United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report(Date of earliest event reported) April 30, 1996
McRae Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-8578 56-0706710
(State or other jurisdiction (Commission (IRS Employer
of corporation) File Number) Identification No.)
402 North Main Street, Mt Gilead, N.C. 27306
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (910) 439-6147
(Former name or former address, if changed since last report.)
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Item 2. Acquisition or Disposition of Assets.
(a) On April 30, 1996, McRae Industries, Inc. (McRae) entered into a Stock
Purchase Agreement which provides among other things, for McRae to purchase
all of the outstanding common stock of American West Trading Company (American
West)from its current shareholders. American West is a manufacturer and
distributor of western and work boots with manufacturing facilities located in
Dresden and Waverly, Tennessee. American West sells it's boots nationwide to
major retail and specialty chain stores.
In connection with the above Agreement, McRae purchased 400,000 shares
of American West Common Stock for $490,000 in cash and notes and $60,000 of
McRae's Class A Common Stock. In addition, a deferred earn-out amount will be
paid subject to certain conditions being met over a sixty month period. As of
April 30, 1996, American West had approximately $6.5 million of assets and
liabilities and annual revenues of $18,400,000.
Item 7. Financial Statements, Pro Forma Information, and Exhibits.
(a) Financial Statements of Business Acquired: In response to this item, it is
impracticable to provide all of the required financial information of American
West at this time, however the required financial statements will be filed as
soon as practicable, but not later than 75 days from April 30, 1996.
(b) Pro Forma Financial Information: In response to this item, it is
impracticable to provide the required financial information at this time,
however, it will be filed as soon as practical, but not later than 75 days
from April 30, 1996.
(c) Exhibit:
Exhibit No. Description
(2) Stock Purchase Agreement
(including exhibits)
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
McRae Industries, Inc.
(Registrant)
Date: May 10, 1996 By: /s/B.J. McRae
B.J. McRae
President
(Principal Executive Officer)
Date: May 10, 1996 By: /s/David K. Helms
David K. Helms
Vice President-Finance
(Principal Financial Officer)
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NO.
(2) STOCK PURCHASE AGREEMENT 4-55
(INCLUDING EXHIBITS)
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement")is made and entered into as of
the 7th day of April, 1996, by and among WALTER A. DUPUIS ("DuPuis"), KENNETH O.
MOORE ("Moore") and WILLIAM GLOVER ("Glover"), being collectively referred to
herein as the "Shareholders", and MCRAE INDUSTRIES, INC., a Delaware corporation
("Purchaser").
STATEMENT OF PURPOSE
AMERICAN WEST TRADING COMPANY, a Tennessee corporation (the "Company"),
is engaged in the business of manufacturing and selling, at wholesale, boots
and other footwear (the "Business"). The Company has authorized capital of
775,000 shares of Common Stock, of which 400,000 shares are issued and
outstanding (the "Shares"), all of which are held by the Shareholders. Pur-
chaser desires to purchase all of the Shares. The purpose of this Agreement
is to set forth the terms and conditions upon which the Shareholders have
agreed to sell to Purchaser, and Purchaser has agreed to purchase and pay for,
the Shares. Capitalized terms shall have the meanings ascribed to them in
Section 8.3 unless defined in other sections of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the Shareholders and Purchaser hereby agree as
follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
Section 1.1 General. Subject to all of the terms and conditions of this
Agreement, each of the Shareholders severally agrees that at the Closing (as
defined in Section 6.1) (i) such Shareholder will sell, assign, transfer and
convey unto Purchaser all of the Shares held by such Shareholder as set forth
below, and Purchaser agrees that at the Closing it will purchase all (but not
less than all) of the Shares at an aggregate purchase price (the "Purchase
Price") equal to (a) $325,000 in cash at the Closing, (b) Purchaser's
promissory note, payable to the Shareholders jointly, in the principal amount
of $45,000, bearing interest at the Interest Rate (defined in Section 8.3
below), payable in 24 equal monthly installments of principal in the amount of
$1,875 each, together with accrued interest (the "Note"), (c) a number of
whole shares of Purchaser's Class A Common Stock having an aggregate Fair
Market Value (defined in Section 8.3 below) at that date of $60,000, issued to
and in the name of Moore; and (d) deferred earn-out payments of up to an
aggregate $105,000 to Moore, payable in accordance with the provisions of
Section 1.5 below. In addition, Purchaser and DuPuis will enter into a
consulting and non-competition agreement covering the period of 24 consecutive
months following the Closing, providing for payments to DuPuis of $5,000 per
month during such period.
Section 1.2 Appointment of Agent. By his execution hereof, Glover
hereby appoints Moore as his agent to receive and accept at the Closing, on
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his behalf Glover's portion of the Purchase Price to be paid and delivered to
such Shareholder and all other documents to be delivered to such Shareholder
at the Closing hereunder, to deliver at the Closing Glover's certificates for
the Shares, instruments of transfer in accordance with Section 1.3 and all
other documents, certificates or other writings contemplated hereunder, and to
receive and distribute all payments of principal and interest on the Note. In
addition, Glover agrees that Moore shall have full and plenary authority to
bind Glover with respect to all actions to be taken by the Shareholders
pursuant to this Agreement on and after the date hereof, whether such action
is taken before, on or after the Closing Date. Moore by his execution hereof
accepts such appointment and agrees that promptly after the Closing he will
deliver such cash to Glover. Delivery of such cash by Purchaser to Moore as
such agent shall constitute a full acquittance of Purchaser with respect
thereto, and Purchaser shall have no obligation to see to the redelivery of
such cash.
Section 1.3 Delivery of Share Certificates.. Against receipt of the
payment of the Purchase Price, each Shareholder shall deliver to Purchaser the
certificate(s) for the Shares being sold by such Shareholder, together with
such stock powers, endorsements, and assurances (including signature guaran-
tees, if requested by Purchaser) as will entitle Purchaser to immediate
registration of transfer of such Shares in its name and as will convey such
Shares to Purchaser free and clear of all liens, encumbrances and adverse
claims, other than transfer restrictions imposed by applicable securities
laws.
Section 1.4 "All or None". The obligation of Purchaser to purchase and
pay for the Shares tendered at Closing by any Shareholder is subject, inter
alia, to the condition that all of the shares held by all Shareholders be
tendered, delivered and available for purchase, Purchaser having no obligation
hereunder to purchase less than all of the Shares.
Section 1.5 Deferred Purchase Price. Purchaser shall pay to Moore an
amount (the "Deferred Payment") equal to a percentage of the Company's Pre-Tax
Earnings (as defined below), determined and payable as follows:
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Period of Determination
of Pre-Tax Earnings Amount Payable When Payable
(a) 1st through 24th calendar
months following the
Closing. Lesser of 40% of
Pre-Tax Earnings
or $45,000.00.
On or before the
end of the 26th
calendar month
after the Closing.
(b) 25th through 36th calendar
month after the Closing. Lesser of 20% of
Pre-Tax Earnings
or $20,000. On or before the
end of the 38th
calendar month
after the Closing.
(c) 25th through 48th calendar
month after the Closing. Lesser of 20% of
Pre-Tax Earnings
or $40,000, less
any amount paid
under (b) above. On or before the
end of the 50th
calendar month
after the Closing.
(d) 25th through 60th calendar
month after the Closing. Lesser of 20% of
Pre-Tax Earnings
and $60,000, less
any amounts paid
under (b) and (c)
above. On or before the
end of the 62nd
calendar month
after the Closing.
"Pre-Tax Earnings" shall mean income from the Company's continuing
operations of the Business, including related expense and interest on all
funds advanced to the Company, but excluding extraordinary, unusual or
nonrecurring items, the effect of any change in accounting principles, prior
period adjustments, the effect, if any, of net operating loss carryover, and
the effect of any discontinued operations, as defined by generally accepted
accounting principles, all as determined, without audit, for each of the
relevant periods by the independent accounting firm then auditing the books of
the Purchaser.
ARTICLE II
REPRESENTATIONS AND WARRANTIES AS TO THE SHARES
AND THE TRANSACTION
To induce Purchaser to enter into this Agreement and to purchase such
Shareholder's Shares hereunder, each Shareholder severally represents and
warrants to the Purchaser that:
Section 2.1 Ownership of Shares. Such Shareholder is the legal owner
of the number of shares set forth by such Shareholder's name in Section 3.4
hereof. Such Shares are held by such Shareholder free and clear of all liens,
encumbrances and adverse claims whatsoever (other than a pledge of all of the
Shares to Trans Financial Bank NA (the "Trans Financial Pledge") and restric-
tions on transfer imposed by applicable securities laws; such Shareholder has
full power and authority to sell and assign such Shares to Purchaser at the
closing pursuant hereto; and upon the delivery to Purchaser of the
certificate(s) for such Shares and accompanying instruments at the Closing
<PAGE>
pursuant to Section 1.3 Purchaser will have acquired good, valid and exclusive
title to such Shares free and clear of all liens, encumbrances and adverse
claims whatsoever (other than transfer restrictions imposed by applicable
securities laws) and will be immediately entitled to the registration of such
Shares in its name on the books of the Company and thereupon entitled to all
rights of a Shareholder of the Company evidenced thereby. Upon delivery to
Purchaser of the certificate(s) for the Shares and accompanying instruments at
the Closing pursuant to Section 1.3, Purchaser shall have acquired all of the
outstanding shares of capital stock of the Company and all of the interests in
the Shares, including any remainder or other residual interest. The Shares
have been duly and validly issued and are fully paid, nonassessable and not
subject to call and have not been issued in violation of any preemptive
rights.
Section 2.2 No Conflicts; Consents; Binding Effect. The execution,
delivery and performance of this Agreement by such Shareholder and the sale of
such Shareholder's Shares to Purchaser hereunder, do not and will not conflict
with, violate or constitute a breach of any agreement, instrument or other
contract by which such Shareholder is bound, except as set forth on Schedule
2.2 hereto, nor will they violate any judgment, order, decree, law, statute,
regulation or other judicial or governmental restriction to which such
Shareholder is subject or (in the case of a Shareholder who is not an
individual) the charter, trust agreement or other constituent instrument by
which such Shareholder was created or is governed, nor do they or will they
require the consent of, or any prior filing with or notice to, any
governmental authority or other third party. This Agreement constitutes the
legal, valid and binding obligation of such Shareholder, enforceable against
such Shareholder in accordance with its terms.
Section 2.3 No Litigation. There is not pending or threatened against
such Shareholder any action, suit or proceeding before any court, arbitrator
or governmental or regulatory authority which challenges or calls into
question the authority of such Shareholder to enter into this Agreement or to
perform his obligations hereunder or in which an adverse decision could
adversely affect the transactions contemplated hereby.
ARTICLE III
GENERAL REPRESENTATIONS AND WARRANTIES
To induce Purchaser to enter into this Agreement and to purchase the
Shares hereunder Moore and DuPuis, jointly and severally, represent and
warrant that:
Section 3.1 Corporate Organization and Authority. The Company is a
corporation duly organized and validly existing in good standing under the
laws of the State of Tennessee, with full corporate power and authority to
conduct its business as now conducted, own its assets and enter into and
perform its obligations under this Agreement, and the copies of the Company's
Articles of Incorporation and Bylaws heretofore provided to Purchaser are true
and complete as of this date hereof.
Section 3.2 Subsidiaries and Foreign Qualification.
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(a) Subsidiaries. Except as set forth on Schedule 3.2 hereto, the
Company has no subsidiaries and no other equity investments in any other
corporation, partnership, association, trust or other business entity.
(b) Foreign Qualification. The Company is in good standing and is
qualified to transact business as a foreign corporation in all states in which
the nature and location of the Company's business and assets requires
qualification as a foreign corporation, unless the failure by the Company to
so qualify in such jurisdiction will not have a material adverse effect on its
business or assets or subject it to material penalties.
Section 3.3 Absence of Conflicts and Consent Requirements. Except as
set forth on Schedule 3.3, the Shareholders' execution and delivery of this
Agreement and performance of its and their obligations hereunder, do not and
will not conflict with, violate or result in any default under the Company's
Articles of Incorporation or Bylaws or any mortgage, indenture, agreement,
instrument or other contract or by which the Company or any Shareholder is
bound, nor will they violate any judgment, order, decree, law, statute,
regulation or other judicial or governmental restriction to which either the
Company or any Shareholder is subject, nor do they or will they require the
consent of, or any prior filing with or notice to, any governmental authority
or other third party.
Section 3.4 Capitalization. The authorized capital stock of the
Company consists of 775,000 shares of Common Stock. The only issued and
outstanding shares are the Shares, which have been duly and validly authorized
and issued and are fully paid and nonassessable. The Shares are owned
beneficially and of record as follows:
Name # of Shares Certificate Number
William Glover 20,000 9 and 11
Walter A. DuPuis 190,000 5, 6 and 10
Kenneth O. Moore 190,000 12
There are no outstanding subscriptions, warrants, options, calls,
commitments or other rights or agreements to which the Company or any
Shareholder is bound relating to the issuance, sale or redemption of shares of
Common Stock or other securities of the Company and no person other than the
Shareholders has any interest in the Shares, except a possible claim by Greg
Gellman, Dennis Ziolkowski and Charlie McCoy that they are or were entitled to
have shares of the Common Stock issued to them pursuant to a stock plan (the
Capital Stock Plan Claim ). No shares of capital stock or other securities
of the Company are reserved for any purpose. No Shares have been issued in
violation of any preemptive rights.
Section 3.5 Financial Statements; No Undisclosed Liabilities. The
Company has delivered to Purchaser (i) the Company's balance sheets at
December 31, 1993, 1994 and 1995, and the related statements of income and
expense for each of the three years then ended, and (ii) the Company's balance
sheet at February 29, 1996, and (the "Balance Sheet") and the year-to-date
related statement of income and expense (such financial statements are herein-
<PAGE>
after referred to as the "Financial Statements"). The Financial Statements
are true and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles, which have been
applied consistently throughout the periods involved except as noted in such
Financial Statements and except that the income statement for the year ended
December 31, 1995, should be adjusted for the following items: additional bad
debts of $72,000; (2) additional inventory writedown of $84,000; (3)
additional loss incurred for gross profit on Ross Cheney account of $20,000;
and (4) 1995 employee bonus of $5,000. The balance sheets contained in the
Financial Statements fairly reflect all liabilities of the Company of the
types normally reflected in balance sheets as of the dates thereof and any
liabilities that will arise or be incurred by the Company in connection with
the transactions contemplated hereby, and except for current liabilities
incurred in the ordinary course of business consistent with past practices
(and not materially different in type or amount), the Company has no liabili-
ties or obligations of any nature, whether accrued, absolute, contingent or
otherwise, whether due or to become due, whether properly reflected as a
liability or a charge or reserve against an asset or equity account, and
whether or not the amount thereof is readily ascertainable, except as set
forth on Schedule 3.5 hereto.
Section 3.6 Absence of Certain Changes. Since December 31, 1995,
except as set forth or referred to in Schedule 3.6 hereto, there has not been:
(a) any material adverse change in the financial position of the
Company or in the results of its operations, other than operating losses
incurred in January and February 1996 of which the Purchaser has been advised
and economic or regulatory changes generally known throughout the Company's
industry as a whole and not unique to the Company's business;
(b) any change in the condition of the properties, business or
liabilities of the Company except normal and usual changes in the ordinary
course of business which have not been materially adverse, other than economic
or regulatory changes generally known throughout the Company's industry as a
whole and not unique to the Company's business;
(c) any damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting the properties or business of
the Company;
(d) any purchase or any sale, lease, abandonment or other disposition
by the Company of any interest in real property, or of any machinery,
equipment or other operating tangible personal property other than
acquisitions and dispositions of personal property in the ordinary course of
business;
(e) any change in the accounting methods or practices followed by the
Company or in depreciation, amortization or inventory valuation policies
theretofore used or adopted;
(f) any material liability incurred by the Company, contingent or
otherwise, other than trade accounts, operating expenses, obligations under
executory contracts incurred for fair consideration, taxes accrued with
respect to operations during such period and indebtedness for money borrowed
or for the deferred purchase price of property purchased for fair con-
<PAGE>
sideration, all incurred in the ordinary course of the Company's business;
(g) any bonus paid to any employee, Shareholder or officer of the
Company, any increase in the compensation paid or to be paid, directly or
indirectly, to any officer or key employee of the Company, or any general
increase in the rate of compensation paid to the Company's other employees
other than routine increases in wages in the ordinary course of business;
(h) any loan or advance made to any employee, officer or Shareholder
of the Company or any relative of such employee, officer or Shareholder;
(i) any resignation or threatened resignation of any key employee of
the Company;
(j) any other material adverse change in the business or prospects of
the Company, other than operating losses in January and February 1996 and
economic or regulatory changes generally known throughout the Company's
industry as a whole and not unique to the Company's business;
(k) any payment or declaration, or any commitment for the payment or
declaration, by the Company of any dividend (whether in cash, stock, property
or otherwise) or other distribution in respect of the Common Stock, or any
repurchase, redemption or retirement, or commitment to repurchase, redeem or
retire, by the Company of any of the Common Stock;
(l) any amendment to or change in the Articles of Incorporation or
Bylaws of the Company;
(m) any forgiveness by the Company of any material debt due it or any
waiver by the Company of any material rights;
(n) any material election for tax purposes which was either (i) made
by the Company, or (ii) eligible to be made by the Company but not so made,
with the effect that such election may not be subsequently made;
(o) any capital expenditure, or group of related capital expenditures,
by the Company of $20,000 or more; or
(p) any other circumstances or conditions known to the Company or the
Shareholders that could result in any of the events referred to in the
foregoing subparagraphs (a) - (o) or any agreement or commitment by or on
behalf of the Company or the Shareholders to do or take any of the actions
referred to in the foregoing subparagraphs (a) - (o).
Section 3.7 Title to Assets.
(a) Real Property.
(i) The Company has good and marketable fee simple title to the
Real Property free and clear of all liens, charges, security interests,
easements, reservations, restrictions, encumbrances or other defects in title
other than those set forth in Schedule 3.7(a) hereto ("Permitted
Encumbrances").
<PAGE>
(ii) The Real Property and the present use and condition
thereof do not violate any applicable deed restrictions or other covenants,
restrictions, agreements, existing site plan approvals, zoning or subdivision
regulations or urban redevelopment plans applicable to the real property as
modified by any duly issued variances, and no permits, licenses or
certificates pertaining to the ownership or operation of the real property,
other than those which are transferable therewith, are required by any
governmental agency having jurisdiction over the Real Property or its
operation.
(iii) All improvements on the Real Property are wholly
within the lot limits of the real property and do not encroach on any
adjoining premises; and there are no encroachments on any of the real property
by any improvements located on any adjoining premises.
(iv) Neither Moore nor DuPuis has any knowledge of any (i)
proposed increases in the property valuation of the Company's real property,
(ii) proposed changes in the real or personal property tax laws or ordinances
(including new laws and ordinances) or (iii) proposed changes in other laws or
regulations (including new laws and ordinances), any of which, if enacted,
would have a material adverse effect on the Company's real property or the
Business.
(v) There are no facts known to Moore or DuPuis that would
prevent any of the Real Property from being occupied after the Closing in
substantially the same manner as before.
(vi) None of the Company's real property is leased to others.
(vii) The Company's manufacturing facilities have at all
times been lawfully occupied and there are no facts known to Moore or DuPuis
that would prevent any of such facilities from being occupied after the
Closing in substantially the same manner as before.
(viii) The Company's manufacturing facilities, and all
improvements thereon, were constructed in compliance with all applicable
federal, state or local statutes, laws, ordinances, regulations, rules, codes,
orders or requirements (including, but not limited to, any building, zoning or
environmental laws or codes) affecting such premises.
(b) Equipment. The Company has good and marketable fee simple title
to the Equipment free and clear of all liens, charges, security interests,
easements, reservations, restrictions, encumbrances and other defects in title
other than those set forth in Schedule 3.7(b) hereto ("Permitted Encumbranc-
es").
(c) Inventory. Except as set forth in Schedule 3.7(c) ("Permitted
Encumbrances"), the Company has good and marketable fee simple title to the
Inventory, free and clear of all encumbrances.
(d) Receivables. The Receivables existing on the Closing Date will
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constitute valid and enforceable claims of the Company, arising in the
ordinary course of the Business and enforceable by the Company in accordance
with the terms of the instruments or documents creating them.
(e) Intangible Property. The Company has the rights to use the Names
in connection with its business as and where now conducted, and the Company is
not a party to any agreement with any other person or entity with respect to
the use of the Names. The Company owns or possesses all licenses and permits,
and any and all rights to use any trademarks, trade names, software or
copyrights necessary or being used to conduct its business as and where now
conducted and has not received any notice of conflict with the asserted rights
of any others. Listed on Schedule 3.7(e) hereto is an accurate and complete
listing of all such trademarks, trade names, software or copyrights owned by,
registered or licensed by the Company, together with a description of all
liens and encumbrances on any of them.
(f) Contract Rights. The rights of the Company under the Contracts
are valid and enforceable by the Company, will at the Closing be enforceable
by Purchaser, in each case in accordance with their respective terms except as
such enforceability may be limited by applicable bankruptcy, insolvency and
other similar laws affecting creditors' rights generally and by such
principles of equity as may affect the availability of equitable remedies.
Neither the Company nor the other parties thereto are in default in any
material respects (nor does any circumstance exist which, with notice or the
passage of time or both, would result in such a default) under said Contracts,
and subject only to obtaining the consents described in Schedule 3.7(f) hereto
with respect thereto, will not violate the terms thereof. All amendments or
supplements to the Material Contracts (as defined in Section 3.15) and all
notices with respect to such Contracts are specifically identified in Schedule
3.15 hereto.
Section 3.8 Condition of Tangible Assets.
(a) Real Property. All electric, gas, water and sewer utilities
serving the Real Property are adequate. There are no zoning or similar land
use restrictions presently in effect or, to the knowledge of Moore or DuPuis,
proposed by any governmental authority, which would impair the use of the Real
Property for the purposes for which it is now being used or now proposed to be
used, and the Real Property is in compliance in all material respects with all
applicable zoning or similar land use restrictions of all governmental
authorities having jurisdiction thereof and with all recorded restrictions,
covenants and conditions affecting the Real Property. No proceedings for the
taking of any of the Real Property by eminent domain by any governmental
authority are pending or, to the knowledge of Moore or DuPuis, threatened.
(b) Environmental Compliance. Except as set forth on Schedule 3.8(b)
hereto, no pollutants or other toxic, infectious or hazardous substances,
materials or wastes (collectively, the "Substances"), including, without
limitation, any solid, liquid, gaseous or thermal irritant or contaminant,
such as smoke, vapor, soot, fumes, acids, alkalis, chemicals or wastes
(including materials to be recycled, reconditioned or reclaimed), petroleum,
petroleum derivatives and petroleum products, asbestos and asbestos-containing
materials, radon gas, methane gas, polychlorinated biphenyls ("PCBs")
(including PCBs in the form of electrical transformers, fluorescent light fix-
<PAGE>
tures with ballasts, cooling oils or any other device or form) and any other
substance, material or waste, which Substances may be regulated or prohibited
by, or may support a cause of action, claim or proceeding under, any federal,
state or local environmental statute or ordinance or regulations promulgated
thereunder (including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, the Superfund Amendments and
Reauthorization Act, the Resource Conservation and Recovery Act, the Toxic
Substances Control Act, the Hazardous Materials Transportation Act, the Clean
Air Act, the Federal Water Pollution Control Act, the Safe Drinking Water Act,
the Occupational Safety and Health Act, the Emergency Planning and Community
Right-to-Know Act, and the Federal Insecticide, Fungicide and Rodenticide
Act), law, ordinance, regulation, rule, requirement, published policy, or
right or remedy existing under common law or in equity (collectively, the
"Statutes and Laws") have been or, prior to the Closing, shall have been,
used, installed, located, spilled, discharged, dispersed, released, stored,
treated, generated, transported to or from, disposed of or allowed to escape
on the Real Property, including, without limitation, the soil and the surface
and subsurface waters of such location in such a manner so as to violate the
Statutes and Laws, or to give rise to liability or potential liability under
the Statutes and Laws or to create a cause of action under the Statutes and
Laws. No investigation, administrative order, governmental notice of
noncompliance or violation, remediation action plan, consent order or
agreement, civil or criminal litigation or settlement with respect to Sub-
stances or underground storage tanks shall be proposed, threatened or in exis-
tence with respect to the Real Property. There are not currently and have
never been any above-ground storage tanks or underground storage tanks located
on the Real Property except as noted in a Phase I Report of a study done n
March 1993, which has been delivered to the Purchaser.
The Real Property and the Company's operations at the Real Property have
at all times been and at the Closing Date shall be in material compliance with
all applicable Statutes and Laws. No notice shall have been served on or
delivered to the Company or any Shareholder from any entity, governmental body
or individual claiming any violation of any Statutes and Laws or demanding
payment or contribution for environmental damage or injury to natural
resources.
(c) Equipment. Moore and DuPuis are making no representation or
warranty with respect to the physical condition of the Equipment, it being the
understanding of the parties hereto that Purchaser is accepting the Equipment
in its "as is" physical condition.
(d) Inventory. The finished goods in the Inventory (with the
exception of manufacturing defects occurring in the ordinary course of
business) consists of items that are saleable in the ordinary course of the
Business and are of a good quality. All items of raw materials and work-in-
process in the Inventory are usable in the Business.
Section 3.9 Leases. Except as set forth in Schedule 3.9 hereto, none
of the Equipment or the Real Property is leased by the Company to any other
party and none of the real or personal property used in the Business is leased
by the Company from any other party.
<PAGE>
Section 3.10 Adequacy of Assets. Except as set forth in Schedule 3.10
hereto, the Assets include all property, contract rights, leases and
intangibles necessary for Purchaser to continue the Business after the Closing
as it is now conducted. Except as set forth in Schedule 3.10 hereto, for such
continuation of the Business as it is now conducted, there are no capital
expenditures which the Company now plans to make or anticipates will be
required to be made in excess of an aggregate of $35,000.
Section 3.11 Loss Contingencies.
(s) Pending or Threatened Litigation. Except as described in Schedule
3.11(a) hereto, there are no material claims, actions, suits or other
proceedings pending, or to the knowledge of Moore or DuPuis, threatened,
against the Company or any of the Assets or the Real Property before any
court, agency or other judicial, administrative or other governmental body or
arbitrator.
(b) Other Loss Contingencies. Except as described in Schedule 3.11(b)
hereto, there are no other material "loss contingencies" (as defined in
Statement of Financial Accounting Standards No. 5 issued by the Financial
Accounting Standards Board in March 1975 ("FAS 5")), which would be required
by FAS 5 to be disclosed or accrued in financial statements of the Company
were such statements prepared at the time this warranty is made or deemed
made.
Section 3.12 Compliance with Law.
(a) Conduct of Business. The Company has conducted its business so
as to comply with, and is in compliance with, all laws, statutes, regulations,
rules and other requirements of any governmental authority applicable to it
(collectively "Legal Requirements").
(b) Investigations. Except as set forth in Schedule 3.12(b) hereto,
there have been no investigations of the Company or the Business known to
Moore or DuPuis conducted by any grand jury, administrative agency or other
governmental authority since January 1, 1990.
(c) Judgments and Orders. There are no outstanding judgments, orders,
writs or decrees of any judicial or other governmental authority binding upon
the Company or its assets.
(d) Capital Expenditures. There are no material capital expenditures
which the Company now anticipates will be required to be made in connection
with the Business as now conducted in order to comply with any existing laws,
regulations or other governmental requirements applicable to the Company's
business, including without limitation requirements relating to occupational
health and safety, the Americans with Disabilities Act and protection of the
environment.
(e) Licenses. The Company holds all of the licenses, permits and
other governmental franchises required for the conduct of the Business as now
conducted, all of which are listed on Schedule 3.12(e) hereto. The Company is
not in default under any such license, or permit or franchise, nor does any
<PAGE>
circumstance exist which with notice or the passage of time or both would
result in such a default.
(f) Improper Payments. Neither the Company or any of the Shareholders
nor any officer, director, employee or other representative of the Company
acting or purporting to act on behalf of the Company or of any business enter-
prise with which the Company has been associated or affiliated, has, directly
or indirectly, made or authorized any payment, contribution or gift of money,
property, or services, in violation of applicable law, (i) as a kickback or
bribe to any person or (ii) to any political organization or the holder of, or
any aspirant to, any elective or appointive office of any nation, state,
political subdivision thereof, or other governmental body or instrumentality.
Section 3.13 Taxes.
(a) Returns and Payment of Taxes. All tax returns due prior to the
Closing Date by the Company and the Shareholders with all taxing authorities
have been or prior to the Closing Date will have been filed, or appropriate
extensions obtained; and all Taxes (as defined in Section 8.3) shown to be due
and payable on such returns, all other Taxes, duties and other governmental
charges payable by the Company and the Shareholders and for the payment of
which there may arise any lien upon the Company's assets subsequent to the
Closing, and all deficiencies, assessments, penalties and interest with
respect thereto notice of which has been received by the Company or the
Shareholders, in each case due and payable on or before the Closing Date, have
been or prior to the Closing Date will have been paid.
(b) Withholding of Taxes. There has been withheld or collected from
each payment made to each employee of the Company the amount of all Taxes
(including without limitation federal income taxes, Federal Insurance
Contributions Act taxes and state and local income, payroll and wage taxes)
required to be withheld or collected therefrom and the same have been paid to
the proper tax depositories or collecting authorities.
(c) Property Taxes. All state or local real and personal property
taxes and assessments for years prior to 1996 imposed on the Company with
respect to, or which may become a lien on, the Assets have been paid in full.
(d) Audits. There are no pending, or to the knowledge of Moore or
DuPuis, threatened, questions or examinations relating to, or claims asserted
for any federal, state or local taxes, including without limitation income,
payroll, wage, withholding or property taxes, against the Company. Except as
set forth on Schedule 3.13(d) hereto, the Company has not been the subject of
any audit by the Internal Revenue Service or any state or local taxing
authorities.
Section 3.14 Employee Matters.
(a) List of Agreements. Except as set forth on Schedule 3.14(a)
hereto, there are no agreements between the Company and any of its employees,
consultants, officers and directors, or any other persons performing services
for the Company, relating to their employment by or performance of services
for the Company or their compensation therefor, other than oral employment
<PAGE>
agreements with employees terminable at will.
(b) Other Information as to Employees and Their Benefits.Schedule
3.14(b) hereto sets forth:
(i) the names of all employees of the Company whose rate of
direct compensation (including wages, salaries and actual or anticipated
bonuses) plus the value of other annual benefits not made available to the
Company's other employees generally, exceeds $25,000 per year, and the rate of
compensation and amount of such other benefits for each such employee; and
(ii) all bonus, pension, profit sharing, deferred compensation,
retirement, hospitalization, medical or dental reimbursement, severance pay,
vacation pay, disability, death benefit, insurance, and other similar plans,
programs or arrangements providing benefits to employees of the Company
(including without limitation all "employee benefit plans" within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) ("Employee Benefit Plans").
(c) Company Plans. Except as disclosed on Schedule 3.14(c) hereto,
neither the Company nor any ERISA Affiliate sponsors, maintains or contributes
to any "employee pension benefit plan" (within the meaning of Section 3(2) of
ERISA). Neither the Company nor any ERISA Affiliate has any liability,
contingent or otherwise, under (i) any Employee Benefit Plan, (ii) any
employee pension benefit plan (within the meaning of Section 3(2) of ERISA)
sponsored, maintained or contributed to by the Company or any ERISA Affiliate
in the past, to any employees, any former employees (or those deriving rights
from either such persons), or the Pension Benefit Guaranty Corporation, or
(iii) any "multiemployer plan" (within the meaning of Section 4001(a)(3) of
ERISA).
(d) Compliance with Laws and Regulations. Each Employee Benefit Plan
has at all times been maintained and operated in compliance with its terms and
the requirements of all applicable laws and regulations, including, without
limitation, ERISA and the Internal Revenue Code of 1986 (the "Code"), and the
Company has received no notice from any governmental authority of any failure
to so comply which failure has not been cured. All reports and returns with
respect to the Employee Benefit Plans required to be filed with any
governmental authority, the failure to so timely file which could have a
material adverse effect on the Company's business or its assets, have been
timely filed. Each Employee Benefit Plan that is a "group health plan" (as
such term is defined in Section 5000(b)(1) of the Code) has been administered
and operated in all respects in compliance with the applicable requirements of
Sections 601 through 607 of ERISA and Section 4980B(f) of the Code ("COBRA"),
and the Company is not subject to any liability for such noncompliance,
including, but not limited to, additional contributions, fines, penalties or
loss of tax deduction as a result of such administration and operation. The
Company does not maintain any Employee Benefit Plan (whether qualified or
nonqualified within the meaning of Section 401(a) of the Code) providing for
retiree health and/or life benefits except as described in Section
3.14(b)(ii). There are no claims, appeals of claims (including litigation) or
alleged fiduciary breaches involving any Employee Benefit Plan presently
asserted or which may foreseeably be asserted with respect to benefits under
<PAGE>
any such Employee Benefit Plan.
(e) Documents Related to Employee Benefit Plans. The Company has
delivered or caused to be delivered to Purchaser true and complete copies of
all material documents in connection with each Employee Benefit Plan,
including, without limitation (where applicable), (i) the text of all Employee
Benefit Plans as in effect on the date hereof, together with all amendments
thereto; (ii) all current summary plan descriptions, summaries of material
modifications and material communications; (iii) all current trust agreements,
declarations of trust and other documents establishing other funding
arrangements (and all amendments thereto and the latest financial statements
thereof); (iv) Form 5500 for the most recent completed fiscal year for each
Employee Benefit Plan which has been filed; (v) the most recently prepared
financial statements; and (vi) all service provider agreements, insurance
contracts, annuity contracts, investment management agreements, subscription
agreements and recordkeeping agreements.
(f) Labor Organizations. The Company is not party to any collective
bargaining agreement with any labor union or similar organization, nor does
Moore or DuPuis know of any such organization which represents or claims to
represent, is currently soliciting union authorization cards from, or intends
to organize any of the Company's employees.
(g) Restrictions on Employees. Except as set forth on Schedule
3.14(g), to the knowledge of Moore and DuPuis, no officer or employee of the
Company is subject to any agreement with any other person or entity which
requires such officer or employee to keep confidential any trade secrets,
proprietary data, customer lists or other business information or which
restricts such officer or employee from engaging in competitive activities or
solicitation of customers.
Section 3.15 Certain Contracts and Transactions. The term "Material
Contracts" shall mean all of the contracts, agreements, commitments or the
like of the Company set forth on Schedules 3.15(a), (b), (c) and (d).
(a) Executory Contracts. Schedule 3.15(a) hereto sets forth all
existing executory material contracts, agreements and commitments of the
Company of any kind or nature, including without limitation contracts,
agreements and commitments which require the Company to make payments
thereunder during the next 12 months from the date of this Agreement in excess
of $25,000, except purchase orders in the ordinary course of business, and
including without limitation all joint venture, partnership and participation
agreements, license agreements, leases, notes or other evidence of indebted-
ness, security agreements, mortgages, noncompetition agreements and powers of
attorney, whether written or unwritten, and all material supply contracts.
(b) Contracts. Except as set forth in Schedule 3.15(b) hereto or
entered into between the date hereof and the Closing Date with Purchaser's
prior consent, the Company is not party to any contract or agreement
(including an option) entered into other than in the ordinary course of the
Business.
(c) Interested Transactions. Except as set forth in Schedule 3.15(c),
<PAGE>
the Company is not party to any contract, agreement, transaction,
understanding or concession with any of the following persons, or in which any
of the following persons have any direct or indirect interest (other than as a
shareholder or employee of the Company):
(i) any shareholder or any director or officer of the Company;
(ii) any of the spouse, parents, siblings and children of any of
the persons described in clause (i); or
(iii) any corporation, trust, partnership or other entity in which
any of the persons described in clauses (i) and (ii) have a beneficial
interest (other than a corporation whose shares are publicly traded and in
which such persons own beneficially in the aggregate no more than 2% of the
equity interests).
(d) Guaranties. Except as set forth on Schedule 3.15(d) hereto the
Company is not a guarantor or otherwise liable for any liability or obligation
(including indebtedness) of any other person.
Section 3.16 Prospective Changes. Except as set forth on Schedule 3.16
hereto, the Company currently has a good relationship with all of its
suppliers and major customers (for purposes of this Section 3.16, a major
customer shall have accounted in 1994 or 1995 for greater than 5% of the
Company's 1994 net sales); to the knowledge of Moore and DuPuis, there are no
impending changes in the Business or the Company's assets, liabilities,
relations with employees, competitive situation, relations with suppliers or
major customers, or in any governmental actions or regulations affecting the
Business, which, if they occur, could have a material adverse effect on the
Company, the Business or the Assets, other than economic or regulatory changes
generally known throughout the Company's industry as a whole and not unique to
the Company's business; neither the Company or any of the Shareholders has any
arrangements to provide discounts, rebates or other payments or concessions to
any of the Company's suppliers or customers; neither Moore nor DuPuis has any
knowledge of any supplier or major customer's considering or having grounds to
consider terminating its business with the Company; neither Moore nor DuPuis
has received since September 30, 1995 any correspondence from any supplier or
major customer regarding any material potential or actual claims or disputes;
Moore and DuPuis have no knowledge that any major customer is intending to
materially reduce its volume of purchases from the Company from the volume
purchased by such customer from the Company in 1995, or that any supplier is
intending to restrict the availability of any of its products from that
available or supplied to the Company in 1995.
Section 3.17 No Material Misstatements or Omissions. The
representations and warranties of the Shareholders in this Agreement and the
written information provided by the Company and the Shareholders to Purchaser
do not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements made therein not misleading
other than economic or regulatory changes generally known throughout the
Company's industry as a whole and not unique to the Company's business.
Section 3.18 Insurance. The Company has fire and casualty insurance
<PAGE>
policies with extended coverage (subject to deductibles) sufficient to allow
it to replace any of its properties or assets that might be damaged or
destroyed. Schedule 3.18 identifies all policies of insurance now in effect
covering the Business and the assets and properties of the Company and all
life insurance policies maintained by them. The Company has delivered an
accurate and complete copy of each of the policies listed on Schedule 3.18 to
Purchaser. The Company has not done anything by way of action or inaction
that invalidates any of such policies in whole or in part.
Section 3.19 S Corporation Election. The Company duly and validly made
an election pursuant to Section 1362(a) of the Code and such election has not
been terminated or revoked. At all times from the year such election was made
up to and including the date hereof, the Company has met all of the require-
ments to be treated as an S Corporation within the meaning of Sections 1361 et
seq. of the Code and shall continue to meet such requirements up to and
including the Closing Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
To induce the Shareholders to enter into this Agreement and to sell the
Shares hereunder, Purchaser hereby represents and warrants that:
Section 4.1 Corporate Organization and Authority. Purchaser is a
corporation duly organized and validly existing in good standing under the
laws of the State of Delaware, with full corporate power and authority to
conduct its business as now conducted and enter into and perform its obliga-
tions under this Agreement, the Consulting and the Noncompetition Agreement
and the Note (collectively, the "Transaction Documents"). Purchaser's
execution, delivery and performance of the Transaction Documents and its
acquisition of and payment for the Shares hereunder have been duly authorized
by all requisite corporate action on the part of Purchaser, and the
Transaction Documents constitute, and all agreements and other instruments and
documents to be executed and delivered by Purchaser hereunder will constitute,
Purchaser's legal, valid and binding obligations, enforceable against Pur-
chaser in accordance with their terms.
Section 4.2 Absence of Conflicts and Consent Requirements. Purchaser's
execution and delivery of the Transaction Documents and the performance of its
obligations thereunder do not and will not conflict with, violate or result in
any default under Purchaser's Certificate of Incorporation or Bylaws or any
mortgage, indenture, agreement, instrument or other contract to which
Purchaser is a party or by which Purchaser or its property is bound, nor will
they violate any judgment, order, decree, law, statute, regulation or other
judicial or governmental restriction to which Purchaser is subject.
Purchaser's execution and delivery of the Transaction Documents and
performance of its obligations thereunder, including the purchase of and
payment for the Shares, 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 4.3 Capitalization. The authorized capital stock of Purchaser
<PAGE>
consists of 7,500,000 shares of Common Stock, divided into 5,000,000 shares of
Class "A" Common Stock and 2,500,000 shares of Class "B" Common Stock, of
which as of the date hereof 1,780,187 shares of Class "A" Common Stock are
issued and outstanding, and 951,213 shares of Class "B" Common Stock are
issued and outstanding; an aggregate of 120,000 shares of Class "A" Common
Stock and 120,000 shares of Class "B" Common Stock are reserved for issuance
pursuant to Purchaser's Non-Qualified Stock Option Plan. Except as set forth
above there is no security, option, warrant, right, call, subscription,
agreement, commitment or understanding of any nature whatsoever, fixed or
contingent, that directly or indirectly (a) calls for the issuance, sale,
pledge or other disposition of any shares of capital stock of Purchaser or any
securities convertible into, or other rights to acquire, any shares of capital
stock of Purchaser or (b) obligates Purchaser to grant, offer or enter into
any of the foregoing.
Section 4.4 Purchaser Shares. The shares of Purchaser's Class A Common
Stock to be issued to Moore at the Closing ("Purchaser Shares"), when so
issued and delivered, will be duly and validly authorized and issued, fully
paid and non-assessable. The offer, issue, sale and delivery of the Purchaser
Shares under the circumstances contemplated by this Agreement will constitute
exempt transactions under the Securities Act, and under any applicable state
securities laws, and the registration thereunder of the Purchaser Shares is
not required under the circumstances contemplated by this Agreement.
Section 4.5 SEC Reports. Purchaser has previously delivered or is
herewith delivering to Moore its (a) Annual Reports on Form 10-K for the
fiscal years ended July 31, 1993, July 30, 1994, and July 29, 1995, as filed
with the Securities and Exchange Commission ("SEC"), (b) proxy statements
relating to Purchaser's meetings of Shareholders during 1994 and 1995, and (c)
periodic report on Form 10-Q for the fiscal quarter ended January 27, 1996, as
filed with the SEC. As of their respective dates, such reports and statements
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Section 4.6 Absence of Material Adverse Change. Since July 29, 1995,
there has been no material adverse change in the business, assets, financial
or other condition of Purchaser and there is no condition, development or
contingency of any kind existing which, individually or in the aggregate, has
a material adverse effect on Purchaser or any significant subsidiary of
Purchaser.
Section 4.7 Pending or Threatened Litigation. Except as set forth on
Schedule 4.7, there are no material claims, actions, suits or other
proceedings pending, or to the knowledge of Purchaser, threatened against
Purchaser or any of its assets before any court, agency or other judicial,
administrative or other governmental body or arbitrator.
Section 4.8 Investment. Purchaser is acquiring the Shares pursuant to
this Agreement for its own account for investment and not with a view to, or
for resale in connection with, any "distribution" thereof within the meaning
of the Securities Act of 1933, as amended.
<PAGE>
Section 4.9 Securities Laws Requirements.
(a) Purchaser understands (i) that the Shares have not been registered
under the Securities Act of 1993, as amended, (the "1993 Act") in reliance
upon an exemption from such registration because the sale to Purchaser is not
in connection with a public offering, (ii) that Purchaser must continue to
bear the economic risk of an investment in the Company for an indefinite time
and (iii) that Purchaser is subject to substantial restrictions on the
transfer of its Shares unless such transfer is registered under the 1933 Act
or an exemption from such transfer is available;
(b) Purchaser understands (i) that the offer and sale of the Shares
has not been registered under state Blue Sky laws in reliance on an exemption
from such registration; (ii) that the Shares purchased by the Purchaser may
not be resold unless such sale is registered under applicable Blue Sky laws in
the state of sale or an exemption from such registration is available; and
(iii) Purchaser further understands that the Company is not under any
obligation to register any of the Shares under the Blue Sky laws in any state;
and
(c) Purchaser is an "accredited investor," as such term is defined in
Rule 501(a) of Regulation D under the 1993 Act.
ARTICLE V
CERTAIN COVENANTS AND AGREEMENTS
Section 5.1 Conduct Prior to Closing. The Shareholders will exercise
control over the Company to assure that the following covenants are met:
(a) Ordinary Course of Business. Through the Closing Date, the
Company will retain exclusive control of the Business and the employees of the
Company; however, unless Purchaser consents otherwise, the Company (i) will
conduct its business only in the ordinary course; (ii) will not make any
expenditures or disbursements other than in the ordinary course or as
permitted by clause (iii) or (iv) below; (iii) will not make any payments to
the Shareholders or their affiliates, except for the payment of salary to
Moore in the usual amount and normal rent to Moore and DuPuis under the Lease;
and (iv) will not make any payments to attorneys, accountants, investment
bankers or consultants or any payment with respect to fees or expenses
incurred in connection with this transaction; (v) will dispose of any of its
Inventory only in the ordinary course; (vi) will not dispose of any Assets
(other than Inventory) or Real Property; and (vii) will not knowingly take any
other action which would cause any representation or warranty made in Article
II or III hereof to be incorrect in any material respect if such repre-
sentation or warranty were made on any date from the date hereof through the
Closing Date.
(b) Notice of Material Developments. From the date hereof until the
Closing, the Company and the Shareholders will give prompt written notice to
Purchaser of any material development affecting the Assets, Liabilities,
Business, Real Property or the Company's results of operations. Each party
hereto will give prompt written notice to the other parties of any material
<PAGE>
development affecting the ability of such party to consummate the transactions
contemplated by this Agreement. No disclosure by any party pursuant to this
Section 5.1(b), however, shall be deemed to amend or supplement any schedule
hereto or to prevent or cure any misrepresentation, breach of warranty or
breach of covenant.
(c) Capital Stock. Through the Closing Date, the Company shall not
issue any capital stock, declare or pay any stock dividends, make any other
distributions with respect to its capital stock or grant any options or rights
to acquire any of its capital stock.
(d) Salary; Bonus; Directors' Fees. Through the Closing Date, the
Company shall not increase the salary or increase the bonus compensation pay-
able to any employee of the Company (except wage increases in the normal
course of business) and shall not increase the compensation or fees payable to
any director of the Company.
(e) Access. Through the Closing Date, the Company shall, at
reasonable times during normal business hours, give Purchaser and its agents,
attorneys and representatives full access to such of its properties, books,
records and documents as Purchaser may reasonably request; provided, however,
that until the Closing, Purchaser shall not disclose and shall cause its
agents, attorneys and representatives not to disclose to any other party any
confidential data or information secured from the Company.
(f) Insurance. The risk of loss or damage to each Asset shall be that
of the Company until the Closing Date. Through the Closing Date, the Company
shall, unless Purchaser otherwise consents, maintain in effect all of its
current insurance policies. In the event of any loss or damage to the Assets
covered by such insurance policies, the Company, as the case may be, shall use
the proceeds therefrom to repair or restore the damaged or lost Asset or pay
such proceeds to Purchaser at Closing, as Purchaser may elect.
(g) Press Releases and Announcements. Prior to and after the Closing
Date, neither Purchaser, the Company nor the Shareholders shall disclose the
Purchase Price or any other terms of this transaction without the prior
written consent of the other parties hereto, except as such disclosure may be
required by applicable law or is otherwise contemplated herein.
(h) Preservation of Business. Through the Closing Date, the Company
and the Shareholders will use their best efforts to (i) preserve the Company's
present business organization intact, (ii) retain the services of the
Company's present officers and employees, (iii) preserve the present rela-
tionships of the Company with its customers, suppliers and other persons with
whom it has business dealings, and (iv) preserve the good will of the
Business.
(i) Necessary Consents and Other Actions. The Company, the
Shareholders and Purchaser shall use their best efforts to obtain such written
consents, approvals, waivers and clearances as are necessary to consummate the
transactions contemplated by this Agreement. The Company, the Shareholders
and Purchaser shall cooperate and use their respective best efforts to prepare
all documentation, to effect all filings, to obtain all permits, consents,
<PAGE>
approvals and authorizations of all third parties and governmental authorities
necessary to consummate the transactions contemplated by this Agreement, and
to take all such other actions necessary to cause the transactions
contemplated by this Agreement to be consummated as expeditiously as is
reasonably practicable. Without limiting the foregoing, the Shareholders
agree that they will take all action necessary to ensure that all corporate
approvals on behalf of the Company are obtained.
(j) Exclusivity. The Company and the Shareholders shall refrain from,
and shall cause the officers, employees and agents of the Shareholders and the
Company to refrain from, directly or indirectly, soliciting, encouraging,
initiating or engaging in any discussions with, providing any information to,
or considering any proposal from any corporation, partnership or other entity
or group (including without limitation parties who have previously expressed
an interest in the Company), other than Purchaser, concerning any merger, sale
of assets, sale of shares of capital stock, share exchange or similar
transaction involving the Company (all such transactions are hereinafter
referred to as "Acquisition Proposals"). The Shareholders will inform
Purchaser promptly of any inquiry that they may receive regarding an Acquisi-
tion Proposal.
Section 5.2 Further Assurances. The Shareholders and Purchaser each
hereby covenants and agrees with the other that at any time and from time to
time it or he will promptly execute and deliver to the other such further
assurances, instruments and documents (including on the part of the
Shareholders any and all assignments, certificates of title, powers of
attorney and other documents or instruments of conveyance and transfer, as
Purchaser may reasonably request, in order to vest in Purchaser title to the
Shares, free and clear of all liens, charges, encumbrances and security
interests whatsoever and take such further action as the other may reasonably
request in order to carry out the full intent and purpose of this Agreement.
Section 5.3 Access to Records. From and after the Closing Date, the
Shareholders and Purchaser shall provide to one another, upon reasonable prior
notice and during normal business hours, access to such respective books and
records of the Company and Purchaser as may reasonably be required by the
other such party for (a) the purpose of making any necessary tax filings
and/or investigating and defending audit claims by any taxing authority and
(b) such other proper purpose stated in such notice.
Section 5.4 Fees and Expenses. Purchaser shall bear its own expenses
in connection with the negotiation and preparation of this Agreement and the
consummation of the transactions contemplated hereby, including without
limitation the fees and expenses of its counsel, accountants and consultants.
The Shareholders and the Company each shall bear their respective expenses in
connection with the negotiation and preparation of this Agreement and the
consummation of the transactions contemplated hereby, including without
limitation the fees and expenses of their respective counsel, accountants,
consultants and brokers to the Shareholders or the Company; provided, however,
the separate fees and expenses to be paid by the Company, except any broker's
fee claimed to be owing to BKD Financial L.L.C., shall be paid prior to the
Closing Date. The costs associated with the 1995 audit will be the
responsibility of the Company and not of the Shareholders.
<PAGE>
Section 5.5 Brokers. The Shareholders, on the one hand, and Purchaser,
on the other hand, each represents and warrants to the other that no broker or
finder has been involved or engaged by it in connection with the transactions
contemplated hereby, other than the claim of BKD Financial L.L.C., which shall
be the sole and exclusive responsibility of the Shareholders, and each hereby
agrees to indemnify and save harmless the other from and against any and all
broker's or finder's fees, commissions or similar charges incurred or alleged
to have been incurred by the indemnifying party in connection with the trans-
actions contemplated hereby and any and all loss, liability, cost or expense
(including reasonable attorneys' fees) arising out of any claim that the
indemnifying party or the Company incurred any such fees.
Section 5.6 Certain Tax Matters. The parties acknowledge and agree
that the status of the Company as an S corporation under Section 1361 of the
Code will terminate as of the Closing Date due to the Company's ceasing to
meet the eligibility requirements for continuing such status due to the
acquisition of the Shares by Purchaser. A notification of that termination
shall be attached to the tax returns of the Company for the taxable year of
the Company with respect to which the termination occurs. The parties agree
that the portion of the taxable year of the Company ending at the close of the
day prior to the termination of the Company's S election shall be treated as a
short taxable year for which the Company is an S corporation (the "S short
year") and that the portion of the Company's taxable year beginning on the day
the termination is effective shall be treated as a short taxable year for
which the Company is a C corporation (the "C short year"). The parties
further agree that all items of income, gain, loss, deduction and credit of
the Company shall be assigned to the S short year and the C short year,
respectively, based on a closing of the books of the Company as of the end of
the S short year rather than based on a pro rata allocation of those items for
the entire taxable year of the Company. Such assignment shall be made on the
basis of the Company's normal method of accounting as determined under Section
446 of the Code and as otherwise shall be in accordance with the provisions of
Section 1362 of the Code and the Regulations thereunder. The parties agree
that they shall cooperate with each other in preparing and filing any
elections or other documentation necessary to effect a closing of the books of
.the Company for these purposes in accordance herewith. The parties agree
that Moore shall prepare and file any and all tax returns required of the
Company for the taxable year of the Company of which the S short year is a
part and the Purchaser shall prepare and file any and all tax returns required
of the Company for the taxable year of the Company of which C short year is a
part, and all parties agree to include in taxable income each party's share of
items of income, gain, loss, deduction and credit assigned to them, as
applicable, under the above terms and provisions, with such filings being
subject to the review by each party of the other's tax return for the
respective portions of the tax year and each party's good faith consideration
of the other party's reasonable requests and comments. The parties agree to
cooperate with one another and provide such information as any shall deem
necessary or advisable in order to properly account for, and report for
taxation, the operations of the Company during the taxable year of the Company
of which the S short year and C short year are a part. Further, the parties
agree to cooperate with one another and their respective agents, including
accounting firms and legal counsel, in connection with the preparation of tax
returns and reports of the Company for the S short year and C short year,
<PAGE>
including, without limitation, making available all information, records and
documents in their respective possession as applicable thereto. The parties
agree to make available, as reasonably requested, personnel responsible for
preparing, maintaining and interpreting such information, records and
documents. The parties agree to keep confidential such information, records
and documents, except as otherwise may be necessary in connection with the
filing of tax returns and reports and dealing with refund claims, audits, tax
claims and litigation related thereto.
ARTICLE VI
CLOSING
Section 6.1 Time and Place of Closing. The consummation of the
purchase and sale transaction contemplated hereby (the "Closing") shall be
held at the offices of Kennedy Covington Lobdell & Hickman, L.L.P.,
NationsBank Corporate Center, Suite 4200, 100 North Tryon Street, Charlotte,
North Carolina, commencing at 9:00 A.M. eastern daylight saving time on or
before April 30, 1996. The date on which the Closing occurs is referred to
herein as the "Closing Date." At the Closing, subject to the fulfillment or
waiver of the conditions set forth in this Article VI, the Shareholders shall
transfer the Shares to Purchaser by appropriate instruments of transfer, and
Purchaser shall pay to the Shareholders the Purchase Price in the manner
provided in Section 1.2.
Section 6.2 Conditions to Purchaser's Obligations. The obligations of
Purchaser to complete the Closing are contingent upon the fulfillment of each
of the following conditions on or before the Closing Date, except to the
extent that Purchaser may, in its absolute discretion, waive any one or more
thereof in whole or in part:
(a) Bringdown. The representations and warranties of the Shareholders
set forth in this Agreement shall be true and correct in all material respects
on the Closing Date with the same force and effect as though made on the
Closing Date; all terms, covenants and conditions to be complied with and
performed by the Shareholders under the Agreement on or before the Closing
Date shall have been duly complied with and duly performed in all material
respects; and the Shareholders shall have delivered to Purchaser at Closing a
certificate, dated the Closing Date, to such effect;
(b) Share Certificates. Certificates for all of the Shares, together
with all appropriate endorsements, stock powers and assurances, shall have
been delivered to Purchaser in accordance with Section 1.3.
(c) No Material Adverse Change. There shall not have been any
material adverse change in the business, assets, financial or other condition
of the Company;
(d) No Adverse Proceedings. No action, suit or proceeding before any
court or any governmental or regulatory authority shall have been commenced,
no investigation by any governmental or regulatory authority shall have been
commenced, and no action, suit or proceeding by any governmental or regulatory
authority shall have been threatened, against any of the parties to this
<PAGE>
Agreement, or any of the principals, officers or directors or any of them, or
any of the Assets seeking to restrain, prevent or change the transactions
contemplated hereby or questioning the validity or legality of any of such
transactions or seeking damages in connection with any of such transactions;
(e) Legal Opinion. There shall have been delivered to Purchaser the
written legal opinion of Rodger N. Bowman, Esq., counsel to the Shareholders,
dated the Closing Date, in substantially the form and to substantially the
effect set forth as Exhibit A hereto;
(f) Other Assurances. The Shareholders shall have delivered to
Purchaser such other and further certificates, assurances and documents as
Purchaser may reasonably request in order to evidence the accuracy of the
Shareholders' representations and warranties, the performance of their cove-
nants and agreements to be performed at or prior to the Closing, and the
fulfillment of the conditions to Purchaser's obligations;
(g) Good Standing Certificates. Purchaser shall have received a
certificate of good standing of the Company from the State of Tennessee;
(h) Certified Resolutions. Purchaser shall have received certified
resolutions of the Board of Directors of the Company, in form and substance
reasonably satisfactory to Purchaser, authorizing the transactions contem-
plated hereby, and all actions to be taken by the Company hereunder;
(i) Certified Charter Documents and Bylaws. Purchaser shall have
received certified copies of the Company's Articles of Incorporation and
Bylaws.
(j) Consulting and Noncompetition Agreement. Purchaser and DuPuis
shall have entered into the Consulting and Noncompetition Agreement
substantially in the Form of Exhibit B hereto (the "Noncompetition
Agreement").
(k) Employment Agreements. Each of the key employees of the Company
listed on Schedule 6.2(k) shall have entered into employment agreements with
the Company substantially in the form of Exhibit C hereto.
(l) Resignation of Directors and Officers; Release of Claims. Each
director and officer of the Company shall have resigned as such effective as
of the Closing Date. The Shareholders shall have each executed a release in a
form reasonably satisfactory to Purchaser pursuant to which such Shareholder
releases any and all claims it may have against the Company and its assets,
including without limitation any claims for compensation, expense reimburse-
ment, benefits or rent.
(m) Releases. The TransFinancial Pledge and the Capital Stock Plan
Claim shall have been released to the Purchaser's full satisfaction.
(n) Consents and Terminations. All consents identified in Items 1
through 4 of Schedule 2.2 shall have been obtained and the agreements
identified in Items 6 and 7 of Schedule 2.2 shall have been terminated, all to
Purchaser's satisfaction.
<PAGE>
(o) Due Diligence Review. Purchaser shall have completed to its full
satisfaction a review of the Company's business, operations, accounting,
corporate proceedings, tax status and any matters raised in the Schedules to
this Agreement and the results of such review shall be satisfactory to
Purchaser in its sole discretion.
Section 6.3 Conditions to the Shareholders' Obligations. The obli-
gations of the Shareholders to complete the Closing are contingent upon the
fulfillment of each of the following conditions on or before the Closing Date,
except to the extent that the Shareholders may, in their absolute discretion,
waive any one or more thereof in whole or in part:
(a) Bringdown. The representations and warranties of Purchaser set
forth in this Agreement shall be true and correct in all material respects on
the Closing Date with the same force and effect as though made on the Closing
Date; all terms, covenants and conditions to be complied with and performed by
Purchaser under this Agreement on or before the Closing Date shall have been
duly complied with and duly performed in all material respects; and Purchaser
shall have delivered to the Shareholders at Closing a certificate signed by an
executive officer, dated the Closing Date, to such effect;
(b) Payment of Purchase Price. Purchaser shall have paid to the
Shareholders the Purchase Price;
(c) No Adverse Proceedings. No action, suit or proceeding before any
court or any governmental or regulatory authority shall have been commenced,
no investigation by any governmental or regulatory authority shall have been
commenced, and no action, suit or proceeding by any governmental or regulatory
authority shall have been threatened, against any of the parties to this
Agreement, or any of the principals, officers or directors or any of them, or
any of the Assets, seeking to restrain, prevent or change the transactions
contemplated hereunder or questioning the validity or legality of any of such
transactions or seeking damages in connection with any of such transactions;
(d) Other Assurances. Purchaser shall have delivered to the
Shareholders such other and further certificates, assurances and documents as
the Shareholders may reasonably request in order to evidence the accuracy of
Purchaser's representations and warranties, the performance of its covenants
and agreements to be performed at or prior to the Closing, and the fulfillment
of the conditions to the Shareholders' obligations;
(e) Good Standing Certificates. The Shareholders shall have received
a good standing certificate from the State of Delaware and a certificate from
the Secretary of State of North Carolina that Purchaser is qualified to do
business in North Carolina;
(f) Certified Resolutions. The Shareholders shall have received
certified resolutions of the Board of Directors of Purchaser, in form and
substance reasonably satisfactory to the Shareholders, authorizing Purchaser's
execution, delivery and performance of this Agreement, the transactions
contemplated hereby and thereby, and all actions to be taken by Purchaser
hereunder and thereunder;
<PAGE>
(g) Consulting and Noncompetition Agreement. Purchaser and DuPuis
shall have entered into the Consulting and Noncompetition Agreement.
ARTICLE VII
INDEMNIFICATION
Section 7.1 Indemnification by Shareholders.
(a) Indemnification. Moore and DuPuis shall, jointly and severally,
indemnify and hold harmless Purchaser, its successors and assigns, from and
against any and all liabilities, losses, damages, actions, suits, proceedings,
claims, demands, assessments, fines, penalties, judgments, fees, costs and
expenses (including reasonable accountants' and attorneys' fees), of every
nature and character, to the extent not covered by insurance, (hereinafter
referred to as a "Loss" or "Losses"), which Purchaser, its successors and
assigns, or any one or more of them, may sustain or incur, directly or
indirectly, arising out of or incident to or by reason of any of the follow-
ing:
(i) The falsity or incorrectness of any representation or
warranty made by Moore and DuPuis in this Agreement or any breach
of any representation or warranty or of any covenant to be per-
formed by or on the part of any of the Shareholders under this
Agreement or any document, certificate, or other agreement or
instrument entered into, furnished or to be furnished by the
Company or any of the Shareholders pursuant to this Agreement;
provided, that neither Moore nor DuPuis shall be liable for the
falsity or incorrectness of any representation or warranty
identified in Schedule 7(1)(a) hereto unless he knew of such
falsity or incorrectness at the Closing Date.
(ii) Any levy or other claim by any third party against or with
respect to the Shares or any other claim by any third party against
Purchaser or the Company, including any claim by BKD Financial
L.L.C., arising out of any act or omission or alleged act or
omission of the Company or any of the Shareholders prior to the
Closing; provided, that neither Moore nor DuPuis shall be liable
for the falsity or incorrectness of any representation or warranty
identified in Schedule 7(1)(a) hereto unless he knew of such
falsity or incorrectness at the Closing Date.
(b) Indemnification by Glover. Glover shall indemnify and hold harm-
less Purchaser, its successors and assigns, from and against any and all
liabilities, losses, damages, actions, suits, proceedings, claims, demands,
assessments, fines, penalties, judgments, fees, costs and expenses (including
reasonable accountants' and attorneys' fees), of every nature and character
(hereinafter referred to as a "Loss" or "Losses"), which Purchaser, its
successors and assigns, or any one or more of them, may sustain or incur,
directly or indirectly, arising out of or incident to or by reason of the
<PAGE>
falsity or incorrectness of any representation or warranty made by Glover with
respect to himself or his Shares in Sections 2.1, 2.2 and 2.3 above or any
breach of any such representation or warranty, or his breach of any covenant
to be performed by him under this Agreement or any document, certificate, or
other agreement or instrument entered into, furnished or to be furnished by
him.
(c) Notice. If any matter shall arise which may involve or give rise
to a claim by Purchaser against the Shareholders, or any one or more of them,
under the provisions of this Section 7.1 (an "Indemnity Claim"), Purchaser
shall give prompt notice thereof to such Shareholder at the address provided
in Section 8.8 stating the general nature of the Indemnity Claim and shall
thereafter give prompt notice of any change therein.
(d) Third Party Claim. If the Indemnity Claim involves any claim made
by any third party against Purchaser, the Company or the Shares (a "Third
Party Claim"), then within 60 days of such original notice of such Indemnity
Claim, the Shareholders, may elect (by written notice to Purchaser) to assume
the defense of such Third Party Claim. If a Shareholder so elects to assume
such defense, then (i) Purchaser shall not enter into any settlement of such
Third Party Claim without the consent of such Shareholder, which consent shall
not be unreasonably withheld, and (ii) such Shareholder agrees to cooperate
with Purchaser in connection with such defense and to permit Purchaser to
participate therein; provided, however, that Shareholder shall not be liable
to Purchaser under the provisions hereof for any legal or other expenses
incurred by Purchaser in connection with Purchaser's participation in the
defense of such Third Party Claim after a shareholder has elected to assume
the defense thereof. In the event that such Shareholder shall assume the
defense of a Third Party Claim and so long as such Third Party Claim is being
contested in good faith, then such Shareholder shall not be required to pay or
discharge such Third Party Claim except to the extent that the failure to so
pay or discharge such Third Party Claim during the period of such contest may
result in (i) a forfeiture of, or the imposition of any lien or charge upon,
any of the assets of Purchaser or the Shares or (ii) an interruption in, or
material adverse effect upon, the operation of Purchaser's business, in either
of which cases such Shareholder, shall either (A) pay or discharge the Third
Party Claim to such extent or (B) provide the Purchaser with a bond with sure-
ty(ies) reasonably acceptable to Purchaser which will adequately compensate
the Purchaser for any loss resulting from the failure to so pay or discharge
such Third Party Claim.
Any notice or consent to be given by Moore or Glover under this subpara-
graph (c) shall be deemed to have been duly authorized if given by Moore.
(e) Continued Liability for Indemnity Claims. The liability of the
Shareholders hereunder with respect to each Indemnity Claim shall continue, if
presented within the applicable time period provided in Section 8.5, for so
long as such Indemnity Claim may be made under and, with respect to any such
Indemnity Claim made, thereafter until such Shareholders' liability therefor
is finally determined and satisfied, whether by payment in full or otherwise.
(f) Deductible Losses. The Shareholder shall not have any liability
for any Loss otherwise indemnifiable under this Article VII to the extent of
<PAGE>
the first $25,000, on a cumulative aggregate basis, of Losses otherwise
indemnifiable hereunder.
Section 7.2 Set Off.
(a) Right to Set Off. In addition to Purchaser's right of
indemnification hereunder, it is understood and agreed by the Shareholders
that at any time after the Closing Date, Purchaser may set-off any unpaid
amounts owed it by any of them pursuant to this Agreement (whether under
Section 7.1 or another provision hereof, including without limitation Sections
1.8 and 3.7(d)) against amounts due and payable to any such Shareholder
pursuant to the Note or the Consulting and Noncompetition Agreement (the
"Instruments") or pursuant to Section 1.5 of this Agreement. In addition, in
the event the amounts to be set-off by Purchaser exceed the amount then
payable under the Instruments, the Shareholders shall, jointly and severally,
be obligated to pay Purchaser the amount of such excess (with interest thereon
as provided in this Agreement) within five (5) business days after demand for
payment by Purchaser.
(b) Set Off Procedure. With respect to Purchaser's right to set off
amounts due under Section 1.10 of this Agreement and under the Instruments, in
the event Purchaser asserts an Indemnity Claim in writing under this Section
7.1, the Purchaser shall notify Moore, or, as appropriate, DuPuis, setting
forth its then good faith estimate of the reasonably foreseeable maximum
amount of its claim for indemnification (the "Indemnity Notice"). If either
Moore or DuPuis objects to an Indemnity Claim, he shall provide Purchaser a
notice in writing setting forth in reasonable detail the basis for such
dispute within five (5) business days of his receipt of the Indemnity Notice.
In the event Moore or DuPuis disputes part of, but not all of, an Indemnity
Claim, then, to the extent applicable, he shall so indicate in his notice. To
the extent that Moore or DuPuis does not dispute all or any part of any
Indemnity Claim, Purchaser may set off the undisputed amount against the next
regularly scheduled payment to Moore or DuPuis under the Noncompetition
Agreement or, to the extent not already set off, any payment due under Section
1.5 hereof. In the event Moore or DuPuis disputes all or any part of an
Indemnity Claim, Purchaser shall not set off any such disputed amount until
(i) all differences shall have been resolved by agreement or (ii) ten business
days after the entry of an order, judgment or decree of a court of competent
jurisdiction, or final arbitration award, adjudicating and declaring the
respective rights of the adverse claimants.
Section 7.3 Indemnification by Purchaser. The Purchaser shall
indemnify and hold harmless the Shareholders, their successors and assigns,
from and against any and all liabilities, losses, damages, actions, suits,
proceedings, claims, demands, assessments, fines, penalties, judgments, fees,
costs and expenses (including reasonable accountants' and attorneys' fees) of
every nature and character which the Shareholders, their successors and
assigns, or any one or more of them, may sustain or incur, directly or
indirectly, arising out of or incident to or by reason of the falsity or
incorrectness of any representation or warranty made by Purchaser in this
Agreement or any breach of any representation, warranty or covenant to be
performed by or on the part of Purchaser under this Agreement or any document,
certificate, or other agreement or instrument entered into, furnished or to be
<PAGE>
furnished by Purchaser pursuant to this Agreement and any payment required to
be made by Purchaser hereunder shall be made within five (5) business days
after demand for payment by the Shareholders.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Merger Clause. This Agreement contains the final, complete
and exclusive statement of the agreement between the parties with respect to
the transactions contemplated herein and all prior or contemporaneous written
or oral agreements with respect to the subject matter hereof are merged
herein.
Section 8.2 Termination.
(a) Purchaser may terminate this Agreement without liability and
without waiving any of its rights at law or in equity by giving written notice
to the Shareholders at any time prior to the Closing (i) in the event any of
the Shareholders or any of them is in material breach of any representation,
warranty or covenant contained in this Agreement or (ii) if the Closing shall
not have occurred on or before April 30, 1996 by reason of the failure of any
of the Shareholders to satisfy any condition under Section 6.2 hereof (unless
the failure results primarily from Purchaser's breaching any representation,
warranty or covenant contained in this Agreement).
(b) The Shareholders may terminate this Agreement without liability
and without waiving any of their rights at law or in equity under this
Agreement by giving written notice to Purchaser at any time prior to Closing
(i) in the event Purchaser is in material breach of any representation,
warranty or covenant contained in this Agreement or (ii) if the Closing shall
not have occurred on or before April 30, by reason of the failure of Purchaser
to satisfy any condition under Section 6.3 hereof (unless the failure results
primarily from any of the Shareholders' breaching any representation, warranty
or covenant contained in this Agreement).
(c) If this Agreement is terminated prior to the Closing pursuant to
subsection (a) or (b) above, Purchaser, on the one hand, and the Shareholders,
on the other, shall promptly deliver to the other party any and all documents
and other materials obtained from such other party or produced by Purchaser or
the Company and the Shareholders, as the case may be, and containing any
confidential information of such other party, together with any and all copies
thereof.
Section 8.3 Certain Definitions. For purposes of this Agreement:
(a) "Assets" shall mean all of the assets of the Company, including
without limitation all of the following items listed in subparagraphs (i) -
(xi) of this Section 8.3(a):
(i) all of the Company's inventory, raw materials, work in
process and finished goods (collectively, the "Inventory"), including the
proceeds therefrom;
<PAGE>
(ii) all rights, title and interest of the Company under all
contracts, agreements, understandings and commitments whatsoever relating to
the Business, including all rights of refund and offset, all privileges,
deposits, claims, causes of action and options relating or pertaining thereto
("Contracts");
(iii) all customer deposits on current contracts;
(iv) all prepaid expenses, unearned insurance premiums, rental
credits, deferred costs and expenses, and all other items of the type
classified as "current assets" in accordance with GAAP;
(v) all fixtures, machinery and equipment, computers, pollution
abatement equipment, office equipment and supplies, other supplies, furniture,
parts and other tangible personal property owned or used (whether or not cur-
rently used) by the Company in the conduct of the Business, whether located at
the Company's premises elsewhere, and any additions or accessions thereto or
substitutions therefor or proceeds thereof (the "Equipment");
(vi) all real property and interests in real property and build-
ings, structures and improvements thereon (including all easements, rights-of-
way, water rights, tenements, hereditaments, appurtenances, fixtures and other
real property rights appertaining thereto) owned by the Company and more
particularly described in Exhibit D attached hereto (the "Real Property").
(vii) (A) all rights of the Company in the names and any
trademarks or service marks in connection therewith and the goodwill of the
business in connection therewith (the "Names"), (B) all other trade names,
trademarks, service marks, copyrights, patents, and registrations thereof or
applications therefor, and trade secrets, secret processes, customer lists,
inventions, formulae, computer programs and software (along with license
rights pertaining thereto), and other intellectual property belonging to, used
in or appertaining to Seller's business, and the goodwill of the business in
connection therewith (together with the Names, the "Intangible Property"), and
(C) all other goodwill and going concern value of the Business;
(viii) all of the Company's books, records, papers and instru-
ments of whatever nature and wherever located, whether stored in or readable
or accessible by computer or otherwise, that relate to the Business or Assets
or that are required or necessary in order for Purchaser to conduct the
Business from and after the Closing Date in the manner in which it is
presently being conducted, corporate minute books, stock records, income tax
records and all other records of the Company;
(ix) all accounts receivable, proceeds related to Assets other
than Inventory or rebates due from any supplier, distributor or other entity,
but exclusive of the Inter-Company Receivables (the "Receivables");
(x) all of the Company's federal, state and local permits,
authorizations, certificates, approvals, registrations, variances, exceptions,
franchises, grants and licenses of every kind and character required for the
<PAGE>
conduct of its business; and
(xi) all cash on deposit and all cash on hand and in petty cash
funds.
(b) "Fair Market Value" of Purchaser's Class A Common Stock shall mean
the average of the daily closing prices reported by the American Stock
Exchange during the prior 30 trading days, with trading days in which no
trades of Purchaser's Class A Common stock were reported being excluded from
the calculation.
(c) "Interest Rate" shall mean a rate of six percent (6%) per annum.
(d) "Lease" shall mean that certain lease agreement between the
Company and Moore and DuPuis dated March __, 1996, covering the Clarksville
office building occupied by the Company.
(e) "Liability" shall mean any liability or obligation of any kind or
nature of the Company, whether known or unknown, whether absolute or
contingent, whether liquidated or unliquidated, whether due or to become due;
provided, however, "Liability" shall not include any cost or expense to be
borne by the Shareholders under this Agreement, including without limitation
those specified in Sections 5.4 and 5.5.
(f) "Taxes" means any federal, state, local or foreign income, gross
receipt, license, payroll (including without limitation FICA and FUTA),
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Sec. 59A of the Internal Revenue Code of
1986, as amended), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, workers'
compensation (including any assessments or reassessments of workers'
compensation arrangements), real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
stamp or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
Section 8.4 Parties in Interest. Nothing in this Agreement, whether
expressed or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties hereto and
their respective successors and permitted assigns, nor is anything in this
Agreement intended to relieve or discharge the obligations or liability of any
third persons to any party to this Agreement, nor shall any provisions give
any third persons any right of subrogation of action over or against any party
to this Agreement.
Section 8.5 Survival of Representations and Covenants. All of the
representations, warranties, covenants and agreements of the Shareholders con-
tained in this Agreement and given pursuant hereto shall survive the Closing
and survive for a period of three years from the Closing Date except (a) those
in Sections 2.1 and 2.2, to the extent they relate to title to Shares, which
shall survive in perpetuity, (b) those with respect to environmental matters,
which shall survive for a period of five years from the Closing Date, and (c)
those with respect to tax matters, which shall survive until the expiration of
<PAGE>
the applicable statutes of limitation subject to any extensions thereof. All
of the representations, warranties, covenants, and agreements of Purchaser
contained in this Agreement and given pursuant hereto shall survive the
Closing for a period of five (5) years from the Closing Date.
Section 8.6 Amendments; Waivers. No change, amendment, qualification
cancellation or waivers hereof shall be effective unless in writing and
executed by Purchaser and by or on behalf of the Shareholders.
Section 8.7 Benefits and Binding Effect. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
Section 8.8 Notices. All notices, requests, consents, approvals,
demands, waivers or other communications hereunder shall be in writing and
sent by (a) personal delivery, (b) certified or registered mail, postage
prepaid or (c) overnight courier, to the parties at the following addresses or
such other addresses as may be designated in writing by the respective
parties:
(i) as to Moore or Glover:
Kenneth O. Moore
412 Savannah Trace Drive
Clarksville, Tennessee 37040
copy to:
Rodger N. Bowman, Esq.
P. O. Box 1404
Clarksville, Tennessee 37041-1404
(ii) as to DuPuis:
Walter A. DuPuis
200 Ussery Road
Clarksville, Tennessee 37043
(iii)as to the Company:
American West Trading Company
1751 Jardco Drive
Clarksville, Tennessee 37040
copy to:
Rodger N. Bowman, Esq.
P. O. Box 1404
Clarksville, Tennessee 37041-1404
(iv) as to Purchaser:
McRae Industries, Inc.
402 North Main Street
Mount Gilead, North Carolina 27306
Attention: President
<PAGE>
copy to:
Clarence W. Walker, Esq.
Kennedy Covington Lobdell & Hickman, L.L.P.
NationsBank Corporate Center
100 North Tryon Street, Suite 4200
Charlotte, North Carolina 28202-4006
Notices shall be deemed effective upon receipt in the case of personal
delivery or via overnight courier or three business days after the date of
mailing.
Section 8.9 Captions. The captions herein are for convenience of
reference only and shall not be construed as a part of this Agreement.
Section 8.10 Calendar versus Business Days. References in this Agreement
to time periods in terms of a certain number of days shall mean calendar days
unless expressly stated herein to be business days.
Section 8.11 Governing Law. This Agreement shall be construed,
interpreted, enforced and governed by and under the laws of the State of
North Carolina.
Section 8.12 Schedules and Exhibits. All of the Schedules and Exhibits
hereto referred to in this Agreement are hereby incorporated herein by
reference and shall be deemed and construed to be a part of this Agreement for
all purposes.
Section 8.13 Shareholders Guarantees. DuPuis and Moore, individually,
jointly, and with their spouses, have been required to guaranty the
performance of the company on certain Notes, (see Schedule 8.13). Purchaser
shall give its best effort to have Moore, DuPuis, and their spouses released
from the personal guaranties as set out in Schedule 8.13.
Section 8.14 Severability. The invalidity or unenforceability of any one
or more phrases, sentences, clauses or provisions of this Agreement shall not
affect the validity or enforceability of the remaining portions of this
Agreement or any part thereof.
Section 8.15 Counterparts. This Agreement may be executed in any number
of counterparts, all of which shall constitute one and the same instrument.
* * *
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed
by the Shareholders and Purchaser, as of the day and year first above written.
/s/ Kenneth O. Moore
Kenneth O. Moore
/s/ Walter A. Dupuis
Walter A. DuPuis
/s/ William L. Glover
William L. Glover
MCRAE INDUSTRIES, INC.
By:/s/ Branson J. McRae
Branson J. McRae, President
<PAGE>
INDEX OF EXHIBITS AND SCHEDULES
Exhibit Description
A Opinion of Rodger N. Bowman, Esq.
B Consulting and Non-Competition Agreement
C Employment Agreement
D Real Property Description
Schedule Description
2.2 Conflicts; Required Consents
3.2 Subsidiaries
3.3 Consent Requirements
3.5 Additional Disclosed Liabilities
3.6 Certain Changes
3.7(a) Real Estate Encumbrances
3.7(b) Equipment Encumbrances
3.7(c) Inventory Encumbrances
3.7(e) Intangible Property
3.7(f) Consents
3.8(b) Environmental
3.9 Leased Property
3.10 Capital Expenditures
3.11(a) Litigation
3.11(b) Loss Contingencies
3.12(b) Investigations
3.12(e) Licenses
3.13(d) Tax Audits
3.14(a) Employment and Service-Related Agreements
3.14(b) Employees Over $25,000
3.14(c) Pension Plans
3.14(g) Restrictions on Employees
3.15(a) Executory Contracts
3.15(b) Company Contracts Not in the Ordinary
Course of Business
3.15(c) Interested Transactions
3.15(d) Company Guaranties
3.16 Prospective Changes
3.18 Insurance
4.7 Purchaser - Litigation
6.2(k) Key Employees
7.1(a) Limitations on Indemnification
8.13 Shareholders' Guarantees
<PAGE>
EXHIBIT A
March 28, 1996
McRae Industries, Inc.
402 North Main Street
Mount Gilead, NC 27306
Dear Gentleman:
I have served as counsel for Walter A. DuPuis, Kenneth O. Moore, and William
Glover (collectively, the "Shareholders"), in connection with the purchase by
McRae Industries, Inc., a Delaware corporation ("Purchaser"), of all
outstanding shares (the "Shares") of the Common Stock of American West Trading
Company, a Tennessee corporation (the "Company"), pursuant to the Stock
Purchase Agreement dated as of March ___, 1996, (the "Agreement"), by and
between the Shareholders and Purchaser and with respect to all documents in
connection therewith, including the Consulting and Non-Competition Agreement,
and all stock powers, assignments, agreements and other instruments and
documents delivered in connection therewith (the foregoing documents, together
with the Agreement, being referred to herein as "Transaction Documents").
Unless otherwise defined herein, capitalized terms used herein shall have the
meanings ascribed to them in the Agreement,
In connection with the opinions expressed herein, I have examined originals,
or copies certified to my satisfaction, of the Transaction Documents, the
Articles of Incorporation and By-Laws, including all amendments thereto, and
corporate records of the Company, the instruments of assignment, transfer and
conveyance referred to in paragraphs numbered 10 and 11 below, and such other
documents and consents, instruments, opinions and certifications of persons as
I have deemed necessary for the purpose of rendering the opinions hereinafter
set forth.
In such examinations, I have assumed the genuineness of all signatures of
individuals, the personal legal capacity of all individual signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to me as certified, conformed or
photostatic copies and the authenticity of the originals of such copies. As
to various questions of fact material to the opinions expressed herein, I have
relied upon certificates provided and statements made to me by the
Shareholders and the company, and the representations and warranties of the
Shareholders and the Company set forth in the Agreement. Nothing has come to
my attention in the course of my representation of the company and the
Shareholders that would cause me to believe that such assumptions are
unwarranted.
In rendering the opinions expressed herein, I have further assumed that (i)
the Purchaser has all requisite power and authority to enter into and perform
its obligations under the Transaction Documents, (ii) the Transaction
Documents have been duly authorized, executed and delivered by the Purchaser,
and (iii) the Transaction Documents constitute the Purchaser's legal, valid,
binding and enforceable obligation.
<PAGE>
Based upon my examination of the aforementioned documents and subject to the
assumptions, limitations, qualifications and exceptions set forth herein, I am
of the opinion that:
1 . The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Tennessee. Insofar as known to me,
the Company and the Shareholders have complied with all federal, state and
local laws, rules and regulations applicable to the operations and conduct of
the Business which might affect adversely any of the Assets or Purchaser's
ability to operate the Business after the Closing Date.
2. The Company is duly qualified to do business and is in good standing as
a foreign corporation in , which to my knowledge are the
only jurisdictions where qualification as a foreign corporation is required,
except where the failure to be qualified and in good standing would not have a
material adverse effect on the Business or the Assets, or the operations or
financial condition of the Company.
3. The authorized capital stock of the Company consists of 775,000 shares
of Common Stock without par value (the "Common Stock"). The Shares,
consisting of 400,000 shares of Common Stock, constitute all of the issued and
outstanding shares of capital stock of the Company. All of the Shares have
been validly authorized and issued, are held of record as described in Section
3.4 of the Agreement, are fully paid and nonassessable, and were issued free
of any preemptive or similar contractual rights.
4. To my knowledge, there are no outstanding securities, options, warrants,
rights, calls, subscriptions, agreements, conversions, exchange rights,
commitments or understandings of any nature whatsoever, fixed or contingent,
that directly or indirectly (a) call for the issuance, sale, pledge or other
disposition of any shares of capital stock of the Company or any securities
convertible into, or other rights to acquire, any such shares of capital
stock, (b) obligate the Company to grant, offer or enter into any of the
foregoing, (c) obligate the Company to repurchase, redeem or otherwise acquire
any such capital stock, securities or rights, or (d) relate to the voting or
control of such capital stock, securities or rights.
5. The Company has the corporate power and authority to own its assets and
properties and to carry on the Business as now conducted and to make, execute,
deliver and perform the Transaction Documents in accordance with their terms,
and the Transaction Documents and all transactions contemplated thereunder
have been duly authorized and approved by all necessary corporate actions of
the Company. The Shareholders have the power and authority to make, execute,
deliver and perform the Transaction Documents in accordance with their terms.
6. The Transaction Documents have been duly and validly executed and
<PAGE>
delivered by the Shareholders, and on behalf of the Company by its authorized
corporate officers, and constitute the valid and legally binding obligations
of the Shareholders and the Company enforceable against them, subject to
following qualifications and limitations:
(a) the enforceability of the Transaction Documents may be restricted,
limited or delayed by bankruptcy, reorganization, insolvency,
moratorium or similar laws affecting or relating to enforcement of
creditors rights in general as from time to time in effect;
(b) the enforceability of the Transaction Documents is subject to
general principles of equity and general standards of commercial
reasonableness regardless of whether enforceability is considered
in the preceding at law or in equity;
(c) I express no opinion as to any equitable remedy that a court may
grant, impose or render; and
(d) I express no opinion as to the enforceability of any provision in
the Agreement and the Consulting and Non-Competition Agreement
that a course of dealing with a party, or the failure on the part
of any party to exercise in whole or in part, a right or remedy
provided to such party shall not constitute a waiver of such
party's rights or remedies, nor a waiver of any event of default
under such documents.
7. Neither the execution and delivery of the Transaction Documents by the
Company or the Shareholders nor performance by them in compliance with its
terms will result in a breach or violation of, or constitute a default under,
the Company's Articles of Incorporation or By-Laws, or to my knowledge, any
agreement, instrument, undertaking, governmental law, rule, order or
regulation, or any other restriction or obligation, known to me which the
Company or the Shareholders is a party or by which either of them or any of
the Shares or the Assets are bound.
8. Except as disclosed in the Agreement (including the Schedules thereto),
no consent, approval order or authorization of, or registration, declaration
or filing with, any Tennessee or United States governmental authority or, to
my knowledge, other person on the part of any of the Shareholders-or the
Company is required in connection with the execution and delivery by each of
them of the Transaction Documents, consummation by each of them of the
transactions contemplated thereby, including without limitation the transfer
of the Shares, or other compliance by each of them with, or performance under,
the Transaction Documents.
9. Except as set forth in Schedule 3.11(a) to the Agreement, to my
<PAGE>
knowledge, (a) there is no claim, action, suit, litigation, investigation,
inquiry, review or proceeding pending or threatened against or affecting the
Company or any of its rights or properties, before or by any court,
arbitrator, panel, agency or other governmental, administrative or judicial
entity or which questions the validity of the Agreement or any action taken or
to be taken by the Company or any Shareholder pursuant to the Agreement or in
connection with the transactions contemplated thereby and (b) neither the
Company nor any of the Shareholders is subject to any judgment, decree, writ,
injunction or order of any governmental, administrative or judicial authority
which (i) is binding upon or specifically affects the Company or the Business
or its properties, (ii) is not of general application and (iii) individually
or in the aggregate has a material adverse effect on the Business or the
Assets, or the operations or condition (financial or otherwise) of the
Company, taken as a whole.
10. Each Shareholder has full Power and authority to assign, transfer and
deliver the Shares to Purchaser as provided for in the Agreement. The
instruments of assignment, transfer and conveyance from the Shareholders to
Purchaser are their Valid acts and deeds, effectively vesting in Purchaser all
of each Shareholder's interest in the Shares, and all other rights and
Shareholders to be transferred, assigned and conveyed to Purchaser with
respect to the shares thereunder.
11. The Shareholders, by reason of their delivery at the Closing of
certificates representing the Shares, in the forms required to be delivered by
Section 1.3 of the Agreement, will transfer to the Purchaser valid and
marketable title to the Shares, which will be free and clear of any liens,
encumbrances, security interests or claims, other than liens, encumbrances,
security interests or claims known to the Purchaser.
The opinions expressed above are subject to the following assumptions,
limitations, qualifications
and exceptions:
1 . My opinions are limited to matters expressly stated herein and no
opinion is inferred or may be implied beyond the matters expressly stated.
2. The opinions expressed herein are as of the date hereof and I undertake
no obligation to advise you of any changes in applicable law or any other
matters that may come to our attention after the date hereof that may affect
our opinions expressed herein.
3. 1 express no opinion herein concerning any laws other than the laws of
the State of Tennessee and the federal laws of the United States. I note that
the Agreement provides that it is to be governed by North Carolina law, and I
have assumed that there is no difference in such laws that would affect the
<PAGE>
opinions set forth in this letter.
4. Opinions or statements herein given "to my knowledge" and the factual
matters on which I have relied in giving my opinions herein (except for my
opinions as to corporate matters that I have given in reliance upon my
investigation of the minute books of the Company) are based upon (a)
information coming to my attention with no duty of further investigation or
inquiry, and (b) the representations and warranties of the Shareholders
contained in the Agreement.
This opinion is rendered pursuant to your request, is intended solely for your
use in connection with the transactions under the Agreement, and can be relied
upon solely by you. The opinion is not to be furnished or referred to any
other party or to any governmental agency without my prior written consent.
Yours very truly,
Rodger N. Bowman
PC: File
Ken Moore
Gus DuPuis
Bill Glover
<PAGE>
EXHIBIT B
CONSULTING AND NON-COMPETITION AGREEMENT
THIS CONSULTING AND NONCOMPETITION AGREEMENT, made as of the ____ day of
April, 1996, between WALTER A. DUPUIS, residing at 200 Ussery Road, Clarksville,
Tennessee ("Dupuis"), AMERICAN WEST TRADING COMPANY, a Tennessee corporation
(the"Company"), and MCRAE INDUSTRIES, INC., a Delaware corporation
(the "Purchaser"),
WITNESSETH:
WHEREAS, pursuant to that certain Stock Purchase Agreement, dated as of
March __, 1996, between all of the shareholders of the Company (the
"Shareholders"), the Company and the Purchaser (the "Stock Purchase Agreement"),
concurrently with the execution and delivery hereof the Shareholders will
transfer to the Purchaser and Purchaser will buy from the Shareholders, all of
the outstanding Common Stock (the "Shares"), of the Company; and
WHEREAS, DuPuis is the holder of record and beneficial owner of 47.5 % of
the Shares and is a director and former officer of the Company; and
WHEREAS, under the Stock Purchase Agreement it is a condition precedent to
the obligation of Purchaser to consummate the transactions contemplated thereby
that DuPuis shall have executed and delivered to Purchaser a consulting and non-
competition agreement substantially in the form of this Agreement; and
WHEREAS, Purchaser has informed the Company and the Shareholders that it
will not consummate the transactions contemplated by the Stock Purchase
Agreement unless the aforesaid condition precedent has been fulfilled; and
WHEREAS, it is a benefit to, and in the best interests of, DuPuis that the
transactions contemplated by the Stock Purchase Agreement be consummated, and in
order to induce Purchaser to proceed with the sale, DuPuis is willing to make
the covenants and agreements herein set forth;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, DuPuis hereby covenants and agrees with the Company and Purchaser
as follows:
1. Consulting Services. DuPuis agrees to perform consulting
services for the Company as an independent contractor and not as the
Company's agent, and nothing herein shall restrict DuPuis in
exercising complete and independent control over the performance of
such consulting services. DuPuis is not authorized by the Company,
and DuPuis agrees not to hold himself out as authorized by the
Company, to enter into any agreement in the Company's name or on
behalf of the Company, or otherwise to bind the Company in any way
except in each instance upon the Company's prior specific
authorization.
<PAGE>
DuPuis' obligations hereunder (i) shall commence on the date hereof, and
shall continue until April 30, 1998 (the "Consulting Period"). DuPuis shall
hold himself available to perform, and upon the Company's instructions shall
perform, such consulting services relating to the business of the Company as the
Company shall request, and DuPuis further agrees to perform such services at the
time and place specified by the Company. Such requests for DuPuis' time will be
made by the Company in advance so as not to unreasonably interfere with DuPuis's
business or leisure pursuits, and such consulting time shall not exceed an
aggregate of_____ business days annually during the Consulting Period.
DuPuis shall be reimbursed by the Company for all reasonable out-of-pocket
expenses and other disbursements incurred by him in the performance of his
duties hereunder which have been approved in advance by the Company, including
but not limited to travel, lodging and meals.
2. Compensation. In consideration of DuPuis' covenants and undertakings
as set forth in this Agreement, Purchaser agrees to pay to DuPuis the sum of
$5,000 per month, beginning on May 1, 1996, and continuing to the end of the
Consulting Period. The parties agree to treat said payments for all purposes
(including for all tax and financial accounting purposes) as payments for a
covenant-not-to-compete and consulting services unless required by a
governmental authority to do otherwise.
3. Confidentiality. DuPuis acknowledges that, as a result of his
investment in and his positions with the Company, he has had access to
proprietary confidential information that directly and indirectly relates to the
business of the Company (the "Business"). DuPuis agrees that, for a period from
the date hereof through and including April 20, 2002 (the "Confidentiality
Period"), he will not, without the prior written consent of Purchaser, (i)
disclose to any person any confidential information obtained by DuPuis with
respect to the Business, except for information which at the time is known to
the public other than as a result of a disclosure by DuPuis not permitted
hereunder, or lawfully acquired from a third party who is not obligated to the
Company or to the Purchaser to maintain such information in confidence, or (ii)
following the Closing under the Stock Purchase Agreement, retain any documents
or papers relating to any such confidential information.
4. Competition. During the Consulting Period, DuPuis will refrain from:
(a) entering, directly or indirectly, into the
employment of or rendering, directly or
indirectly, any services to any person, firm or
corporation engaged in any business competitive
with any business presently being conducted by
the Company in any geographical market area
within or outside the United States in which the
Company conducts business on the date hereof;
(b) engaging, directly, or indirectly, in any
such business for his own account; or
<PAGE>
(c) becoming interested, directly or indi-
rectly, in any such business as an individual,
partner, shareholder, creditor, director,
officer, principal, agent, employee, trustee,
consultant, advisor or any in any other
relationship or capacity; provided, however, that
the provisions of this paragraph 4(c) shall not
be deemed to prohibit DuPuis from acquiring or
holding, solely as an investment, publicly traded
securities of any such corporation so long as
such securities do not, in the aggregate,
constitute more than 5% of any class or series of
outstanding securities of such corporation;
(d) directly or indirectly employing,
soliciting for employment, or advising or
recommending to any other person that they employ
or solicit for employment, any employee of the
Company or the Purchaser engaged in the Business;
and
(e) Discussing with any employee of Company or
Purchaser engaged in the Business, or any former
employee of the Company, the formation or
operations of any business intended to compete
with the Business or the possible future
employment of such employee by any business, if
DuPuis has or expects to acquire a proprietary
interest in such business or is or expects to be
made a director or executive officer thereof.
DuPuis agrees and acknowledges that the limitations set forth herein are
reasonable and properly required for adequate protection of the Business. For
purposes of this Section 4, (i) a "proprietary interest" in a business shall
mean ownership, through direct or indirect stockholdings or otherwise, of more
than 5 % of such business, and DuPuis shall be deemed to expect to acquire a
proprietary interest in a business or to be made a director or executive officer
of such business if such possibility has been discussed by any officer,
director, employee, agent or promotor of such business, and (ii) the words
"compete," "competitor," "competition, "competitive" and words of like
derivation, when used in relation to the Business, shall encompass businesses
that compete with the Business as of the date hereof.
5. Entire Agreement, Modifications. This Agreement among the Company,
McRae and DuPuis contains the entire agreement with respect to the matters set
forth herein and may not be modified, amended or otherwise changed orally but
only by agreement in writing signed by the party against whom enforcement of any
waiver, change, modification or amendment or discharge is sought.
6. Remedies. The parties agree and acknowledge that the rights and
obligations set forth in this Agreement are of a unique and special nature and
that Purchaser is, therefore, without an adequate legal remedy in the event of
<PAGE>
DuPuis's violation of the covenants set forth herein. The parties, therefore,
agree that the covenants made by DuPuis under this Agreement shall be
specifically enforceable in equity, in addition to all other rights and
remedies, at law or in equity, that may be available to the Company and the
Purchaser.
7. Notices. All notices and other communications provided for by this
Agreement shall be in writing and shall be deemed to have been given at the time
when delivered personally or mailed by registered or certified mail, return
receipt requested, postage prepaid, or sent by national overnight courier
service addressed to the parties as set forth below or to such changed
address as a party may have fixed by notice:
If to Purchaser, to: McRae Industries, Inc.
402 North Main Street
Mt. Gilead, NC 27306
Attention: Branson J. McRae, President
with copy to: Clarence W. Walker, Esq.
Kennedy Covington Lobdell & Hickman, L.L.P.
NationsBank Corporate Center
Suite 4200
100 North Tryon Street
Charlotte, NC 28202-4006
If to DuPuis, to: Walter A. DuPuis
200 Ussery Road
Clarksville, TN 37043
with copy to: Rodger N. Bowman, Esq.
P. 0. Box 1404
Clarksville, TN 37041-1404
8. Governing Law. This Agreement shall be governed in all respects by
the laws of the State of North Carolina, without giving effect to the principles
of conflicts of law.
9. Severability. If any provision or part of this Agreement shall be
determined to be invalid, illegal or unenforceable in whole or in part, neither
the validity of the remaining part of such provision nor the validity of any
other provision of this Agreement shall in any way be affected thereby.
10. Waiver. Failure to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a waiver of such term,
covenant or condition, nor shall any waiver or relinquishment of any right or
power hereunder at any one or more times be deemed a waiver or relinquishment of
such right or power at any other time or times.
11. Counterparts. This Agreement may be executed in several counterparts
with the same effect as if the parties executing the several counterparts had
all executed one counterpart.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
Walter A. DuPuis
AMERICAN WEST TRADING COMPANY
By:
MCRAE INDUSTRIES, INC.
By:
<PAGE>
EXHIBIT C
EMPLOYMENT AGREEMENT
AGREEMENT dated as of April ____, 1996, between AMERICAN WEST TRADING
COMPANY, a Tennessee corporation (the "Company"), and (the "Employee").
The Employee is now an employee of the Company. McRae Industries, Inc.,
("McRae") has entered into an agreement to buy all of the outstanding capital
stock of the Company (the "Stock Purchase Agreement"), and it is a condition to
the obligations of McRae to complete the purchase of such stock that the Company
and the Employee shall have entered into this Agreement at or prior to the
Closing under the Stock Purchase Agreement so that the Company (and, indirectly,
McRae) shall (i) have the benefit of the Employee's covenant not to compete with
the Company for a period (determined as hereinafter provided) following the
Employee's term of employment, and (ii) be assured of the continuing services of
the Employee on a full-time basis. Accordingly, the Board of Directors of the
Company (the "Board") has requested that the Employee enter into this
Agreement. In consideration of the covenants and agreements herein contained,
the parties agree as follows:
1. Employment and Acceptance; Term.
1.1 The Company hereby employs the Employee, and the Employee
hereby accepts employment from the Company, for a term of full-time employment
determined in accordance with this Agreement.
1.2 The Employee's term of full-time employment pursuant to this
Agreement shall commence on the date of this Agreement and shall continue the
thirtieth (30th) day following receipt of a notice of termination of employment,
given either by the Company to the Employee or by the Employee to the Company,
which notice shall state that it is being given pursuant to Section 1.2 of this
Agreement.
2. Duties and Authority.
2.1 Duties During Term of Employment. During the Employee's term
of employment the Employee shall devote his full working time and energies to
the business and affairs of the Company. The Employee agrees during such term
to use his best efforts, skill and abilities to promote the Company's interests;
to serve as a director and officer of the Company if elected by the stockholders
or Board; and to perform such duties as may be assigned to him by the Board and
by such executives of McRae as McRae's Chief Executive Officer shall designate.
During his term of full-time employment, the Employee shall not, directly or
indirectly, without the prior consent of the Board or render any services to any
other person, or acquire any interests of any type in any other person, in
conflict with his full-time, exclusive position as an employee of the Company;
provided, however, that, subject to Section 6 of this Agreement, the foregoing
shall not be deemed to prohibit the Employee from acquiring, solely as an
investment, any securities of, or interests in, any entity so long as he remains
a passive investor in such entity and does not become part of any control group
<PAGE>
thereof and so long as such entity does not compete or have any material
business connection with the Company or any of its subsidiaries; or
participating in civic, charitable, educational or religious activities and
affairs so long as such activities and affairs do not involve business
connections or competition with the Company or (alone or together with all other
outside activities of the Employee) require a significant commitment of time by
the Employee or otherwise interfere with the performance by the Employee of his
duties and obligations to the Company. 2.2 Authority, Duties, Power and
Responsibilities. Subject to the direction and control of the Board, during the
Employee's term of full-time employment the Employee shall from time to time
have such title and shall have such authority, duties, power and
responsibilities as from time to time shall be delegated to him by the Company's
Chief Executive Officer or the Board. The Employee will perform his services
subject to the direction and control of the Board and will report to the Chief
Executive Officer of the Company and, assuming that the Company shall be a
subsidiary of McRae, to such executives of McRae as McRae's Chief Executive
Officer shall designate.
3. Compensation.
The Company shall pay or cause to be paid to the Employee during the term
of full-time employment a salary of not less than _________________ ($________)
per annum, payable in monthly or more frequent installments in accordance with
the company's regular payroll practices for employees of similar rank.
4. Expenses.
Upon submission of proper vouchers, the Company will pay or reimburse
the Employee for all business expenses reasonably incurred by him in connection
with the business of the Company during the term of his employment hereunder.
5. Protection of Confidential Information.
5.1 Covenant. The Employee acknowledges that his employment by the
Company will, throughout the term of this Agreement, bring him into close
contact with many confidential affairs of the Company, including information
about costs, profits, markets, sales, products, key personnel, pricing policies,
operational methods, technical processes and other business affairs and methods,
plans for future development and other information not readily available to the
public.The Employee further acknowledges that the services to be performed under
this Agreement are of a special, unique, unusual, extraordinary and intellectual
character. In recognition of the foregoing, the Employee covenants and agrees
that he will keep secret all material confidential matters of the Company which
are not otherwise in the public domain and will not (otherwise than in the
ordinary course of the Company's business) intentionally disclose them to any
Competitive Business (as defined in Section 6.3) either during or after the term
of this Agreement, except with the Company's written consent.
5.2 Specific Remedy. If the Employee commits a material breach of
any of the provisions of Section 5.1, the Company shall have, in addition to the
other remedies provided by law, the right and remedy to have such provisions
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed that any such breach or threatened breach will cause
<PAGE>
irreparable injury to the Company and that money damages will not provide an
adequate remedy to the Company.
5.3 The provisions of this Section 5 shall survive any termination
of this Agreement.
6. Non-competition.
6.1 Covenant. (a) In recognition of the considerations described
in Section 3 and in the preamble to this Agreement and in consideration of the
benefits to the Employee that will result from the Stock Purchase Agreement, the
Employee agrees that he will not, without the written permission of the Company,
(i) enter into the employ of or render any services to any person, firm,
corporation or other entity engaged in any "Competitive Business" (as defined in
Section 6.3), (ii) engage in any Competitive Business for his own account or
(iii) become interested in any Competitive Business as an individual, partner,
shareholder, creditor, director, officer, principal, agent, employee, trustee,
consultant, advisor or any other relationship or capacity; provided, however,
that nothing contained in this Section 6.1 shall be deemed to prohibit the
Employee from acquiring, solely as an investment through market purchases, up to
one percentum (5%) of the securities of any corporation so long as he is not
part of any control group of such corporation.
(b) The provisions of paragraph (a) of this Section 6.1 shall apply for
and during the period of the Employee's employment hereunder and the three-year
period following termination of his employment.
6.2 Specific Remedy. In the event of a breach or threatened breach
by the Employee of Section 6.1, the Company shall, in addition to the other
remedies provided by law, have the right and remedy to have such provisions
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed that any breach or threatened breach of Section 6.1 will
cause irreparable injury to the Company and that money damages will not provide
an adequate remedy to the Company.
6.3 "Competitive Business". The phrase "Competitive Business" as
used in this Agreement shall mean any line of business that is substantially the
same as any line of any operating business engaged in or conducted by the
Company and which, during, or at the expiration of, the term of the Employee's
employment, the Company was engaged in or conducting, or had, to the knowledge
of the Employee, definitively planned to engage in or conduct.
7. Notices. All notices, requests, consents and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally or sent by prepaid
telegram or by facsimile transmission, or mailed first-class, postage prepaid,
by registered or certified mail, as follows (or to such other or additional
address as either party shall designate by notice in writing to the other in
accordance herewith):
7.1 If to the Company:
American West Trading Company
1751 Jardco Drive
Clarksville, TN 37040
<PAGE>
with a copy to:
McRae Industries, Inc.
402 N. Main Street
Mount Gilead, NC 27306
Attention: President
7.2 If to the Employee, to him at his address on the personnel
records of the Company.
8. General.
8.1 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Tennessee
applicable to agreements made and to be performed entirely in Tennessee.
8.2 Captions. The Section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
8.3 Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter hereof
and supersedes all prior agreements, arrangements and understandings, written or
oral, between the parties.
8.4 No other Representations. No representation, promise or
inducement has been made by either party that is not embodied in this Agreement,
and neither party shall be bound by or liable for any alleged representation,
promise or inducement not so set forth.
8.5 Assignability. This Agreement, and the Employee's rights and
obligations hereunder, may not be assigned by the Employee. The Company may
assign its rights, together with its obligations, hereunder in connection with
any sale, transfer or other disposition of all or substantially all of its
business and assets; and such rights and obligations shall inure to, and be
binding upon, any successor to the business or substantially all of the assets
of the Company (whether by merger, purchase of stock or assets or otherwise)
which shall expressly assume such obligations.
8.6 Amendments; Waivers. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms or covenants hereof may
be waived, only by a written instrument executed by both of the parties hereto,
or in the case of a waiver, by the party waiving compliance. The failure of
either party at any time or times to require performance of any provisions
hereof shall in no manner affect the right at a later time to enforce the same.
No waiver by either party of the breach of any term or covenant contained in
this Agreement, whether by conduct or otherwise, in any one or ignore instances,
shall be deemed to be, or construed as, a further or continuing waiver of any
such breach, or a waiver of the breach of any other term or covenant contained
<PAGE>
in this Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
AMERICAN WEST TRADING COMPANY
By:
Employee
<PAGE>
EXHIBIT D
Description of Real Property
Survey No. 1. This survey depicts and describes a single parcel of real
property of 10.62 acres. The survey refers to the parcel as the "Stetson Boot
& Shoe Company, Inc. Property," located in the 2nd civil district, Humphreys
County, Tennessee. The survey was prepared on March 30, 1993 by Thomas C.
White and Associates (Drawing No. 865-2293). The deed references for the
subject property are deed book 160, page 440 and deed book 160, page 440.
The survey provides the following legal description of the property:
BEGINNING at a point in the North right-of-way of North Railroad Street, at
the Southeast corner to the Katie Catherine Durham property, said point also
being located 80.00 feet North of, and perpendicular to the center-line, of
the C.S.X. Railroad track, and also being on the West side as what is known as
Pine Hill Drive, said Pine Hill Drive being the access to the Jones Cemetery
and other properties; thence runs with the West side Pine Hill Drive and the
East boundary to the Katie Catherine Durham property, North 06 degrees, 09
minutes, 30 seconds East and along an old fence line, passing a concrete
monument, reference point with cap (RLS #69), set at 20.00 feet continuing on
in all 322.13 feet to a concrete monument found at Southwest corner to the
Jones Cemetery; thence runs with the South boundary to the Cemetery, South 87
degrees, 00 minutes, 00 seconds East, crossing Pine Hill Drive, in all 146.50
feet to an iron pipe found at the base of a large Pine tree, said iron pipe
being the Southeast corner to the Jones Cemetery; thence runs with the East
boundary to the Jones Cemetery, North 11 degrees, 00 minutes, 00 seconds East
180.00 feet to a concrete monument found in the South boundary of the Waverly
Recreation Corporation property, said point also being the Northeast corner to
the Jones Cemetery; thence runs with the South boundary to the Waverly
Recreational Corporation property; South 82 degrees, 22 minutes, 28 seconds
East passing the Southeast corner to the Waverly Recreational Corporation
property and a corner to property owned by the City of Waverly at 446.00 feet,
thence continuing with the City of Waverly boundary, South 82 degrees, 22
minutes, 28 seconds East passing a concrete monument reference point found at
780.00 feet, in all 840.00 feet to a point in the pavement of Golf Course
Road, the Northeast corner to the herein described property; thence runs with
the West right-of-way of Golf Course Road and the City of Waverly property
boundary, South 00 degrees, 00 minutes, 32 seconds East, passing a concrete
monument reference point found at 60.00 feet; in all 415.00 feet to a concrete
monument found in the North right-of-way of North Railroad Street, along a
line 80.00 feet North of, and perpendicular to the center-line of the C.S.X.
Railroad track, chord bearings and distances as follows; South 87 degrees, 25
minutes, 05 seconds West 183.58 feet; North 89 degrees, 53 minutes, 17 seconds
West 296.52 feet; North 87 degrees, 33 minutes, 55 seconds West 166.20 feet;
North 85 degrees, 10 minutes, 39 seconds West 295.00 feet; North 83 degrees,
07 minutes, 44 seconds West 108.69 feet to the point of beginning, containing
an area by computation of 10.62 acres.
Survey No. 2: The survey depicts and describes two parcels of real property
<PAGE>
of 5.49 acres and 0.89 acre. The survey refers to the parcels as the
"Stetson Boot & Shoe Company, Inc. Property" located in the 7th civil
district, Weakley County, Tennessee. The survey was prepared on March 30,
1993 by Thomas C. White & Associates (Drawing No. 832-2393). The deed
references for the subject property are deed book 296, Page 555 and deed book
299, page 100.
Parcel Number 1: The survey provides the following legal description of the
first parcel of 5.49 acres:
BEGINNING at a point at the intersection of the center-line of Jones Street
with the center-line of Hillcrest Street, said point of beginning being
located South 61 degrees, 66 minutes, 35 seconds East 34.60 feet from the
corner of the curb and [retaining] wall at the Southwest intersection of Jones
Street and Hillcrest Street and runs thence with the center-line of Hillcrest
Street, North 89 degrees, 03 minutes, 11 seconds West 514.21 feet to a point
at the Southeast corner to the Leonard West property; thence runs with the
East boundary to the West property, North 02 degrees, 16 minutes, 05 seconds
West, passing a 1/2 inch diameter Re-bar pin found at the back edge of the
curb, in all 147.19 feet to a metal post marked for a corner, found; thence
runs with the chain-link fence, and the North boundary to the Leonard West
property, North 88 degrees, 37 minutes, 11 seconds West passing a 1/2 inch
diameter Re-bar pin found at the back edge of the curb, at 124.14 feet
continuing on in all 140.90 feet to a point in the center of Broad Street, the
Northwest corner to the Leonard West property; thence runs with the center-
line of Broad Street, North 03 degrees, 07 minutes, 05 seconds West 399.18
feet to a point in the center-line of Broad Street at the South right-of-way
of the N.C. and St.L. Railroad; thence runs with the South right-of-way of a
N.C. & St.L. Railroad, South 65 degrees, 18 minutes, 49 seconds East 646.36
feet to a concrete monument with aluminum cap (RLS #69) set; thence runs with
the South right-of-way of the N.C. & St.L. Railroad, South 60 degrees, 00
minutes, 49 seconds East, 100.00 feet to a "PK" Nail and brass marker marked
"RLS-69" set in the center of Jones Street; thence runs South 02 degrees, 04
minutes, 55 seconds East 237.78 feet to the point of beginning, containing an
area computation of 5.49 acres.
Parcel Number 2: The survey provides the following legal description of the
second parcel of 0.89 acre:
BEGINNING at a "PK" Nail and brass marker stamped "RLS-69", set in the West
right-of-way of Jones Street, at the Northeast corner to the City of Dresden
water tank property, said beginning point being located North 39 degrees, 07
minutes, 32 seconds East 53.26 feet from a U.S.C.G.S. monument No "F-23,"
found at the Southeast leg of the City water tank; thence runs with the North
boundary to the City water tank property, South 88 degrees, 00 minutes, 50
seconds West 80.00 feet to a "PK" Nail and brass marker stamped "RLS-69," set
in the pavement, the Northwest corner to the City water tank property; thence
runs with the West boundary to the City water tank property, South 01 degrees,
59 minutes, 10 seconds East 80.00 feet to a "PK" Nail and brass marker stamped
"RLS-69" set in the pavement, the Southwest corner of the City of Dresden
water tank property in the North right-of-way of the N.C. & St.L. Railroad;
thence runs with said Railroad right-of-way, North 66 degrees, 21 minutes 19
<PAGE>
seconds West 266.82 feet to a one-half inch diameter Re-bar pin found at a
street post, said point being the Southeast corner to Gary D. Inman property;
thence runs with Inman's East boundary line, North 00 degrees, 54 minutes, 54
seconds East 64.00 feet to a one-half inch diameter Re-bar pin with cap (RLS
#69) set at the Southwest corner to the Carline F. Turner property; thence
runs with Turner's South boundary, North 84 degrees, 54 minutes, 31 seconds
East 117.50 feet to a one-half inch diameter Re-bar pin with cap (RLS #69)
set; thence runs with the South boundary to the Donald R. Moubrey property and
the South boundary to the Brian A. Arnold property, North 88 degrees, 00
minutes, 51 seconds East 200.00 feet to a one-half inch diameter Re-bar pin
with cap (RLS #69) set in the West right-of-way of Jones Street; thence runs
with said West right-of-way of Jones Street, South 01 degree, 59 minutes 10
seconds East 105.70 feet to the point of beginning containing an area
computation of 0.89 acre.
