ASSET PURCHASE AGREEMENT

ASSET PURCHASE AGREEMENT

between

MCRAE INDUSTRIES, INC.

as Buyer

and

TEXAS BOOT, INC.

as Seller

May ___, 2005

TABLE OF CONTENTS

Page

i

SCHEDULES

ii

ASSET PURCHASE AGREEMENT

     This Asset Purchase Agreement (this “ Agreement ”) is made and entered into as of May ___, 2005 by McRae Industries, Inc., a Delaware corporation (“ Buyer ”), and Texas Boot, Inc., a Delaware corporation (“ Seller ”).

STATEMENT OF PURPOSE

     Seller, has been managing its affairs as a debtor-in-possession in a case (the “ Chapter 11 Case ”) under Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. § 101 et seq . (the “ Bankruptcy Code ”) with the United States Bankruptcy Court for the Middle District of Tennessee (the “ Bankruptcy Court ”). Buyer has agreed to purchase from Seller, and Seller has agreed to sell to Buyer, the Purchased Assets (as defined in Section 2.1 of this Agreement) (the “ Transactions ”), upon the terms, and subject to the conditions, set forth in this Agreement:

     NOW, THEREFORE, in consideration of the premises and the mutual agreements set forth herein, Buyer and Seller hereby agree as follows:

ARTICLE I
DEFINITIONS

      Section 1.1 Definitions. When used in this Agreement, each of the following terms have the definition assigned below:

     “ Approval Order ” is used as defined in Section 7.3 hereof.

     “ Auction ” means the auction of the Purchased Assets to be effected in the Chapter 11 Case pursuant to the Procedures Order.

      “Auction Date” means the date of the Auction.

     “ Business Day ” means any day that is not a Saturday, Sunday or any other day on which banks are required or authorized by law to be closed in Charlotte, North Carolina.

     “ Encumbrance ” means any security interests, liens, claims, charges, options, mortgages, deeds of trust, pledges, hypothecations, assignments, preferences, debts, leases (and subleases), conditional sales agreements, title retention agreements, licenses, covenants, encumbrances of any kind, defects as to title or restrictions on the use and enjoyment thereof or against the transfer or assignment thereof.

     “ Intellectual Property ” means all Marks, Copyrights and Domain Names, all as defined in Section 2.1.

     “ Liabilities ” means any debt, liability or obligation, whether disputed or undisputed, secured or unsecured, liquidated, unliquidated, matured or unmatured, known or unknown or accrued or contingent.

     “ Lock Box ” means that certain lock box in favor of Wells Fargo (as defined below), maintained at Bank of America, account number 000112638838.

     “ Person ” means any individual, corporation, limited liability company, partnership, company, sole proprietorship, joint venture, trust, estate, association, organization, labor union, or other entity.

     “ Primary Registrations ” means the registrations and applications for the Marks designated as “primary registrations” on Schedule 2.1(a) .

     “ Procedure Order ” is used as defined in Section 7.2 hereof.

     “ Secondary Registrations ” means all registrations for the Marks that are not Primary Registrations.

ARTICLE II
SALE AND PURCHASE OF ASSETS

      Section 2.1 Sale and Purchase of Assets . Subject to the terms and conditions of this Agreement, on the Closing Date (defined below), Seller will sell, assign, transfer and convey to Buyer or its designees, and Buyer or its designees will purchase, acquire and accept from Seller, free and clear of Encumbrances, all of Seller’s rights, title and interest in and to the following assets of Seller (the “ Purchased Assets ”):

          (a) all of Seller’s worldwide rights, title, and interests in and to the trademarks, service marks, trade names, logos and corporate names set forth on Schedule 2.1(a) hereto (whether registered or not), together with translations, adaptations, derivations and combinations thereof and including the goodwill of the business associated therewith, and all applications, registrations, renewals in connection therewith (collectively, the “ Marks ”) as well as all rights to sue, recover and retain damages for any past, current or future infringement of the Marks.

          (b) all of Seller’s worldwide rights, title and interests in and to all of Seller’s registered and unregistered copyrights and copyright registrations and applications related to the Marks including without limitation the copyright registrations set forth on Schedule 2.1(b) (collectively, the “ Copyrights ”);

          (c) all of Seller’s domain names and all domain names registered on Seller’s behalf for use in Seller’s business and corresponding registrations including without limitation the domain names set forth on Schedule 2.1(c) (collectively, the “ Domain Names ”);

          (d) all trade and other accounts receivable owing to Seller on the Closing Date which shall be set forth on Schedule 2.1(d) to be attached hereto on the Closing Date, including the benefit of all collateral, security, guaranties, and similar undertakings received or held in connection therewith and any claim, remedy or other right related to the foregoing (the “ Acquired Accounts Receivable ”); provided , however that Acquired Accounts Receivable shall consist solely of the following: (i) accounts receivable listed on Schedule 3.5 less any accounts receivable collected in accordance with Section 5.4 and less any accounts receivable on which goods have been returned, plus (ii) accounts receivable generated by Seller after April 4, 2005 (x) in connection with goods sold to account debtors either listed on Schedule 3.5 or approved in advance by Buyer or (y) that Buyer agrees in its sole discretion to purchase;

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          (e) the pairs of boots in the style numbers and quantity as set forth on Schedule 2.1(e) (the “ Inventory ”); and

          (f) any inventory returned by a customer that is the subject of any Acquired Accounts Receivable.

      Section 2.2 Deposit . On the date hereof, Buyer will submit to Seller’s counsel a cash deposit in the amount of $200,000 (the “ Buyer Deposit ”), which shall be returned to Buyer in the event that Buyer is not the successful bidder following the Auction pursuant to Article VII or if for any reason (other than Buyer’s material breach of this Agreement) the Closing has not occurred by July 15, 2005.

Section 2.3 Purchase Price.

          (a) The purchase price for the Purchased Assets (the “ Purchase Price ”) will be the sum of (i) $1,200,000, plus (ii) the amount to be paid for the Inventory as set forth on Schedule 2.1(e) , plus (iii) an amount equal to 75% of (the gross book value of the Acquired Accounts Receivable minus $100,000).

          (b) Subject to the terms and conditions of this Agreement, Buyer will pay the Purchase Price (less the amount of the Buyer Deposit) at Closing to Seller by wire transfer of immediately available funds to a bank account designated by Seller on the Closing Date.

      Section 2.4 No Liabilities Assumed . Buyer will not assume any, and Seller will retain all, liabilities and obligations arising from the ownership of the Purchased Assets on or prior to the Closing Date.

      Section 2.5 Closing . The closing of the purchase and sale of the Purchased Assets (the “ Closing ”) shall take place at the offices of Neal & Harwell, PLC, in Nashville, Tennessee, commencing at 9:00 a.m. local time on the date that is the Business Day following the date that all of the conditions that must be fulfilled prior to the Closing, as set forth in Articles VI, have been fulfilled or waived by Buyer or Seller, as applicable, or at such other place, time and date as Buyer and Seller may mutually determine (the “Closing Date” ). Subject to the consummation of the Closing on the Closing Date, the sale, assignment, transfer and conveyance to Buyer of the Purchased Assets will be deemed effective as of 11:59 p.m. local time on the Closing Date.

      Section 2.6 Lasts and Dies. In addition, Seller will quitclaim to Buyer or its designees and Buyer and its designees will purchase, acquire and accept from Seller all of Seller’s right, title and interest in and to the lasts, dies and paper patterns as set forth on Schedule 2.6 . Buyer shall pay One Dollar ($1.00) for the Lasts.

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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER

     Seller represents and warrants as follows:

      Section 3.1 Organization and Authority. Seller is a corporation duly organized under the laws of its state of incorporation. Subject to the approval by the Bankruptcy Court, (a) Seller has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder, (b) the execution and delivery by Seller of this Agreement and the performance by Seller of the transactions contemplated hereby have been duly approved by the board of directors of Seller and, if required, the shareholders of Seller and (c) this Agreement constitutes the valid and legally binding obligation of Seller, enforceable against Seller in accordance with its terms.

      Section 3.2 No Conflicts . Subject to the approval by the Bankruptcy Court, Seller’s execution and delivery of this Agreement and performance of its obligations hereunder do not and will not require the consent of, or any prior filing with or notice to, any governmental authority or other third party.

      Section 3.3 Title to Purchased Assets . Seller is conveying, transferring and assigning to Buyer the Purchased Assets free and clear of all Encumbrances or adverse claims pursuant to 11 U.S.C. §363. Buyer is acquiring good and marketable title to the Purchased Assets, provided , Seller does not warrant good and marketable title with respect to the Secondary Registrations.

      Section 3.4 Intellectual Property .

     (a) Seller owns all rights, title and interests in and to the Intellectual Property free and clear of any Encumbrance, provided , that with respect to the Secondary Registrations, Seller makes no express representation or warranty as to such ownership of the Secondary Registrations.

     (b) No legal proceeding occurred in the past, is currently pending or, to the knowledge of Seller, is or ever was threatened or anticipated that challenges (i) the legality, validity, enforceability, transferability or assignability of the Intellectual Property, or (ii) the use or ownership of any Intellectual Property by Seller or its successors or assigns.

     (c) Seller has taken all necessary and prudent action to maintain and protect the Primary Registrations. Each Primary Registration is valid and enforceable and otherwise fully complies with all judgments, orders, decrees, laws, statutes, regulations or other judicial or governmental restrictions applicable to the enforceability thereof.

     (d) The Purchased Assets do not and will not violate, infringe upon or come in conflict with any right of any third party, including, without limitation, any copyrights, patent rights, trademark rights, trade secret right or confidentiality rights of any third party. To the best of Seller’s knowledge, the Secondary Registrations do not and will not violate, infringe upon or come in conflict with any right of any third party, including, without limitation, any copyrights, patent rights, trademark rights, trade secret right or confidentiality rights of any third party.

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     (e) Seller has continuously used the Marks associated with each Primary Registration set forth on Schedule 2.1(a) under the heading “U.S. — Federal” in commerce on or in connection with the goods and services identified by such Primary Registration for the period commencing with the date of first use for such Primary Registration through the Closing Date. With respect to the Primary Registrations for LAREDO set forth on Schedule 2.1(a) under the heading “Foreign,” and Seller has had sales of goods identified by such Primary Registrations of at least three hundred thousand dollars ($300,000) per year in each of years 2002, 2003, and 2004.

     (f) Seller has delivered, or will deliver, to Buyer prior to the Closing Date, copies of all registration and application materials relating to the Intellectual Property in Seller’s possession including, without limitation, complete copies of all files regarding the Intellectual Property’s maintenance by any legal counsel engaged by Seller, and all other written documentation evidencing ownership and prosecution of each such item in Seller’s possession.

     (g) The domain names identified in Schedule A-4 of Exhibit A are the only Domain Names used in connection with Seller’s business. For the avoidance of doubt, both Seller and Buyer are aware that a third party is using the domain name TEXASBOOTCO.COM and agree that such use is not a breach of this Agreement.

     (h) There are no licenses relating to or associated with the Intellectual Property.

      Section 3.5 Accounts Receivable . Schedule 3.5 sets forth a list of all accounts receivable of Seller as of April 4, 2005, which list sets forth the aging of such accounts receivable. Subject to the $100,000 reserve for bad debts, uncollectible items, offsets, charge backs, etc., all accounts receivable set forth on Schedule 3.5 represented as of April 4, 2005, and all Acquired Accounts Receivable will represent on the Closing Date, valid obligations arising from products or services actually sold by Seller in the ordinary course of business enforceable in accordance with their terms. Subject to the $100,000 reserve for bad debts, uncollectible items, offsets, charge backs, etc., as of the date hereof, with respect to the accounts receivable set forth on Schedule 3.5 , there is no, and as of the Closing Date, with respect to the Acquired Accounts Receivable, there will be no contest, claim or right to set-off, other than returns in the ordinary course of business, under any contract with any obligor of any such account receivable or Acquired Account Receivable relating to the amount or validity of any such account receivable or Acquired Account Receivable. Seller makes no warranty as to the creditworthiness of any customer or the collectability of any or all of the Acquired Accounts Receivable.

     Seller agrees that any inventory that is returned to Seller after the Closing and that is the subject of an Acquired Accounts Receivable shall be the sole property of Buyer and shall be delivered promptly to Buyer upon such return.

      Section 3.6 Inventory . The Inventory is of a nature that is consistent with the standards of quality established over the years with respect to the Marks, is usable for its intended purpose and salable in the ordinary course of business consistent with past practices. The Inventory is located within Seller’s warehouse located at 125 East Forest Avenue , Lebanon, Tennessee, 37087.

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      Section 3.7 Disclosure. The representations and warranties of Seller in this Agreement do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements made herein not misleading.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER

     Buyer represents and warrants as follows:

      Section 4.1 Organization and Authority. Buyer is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation. Buyer has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery by Buyer of this Agreement and the performance by Buyer of the transactions contemplated hereby have been duly approved by the board of directors of Buyer and, if required, the shareholders of Buyer. This Agreement constitutes the valid and legally binding obligation of Buyer, enforceable against Buyer in accordance with its terms.

      Section 4.2 No Conflicts . Neither the execution and delivery of this Agreement nor the performance of the transactions contemplated hereby will, directly or indirectly, with or without notice or lapse of time conflict with, violate or result in any default under Buyer’s articles of incorporation or bylaws, or any mortgage, indenture, agreement, instrument or other contract to which Buyer is party or by which Buyer or any of its property is bound, or any judgment, order, decree, law, statute, regulation or other judicial or governmental restriction to which Buyer is subject. Buyer’s execution and delivery of this Agreement and performance of its obligations he