary
                           of State of the jurisdiction of each entities'
                           organization.

                  (viii)   Certificates evidencing the existence of all
                           insurance required under the terms of this Agreement
                           or any other Loan Documents.

<PAGE>
                                                                              23

                  (ix)     The documentation reimbursement fee required under
                           the terms of Section 2.d(vii).

                  (x)      Such other documents as the Bank may reasonably
                           require.

         c.       DOCUMENTS TO BE FURNISHED AT TIME OF EACH ADVANCE. The Bank
                  shall have received the following prior to making any Advance,
                  each duly executed and currently dated, unless waived at the
                  Bank's discretion as provided in Section 2.a(ii):

                  (i)      An Application for the Advance.

                  (ii)     An Officer's Certificate.

                  (iii)    Such other documents as the Bank may reasonably
                           require.

         Section 8. EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement:

         a.       NONPAYMENT OF THE LOAN. Default in the payment when due of any
                  amount payable under the terms of the Note, or otherwise
                  payable to the Bank or any other holder of the Note under the
                  terms of this Agreement.

-                 NONPAYMENT OR NONPERFORMANCE OF OTHER OBLIGATIONS. Subject to
                  the expiration of any applicable grace period, default by the
                  Company in the payment or performance of any other
                  obligations.

-                 LETTER OF CREDIT AGREEMENT DEFAULT. The occurrence and
                  continuance of an "Event of Default" as defined in the Letter
                  of Credit Agreement.

         d.       NONPAYMENT OF OTHER INDEBTEDNESS FOR BORROWED MONEY. Default
                  by the Company or any Subsidiary in the payment when due,
                  whether by acceleration or otherwise, of any other material
                  indebtedness for borrowed money, or default in the performance
                  or observance of any obligation or condition with respect to
                  any such other indebtedness if the effect of such default is
                  to accelerate the maturity of such other indebtedness or to
                  permit the holder or holders thereof, or any trustee or agent
                  for such holders, to cause such indebtedness to become due and
                  payable prior to its scheduled maturity, unless the Company or
                  any Subsidiary is contesting the existence of such default in
                  good faith and by appropriate proceedings and that appropriate
                  reserves have been established with respect thereto.

         e.       OTHER MATERIAL OBLIGATIONS. Subject to the expiration of any
                  applicable grace period, default by the Company or any
                  Subsidiary in the payment when due, or in the performance or
                  observance of any material obligation of, or condition agreed
                  to by the Company or any Subsidiary with respect to any
                  material purchase or lease of goods, securities or services
                  except only to the extent that the existence of any such
                  default is being contested in good faith and by appropriate
                  proceedings and that appropriate reserves have been
                  established with respect thereto.

<PAGE>
                                                                              24

         f.       BANKRUPTCY, INSOLVENCY, ETC. The Company or any Subsidiary
                  admitting in writing its inability to pay its debts as they
                  mature or an administrative or judicial order of dissolution
                  or determination of insolvency being entered against the
                  Company or any Subsidiary; or the Company or any Subsidiary
                  applying for, consenting to, or acquiescing in the appointment
                  of a trustee or receiver for the Company or any Subsidiary or
                  any property thereof, or the Company or any Subsidiary making
                  a general assignment for the benefit of creditors; or, in the
                  absence of such application, consent or acquiescence, a
                  trustee or receiver being appointed for the Company or any
                  Subsidiary or for a substantial part of its property and not
                  being discharged within sixty (60) days; or any bankruptcy,
                  reorganization, debt arrangement, or other proceeding under
                  any bankruptcy or insolvency law, or any dissolution or
                  liquidation proceeding being instituted by or against the
                  Company or any Subsidiary, and, if involuntary, being
                  consented to or acquiesced in by the Company or any Subsidiary
                  or remaining for sixty (60) days undismissed.

         g.       WARRANTIES AND REPRESENTATIONS. Any warranty or representation
                  made by the Company in this Agreement proving to have been
                  false or misleading in any material respect when made, or any
                  schedule, certificate, financial statement, report, notice, or
                  other writing furnished by the Company to the Bank proving to
                  have been false or misleading in any material respect when
                  made or delivered.

         h.       VIOLATIONS OF NEGATIVE AND FINANCIAL COVENANTS. Failure by the
                  Company to comply with or perform any covenant stated in
                  Section 5.g or Section 6 of this Agreement.

         i.       NONCOMPLIANCE WITH OTHER PROVISIONS OF THIS AGREEMENT. Failure
                  of the Company to comply with or perform any covenant or other
                  provision of this Agreement or to perform any other Obligation
                  (which failure does not constitute an Event of Default under
                  any of the preceding provisions of this Section 8) and
                  continuance of such failure for thirty (30) days after notice
                  thereof to the Company from the Bank.

         Section 9. EFFECT OF EVENT OF DEFAULT. If any Event of Default
described in Section 8.f shall occur, maturity of the Loan shall immediately be
accelerated and the Note and the Loan evidenced thereby, and all other
indebtedness and any other payment Obligations of the Company to the Bank shall
become immediately due and payable, and the Commitment shall immediately
terminate, all without notice of any kind. When any other Event of Default has
occurred and is continuing, the Bank or any other holder of the Note may
accelerate payment of the Loan and declare the Note and all other payment
Obligations due and payable, whereupon maturity of the Loan shall be accelerated
and the Note and the Loan evidenced thereby, and all other payment Obligations
shall become immediately due and payable and the Commitment shall immediately
terminate, all without notice of any kind. The Bank or such other holder shall
promptly advise the Company of any such declaration, but failure to do so shall
not impair the effect of such declaration. The remedies of the Bank specified in
this Agreement or in any other Loan Document shall not be exclusive, and the
Bank may avail itself of any other remedies provided by law as well as any
equitable remedies available to the Bank.

         Section 10. WAIVER -- AMENDMENTS. No delay on the part of the Bank, or
any holder of the Note in the exercise of any right, power or remedy shall
operate as a waiver thereof, nor shall any

<PAGE>
                                                                              25

single or partial exercise by any of them of any right, power or remedy preclude
any other or further exercise thereof, or the exercise of any other right, power
or remedy. No amendment, modification or waiver of, or consent with respect to
any of the provisions of this Agreement or the other Loan Documents or otherwise
of the Obligations shall be effective unless such amendment, modification,
waiver or consent is in writing and signed by the Bank.

         Section 11. NOTICES. Any notice given under or with respect to this
Agreement to the Company or the Bank shall be in writing and, if delivered by
hand or sent by overnight courier service, shall be deemed to have been given
when delivered and, if mailed, shall be deemed to have been given five (5) days
after the date when sent by registered or certified mail, postage prepaid, and
addressed to the Company or the Bank (or other holder of the Note) at its
address shown below, or at such other address as any such party may, by written
notice to the other party to this Agreement, have designated as its address for
such purpose. The addresses referred to are as follows:

         As to the Company:         Escalade, Incorporated
                                    817 Maxwell Avenue
                                    P.O. Box 889
                                    Evansville, Indiana 47706-0889

         As to the Bank:            Bank One, Indiana, NA
                                    Bank One Center/Tower - 4th Floor
                                    111 Monument Circle
                                    P.O. Box 7700
                                    Indianapolis, Indiana  46277-0119
                                    Attention:  Manager, Specialty Industries

         Section 12. COSTS, EXPENSES AND TAXES. The Company shall pay or
reimburse the Bank on demand for all reasonable out-of-pocket costs and expenses
of the Bank (including reasonable attorneys' fees and legal expenses) incurred
by it in connection with the enforcement, or restructuring in the nature of a
workout, of this Agreement or any other Loan Document. The Company shall also
reimburse the Bank for expenses incurred by the Bank in connection with any
audit of the books and records or physical assets of the Company conducted
pursuant to any right granted to the Bank under the terms of this Agreement or
any other Loan Document. Such reimbursement shall include, without limitation,
reimbursement of the Bank for its overhead expenses reasonably allocated to such
audits. In addition, the Company shall pay or reimburse the Bank for all
expenses incurred by the Bank in connection with the perfection of any security
interests or mortgage liens granted to the Bank by the Company and for any stamp
or similar documentary or transaction taxes which may be payable in connection
with the execution or delivery of this Agreement or any other Loan Document or
in connection with any other instruments or documents provided for herein or
delivered or required in connection herewith including, without limitation,
expenses incident to any lien or title search or title insurance commitment or
policy. All obligations provided for in this Section shall survive termination
of this Agreement.

         Section 13. SEVERABILITY. If any provision of this Agreement or any
other Loan Document is determined to be illegal or unenforceable, such provision
shall be deemed to be severable from the balance of the provisions of this
Agreement or such Document and the remaining provisions shall be enforceable in
accordance with their terms.

<PAGE>
                                                                              26

         Section 14. CAPTIONS. Section captions used in this Agreement are for
convenience only and shall not affect the construction of this Agreement.

         Section 15. GOVERNING LAW -- JURISDICTION. Except as may otherwise be
expressly provided in any other Loan Document, this Agreement and all other Loan
Documents are made under and will be governed in all cases by the substantive
laws of the State of Indiana, notwithstanding the fact that Indiana conflicts of
law rules might otherwise require the substantive rules of law of another
jurisdiction to apply. The Company consents to the jurisdiction of any state or
federal court located within Marion County, Indiana, and waives personal service
of any and all process upon the Company. All service of process may be made by
messenger, by certified mail, return receipt requested, or by registered mail
directed to the Company at the address stated in Section 11. The Company waives
any objection which the Company may have to any proceeding commenced in a
federal or state court located within Marion County, Indiana, based upon
improper venue or FORUM NON CONVENIENS. Nothing contained in this Section shall
affect the right of the Bank to serve legal process in any other manner
permitted by law or to bring any action or proceeding against the Company or its
property in the courts of any other jurisdiction.

         Section 16. PRIOR AGREEMENTS, ETC. This Agreement supersedes all
previous agreements and commitments made by the Bank and the Company with
respect to the Loan and all other subjects of this Agreement, including, without
limitation, any oral or written proposals or commitments made or issued by the
Bank.

         Section 17. SUCCESSORS AND ASSIGNS. This Agreement and the other Loan
Documents shall be binding upon and shall inure to the benefit of the Company
and the Bank and their respective successors and assigns, provided that the
Company's rights under this Agreement shall not be assignable without the prior
written consent of the Bank.

         Section 18. JURY WAIVER. COMPANY AND BANK HEREBY VOLUNTARILY,
KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) BETWEEN OR AMONG THEM ARISING OUT OF OR IN ANY WAY RELATED TO THIS
DOCUMENT, ANY OTHER LOAN DOCUMENT OR ANY RELATIONSHIP BETWEEN BANK AND COMPANY.
THIS PROVISION IS A MATERIAL INDUCEMENT TO BANK TO PROVIDE THE FINANCING
DESCRIBED HEREIN OR IN THE OTHER LOAN DOCUMENTS.

         IN WITNESS WHEREOF, the parties by their respective duly authorized
officers have executed this Amended and Restated Credit Agreement this 24TH day
of October, 2001.

                                  ESCALADE, INCORPORATED

                                  By:   /s/ John R. Wilson
                                        -----------------------------------
                                        John R. Wilson, Vice President and
                                        Chief Financial Officer

<PAGE>
                                                                              27

                               BANK ONE, INDIANA, NA

                               By: /s/ Robert E. McElwain
                                  ---------------------------------------------
                                       Robert E. McElwain, First Vice President

<PAGE>
                                                                              28

                                    Exhibit D

                             SCHEDULE OF EXCEPTIONS

         This Schedule is a part of the Amended and Restated Credit Agreement
between ESCALADE, INCORPORATED, an Indiana corporation (the "Company"), and BANK
ONE, INDIANA, NA (the "Bank") dated as of the date of this Schedule.

         1.       LITIGATION AND CONTINGENT LIABILITIES. There are no exceptions
                  to the representations contained in Section 3.e with respect
                  to litigation and contingent liabilities. [except the
                  following: NONE

                  --------------------------------------------------------------

                  --------------------------------------------------------------

                  --------------------------------------------------------------

                  --------------------------------------------------------------
                                    ]
                   -----------------

         2.       HAZARDOUS SUBSTANCES. There are no exceptions to the
                  representation contained in Section 3.k. [except the
                  FOLLOWING:NONE

                  --------------------------------------------------------------

                  --------------------------------------------------------------

                  --------------------------------------------------------------

                  --------------------------------------------------------------
                                    ]
                   -----------------

         3.       LIENS. There are no "liens" (as defined in Section 6.b) on any
                  property of the Company except for liens of the types
                  described in items (i) through (vi) of the enumeration
                  contained in Section 6.b. [and except for the following: NONE

                  --------------------------------------------------------------

                  --------------------------------------------------------------

                  --------------------------------------------------------------
                                    ]
                   -----------------

         4.       GUARANTIES. The Company is not a guarantor or surety of, or
                  otherwise responsible in any manner with respect to any
                  undertaking of any other person or entity, except for the
                  items of the type described in items (i) and (ii) of the
                  enumeration contained in Section 6.c. [and except for the
                  following: NONE

                  --------------------------------------------------------------

                  --------------------------------------------------------------

                  --------------------------------------------------------------
                                    ]
                   -----------------

         5.       LOANS AND ADVANCES. The Company does not have outstanding any
                  loans or advances to any person or entity except for items of
                  a type described in items (i) and (ii) of the enumeration
                  contained in Section 6.d. [and except for the following: NONE

                  --------------------------------------------------------------

                  --------------------------------------------------------------

                  --------------------------------------------------------------
                                   ]
                  -----------------

         6.       INDEBTEDNESS AND CAPITAL LEASES. The Company presently has no
                  indebtedness for borrowed money nor is the Company a lessee
                  under any capital lease except for such obligations to

<PAGE>
                                                                              29

                  the Bank and except for Deferred Acquisition Purchase Price of
                  approximately $2,275,000.00 due to Larry G. Mitchell and
                  Matthew D. Buchanan sellers of U.S. Weight LLC with
                  approximately $1,400,000.00 due on March 31, 2002 and
                  $875,000.00 due on September 10, 2002. Deferred Acquisition
                  Purchase Price of $833,335.00 due to Accudart in 5 annual
                  installments of $166,667 starting on April 1, 2002.

         By its execution of this Schedule, the Company acknowledges that it was
prepared in accordance with information provided by the Company.

         Dated:   OCTOBER 24, 2001
                 ------------------------------

                                  ESCALADE, INCORPORATED

                                  By:   /s/ John R. Wilson
                                        --------------------------------------

                                        John R. Wilson, Vice President and CFO
                                        --------------------------------------
                                         (printed name and title)

IM-359856-4

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