Exhibit 10.1

EXECUTION VERSION

 

 

 

UNIT PURCHASE AGREEMENT

between

ENNIS, INC.,

as Seller,

and

GILDAN ACTIVEWEAR INC.,

as Buyer

dated as of

May 4, 2016

 

 

 

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TABLE OF CONTENTS

 

         Page   ARTICLE I    DEFINITIONS    ARTICLE II    PURCHASE AND SALE   

Section 2.01

 

Purchase and Sale

     12   

Section 2.02

 

Purchase Price

     12   

Section 2.03

 

Transactions to be Effected at the Closing.

     12   

Section 2.04

 

Purchase Price Adjustment.

     13   

Section 2.05

 

Sublease

     17   

Section 2.06

 

Transition Services Agreement

     17   

Section 2.07

 

Closing

     17    ARTICLE III    REPRESENTATIONS AND WARRANTIES OF SELLER   

Section 3.01

 

Organization and Authority of Seller

     18   

Section 3.02

 

Organization, Authority and Qualification of the Company

     18   

Section 3.03

 

Capitalization

     19   

Section 3.04

 

Subsidiaries

     19   

Section 3.05

 

No Conflicts; Consents

     20   

Section 3.06

 

Financial Statements

     20   

Section 3.07

 

Undisclosed Liabilities

     21   

Section 3.08

 

Absence of Certain Changes, Events and Conditions

     21   

Section 3.09

 

Material Contracts

     23   

Section 3.10

 

Title to Assets; Real Property

     25   

Section 3.11

 

Condition And Sufficiency of Assets

     26   

Section 3.12

 

Intellectual Property

     26   

Section 3.13

 

Inventory

     28   

Section 3.14

 

Accounts Receivable

     29   

Section 3.15

 

Customers and Suppliers

     29   

Section 3.16

 

Insurance

     29   

Section 3.17

 

Legal Proceedings; Governmental Orders

     30   

Section 3.18

 

Compliance with Laws; Permits

     30   

Section 3.19

 

Environmental Matters

     30   

Section 3.20

 

Employee Benefit Matters

     32   

Section 3.21

 

Employment Matters

     35   

Section 3.22

 

Taxes

     36   

Section 3.23

 

Books and Records

     39   

Section 3.24

 

Brokers

     39   

Section 3.25

 

Related Party Transactions

     39   

Section 3.26

 

Bank Accounts; Attorneys in Fact

     40   

Section 3.27

 

United Purchase Agreement

     40   

Section 3.28

 

No Other Representations or Warranties; Disclosure Schedules

     40   

 

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ARTICLE IV    REPRESENTATIONS AND WARRANTIES OF BUYER   

Section 4.01

 

Organization and Authority of Buyer

     41   

Section 4.02

 

No Conflicts; Consents

     41   

Section 4.03

 

Sophistication; Investigation

     41   

Section 4.04

 

Investment Purpose

     42   

Section 4.05

 

Brokers

     42   

Section 4.06

 

Financing

     42   

Section 4.07

 

No Other Representations or Warranties

     42    ARTICLE V    COVENANTS   

Section 5.01

 

Conduct of Business Prior to the Closing

     42   

Section 5.02

 

Access to Information; Cooperation

     44   

Section 5.03

 

No Solicitation of Other Bids

     44   

Section 5.04

 

Notice of Certain Events

     45   

Section 5.05

 

Resignations

     45   

Section 5.06

 

Confidentiality

     45   

Section 5.07

 

Non-competition; Non-solicitation

     45   

Section 5.08

 

Governmental Approvals and Consents

     47   

Section 5.09

 

Books and Records

     48   

Section 5.10

 

Irshad Ahmad

     49   

Section 5.11

 

Employment-Related Liabilities

     49   

Section 5.12

 

Joinder Agreement

     50   

Section 5.13

 

Closing Conditions

     50   

Section 5.14

 

Public Announcements

     50   

Section 5.15

 

Alstyle Apparel Limited

     50   

Section 5.16

 

Transfer of Acquired Assets

     50   

Section 5.17

 

IMMEX Status

     50   

Section 5.18

 

Further Assurances

     50    ARTICLE VI    TAX MATTERS   

Section 6.01

 

Tax Covenants

     51   

Section 6.02

 

Tax Indemnification

     52   

Section 6.03

 

Straddle Period

     53   

Section 6.04

 

Election

     53   

Section 6.05

 

Contests

     55   

Section 6.06

 

Cooperation and Exchange of Information

     56   

Section 6.07

 

Tax Treatment of Indemnification Payments

     56   

Section 6.08

 

Survival

     56   

Section 6.09

 

Overlap

     57   

Section 6.10

 

Tax Refunds

     57   

 

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ARTICLE VII    CONDITIONS TO CLOSING   

Section 7.01

 

Conditions to Obligations of All Parties

     57   

Section 7.02

 

Conditions to Obligations of Buyer

     58   

Section 7.03

 

Conditions to Obligations of Seller

     60    ARTICLE VIII    INDEMNIFICATION   

Section 8.01

 

Survival

     61   

Section 8.02

 

Indemnification By Seller

     61   

Section 8.03

 

Indemnification By Buyer

     62   

Section 8.04

 

Certain Limitations

     62   

Section 8.05

 

Indemnification Procedures

     63   

Section 8.06

 

Payments

     65   

Section 8.07

 

Tax Treatment of Indemnification Payments

     66   

Section 8.08

 

Effect of Investigation

     66   

Section 8.09

 

Mitigation of Damages

     66   

Section 8.10

 

Other Recoveries

     66   

Section 8.11

 

Exclusive Remedies

     67    ARTICLE IX    TERMINATION   

Section 9.01

 

Termination

     67   

Section 9.02

 

Effect of Termination

     68    ARTICLE X    MISCELLANEOUS   

Section 10.01

 

Expenses

     69   

Section 10.02

 

Notices

     69   

Section 10.03

 

Interpretation

     70   

Section 10.04

 

Headings

     71   

Section 10.05

 

Severability

     71   

Section 10.06

 

Entire Agreement

     71   

Section 10.07

 

Successors and Assigns

     71   

Section 10.08

 

No Third-party Beneficiaries

     71   

Section 10.09

 

Amendment and Modification; Waiver

     71   

Section 10.10

 

Governing Law; Dispute Resolution

     72   

Section 10.11

 

Counterparts

     73   

 

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Exhibit A    Acquired Assets Exhibit B    Sample Working Capital Statement
Exhibit C    Form of Sublease Exhibit D    Form of Transition Services Agreement

 

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UNIT PURCHASE AGREEMENT

This Unit Purchase Agreement (this “Agreement”), dated as of May 4, 2016, is
entered into between Ennis, Inc., a Texas corporation (“Seller”), and Gildan
Activewear Inc., a Canadian corporation (“Buyer”).

RECITALS

WHEREAS, Seller owns 100 units, constituting all of the limited liability
company interests (the “Units”), of Alstyle Apparel, LLC, a Delaware Limited
Liability Company (the “Company”);

WHEREAS, Seller owns the assets set forth on Exhibit A to this Agreement (the
“Acquired Assets”);

WHEREAS, Seller wishes to sell to Buyer, and Buyer wishes to purchase from
Seller, the Units and the Acquired Assets, subject to the terms and conditions
set forth herein; and

WHEREAS, Buyer and Seller have entered into or shall enter into, as applicable,
the Escrow Agreements (as defined herein), pursuant to which Buyer shall deposit
$5,000,000 in the aggregate (the “Escrow Amount”), which amount shall be
credited against the Base Amount as set forth in Section 2.02.

NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

ARTICLE I

DEFINITIONS

The following terms have the meanings specified or referred to in this Article
I:

“A&G” has the meaning set forth in Section 2.05.

“Accounting Principles” means in accordance with GAAP, consistently applied,
using the same accounting methods, principles, practices, procedures and
estimation methodologies used in and on a basis consistent with those applied by
Seller in preparing its consolidated audited financial statements (including
calculating accounting reserves, accruals and write-offs in accordance with the
same methodology used to calculate such reserves, accruals and write-offs in
preparation of Seller’s consolidated audited financial statements).

“Accounting Referee” has the meaning set forth in Section 6.01(b).

“Acquired Assets” has the meaning set forth in the recitals.

“Action” means any claim, action, cause of action, demand, lawsuit, arbitration,
inquiry, audit, notice of violation, proceeding, litigation, citation, summons,
subpoena or investigation of any nature, civil, criminal, administrative,
regulatory or otherwise, whether at law or in equity.

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“Additional Tax Gross-up Amount” has the meaning set forth in Section
6.04(a)(ii).

“Additional Tax Gross-up Notice” has the meaning set forth in Section
6.04(a)(ii).

“Affiliate” of a Person means any other Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such Person. The term “control” (including the terms
“controlled by” and “under common control with”) means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.

“Affiliated Group” means any affiliated, consolidated, combined, unitary or
similar group within the meaning of Section 1504(a) of the Code or any
applicable state, local, or non-U.S. Law.

“Agreement” has the meaning set forth in the preamble.

“Ahmad Employment Agreement” means that certain Amended and Restated Employment
Agreement, dated December 19, 2008, by and between Seller and Irshad Ahmad, as
in effect on the date of the execution of this Agreement.

“Allocation Schedule” has the meaning set forth in Section 6.04(b).

“Arbitration Rules” has the meaning set forth in Section 10.10(d).

“Asset Sale Election” means a timely election either (i) under
Section 338(h)(10) of the Code or (ii) if an election under Section 338(h)(10)
is not available under applicable Law, under Section 336(e) of the Code (and, in
each case, together with any corresponding elections under state and local Law).

“Balance Sheet” has the meaning set forth in Section 3.06.

“Balance Sheet Date” has the meaning set forth in Section 3.06.

“Base Amount” has the meaning set forth in Section 2.02.

“Business Day” means any day except Saturday, Sunday or any other day on which
commercial banks located in the State of New York are authorized or required by
Law to be closed for business.

“Buyer” has the meaning set forth in the preamble.

“Buyer Basket Exclusions” has the meaning set forth in Section 8.04(a).

 

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“Buyer Indemnitees” has the meaning set forth in Section 8.02.

“Buyer’s Accountants” means KPMG LLP.

“CERCLA” means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.

“Claim” has the meaning set forth in Section 10.10(b).

“Closing” has the meaning set forth in Section 2.07.

“Closing Date” has the meaning set forth in Section 2.07.

“Closing Working Capital” means, with respect to the Company on a consolidated
basis with its Subsidiaries, (i) all cash held in any Company disbursing and
petty cash bank accounts in Mexico or Canada (excluding all cash held in (a) any
Company bank account outside of Mexico and Canada and (b) the Canadian and
Mexican bank accounts set forth in Section 1(a) of the Disclosure Schedules),
net accounts receivable, net inventory, prepaid expenses and any other assets
properly classified as current assets in accordance with the Accounting
Principles, less (ii) all accounts payable, accrued taxes, other accrued
expenses and any other obligations properly classified as current liabilities in
accordance with the Accounting Principles, in each case as determined as of the
close of business on the Closing Date and in accordance with the Accounting
Principles. For the purposes of this calculation, any short-term debt
liabilities shall be excluded from the calculation of current liabilities.

“Closing Working Capital Statement” has the meaning set forth in Section
2.04(b)(i).

“Code” means the Internal Revenue Code of 1986, as amended.

“COFECE” means the Mexican Federal Anti-Trust Commission (Comisión Federal de
Competencia Económica).

“Company” has the meaning set forth in the recitals.

“Company Benefit Plan” has the meaning set forth in Section 3.20(a).

“Company Intellectual Property” has the meaning set forth in Section 3.12(a).

“Competing Proposal” has the meaning set forth in Section 5.03(a).

“Contracts” means all contracts, leases, deeds, mortgages, licenses,
instruments, notes, commitments, undertakings, indentures, joint ventures and
all other agreements, commitments and legally binding arrangements, whether
written or oral.

“Corporate Records” means the original corporate books of each Mexican
Subsidiary, namely, the shareholders’ meetings minutes book (libro de actas de
asambleas),

 

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stock registry book (libro de registro de acciones), capital variations registry
book (libro de registro de variaciones de capital) and the board of directors’
meetings minutes book (libro de actas de sesiones del consejo de
administración).

“Direct Claim” has the meaning set forth in Section 8.05(c).

“Disclosing Party” has the meaning set forth in Section 10.10(e).

“Disclosure Schedules” means the Disclosure Schedules delivered by Seller
concurrently with the execution and delivery of this Agreement.

“Disputed Amounts” has the meaning set forth in Section 2.04(b)(iv).

“Disputed Amount Range” has the meaning set forth in Section 2.04(b)(iv).

“Dollars or $” means the lawful currency of the United States.

“Effect” means any change, event, violation, inaccuracy, circumstance or effect.

“Encumbrance” means any charge, claim, community property interest, pledge,
condition, equitable interest, lien (statutory or other), option, security
interest, mortgage, easement, encroachment, right of way, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income or exercise of any other attribute of ownership.

“Environment” means the system of natural and artificial or man induced elements
such as air (including air in buildings, natural or man-made structures below or
above ground), water, superficial water, groundwater and any and all sources of
water of whatever jurisdiction (including without limitation water under or
within land or in drains and sewers and coastal and inland waters and water
bodies defined as Mexican national waters (aguas nacionales) or recipient bodies
of Mexican national waters (cuerpos receptores de aguas nacionales)), land
(including soil whether at or below surface) wetland, sediment, soil, subsoil or
subsurface strata, and any and all natural resources, forestry resources,
habitat, ecosystems, florae and fauna, and in general the environment as defined
in Environmental Laws.

“Environmental Claim” means any Action, Governmental Order, lien, fine, penalty,
administrative proceeding, or, as to each, any settlement or judgment arising
therefrom, by or from any Person alleging liability of whatever kind or nature
(including liability or responsibility for the costs of enforcement proceedings,
investigations, clean-up, governmental response, removal or remediation, natural
resources damages, property damages, personal injuries, medical monitoring,
penalties, contribution, indemnification and injunctive relief) arising out of,
based on or resulting from: (a) the presence, Release of, or exposure to, any
Hazardous Materials; or (b) any non-compliance with any Environmental Law or
term or condition of any Environmental Permit.

“Environmental Law” means any applicable Law, and any Governmental Order or
binding agreement with any Governmental Authority: (a) relating to pollution (or
the clean-up thereof) or the protection of natural resources, endangered or
threatened species, human health or

 

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safety, or the Environment; (b) concerning the presence of, exposure to, or the
management, manufacture, use, containment, storage, recycling, reclamation,
reuse, treatment, generation, discharge, transportation, processing, production,
disposal or remediation of any Hazardous Materials; or (c) relating to
environmental, health and safety matters, or in general to the regulation or
protection of human health. The term “Environmental Law” includes, without
limitation, the following (including their implementing regulations and any
state analogs): CERCLA; the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid
Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq.; the Federal Water Pollution
Control Act of 1972, as amended by the Clean Water Act of 1977, 33 U.S.C. §§
1251 et seq.; the Toxic Substances Control Act of 1976, as amended, 15 U.S.C. §§
2601 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42
U.S.C. §§ 11001 et seq.; the Clean Air Act of 1966, as amended by the Clean Air
Act Amendments of 1990, 42 U.S.C. §§ 7401 et seq.; and the Occupational Safety
and Health Act of 1970, as amended, 29 U.S.C. §§ 651 et seq. With respect to the
Mexican Subsidiaries, the term Environmental Law includes (i) Mexico’s Ley
General del Equilibrio Ecológico y la Protección al Ambiente, Mexico’s Ley de
Aguas Nacionales, Mexico’s Ley General para la Prevención y Gestión Integral de
los Residuos (as well as its regulations known as the Reglamento de la Ley
General para la Prevención y Gestión Integral de los Residuos), Mexico’s Ley
General de Salud, and the respective regulations of each of such laws, as well
as Mexico’s Reglamento Federal de Seguridad, Higiene y Medio Ambiente en el
Trabajo, as such laws and regulations may be amended, restated or supplemented
from time to time, (ii) Mexican Official Norms NOM-052-SEMARNAT-2005,
NOM-053-SEMARNAT-1993, NOM-138-SEMARNAT/SS-2012, NOM-147-SEMARNAT/SSA1-2004, and
NOM-010-STPS-1999, among others, as such norms may be amended, restated or
supplemented from time to time; and (iii) any and all internal guidelines of
Governmental Authorities in charge of enforcing Environmental Law in Mexico.

“Environmental Notice” means any written directive, notice of violation or
infraction, or notice respecting any Environmental Claim relating to actual or
alleged non-compliance with any Environmental Law or any term or condition of
any Environmental Permit.

“Environmental Permit” means any Permit, letter, clearance, consent, waiver,
closure, exemption, decision or other action required under or issued, granted,
given, authorized by or made pursuant to Environmental Law.

“Equity Securities” means, with respect to any Person, (a) any capital stock,
partnership or membership interest, unit of participation or other similar
interest (however designated) in such Person, and (b) any option, warrant,
purchase right, conversion right, exchange right or other contractual obligation
which would entitle any other Person to acquire any such interest in such Person
or otherwise entitle any other Person to share in the equity, profits, earnings,
losses or gains of such Person (including stock appreciation, phantom stock,
profit participation or other similar rights).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and the regulations promulgated thereunder.

 

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“ERISA Affiliate” means, with respect to any Person, any other Person that,
together with such first Person, would be treated as a single employer within
the meaning of Section 414(b), (c), (m) or (o) of the Code.

“Escrow Agreements” means (i) the Escrow Agreement, by and among Buyer, Seller
and Citibank, National Association, dated as of April 26, 2016, and (ii) the
Escrow Agreement, by and among Buyer, Seller and Citibank, National Association,
to be dated as of the Closing Date.

“Escrow Amount” has the meaning set forth in the recitals.

“Estimated Working Capital” has the meaning set forth in Section 2.04(a)(i).

“Estimated Working Capital Statement” has the meaning set forth in Section
2.04(a)(i).

“Financial Statements” has the meaning set forth in Section 3.06.

“GAAP” means United States generally accepted accounting principles in effect
from time to time.

“Governmental Authority” means any federal, state, local or foreign government
or political subdivision thereof, or any agency or instrumentality of such
government or political subdivision, or any self-regulated organization or other
non-governmental regulatory authority or quasi-governmental authority (to the
extent that the rules, regulations or orders of such organization or authority
have the force of Law), or any arbitrator, court or tribunal of competent
jurisdiction.

“Governmental Order” means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.

“Hazardous Materials” means: (a) any material, substance, chemical, waste,
product, derivative, compound, mixture, solid, liquid, mineral or gas, in each
case, whether naturally occurring or manmade, that is hazardous, acutely
hazardous, toxic, corrosive, reactive, explosive, flammable, or of infectious
nature or words of similar import or regulatory effect under Environmental Laws;
(b) any petroleum or petroleum-derived products, radon, radioactive materials or
wastes, asbestos in any form, lead or lead-containing materials, urea
formaldehyde foam insulation, and polychlorinated biphenyls; or (c) any
component or element thereof or any other substance or material referenced in,
regulated under or defined by Environmental Laws as hazardous. With respect to
the Mexican Subsidiaries, the term “Hazardous Materials” shall include, without
limitation, any wastes, materials or substances that are (i) labelled as
“hazardous material” or “hazardous waste” or both, pursuant to Mexico’s Ley
General del Equilibrio Ecológico y la Protección al Ambiente; (ii) listed,
characterized (or subject to characterization) as “hazardous” under Mexican
Official Norms NOM-052-SEMARNAT-2005 and NOM-053-SEMARNAT-1993, (iii) labelled
as “hazardous wastes” under Mexico’s Ley General para la Prevención y Gestión
Integral de los Residuos or its regulations; (iv) capable of causing harm to the
Environment or to human health from exposure thereto in accordance with
Environmental Laws; or (v) any used recipients or containers that may have
contained or stored Hazardous Materials, including above-ground or underground
storage tanks or underground pipes or aboveground pipelines.

 

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“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.

“IMSS” means the Mexican Institute of Social Security (Instituto Mexicano del
Seguro Social).

“Indemnified Party” has the meaning set forth in Section 8.05.

“Indemnifying Party” has the meaning set forth in Section 8.05.

“Indemnitee” has the meaning set forth in Section 8.04(e).

“Indemnitor” has the meaning set forth in Section 8.04(e).

“Indemnity Cap” has the meaning set forth in Section 8.04(c).

“Independent Accountants” has the meaning set forth in Section 2.04(b)(iv).

“INFONAVIT” means the Mexican Institute for Workers’ Housing National Fund
(Instituto del Fondo Nacional de la Vivienda para los Trabajadores).

“Insurance Policies” has the meaning set forth in Section 3.16.

“Intellectual Property” has the meaning set forth in Section 3.12(a).

“Intellectual Property Registrations” has the meaning set forth in Section
3.12(b).

“Joinder Agreement” means that certain Joinder Agreement, dated March 30, 2011,
by and among Seller, Alstyle Internacional de Mexico, S.A. de C.V., the
Municipality of Agua Prieta Sonora, Organismo Operador Municipal de Agua
Potable, Alcantarillado y Saneamiento de Agua Prieta, and Asesoría Fintegra,
S.A. de C.V.

“Knowledge of Seller or Seller’s Knowledge” or any other similar knowledge
qualification, means the actual knowledge of any of the Knowledge Persons, after
due inquiry and reasonable investigation.

“Knowledge Persons” means Keith S. Walters, Richard L. Travis, Jr., Michael D.
Magill, Ronald M. Graham and, with respect to Tax matters, the Company’s tax
director (or the individual with a comparable role) or his/her successor.

“Law” means any and all federal, state or local statutes, laws, ordinance,
regulations, rules, standards, policies, codes, orders, constitution, treaties,
common law, judgment, decrees, other requirement or rule of law of any
Governmental Authority or any agreement with any Governmental Authority. With
respect to the Mexican Subsidiaries, the term “Law” shall include any and all
Mexican official norms (NOMs).

 

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“Legal Requirements” means any Laws applicable to the Company or to any of its
assets, properties or businesses.

“Liabilities” has the meaning set forth in Section 3.07.

“LFCE” means the Mexican Federal Anti-Trust Law (Ley Federal de Competencia
Económica).

“Licensed Intellectual Property” has the meaning set forth in Section 3.12(a).

“Losses” means losses, damages, liabilities, deficiencies, judgments, interest,
awards, penalties, fines, costs or expenses of whatever kind, including
reasonable attorneys’ fees and the cost of enforcing any right to
indemnification hereunder and the cost of pursuing any insurance providers;
provided, however, that “Losses” shall not include punitive damages, except in
the case of fraud or to the extent actually awarded to a Governmental Authority
or other third party.

“Material Adverse Effect” means any event, occurrence, fact, condition or change
that is, or could reasonably be expected to become, individually or in the
aggregate, materially adverse to (a) the business, results of operations,
condition (financial or otherwise) or assets of the Company, or (b) the ability
of Seller to consummate the transactions contemplated hereby on a timely basis,
except to the extent that any such Effect directly results from: (i) changes in
general economic or regulatory conditions or in the securities, credit or
financial markets in general, (ii) general changes or developments in the
business or industry in which the Company operates, (iii) acts of war,
terrorism, violence or other political events, or any natural disaster or
weather-related event, (iv) changes in applicable Legal Requirements, (v) the
negotiation, execution, announcement or performance of this Agreement or the
transactions expressly required hereby, including the impact of the foregoing on
relationships with customers, suppliers, employees and regulators, (vi) the
identity of Buyer as the acquiror of the Company, (vii) any action taken by the
Company expressly consented to by Buyer after the date hereof, (viii) changes in
GAAP or Mexican Financial Norms (Normas de Información Financiera), or the
interpretation thereof, (ix) any failure to meet internal or published
projections, forecasts or revenue or earning predictions for any period ending
on or after the date hereof, or (x) compliance with the specific provisions of,
or the taking of any action specifically required by, this Agreement; provided,
however, that, in the case of clauses (i), (ii), (iii), (iv) or (viii) above,
such changes do not affect the Company substantially disproportionately as
compared to the Company’s competitors to the extent relating to the competing
business.

“Material Change” means, with respect to any Tax liability of Buyer, an increase
of more than $10,000 and, with respect to any Tax asset of Buyer, a reduction of
more than $10,000.

“Material Contracts” has the meaning set forth in Section 3.09(a).

“Material Customers” has the meaning set forth in Section 3.15(a).

“Material Suppliers” has the meaning set forth in Section 3.15(b).

 

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“Mexican Income Tax Law” means the Mexican Income Tax Law (Ley del Impuesto
Sobre la Renta).

“Mexican Subsidiaries” means each and all of (i) Cactex de Mexico, S.A. de C.V.,
(ii) Alvest, S.A. de C.V., (iii) Alstyle Internacional de Mexico, S.A. de C.V.
and (iv) Diaco Internacional, S.A. de C.V.

“Permits” means all permits, licenses, franchises, approvals, authorizations,
registrations, certificates, variances and similar rights obtained, or required
to be obtained, from Governmental Authorities.

“Permitted Encumbrances” has the meaning set forth in Section 3.10(a).

“Person” means an individual, corporation, partnership, joint venture, limited
liability company, Governmental Authority, unincorporated organization, trust,
association or other entity.

“Post-Closing Tax Period” means any taxable period beginning after the Closing
Date and, with respect to any Straddle Period, the portion of such Straddle
Period beginning after the Closing Date.

“Pre-Closing Tax Period” means any taxable period ending on or before the
Closing Date and, with respect to any Straddle Period, the portion of such
Straddle Period ending on and including the Closing Date.

“Pre-Closing Taxes” means Taxes of the Company for any Pre-Closing Tax Period.

“Price Adjustment Decrease” has the meaning set forth in Section 2.04(a)(ii).

“Price Adjustment Increase” has the meaning set forth in Section 2.04(a)(ii).

“Purchase Price” has the meaning set forth in Section 2.02.

“Qualified Benefit Plan” has the meaning set forth in Section 3.20(c).

“Real Property” means the real property owned, leased or subleased by the
Company or any of its Subsidiaries, together with all buildings, structures and
facilities located thereon.

“Related Party” has the meaning set forth in Section 3.25.

“Related Party Contract” has the meaning set forth in Section 3.25.

“Release” means any actual or threatened release, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, depositing, dispersing, injecting,
escaping, leaching, dumping, abandonment, disposing, allowing to escape or
migrating of any Hazardous Material, whether intentional or unintentional, into
or through the indoor and outdoor Environment.

 

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“Remedial Action” means any and all actions necessary to comply with, or
discharge any obligation under, Environmental Laws to (i) clean up, remove,
treat, restore, remedy, contain, fight, abate, recycle, treat, cover or in any
other way adjust Hazardous Materials in the indoor or outdoor Environment;
(ii) prevent, control or minimize the Release of Hazardous Materials so that
they do not migrate or endanger or threaten to endanger public health or welfare
or the Environment; or (iii) perform remedial studies, investigations,
restoration and post-remedial studies (or post-clean-up care), assessments,
testing, investigations or monitoring on, about or in any real property.

“Representative” means, with respect to any Person, any and all directors,
officers, employees, consultants, financial advisors, counsel, accountants and
other agents of such Person.

“Resolution Period” has the meaning set forth in Section 2.04(b)(iii).

“Restricted Business” means the manufacture, production or distribution of blank
T-shirts and other apparel products of the type manufactured, produced or
distributed by the Company at any time since January 1, 2013.

“Restricted Period” has the meaning set forth in Section 5.07(a).

“Review Period” has the meaning set forth in Section 2.04(b)(ii).

“Sample Working Capital Statement” means the statement attached hereto as
Exhibit B setting forth a sample calculation of Closing Working Capital.

“SAR” means the Mexican Law of Systems of Savings for Retirement (Ley de los
Sistemas de Ahorro para el Retiro).

“Seller” has the meaning set forth in the preamble.

“Seller Basket Exclusions” has the meaning set forth in Section 8.04(b).

“Seller Indemnitees” has the meaning set forth in Section 8.03.

“Seller’s Accountants” means Grant Thornton LLP.

“Software” means any and all (i) computer programs, including any and all
software implementations of algorithms, models and methodologies, whether in
source code or object code, (ii) databases and compilations, including any and
all data and collections of data, whether machine readable or otherwise,
(iii) descriptions, flow-charts and other work product used to design, plan,
organize and develop any of the foregoing, (iv) screens, user interfaces, report
formats, firmware, development tools, templates, menus, buttons and icons, and
(v) all documentation including user manuals and other training documentation
related to any of the foregoing.

“Statement of Objections” has the meaning set forth in Section 2.04(b)(iii).

 

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“Straddle Period” has the meaning set forth in Section 6.03.

“Sublease” has the meaning set forth in Section 2.05.

“Subsidiaries” means (i) A and G, Inc., an Illinois corporation, (ii) Alstyle
Ensenada LLC, an Illinois limited liability company, (iii) Alstyle Hermosilla
LLC, an Illinois limited liability company, (iv) Alstyle Apparel Limited, a
limited company organized under the laws of the United Kingdom, (v) Diaco USA,
LLC, a California limited liability company, and (vi) the Mexican Subsidiaries.

“Tax Authority” means any domestic or foreign, local, municipal, governmental,
state, provincial, territorial, national, or federal authority, body, or
officials (or any entity or individual acting on behalf of such authority, body,
or officials) anywhere in the world, with responsibility for the imposition,
collection or administration of any form of Tax.

“Tax Claim” has the meaning set forth in Section 6.05.

“Tax Representations” has the meaning set forth in Section 3.22.

“Tax Return” means any return, declaration, report, claim for refund,
information return or statement or other document filed or required to be filed
with any Tax Authority with respect to Taxes, including any schedule or
attachment thereto, and including any amendment thereof and requests for the
extension of time.

“Taxes” means (a) all federal, state or local taxes imposed by any Governmental
Authority, including all such taxes based on gross or net income, gross
receipts, flat tax, capital, sales, use, ad valorem, transfer, franchise,
profits, inventory, environmental, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, production, value added,
severance, stamp, occupation, duties (derechos and aprovechamientos) and other
taxes (including any other contributions (contribuciones) and employee payments
for profit sharing (participación de los trabajadores en las utilidades)),
property and estimated taxes, including any payments related to IMSS, INFONAVIT
and SAR, and (b) all interest, penalties, fines, inflationary adjustments,
additions to tax or additional amounts imposed by any Tax Authority in
connection with any item described in subsection (a).

“Third Party Claim” has the meaning set forth in Section 8.05(a).

“Trade Secrets” has the meaning set forth in Section 3.12(a).

“Transaction Documents” means this Agreement, the Transition Services Agreement
and the Sublease.

“Transfer Taxes” has the meaning set forth in Section 6.01(a).

“Transition Services Agreement” has the meaning set forth in Section 2.06.

“Treasury Regulations” means the regulations promulgated under the Code, as such
regulations may be amended from time to time.

 

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“Undisputed Amounts” has the meaning set forth in Section 2.04(b)(iv).

“Union” has the meaning set forth in Section 3.21(b).

“United Purchase Agreement” has the meaning set forth in Section 3.27.

“Units” has the meaning set forth in the recitals.

“WARN Act” means the federal Worker Adjustment and Retraining Notification Act
of 1988, and similar state, local and foreign laws related to plant closings,
relocations, mass layoffs and employment losses.

“Working Capital Cap” means an amount equal to $89,000,000.

“Working Capital Threshold” means an amount equal to $85,000,000.

ARTICLE II

PURCHASE AND SALE

Section 2.01 Purchase and Sale. Subject to the terms and conditions set forth
herein, at the Closing, Seller shall sell to Buyer, and Buyer shall purchase
from Seller, (a) the Units and (b) the Acquired Assets, in each case free and
clear of all Encumbrances other than Permitted Encumbrances, for the
consideration specified in Section 2.02.

Section 2.02 Purchase Price. The aggregate purchase price for the Units and the
Acquired Assets shall be $110,000,000 (the “Base Amount”), subject to adjustment
pursuant to Section 2.04 hereof (the Base Amount as so adjusted, the “Purchase
Price”). The Escrow Amount shall constitute $5,000,000 of the Base Amount. The
parties agree to allocate the Purchase Price as provided in Section 6.04(b).

Section 2.03 Transactions to be Effected at the Closing.

 

  (a) At the Closing, Buyer shall deliver to Seller:

 

  (i) the Base Amount, subject to any adjustment pursuant to Section 2.04(a) and
net of the Escrow Amount, by wire transfer of immediately available funds to an
account of Seller, which account shall be designated in writing by Seller to
Buyer no later than two Business Days prior to the Closing Date; and

 

  (ii) the Transaction Documents and all other agreements, documents,
instruments or certificates required to be delivered by Buyer at or prior to the
Closing pursuant to Section 7.03 of this Agreement.

 

  (b) At the Closing, Seller shall deliver to Buyer:

 

  (i) certificates or other documents evidencing the Units, free and clear of
all Encumbrances other than Permitted Encumbrances, duly endorsed in blank or
accompanied by instruments of transfer duly executed in blank; and

 

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  (ii) the Transaction Documents and all other agreements, documents,
instruments or certificates required to be delivered by Seller at or prior to
the Closing pursuant to Section 7.02 of this Agreement.

Section 2.04 Purchase Price Adjustment.

 

  (a) Closing Adjustment.

 

  (i) At least three (3) Business Days before the Closing Date, Seller shall
prepare and deliver to Buyer a statement (the “Estimated Working Capital
Statement”), certified by the chief financial officer of Seller, setting forth
an estimate of Closing Working Capital as of the last day of the most recently
ended month for which financial statements are available (the “Estimated Working
Capital”). The Estimated Working Capital Statement and the determinations and
calculations contained therein shall be calculated in accordance with the
Accounting Principles and in the same manner as set forth in the Sample Working
Capital Statement.

 

  (ii) In the event that the Estimated Working Capital is greater than the
Working Capital Cap, the Base Amount shall be increased by an amount equal to
the positive difference between the Estimated Working Capital and the Working
Capital Cap (a “Price Adjustment Increase”). In the event that the Estimated
Working Capital is less than the Working Capital Threshold, the Base Amount
shall be reduced by an amount equal to the positive difference between the
Estimated Working Capital and the Working Capital Threshold (a “Price Adjustment
Decrease”).

 

  (iii) For the avoidance of doubt, if the Estimated Working Capital is an
amount (1) equal to or greater than the Working Capital Threshold and (2) equal
to or less than the Working Capital Cap, there shall be no adjustment to the
Base Amount at the Closing.

 

  (b) Post-Closing Adjustment.

 

  (i)

Within ninety (90) days after the Closing Date, Seller, acting pursuant to the
Transition Services Agreement, shall prepare and deliver to Buyer a statement
(the “Closing Working Capital Statement”), certified by the chief financial
officer of Seller, setting forth its calculation of Closing Working Capital,
which statement shall contain an unaudited consolidated balance sheet of the
Company as of the Closing Date (without giving effect to the transactions
contemplated herein). The Closing Working Capital

 

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  Statement and the determinations and calculations contained therein shall be
calculated in accordance with the Accounting Principles and in the same manner
as set forth in the Sample Working Capital Statement.

 

  (ii) After receipt of the Closing Working Capital Statement, Buyer shall have
thirty (30) days (the “Review Period”) to review the Closing Working Capital
Statement. During the Review Period, Buyer and Buyer’s Accountants shall have
full access to the books and records of the Company, the personnel of, and work
papers prepared by, Seller or Seller’s Accountants to the extent that they
relate to the Closing Working Capital Statement and to such historical financial
information (to the extent in Seller’s possession or under Seller’s control)
relating to the Closing Working Capital Statement as Buyer may reasonably
request for the purpose of reviewing the Closing Working Capital Statement and
to prepare a Statement of Objections (defined below), provided, that such access
shall be in a manner that does not interfere with the normal business operations
of Seller or the Company.

 

  (iii) On or prior to the last day of the Review Period, Buyer may object to
the Closing Working Capital Statement by delivering to Seller a written
statement setting forth Buyer’s objections in reasonable detail, indicating each
disputed item or amount and the basis for Buyer’s disagreement therewith (the
“Statement of Objections”). If Buyer fails to deliver the Statement of
Objections before the expiration of the Review Period, the Closing Working
Capital Statement and the Closing Working Capital reflected in the Closing
Working Capital Statement shall be deemed to have been accepted by Buyer. If
Buyer delivers the Statement of Objections before the expiration of the Review
Period, Buyer and Seller shall negotiate in good faith to resolve such
objections within 30 days after the delivery of the Statement of Objections (the
“Resolution Period”), and, if the same are so resolved within the Resolution
Period, the Closing Working Capital and the Closing Working Capital Statement
with such changes as may have been previously agreed in writing by Buyer and
Seller, shall be final and binding.

 

  (iv)

If Seller and Buyer fail to reach an agreement with respect to all of the
matters set forth in the Statement of Objections before expiration of the
Resolution Period, then any amounts remaining in dispute (“Disputed Amounts”,
and any amounts not so disputed, the “Undisputed Amounts”) shall be submitted
for resolution to an impartial nationally recognized firm of independent
certified public accountants other than Seller’s Accountants or Buyer’s
Accountants to be appointed by mutual agreement of Buyer and Seller (the
“Independent Accountants”) who, acting as experts

 

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  and not arbitrators, shall resolve the Disputed Amounts only and make any
adjustments to the Closing Working Capital and the Closing Working Capital
Statement. For the avoidance of doubt, the Independent Accountants shall only
consider and have authority to resolve the Disputed Amounts and shall have no
other rights or obligations with respect to any Undisputed Amounts, including
but not limited, audit rights. The parties hereto agree that all adjustments
shall be made in accordance with the Accounting Principles and without regard to
materiality. The Independent Accountants shall only decide the specific items
under dispute by the parties and their decision for each Disputed Amount must be
within the range of values assigned to each such item in the Closing Working
Capital Statement and the Statement of Objections, respectively, the difference
between which, in the aggregate, shall be referred to as the “Disputed Amount
Range”.

 

  (v) Buyer and Seller shall each bear fifty percent (50%) of all fees and
expenses of the Independent Accountants; provided, that, if the Independent
Accountants determine the Disputed Amounts to be within ten percent (10%
measured by the Disputed Amount Range) of Buyer’s calculations as set forth in
the Statement of Objections, then Seller shall be responsible for all of the
fees and expenses of Independent Accountants, and if the Independent Accountants
determine the Disputed Amounts to be within ten percent (10% measured by the
Disputed Amount Range) of the calculations set forth in the Closing Working
Capital Statement, then Buyer shall bear all fees and expenses of the
Independent Accountants. For purposes of clarification, if the Disputed Amount
Range is $500,000 and the Independent Accountants’ determination of the Disputed
Amounts is within $50,000 of the amounts reflected in the Statement of
Objections, then Seller shall be responsible for all of the fees of the
Independent Accountants. If the Independent Accountants’ determination of the
Disputed Amounts is within $50,000 of the amounts reflected in the Closing
Working Capital Statement, then Buyer shall be responsible for all of the fees
of the Independent Accountants.

 

  (vi) The Independent Accountants shall make a determination as soon as
practicable within 30 days (or such other time as the parties hereto shall agree
in writing) after their engagement, and their resolution of the Disputed Amounts
and their adjustments to the Closing Working Capital Statement or the Closing
Working Capital shall be conclusive and binding upon the parties hereto.

 

  (vii)

No later than five (5) Business Days after the expiration of the Review Period
if Buyer does not dispute any items in the Closing Working Capital Statement or,
if Buyer disputes items in the

 

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  Closing Working Capital Statement, after all Disputed Amounts have been
resolved in accordance with the provisions of this Section 2.04(b):

 

  (A) if the Closing Working Capital is neither greater than the Working Capital
Cap nor less than the Working Capital Threshold, and no adjustment was effected
pursuant to Section 2.04(a)(ii), then no amount shall be payable after Closing
in respect of the Closing Working Capital;

 

  (B) if the Closing Working Capital is neither greater than the Working Capital
Cap nor less than the Working Capital Threshold, and a Price Adjustment Increase
was effected pursuant to Section 2.04(a)(ii), then Seller shall pay to Buyer an
amount equal to such Price Adjustment Increase;

 

  (C) if the Closing Working Capital is neither greater than the Working Capital
Cap nor less than the Working Capital Threshold, and a Price Adjustment Decrease
was effected pursuant to Section 2.04(a)(ii), then Buyer shall pay to Seller an
amount equal to such Price Adjustment Decrease;

 

  (D) if the Closing Working Capital is greater than the Working Capital Cap,
and no adjustment was effected pursuant to Section 2.04(a)(ii), then Buyer shall
pay to Seller an amount equal to the difference between the Closing Working
Capital and the Working Capital Cap;

 

  (E) if the Closing Working Capital is less than the Working Capital Threshold,
and no adjustment was effected pursuant to Section 2.04(a)(ii), then Seller
shall pay to Buyer an amount equal to the difference between the Closing Working
Capital and the Working Capital Threshold;

 

  (F) if the Closing Working Capital is greater than the Working Capital Cap and
a Price Adjustment Increase was effected pursuant to Section 2.04(a)(ii), then
an amount equal to the result obtained by subtracting (x) the Price Adjustment
Increase from (y) an amount equal to the difference between the Closing Working
Capital and the Working Capital Cap, shall be paid (1) by Buyer to Seller if
such amount is a positive number, or (2) by Seller to Buyer, if such amount is a
negative number;

 

  (G)

if the Closing Working Capital is greater than the Working Capital Cap and a
Price Adjustment Decrease was effected pursuant to Section 2.04(a)(ii), then an
amount equal to the

 

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  sum of (x) the Price Adjustment Decrease plus (y) an amount equal to the
difference between the Closing Working Capital and the Working Capital Cap,
shall be paid by Buyer to Seller;

 

  (H) if the Closing Working Capital is less than the Working Capital Threshold
and a Price Adjustment Decrease was effected pursuant to Section 2.04(a)(ii),
then an amount equal to the result obtained by subtracting (x) the Price
Adjustment Decrease from (y) an amount equal to the difference between the
Closing Working Capital and the Working Capital Threshold, shall be paid (1) by
Seller to Buyer if such amount is a negative number, or (2) by Buyer to Seller
if such amount is a positive number;

 

  (I) if the Closing Working Capital is less than the Working Capital Threshold
and a Price Adjustment Increase was effected pursuant to Section 2.04(a)(ii),
then Seller shall pay to Buyer an amount equal to the sum of (x) the Price
Adjustment Increase plus (y) an amount equal to the difference between the
Closing Working Capital and the Working Capital Threshold.

All payments under this Section 2.04(b) shall be made by wire transfer of
immediately available funds.

(c) Adjustments for Tax Purposes. Any payments made pursuant to this
Section 2.04 shall be treated as an adjustment to the Purchase Price by the
parties for Tax purposes, unless otherwise required by Law.

Section 2.05 Sublease. In connection with the transactions contemplated hereby,
Buyer and Seller agree to enter into, or cause to be entered into, as the case
may be, a sublease in the form attached hereto as Exhibit C (the “Sublease”),
whereby A and G, Inc., a wholly-owned subsidiary of the Company (“A&G”), shall
sublease to Crabar/GBF, Inc., a wholly-owned subsidiary of Seller, that portion
of the premises located at 1501 East Cerritos Avenue, Anaheim, California 92805,
as more particularly described in the Sublease.

Section 2.06 Transition Services Agreement. In connection with the transactions
contemplated hereby, Buyer and Seller agree to enter into a Transition Services
Agreement in the form attached hereto as Exhibit D (the “Transition Services
Agreement”), under which Seller shall provide certain administrative, financial,
human resources and information technology services to Buyer, the Company and
the Subsidiaries from and after the Closing Date for the time periods specified
therein.

Section 2.07 Closing. Subject to the terms and conditions of this Agreement, the
purchase and sale of the Units contemplated hereby shall take place at a closing
(the “Closing”) to be held at the offices of Baker Botts L.L.P. at 10:00 a.m.,
Central Time on the third Business

 

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Day following the date on which the conditions to Closing set forth in Article
VII have been satisfied or waived (other than the conditions which, by their
nature, are to be satisfied at the Closing, but subject to the satisfaction or
waiver of those conditions at such time), or such other time and place as Seller
and Buyer may mutually agree. The date on which the Closing occurs is the
“Closing Date”. Upon the occurrence of the Closing, the parties hereto agree
that the transactions contemplated by this Agreement shall be deemed effective
for all purposes (including, without limitation, title, possession, financial
reporting and tax purposes) as of 12:01 a.m. Central Time on the day immediately
following the Closing Date.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

Except as set forth in the Disclosure Schedules (it being agreed that disclosure
of any item in any section or subsection of the Disclosure Schedules shall be
deemed to have been disclosed with respect to any other section or subsection of
the Disclosure Schedules if the relevance of such item to such other section or
subsection is reasonably apparent from the information disclosed), Seller
represents and warrants to Buyer that the statements contained in this Article
III are true and correct as of the date hereof. Except for Sections 3.02, 3.03,
3.04, 3.06 and 3.22, all references to the Company in this Article III shall
include the Subsidiaries.

Section 3.01 Organization and Authority of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Texas. Seller has full corporate power and authority to enter into this
Agreement and the other Transaction Documents to which Seller is a party, to
carry out its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by
Seller of this Agreement and any other Transaction Document to which Seller is a
party, the performance by Seller of its obligations hereunder and thereunder and
the consummation by Seller of the transactions contemplated hereby and thereby
have been duly authorized by all requisite corporate action on the part of
Seller. This Agreement has been duly executed and delivered by Seller, and
(assuming due authorization, execution and delivery by Buyer) this Agreement
constitutes a legal, valid and binding obligation of Seller enforceable against
Seller in accordance with its terms. When each other Transaction Document to
which Seller is or will be a party has been duly executed and delivered by
Seller (assuming due authorization, execution and delivery by each other party
thereto), such Transaction Document will constitute a legal and binding
obligation of Seller enforceable against it in accordance with its terms.

Section 3.02 Organization, Authority and Qualification of the Company. The
Company is a limited liability company duly organized, validly existing and in
good standing under the Laws of the State of Delaware and has full power and
authority to own, operate or lease the properties and assets now owned, operated
or leased by it and to carry on its business as it has been and is currently
conducted. Section 3.02 of the Disclosure Schedules sets forth each jurisdiction
in which the Company is licensed or qualified to do business, and the Company is
duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business as currently conducted makes such licensing or qualification
necessary. All actions of the Board of Managers or members of the Company
required to be taken by the Company in connection with this Agreement and the
other Transaction Documents will be duly authorized on or prior to the Closing.

 

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Section 3.03 Capitalization.

(a) The authorized capital of the Company consists of 100 units, all of which
are issued and outstanding and constitute the Units. All of the Units have been
duly authorized, are validly issued, fully paid and non-assessable, and are
owned of record and beneficially by Seller, free and clear of all Encumbrances.
Upon consummation of the transactions contemplated by this Agreement, Buyer
shall own all of the Units, free and clear of all Encumbrances.

(b) All of the Units were issued in compliance with applicable Law. None of the
Units were issued in violation of any agreement, arrangement or commitment to
which Seller or the Company is a party or is subject to or in violation of any
pre-emptive or similar rights of any Person.

(c) There are no outstanding or authorized options, warrants, convertible
securities or other rights, agreements, arrangements or commitments of any
character relating to units of the Company or obligating Seller or the Company
to issue or sell any units or any other interest in, the Company. The Company
does not have outstanding or authorized any appreciation, phantom stock, profit
participation or similar rights. Except for the Operating Agreement of the
Company, there are no voting trusts, agreements, proxies or other agreements or
understandings in effect with respect to the voting or transfer of any of the
Units.

Section 3.04 Subsidiaries.

(a) The Equity Securities of the Subsidiaries (other than the Mexican
Subsidiaries) are duly authorized and are validly issued, fully subscribed and
paid, and non-assessable. Section 3.04(a) of the Disclosure Schedules sets forth
each of the Subsidiaries (other than the Mexican Subsidiaries) together with the
jurisdiction in which each such Subsidiary is organized or formed and such
Subsidiary’s record owners. Except as set forth in Section 3.04(a) of the
Disclosure Schedules, the record owners of the Equity Securities of the
Subsidiaries listed in Section 3.04(a) of the Disclosure Schedules have good and
valid legal title to such Equity Securities free and clear of any Encumbrances.

(b) The Equity Securities of the Mexican Subsidiaries are duly authorized and
are validly issued, fully subscribed and paid, non-assessable and qualify as
acciones liberadas. Section 3.04(b) of the Disclosure Schedules sets forth the
number and type of issued and outstanding Equity Securities of each Mexican
Subsidiary and the record owners thereof. Except as set forth in Section 3.04(b)
of the Disclosure Schedules, the record owners of the Equity Securities of the
Mexican Subsidiaries listed in Section 3.04(b) of the Disclosure Schedules have
good and valid legal title to such Equity Securities free and clear of any
Encumbrances.

(c) Except for the Subsidiaries, the Company does not own Equity Securities, or
have any other ownership interest, including a partnership or joint venture
interest, in any other Person. Each Subsidiary is duly organized, validly
existing and in good standing

 

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under the Laws of the jurisdiction of its incorporation or formation and has
full power and authority to own, operate or lease the properties and assets now
owned, operated or leased by it and to carry on its business as it has been and
is currently conducted. Section 3.04(c) of the Disclosure Schedules sets forth
each jurisdiction in which each Subsidiary is licensed or qualified to do
business, and each Subsidiary is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which the properties owned or leased
by it or the operation of its business as currently conducted makes such
licensing or qualification necessary. The stock or other ownership interests of
each of the Subsidiaries held, directly or indirectly, by the Company
constitutes all of the outstanding stock or existing ownership interests in each
Subsidiary. There are no outstanding or authorized options, warrants,
convertible securities or other rights in favor of any Person with respect to
the Equity Securities of any Subsidiary.

Section 3.05 No Conflicts; Consents. The execution, delivery and performance by
Seller of this Agreement and the other Transaction Documents to which it is a
party, and the consummation of the transactions contemplated hereby, do not and
will not: (a) conflict with or result in a violation or breach of, or default
under, any provision of the certificate of incorporation, by-laws or other
organizational documents of Seller or the Company; (b) conflict with or result
in a violation or breach of any provision of any Law or Governmental Order
applicable to Seller or the Company; (c) except as set forth in Section 3.05(c)
of the Disclosure Schedules, require the consent, notice or other action by any
Person under, conflict with, result in a violation or breach of, constitute a
default or an event that, with or without notice or lapse of time or both, would
constitute a default under, result in the acceleration of or create in any party
the right to accelerate, terminate, modify or cancel any Contract to which
Seller or the Company is a party or by which Seller or the Company is bound or
to which any of their respective properties and assets are subject (including
any Material Contract) or any Permit affecting the properties, assets or
business of the Company; or (d) result in the creation or imposition of any
Encumbrance other than Permitted Encumbrances on any properties or assets of the
Company or the Acquired Assets. No consent, approval, Permit, Governmental
Order, declaration or filing with, or notice to, any Governmental Authority is
required by or with respect to Seller or the Company in connection with the
execution and delivery of this Agreement and the other Transaction Documents and
the consummation of the transactions contemplated hereby and thereby, except for
such filings as may be required under the HSR Act and the LFCE.

Section 3.06 Financial Statements. Complete copies of the Company’s consolidated
unaudited financial statements consisting of the balance sheet of the Company as
at February 29, in the year 2016, and February 28, in each of the years 2015 and
2014, and the related statements of income for the years then ended (the
“Financial Statements”) are included in Section 3.06 of the Disclosure
Schedules. The Financial Statements have been prepared in accordance with GAAP
applied on a consistent basis throughout the period involved, subject to the
absence of notes (that, if presented, would not differ materially from those
presented in Seller’s annual consolidated audited financial statements). The
Financial Statements are based on the books and records of the Company, and
fairly present in all material respects the financial condition of the Company
and its Subsidiaries as of the respective dates they were prepared and the
results of the operations of the Company and its Subsidiaries for the periods
indicated. The consolidated unaudited balance sheet of the Company as of
February 29, 2016 is referred to herein as the “Balance Sheet” and the date
thereof as the “Balance Sheet Date”. The Company maintains a system of
accounting established and administered in accordance with GAAP. There are no
extraordinary or non-recurring items for the periods covered by the Financial
Statements that are not individually and separately identified in the Financial
Statements.

 

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Section 3.07 Undisclosed Liabilities. Except as set forth in Section 3.07 of the
Disclosure Schedules, the Company has no liabilities, obligations or commitments
of any nature whatsoever, asserted or unasserted, known or unknown, absolute or
contingent, accrued or unaccrued, matured or unmatured or otherwise
(“Liabilities”), except (a) those which are adequately reflected or reserved
against in the Balance Sheet as of the Balance Sheet Date, and (b) those which
have been incurred in the ordinary course of business consistent with past
practice since the Balance Sheet Date and which are not, individually or in the
aggregate, material in amount.

Section 3.08 Absence of Certain Changes, Events and Conditions. Other than in
connection with the Asset Sale Election, the elections made under Section 338(g)
of the Code (together with any corresponding or similar elections made under
state, local, or foreign law) pursuant to Section 6.04(a), or in the ordinary
course of business consistent with past practice or except as set forth in
Section 3.08 of the Disclosure Schedules, since the Balance Sheet Date there has
not been, with respect to the Company, any:

(a) event, occurrence or development that has had, or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect;

(b) amendment of the charter, by-laws or other organizational documents of the
Company;

(c) split, combination or reclassification of any Units (or, in the case of the
Subsidiaries, their Equity Securities);

(d) issuance, sale or other disposition of any of its capital stock, or grant of
any options, warrants or other rights to purchase or obtain (including upon
conversion, exchange or exercise) any of its capital stock;

(e) declaration or payment of any dividends or distributions on or in respect of
the Units (or, in the case of the Subsidiaries, their Equity Securities);

(f) material change in any method of accounting or accounting practice of the
Company, except as required by GAAP or as disclosed in the notes to the
Financial Statements;

(g) material change in the Company’s cash management practices and its policies,
practices and procedures with respect to collection of accounts receivable,
establishment of reserves for uncollectible accounts, accrual of accounts
receivable, inventory control, prepayment of expenses, payment of trade accounts
payable, accrual of other expenses, deferral of revenue and acceptance of
customer deposits;

(h) entry into any Contract that would constitute a Material Contract;

 

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(i) incurrence, assumption or guarantee of any indebtedness for borrowed money
except unsecured current obligations and Liabilities incurred in the ordinary
course of business consistent with past practice;

(j) transfer, assignment, sale or other disposition of any of the assets shown
or reflected in the Balance Sheet or cancellation of any debts or entitlements;

(k) transfer, assignment or grant of any license or sublicense of any material
rights under or with respect to any Intellectual Property;

(l) material damage, destruction or loss (whether or not covered by insurance)
to its property;

(m) capital investment in, or any loan to, any other Person;

(n) acceleration, termination, material modification to or cancellation of any
material Contract (including, but not limited to, any Material Contract) to
which the Company is a party or by which it is bound, or entry into a material
Contract other than in the ordinary course of business consistent with past
practice;

(o) material capital expenditures;

(p) imposition of any Encumbrance upon any of the Company properties, units or
assets, tangible or intangible;

(q) (i) grant of any bonuses, whether monetary or otherwise, or increase in any
wages, salary, severance, pension or other compensation or benefits in respect
of its employees, officers, directors, consultants or independent contractors,
other than as provided for in any written agreements or required by applicable
Law, (ii) entry into or amendment of any employment agreement or change in the
terms of employment for any employee or any termination of any employees, or
(iii) action to accelerate the vesting or payment of any compensation or benefit
for any employee, member, manager, consultant or independent contractor;

(r) adoption, modification or termination of any: (i) Company policies
concerning employment, severance or retention of employees, (ii) Contracts or
other agreements concerning the officers of the Company with respect to such
officers’ employment with the Company, (iii) Company Benefit Plan or
(iv) collective bargaining or other agreements with a Union other than as
provided for in any written agreements or required by applicable Law, in each
case whether written or oral, the effect of which would have a material effect
on the Company’s business;

(s) loan to (or forgiveness of any loan to) any of its stockholders, directors,
officers and employees;

(t) entry into a new line of business or abandonment or discontinuance of
existing lines of business;

 

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(u) adoption of any plan of merger, consolidation, reorganization, liquidation
or dissolution or filing of a petition in bankruptcy under any provisions of
federal or state bankruptcy Law or consent to the filing of any bankruptcy
petition against it under any similar Law;

(v) except as set forth in Section 3.08(v) of the Disclosure Schedules,
purchase, lease or other acquisition of the right to own, use or lease any
property or assets for an amount in excess of $100,000.00, individually (in the
case of a lease, per annum) or $500,000.00 in the aggregate (in the case of a
lease, for the entire term of the lease, not including any option term), except
for purchases of inventory or supplies in the ordinary course of business
consistent with past practice;

(w) acquisition by merger or consolidation with, or by purchase of a substantial
portion of the assets or stock of, or by any other manner, any business or any
Person or any division thereof;

(x) action by the Company to make, change or rescind any Tax election, amend any
Tax Return or take any position on any Tax Return, take any action, omit to take
any action or enter into any other transaction that would have the effect of
causing a Material Change in any Tax liability or Tax asset of Buyer in respect
of any Post-Closing Tax Period; or

(y) Contract to do any of the foregoing, or any action or omission that would
result in any of the foregoing.

Section 3.09 Material Contracts.

(a) Section 3.09(a) of the Disclosure Schedules lists each of the following
Contracts of the Company (such Contracts, together with all Contracts concerning
the occupancy, management or operation of any Real Property (including without
limitation, brokerage contracts and leases for the leased Real Property) listed
or otherwise disclosed in Section 3.10(b) of the Disclosure Schedules and all
Contracts relating to Intellectual Property set forth in Section 3.12(d) and
Section 3.12(f) of the Disclosure Schedules, being “Material Contracts”):

 

  (i) each Contract of the Company involving aggregate consideration in excess
of $500,000.00 and which, in each case, cannot be cancelled by the Company
without penalty or without more than 90 days’ notice;

 

  (ii) all Contracts that require the Company to purchase its total requirements
of any product or service from a third party or that contain “take or pay”
provisions;

 

  (iii)

all Contracts that provide for the indemnification by the Company of any Person
or the assumption of any Tax, environmental or other Liability of any Person in
an aggregate amount in excess of $500,000.00; provided, however, that a Contract
shall not be

 

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  considered to be described in this Section 3.09(a)(iii) solely as a result of
such Contract providing for indemnification by the Company of any Person
against, or the assumption of, any Tax, unless such Contract principally relates
to Taxes;

 

  (iv) all Contracts that relate to the acquisition or disposition of any
business, a material amount of stock or assets of any other Person or any real
property (whether by merger, sale of stock, sale of assets or otherwise);

 

  (v) all broker, distributor, dealer, manufacturer’s representative, franchise,
agency, sales promotion, market research, marketing consulting and advertising
Contracts to which the Company is a party;

 

  (vi) all employment agreements and Contracts with independent contractors or
consultants (or similar arrangements) to which the Company is a party and which
are not cancellable without material penalty or without more than 60 days’
notice;

 

  (vii) except for Contracts relating to trade receivables, all Contracts
relating to indebtedness (including, without limitation, guarantees) of the
Company;

 

  (viii) all Contracts with any Governmental Authority to which the Company is a
party;

 

  (ix) all Contracts that limit or purport to limit the ability of the Company
to compete in any line of business or with any Person or in any geographic area
anywhere in the world or during any period of time;

 

  (x) any Contracts to which the Company is a party that provide for any joint
venture, partnership or similar arrangement by the Company;

 

  (xi) all Contracts between or among the Company on the one hand and Seller or
any Affiliate of Seller (other than the Company) on the other hand;

 

  (xii) all collective bargaining agreements or Contracts with any Union to
which the Company is a party; and

 

  (xiii) all Contracts with material suppliers, including, without limitation,
suppliers of electricity, gas or water;

 

  (xiv) any other Contract that is material to the Company and not previously
disclosed pursuant to this Section 3.09.

 

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(b) Each Material Contract is valid and binding on the Company in accordance
with its terms and is in full force and effect. None of the Company or, to
Seller’s Knowledge, any other party thereto is in breach of or default under (or
is alleged to be in breach of or default under) in any material respect, or has
provided or received any notice of any intention to terminate, any Material
Contract. No event or circumstance has occurred that, with notice or lapse of
time or both, would constitute an event of default under any Material Contract
or result in a termination thereof or would cause or permit the acceleration or
other changes of any right or obligation or the loss of any benefit thereunder.
Complete and correct copies of each Material Contract (including all
modifications, amendments and supplements thereto and waivers thereunder) have
been made available to Buyer prior to the date hereof.

Section 3.10 Title to Assets; Real Property.

(a) The Company has good and valid title (and, in the case of owned Real
Property, marketable and good title of public record and in fact) to, or a valid
leasehold interest in, all Real Property and personal property and other assets
reflected in the Financial Statements or acquired after the Balance Sheet Date,
other than properties and assets sold or otherwise disposed of in the ordinary
course of business consistent with past practice since the Balance Sheet Date.
Seller has good and valid title to the Acquired Assets. All such properties and
assets (including leasehold interests) are free and clear of Encumbrances except
for the following (collectively referred to as “Permitted Encumbrances”):

 

  (i) those items set forth in Section 3.10(a) of the Disclosure Schedules;

 

  (ii) liens for Taxes not yet due and payable or being contested in good faith
by appropriate procedures and for which there are adequate accruals or reserves
on the Balance Sheet;

 

  (iii) mechanics, carriers’, workmen’s, repairmen’s or other like liens arising
or incurred in the ordinary course of business consistent with past practice or
amounts that are not delinquent and which are not, individually or in the
aggregate, material to the business of the Company;

 

  (iv) easements, rights of way, zoning ordinances and other similar
encumbrances affecting Real Property which are not, individually or in the
aggregate, material to the business of the Company; or

 

  (v) other than with respect to owned Real Property, liens arising under
original purchase price conditional sales contracts and equipment leases with
third parties entered into in the ordinary course of business consistent with
past practice which are not, individually or in the aggregate, material to the
business of the Company.

(b) Section 3.10(b) of the Disclosure Schedules lists (i) the street address of
each parcel of such Real Property and (ii) with respect to Real Property located
in Mexico, the title deed number and property registry data for such Real
Property and the notary

 

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before whom such Real Property was granted. With respect to owned Real Property,
Seller has delivered or made available to Buyer prior to the date hereof true,
complete and correct copies of the deeds and other instruments (as recorded) by
which the Company acquired such Real Property, and copies of all title insurance
policies, opinions, abstracts and surveys in the possession of Seller or the
Company and relating to the Real Property. With respect to leased Real Property,
Seller has delivered or made available to Buyer prior to the date hereof true,
complete and correct copies of any leases affecting the Real Property. The
Company is not a sublessor or grantor under any sublease or other instrument
granting to any other Person any right to the possession, lease, occupancy or
enjoyment of any leased Real Property. The use and operation of the Real
Property in the conduct of the Company’s business do not violate in any material
respect any Law, covenant, condition, restriction, easement, license, permit or
agreement. No material improvements constituting a part of the Real Property
encroach on real property owned or leased by a Person other than the Company.
There are no Actions pending nor, to Seller’s Knowledge, threatened against or
affecting the Real Property or any portion thereof or interest therein in the
nature or in lieu of condemnation or eminent domain proceedings.

Section 3.11 Condition And Sufficiency of Assets. The buildings, plants,
structures, furniture, fixtures, machinery, equipment, vehicles and other items
of tangible personal property of the Company are structurally sound, are in good
operating condition and repair (ordinary wear and tear excepted), and are
adequate for the uses to which they are being put, and none of such buildings,
plants, structures, furniture, fixtures, machinery, equipment, vehicles and
other items of tangible personal property is in need of maintenance or repairs
except for ordinary, routine maintenance and repairs that are not material in
nature or cost. The buildings, plants, structures, furniture, fixtures,
machinery, equipment, vehicles and other items of tangible personal property
currently owned or leased by the Company, together with all other properties and
assets of the Company, the Acquired Assets to be acquired pursuant to the terms
of this Agreement and the services to be provided by Seller under the Transition
Services Agreement, are sufficient for the continued conduct of the Company’s
business after the Closing in substantially the same manner as conducted prior
to the Closing and constitute all of the rights, property and assets necessary
to conduct the business of the Company as currently conducted.

Section 3.12 Intellectual Property.

(a) “Intellectual Property” means all of the following and similar intangible
property and related proprietary rights (including related goodwill), interests
and protections, however arising, pursuant to the Laws of any jurisdiction
throughout the world, including such property that is owned by the Company
(“Company Intellectual Property”) and that in which the Company holds exclusive
or non-exclusive rights or interests granted by license from other Persons,
including Seller (“Licensed Intellectual Property”):

 

  (i) trademarks, service marks, trade names, brand names, logos, trade dress
and other proprietary indicia of goods and services, whether registered,
unregistered or arising by Law, and all registrations and applications for
registration of such trademarks, including intent-to-use applications, and all
issuances, extensions and renewals of such registrations and applications;

 

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  (ii) internet domain names, whether or not trademarks, registered in any
generic top level domain by any authorized private registrar or Governmental
Authority;

 

  (iii) original works of authorship in any medium of expression, whether or not
published, all copyrights (whether registered, unregistered or arising by Law),
all registrations and applications for registration of such copyrights, and all
issuances, extensions and renewals of such registrations and applications;

 

  (iv) confidential information, formulas, designs, devices, technology,
know-how, research and development, inventions, methods, processes, compositions
and other trade secrets, whether or not patentable (collectively, “Trade
Secrets”);

 

  (v) patented and patentable designs and inventions, all design, plant and
utility patents, letters patent, utility models, pending patent applications and
provisional applications and all issuances, divisions, continuations,
continuations-in-part, reissues, extensions, re-examinations and renewals of
such patents and applications; and

 

  (vi) Software, other than commercially available licenses for off-the-shelf
Software and other “shrink-wrap” Software.

(b) Section 3.12(b) of the Disclosure Schedules lists all Company Intellectual
Property that is either (i) subject to any issuance, registration, application
or other filing by, to or with any Governmental Authority or authorized private
registrar in any jurisdiction (collectively, “Intellectual Property
Registrations”), including registered trademarks, domain names and copyrights,
issued and reissued patents and pending applications for any of the foregoing;
or (ii) used in or necessary for the Company’s current business or operations.
All required filings and fees related to the Intellectual Property Registrations
have been timely filed with and paid to the relevant Governmental Authorities
and authorized registrars, and all Intellectual Property Registrations are
otherwise in good standing. Neither Seller nor any of its subsidiaries (other
than the Company and its Subsidiaries) own any Intellectual Property used by the
Company or any of its Subsidiaries in the conduct of its business (other than
Software provided under the Transition Services Agreement and retained by
Seller), except as will be transferred to the Company pursuant to this
Agreement.

(c) Except as set forth in Section 3.12(c) of the Disclosure Schedules, the
Company owns, exclusively all right, title and interest in and to the Company
Intellectual Property, free and clear of Encumbrances (other than Permitted
Encumbrances). The Company has taken commercially reasonable actions to maintain
its exclusive ownership of the Company Intellectual Property. The Company is in
full compliance with all Legal Requirements applicable to the Company
Intellectual Property and the Company’s ownership and use thereof.

 

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(d) Section 3.12(d) of the Disclosure Schedules lists all licenses, sublicenses
and other agreements whereby the Company is granted rights, interests and
authority, whether on an exclusive or non-exclusive basis, with respect to any
Licensed Intellectual Property that is used in or necessary for the Company’s
current or planned business or operations. Seller has provided Buyer with true
and complete copies of all such agreements. All such agreements are valid,
binding and enforceable between the Company and the other parties thereto, and
the Company and such other parties are in full compliance with the terms and
conditions of such agreements.

(e) The Company Intellectual Property and Licensed Intellectual Property as
currently or formerly owned, licensed or used by the Company or proposed to be
used, and the Company’s conduct of its business as currently and formerly
conducted a have not and do not infringe, violate or misappropriate the
Intellectual Property of any Person. Neither Seller nor the Company has received
any written communication, and no Action has been instituted, settled or, to
Seller’s Knowledge, threatened that alleges any such infringement, violation or
misappropriation, and none of the Company Intellectual Property are subject to
any outstanding Governmental Order.

(f) Section 3.12(f) of the Disclosure Schedules lists all licenses, sublicenses
and other agreements pursuant to which the Company grants rights or authority to
any Person with respect to any Company Intellectual Property or Licensed
Intellectual Property. Seller has provided Buyer with true and complete copies
of all such agreements. All such agreements are valid, binding and enforceable
between the Company and the other parties thereto, and the Company and such
other parties are in full compliance with the terms and conditions of such
agreements. No Person has infringed, violated or misappropriated, or is
infringing, violating or misappropriating, any Company Intellectual Property.

(g) The Company has taken commercially reasonable measures to protect the
confidentiality of all Trade Secrets included in the Company Intellectual
Property.

(h) To Seller’s Knowledge, in the past 12 months, no Person has gained
unauthorized access to the computer or network systems of the Company.

Section 3.13 Inventory. All inventory of the Company, whether or not reflected
in the Balance Sheet, consists of a quality and quantity usable and saleable in
the ordinary course of business consistent with past practice, except for items
that have been written off or written down to fair market value or for which
adequate reserves have been established consistent with the Accounting
Principles. All such inventory is owned by the Company free and clear of all
Encumbrances (except Permitted Encumbrances), and no inventory is held on a
consignment basis. The quantities of each item of inventory (whether raw
materials, work-in-process or finished goods) are not excessive, but are
reasonable in the present circumstances of the Company.

 

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Section 3.14 Accounts Receivable. The accounts receivable reflected on the
Balance Sheet and the accounts receivable arising after the date thereof
(a) have arisen from bona fide transactions entered into by the Company
involving the sale of goods or the rendering of services in the ordinary course
of business consistent with past practice; (b) constitute only valid, undisputed
claims of the Company not subject to claims of set-off or other defenses or
counterclaims other than normal cash discounts or returns accrued in the
ordinary course of business consistent with past practice; and (c) subject to a
reserve for bad debts shown on the Balance Sheet or, with respect to accounts
receivable arising after the Balance Sheet Date, on the accounting records of
the Company, are collectible by their terms within 120 days after the due date
for such accounts receivable. The reserve for bad debts shown on the Balance
Sheet or, with respect to accounts receivable arising after the Balance Sheet
Date, on the accounting records of the Company, have been determined in
accordance with GAAP, consistently applied, subject to normal year-end
adjustments and the absence of disclosures normally made in footnotes.

Section 3.15 Customers and Suppliers.

(a) Section 3.15(a) of the Disclosure Schedules sets forth each customer who has
paid aggregate consideration to the Company for goods or services rendered in an
amount greater than or equal to $500,000.00 for each of the two most recent
fiscal years (collectively, the “Material Customers”). To Seller’s Knowledge,
the Company has not received any notice that any of its Material Customers has
ceased, or intends to cease after the Closing, to use its goods or services or
to otherwise terminate or materially reduce its relationship with the Company.

(b) Section 3.15(b) of the Disclosure Schedules sets forth each supplier to whom
the Company has paid consideration for goods or services rendered in an amount
greater than or equal to $500,000.00 for each of the two most recent fiscal
years (collectively, the “Material Suppliers”). To Seller’s Knowledge, the
Company has not received any notice that any of its Material Suppliers has
ceased, or intends to cease, to supply goods or services to the Company or to
otherwise terminate or materially reduce its relationship with the Company.

Section 3.16 Insurance. Section 3.16 of the Disclosure Schedules sets forth a
true and complete list of all current policies or binders of fire, liability,
product liability, umbrella liability, real and personal property, workers’
compensation, vehicular, directors’ and officers’ liability, fiduciary liability
and other casualty and property insurance maintained by Seller or the Company
and relating to the assets, business, operations, employees, officers and
directors of the Company (collectively, the “Insurance Policies”) and true and
complete copies of such Insurance Policies have been made available to Buyer
prior to the date hereof. Neither Seller nor the Company has received any
written notice of cancellation of, premium increase with respect to, or
alteration of coverage under, any of such Insurance Policies. All premiums due
on such Insurance Policies have either been paid or, if due and payable prior to
Closing, will be paid prior to Closing in accordance with the payment terms of
each Insurance Policy for the applicable time period prior to and ending on the
Closing Date. All such Insurance Policies (a) are valid and binding in
accordance with their terms; and (b) have not been subject to any lapse in
coverage. Except as set forth on Section 3.16 of the Disclosure Schedules, there
are no claims related to the business of the Company pending under any such
Insurance Policies as to which

 

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coverage has been questioned, denied or disputed or in respect of which there is
an outstanding reservation of rights. None of Seller or the Company is in
default under, or has otherwise failed to comply with, in any material respect,
any provision contained in any such Insurance Policy. All Insurance Policies
maintained in the U.S. will terminate as of the Closing Date.

Section 3.17 Legal Proceedings; Governmental Orders.

(a) Except as set forth in Section 3.17(a) of the Disclosure Schedules, there
are no Actions pending or, to Seller’s Knowledge, threatened (i) against or by
the Company (or its respective officers or directors) affecting any of its
properties or assets (or by or against Seller and relating to the Company); or
(ii) against or by the Company or Seller that challenges or seeks to prevent,
enjoin or otherwise delay the transactions contemplated by this Agreement.

(b) Except as set forth in Section 3.17(b) of the Disclosure Schedules, there
are no outstanding Governmental Orders and no unsatisfied judgments, penalties
or awards against or affecting the Company or any of its properties or assets.
The Company is in compliance with the terms of each Governmental Order set forth
in Section 3.17(b) of the Disclosure Schedules.

Section 3.18 Compliance with Laws; Permits.

(a) Except as set forth in Section 3.18(a) of the Disclosure Schedules, the
Company and its Subsidiaries have complied, and are now complying in all
material respects, with all Laws applicable to it or its business, properties or
assets, including, without limitation, all applicable anti-bribery and
anti-corruption laws.

(b) All Permits required for the Company and its Subsidiaries to conduct their
business have been obtained by them and are valid and in full force and effect,
except for any Permits the absence of which would not disrupt the operations of
the Company or have a Material Adverse Effect. All fees and charges with respect
to such Permits as of the date hereof have been paid in full. Section 3.18(b) of
the Disclosure Schedules lists all current Permits material to the operations of
the Company, including the names of the Permits and their respective dates of
issuance and expiration. No event has occurred that, with or without notice or
lapse of time or both, would reasonably be expected to result in the revocation,
suspension, lapse or limitation of any Permit set forth in Section 3.18(b) of
the Disclosure Schedules. All the Permits will survive the Closing until the
expiration of their respective terms as set forth in Section 3.18(b) of the
Disclosure Schedules.

Section 3.19 Environmental Matters.

(a) The Company is currently and has been in material compliance with all
Environmental Laws and has not, and Seller has not, received from any Person
any: (i) Environmental Notice or Environmental Claim; or (ii) written request
for information pursuant to Environmental Law, which, in each case, either
remains pending or unresolved, or is the source of ongoing obligations or
requirements as of the Closing Date.

(b) The Company has obtained and is in material compliance with all
Environmental Permits (each of which is disclosed in Section 3.19(b) of the
Disclosure

 

30

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Schedules) necessary for the ownership, lease, operation or use of the business
or assets of the Company and all such Environmental Permits are valid and in
full force and effect, except for any Environmental Permits the absence of which
would not disrupt the operations of the Company or have a Material Adverse
Effect. To the Knowledge of Seller, there is no condition, event or circumstance
that might prevent or impede, after the Closing Date, the ownership, lease,
operation or use of the business or assets of the Company as currently carried
on under the existing Environmental Permits. No event has occurred that, with or
without notice or lapse of time or both, would reasonably be expected to result
in the revocation, suspension, lapse or limitation of any Permit set forth in
Section 3.19(b) of the Disclosure Schedules.

(c) No real property currently owned, operated or leased by the Company: (i) is
listed on, or has been proposed for listing on, the National Priorities List (or
CERCLIS) under CERCLA, or any similar state list; or (ii) has been deemed by any
Governmental Authority or under any Environmental Laws as Hazardous Materials’
disposal site, Hazardous Materials’ handling facility, contaminated site (sitio
contaminado), environmental emergency (emergencia ambiental) or environmental
contingency (pasivo ambiental).

(d) To Seller’s Knowledge, there has been no Release of Hazardous Materials
directly caused by the Company or any of its Subsidiaries in material
contravention of Environmental Law with respect to the business or assets of the
Company or any real property currently owned, operated or leased by the Company,
in each case which could reasonably be expected to (i) result in an
Environmental Claim against Seller or the Company, (ii) require Remedial Action
by Seller under Environmental Law or (iii) result in a violation by the Company
or any of its Subsidiaries of Environmental Law or the terms of any
Environmental Permit which would have a Material Adverse Effect on the Company
or any Subsidiary.

(e) From and after the date on which Seller acquired the Company, the Company
has not directly transported, Released, handled, stored, treated or disposed of,
and the Company has not arranged or granted express permission for any other
Person to transport, Release, store, treat or dispose of, any Hazardous
Materials related or not to the business to or at (x) any location other than a
site lawfully permitted to receive such substances for such purposes in
accordance with Environmental Laws, or (y) any location designated for Remedial
Action pursuant to Environmental Laws; neither have Seller nor the Company
directly performed, arranged for or granted express permission by any method or
procedure to such transportation or disposal in breach of any Environmental Laws
or in any other manner which could reasonably be expected to result in an
Environmental Claim or in a Remedial Action.

(f) From and after the date on which Seller acquired the Company, the Company
has been in material compliance with Environmental Laws and all agreements with,
and Permits issued by, any Governmental Authority relating to the use, supply,
treatment and discharge of water and waste water to and from any real property
currently owned, operated or leased by the Company. For the avoidance of doubt,
the representations and warranties in this Section 3.19(f) shall apply solely
and exclusively to actions taken or controlled directly by Seller or the Company
and shall not be deemed to apply to any actions taken or controlled by any third
party, including any Governmental Authority.

 

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(g) Section 3.19(g) of the Disclosure Schedules contains a complete and accurate
list of all active or abandoned aboveground or underground storage tanks owned
or operated by the Company.

(h) Prior to the date hereof, Seller has provided or otherwise made available to
Buyer copies of material environmental reports, studies, audits, or site
assessments with respect to the business or assets of the Company or any
currently owned, operated or leased real property which are in the possession or
control of Seller or the Company related to compliance with Environmental Laws,
Environmental Claims or an Environmental Notice or the Release of Hazardous
Materials.

(i) Notwithstanding anything to the contrary in this Agreement, Seller makes no
representation or warranty in this Agreement relating to Environmental Laws or
Environmental Permits, including compliance with any such Environmental Laws or
Environmental Permits, other than the representations and warranties set forth
in this Section 3.19.

Section 3.20 Employee Benefit Matters.

(a) Section 3.20(a) of the Disclosure Schedules contains a true and complete
list of each pension, benefit, retirement, compensation, profit-sharing,
deferred compensation, incentive, performance award, phantom equity, change in
control, retention, severance, vacation, paid time off, fringe-benefit,
employment and other similar agreement, plan, policy, program or arrangement
(and any amendments thereto), in each case whether or not reduced to writing and
whether funded or unfunded, including each “employee benefit plan” within the
meaning of Section 3(3) of ERISA, whether or not tax-qualified and whether or
not subject to ERISA, which is or has been maintained, sponsored, contributed
to, or required to be contributed to by the Company or an ERISA Affiliate
thereof for the benefit of any current or former employee, officer, director,
retiree, independent contractor or consultant of the Company or any spouse or
dependent of such individual, or under which the Company has or may have any
material Liability, or with respect to which Buyer would reasonably be expected
to have any material Liability, contingent or otherwise (as listed on
Section 3.20(a) of the Disclosure Schedules, each, a “Company Benefit Plan”).

(b) With respect to each Company Benefit Plan, prior to the date hereof Seller
has made available to Buyer accurate, current and complete copies of each of the
following: (i) where the Company Benefit Plan has been reduced to writing, the
plan document together with all amendments; (ii) where the Company Benefit Plan
has not been reduced to writing, a written summary of all material plan terms;
(iii) where applicable, copies of any trust agreements or other funding
arrangements, custodial agreements, insurance policies and contracts, and
administration agreements and similar agreements, now in effect or required in
the future as a result of the transactions contemplated by this Agreement or
otherwise; (iv) copies of any summary plan descriptions, summaries of material
modifications, employee handbooks and any other material written communications
(or a description of any material oral communications) relating to any Company
Benefit Plan; (v) in the case of any Company Benefit Plan that is intended to be
qualified under Section 401(a) of the Code, a copy of the most recent
determination, opinion or advisory letter from the Internal Revenue Service;
(vi) in the case of

 

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any Company Benefit Plan for which a Form 5500 is required to be filed, a copy
of the most recently filed Form 5500, with schedules attached; (vii) actuarial
valuations and audit reports, as applicable, related to any Company Benefit
Plans with respect to the two most recently completed plan years; and
(viii) copies of material notices, letters or other correspondence from the
Internal Revenue Service, Department of Labor or Pension Benefit Guaranty
Corporation relating to the Company Benefit Plan.

(c) Each Company Benefit Plan has been established, administered and maintained
in accordance, in all material respects, with its terms and in compliance, in
all material respects, with all applicable Laws (including ERISA and the Code)
and its respective funding requirements. Each Company Benefit Plan that is
intended to be qualified under Section 401(a) of the Code (a “Qualified Benefit
Plan”) is so qualified and has received a favorable and current determination
letter from the Internal Revenue Service, or with respect to a prototype or
volume submitter plan, can rely on an opinion or advisory letter from the
Internal Revenue Service, to the effect that such Qualified Benefit Plan is so
qualified and that the plan and the trust related thereto are exempt from
federal income taxes under Sections 401(a) and 501(a), respectively, of the
Code, and nothing has occurred within the past three years that could reasonably
be expected to cause the revocation of such letter from the Internal Revenue
Service, nor has such revocation been threatened. Except as would not subject
the Company, Buyer or any of its Affiliates to any material Liability, nothing
has occurred with respect to any Company Benefit Plan that has subjected or
could reasonably be expected to subject the Company or, with respect to any
period on or after the Closing Date, Buyer, to a penalty under Section 502 of
ERISA or to tax or penalty under Section 4975 of the Code. All benefits,
contributions and premiums relating to each Company Benefit Plan have been
timely paid in accordance with the terms of such Company Benefit Plan and all
applicable Laws and Accounting Principles, and all benefits accrued under any
unfunded Company Benefit Plan have been paid, accrued or otherwise adequately
reserved to the extent required by, and in accordance with, GAAP.

(d) Neither the Company nor any of its Subsidiaries has (i) incurred or
reasonably expects to incur, either directly or indirectly, any material
Liability under Title I or Title IV of ERISA or related provisions of the Code
or foreign Law relating to employee benefit plans; (ii) failed to timely pay
premiums to the Pension Benefit Guaranty Corporation; (iii) withdrawn from any
multi-employer plan within the meaning of Section 3(37) of ERISA; or
(iv) engaged in any transaction which would give rise to any material liability
under Section 4069 or Section 4212(c) of ERISA. Neither the Company nor any of
its Subsidiaries participates in a multiemployer plan as defined in ERISA 3(37),
this sale contemplated by this Agreement will not trigger multiemployer plan
withdrawal liability and that to the extent that Ennis participates in any
multiemployer plans, they will indemnify Buyer from such withdrawal liability.

(e) With respect to each Company Benefit Plan (i) no such plan is a “multiple
employer plan” within the meaning of Section 413(c) of the Code or a “multiple
employer welfare arrangement” (as defined in Section 3(40) of ERISA); (ii) no
such plan is an “employee pension benefit plan” within the meaning of
Section 3(35) of ERISA, and at no time in the past six years has the Company or
any Subsidiary been obligated to contribute to any such plan, (iii) only Irshad
Ahmad and Omer Hassen are eligible for benefits under the Ennis Defined Benefit
Retirement Plan through their employment as executives of Seller and employees
of the Company have been properly excluded from participation in such plan and
are not entitled to any

 

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benefits thereunder, (iv) each plan with provides health benefits has been
maintained and operated in accordance with the applicable provisions to the
Patient Protection and Affordable Care Act of 2010, (v) no Action has been
initiated by the Pension Benefit Guaranty Corporation to terminate any such plan
or to appoint a trustee for any such plan; (vi) no such plan has failed to
satisfy the minimum funding standards of Section 302 of ERISA or Section 412 of
the Code; and (vii) no “reportable event,” as defined in Section 4043 of ERISA,
has occurred with respect to any such plan.

(f) Except as required by applicable Law, no provision of any Company Benefit
Plan or collective bargaining agreement could reasonably be expected to result
in any limitation on Buyer from amending or terminating any Company Benefit
Plan. The Company has no commitment or obligation and has not made any
representations to any employee, officer, director, consultant or independent
contractor, whether or not legally binding, to adopt, amend or modify in any
material respect any Company Benefit Plan or any collective bargaining
agreement, in connection with the consummation of the transactions contemplated
by this Agreement or otherwise.

(g) Other than as required under Section 601 et. seq. of ERISA or other
applicable Law, no Company Benefit Plan provides post-termination or retiree
welfare benefits to any individual for any reason, and neither the Company nor
any of its ERISA Affiliates has any Liability to provide post-termination or
retiree welfare benefits to any individual or has ever contracted or, to
Seller’s Knowledge, has ever represented or promised to any individual that such
individual would be provided with post-termination or retiree welfare benefits.

(h) There is no pending or, to Seller’s Knowledge, threatened Action relating to
a Company Benefit Plan (other than routine claims for benefits), and no Company
Benefit Plan has within the three years prior to the date hereof been the
subject of an examination or audit by a Governmental Authority or the subject of
an application or filing under or is a participant in, an amnesty, voluntary
compliance, self-correction or similar program sponsored by any Governmental
Authority that could reasonably be expected to subject the Company or, with
respect to any period on or after the Closing Date, Buyer or any of its
Affiliates, to a material Liability.

(i) There has been no amendment to, announcement by the Company relating to, or
change in employee participation or coverage under, any Company Benefit Plan or
collective bargaining agreement that would materially increase the annual
expense of maintaining such plan above the level of the expense incurred for the
most recently completed fiscal year with respect to any director, officer,
employee, consultant or independent contractor, as applicable. Seller does not
have any commitment or obligation and has not made any representations to any
director, officer, employee, consultant or independent contractor, whether or
not legally binding, to adopt, amend or modify any Company Benefit Plan or any
collective bargaining agreement.

(j) Each Company Benefit Plan that is subject to Section 409A of the Code has
been operated in compliance, in all material respects, with such section and all
applicable regulatory guidance (including notices, rulings and proposed and
final regulations). No employee of the Company or any Subsidiary, other than
Irshad Ahmad, is eligible for benefits under any deferred compensation plan that
is subject to Section 409A of the Code.

 

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(k) Except as required by this Agreement or as otherwise set forth in
Section 3.20(k) of the Disclosure Schedules, neither the execution of this
Agreement nor any of the transactions contemplated by this Agreement will
(either alone or upon the occurrence of any additional or subsequent events):
(i) entitle any current or former director, officer, employee, contractor or
consultant of the Company to any material severance pay or any other material
payment; (ii) accelerate the time of payment, funding or vesting, or increase
the amount of any material compensation due to any such individual; (iii) limit
or restrict the right of the Company to merge, amend or terminate any Company
Benefit Plan; (iv) materially increase the amount payable under or result in any
other material obligation pursuant to any Company Benefit Plan; or (v) result in
“excess parachute payments” within the meaning of Section 280G(b) of the Code.

Section 3.21 Employment Matters.

(a) Section 3.21(a) of the Disclosure Schedules contains a list of all persons
who are employees, consultants, service providers or contractors of the Company
as of the date hereof, and sets forth for each such individual the following:
(i) name; (ii) title or position (including whether full or part time);
(iii) hire date; (iv) current annual base compensation rate; (v) commission,
bonus or other incentive-based compensation; (vi) employer; and (vii) a
description of the fringe benefits provided to each such individual as of the
date hereof. At least five Business Days prior to the Closing Date, Seller shall
provide Buyer with an updated Section 3.21(a) of the Disclosure Schedules to
reflect any newly hired employees, those employees whose employment has been
terminated (and whether such termination was with or without cause) and any
other change in the other information on Section 3.21(a) of the Disclosure
Schedules. All compensation, including wages, commissions and bonuses, payable
to employees, consultants, or contractors of the Company and all Subsidiaries
for services performed on or prior to the date hereof have been paid in all
material respects (or accrued in all material respects on the Balance Sheet and
otherwise accrued on the books of the Company and the Subsidiaries as of the
Closing Date).

(b) Except as set forth in Section 3.21(b) of the Disclosure Schedules, the
Company is not, and has not been for the past three years, a party to, bound by,
or negotiating any collective bargaining agreement or other Contract with a
union, works council or labor organization (collectively, “Union”), and there is
not, and has not been for the past three years, any Union representing or
purporting to represent any employee of the Company, and, to Seller’s Knowledge,
no Union or group of employees is seeking or has sought within the past three
years to organize employees for the purpose of collective bargaining. There has
never been, nor has there been any threat of, any strike, slowdown, work
stoppage, lockout, concerted refusal to work overtime or other similar labor
disruption or dispute affecting the Company or any of its employees.

(c) The Company is and has been in compliance in all material respects with the
terms of the collective bargaining agreements and other Contracts listed on
Section 3.21(b) of the Disclosure Schedules and all applicable Laws pertaining
to employment and employment practices (including with respect to employee
profit sharing obligations in

 

35

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Mexico), including all Laws relating to labor relations, equal employment
opportunities, fair employment practices, employment discrimination, harassment,
retaliation, reasonable accommodation, disability rights or benefits,
immigration, wages, hours, overtime compensation, child labor, hiring, promotion
and termination of employees, working conditions, meal and break periods,
privacy, health and safety, workers’ compensation, paid sick leave, leaves of
absence and unemployment insurance. All individuals characterized and treated by
the Company as consultants or contractors are properly treated as independent
contractors under all applicable Laws. Except as required by applicable Law, all
employees classified as exempt under the Fair Labor Standards Act and state and
local wage and hour laws are properly classified in all material respects. There
are no Actions against the Company pending, or to Seller’s Knowledge, threatened
to be brought or filed, by or with any Governmental Authority or arbitrator in
connection with the employment of any current or former applicant, employee,
consultant or independent contractor of the Company, including, without
limitation, any claim relating to unfair labor practices, employment
discrimination, harassment, retaliation, equal pay, wage and hours or any other
employment related matter arising under applicable Laws.

(d) The Company has complied with the WARN Act, and it has no plans to undertake
any action in the future that would trigger the WARN Act (excluding any actions
taken after the Closing at the direction of Buyer).

Section 3.22 Taxes.

(a) All income Tax Returns and other Tax Returns required to be filed on or
before the Closing Date by the Company or any of its Subsidiaries (taking into
account for these purposes any extensions) have been, or will be, timely filed.
Such Tax Returns are, or will be, true, complete and correct in all material
respects insofar as they relate to the Company or any of its Subsidiaries. All
Taxes due and owing by the Company or any of its Subsidiaries (whether or not
shown on any Tax Return) have been, or will be, timely paid.

(b) The Company and each of its Subsidiaries has withheld and paid each Tax
required to have been withheld and paid in connection with amounts paid or owing
by the Company or such Subsidiaries to any employee, independent contractor,
creditor, customer, shareholder or other party.

(c) No claim has been made by any Tax Authority in any jurisdiction where the
Company (or any of its Subsidiaries) does not file Tax Returns that the Company
(or such Subsidiary) is, or may be, subject to Tax by that jurisdiction.

(d) No extensions or waivers of statutes of limitations have been given or
requested in writing with respect to any Taxes of the Company or any of its
Subsidiaries.

(e) All deficiencies asserted, or assessments made, against the Company or any
of its Subsidiaries as a result of any examinations by any Tax Authority have
been fully paid.

(f) Neither the Company nor any of its Subsidiaries has been a party during the
past five (5) years or is a party to any Action by any Tax Authority and Seller
is not a party to any Action by any Tax Authority that relates to or affects the
Company or any of its

 

36

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Subsidiaries. There are no Actions pending or threatened in writing by any
Taxing Authority against the Company or any of its Subsidiaries or against
Seller relating to or affecting the Company or any of its Subsidiaries.

(g) Prior to the date hereof, Seller has delivered to Buyer copies of all
federal, state, local and foreign income, franchise and similar Tax Returns of
the Company for all Tax periods ending after February 28, 2010.

(h) There are no Encumbrances for Taxes (other than for current Taxes not yet
due and payable or being contested in good faith by appropriate procedures and
for which there are adequate accruals or reserves on the Balance Sheet) upon the
assets of the Company or any of its Subsidiaries.

(i) Neither the Company nor any of its Subsidiaries is a party to, or bound by,
any Tax indemnity, Tax-sharing or Tax allocation agreement; provided, however,
that an agreement shall not be considered to be described in this
Section 3.22(i) unless such agreement principally relates to Taxes.

(j) Neither the Company nor any of its Subsidiaries is a party to, or bound by,
any closing agreement or offer in compromise with any Tax Authority.

(k) During the time that the Company has been a member of Seller’s Affiliated
Group, other than as set forth in Section 3.22(k) of the Disclosure Schedules,
no private letter rulings, technical advice memoranda or similar agreement or
rulings have been requested, entered into or issued by any Tax Authority with
respect to the Company or any of its Subsidiaries or with respect to Seller
relating to or affecting the Company or any of its Subsidiaries.

(l) The Company has been a member of Seller’s consolidated group for U.S.
federal income Tax purposes since January 1, 2010.

(m) To Seller’s Knowledge, other than as set forth in Section 3.22(m) of the
Disclosure Schedules, neither the Company nor any of its Subsidiaries has agreed
to make, or is required to make, any adjustment under Sections 481(a) of the
Code or any comparable provision of state, local or foreign Tax Laws by reason
of a change in accounting method or otherwise, nor has Seller agreed to make, or
is required to make, any such adjustment as a result of a change in accounting
method that could adversely affect the Company or any of its Subsidiaries.

(n) Seller is not a “foreign person” as that term is used in Treasury
Regulations Section 1.1445-2.

(o) Neither the Company nor any of its Subsidiaries has, in the past five years,
been a “distributing corporation” or a “controlled corporation” in connection
with a distribution described in Section 355 or 361 of the Code.

(p) Neither the Company nor any of its Subsidiaries has entered into a gain
recognition agreement pursuant to Treasury Regulations Section 1.367(a)-8.
Neither the Company nor any of its Subsidiaries has transferred an intangible
the transfer of which would be subject to the rules of Section 367(d) of the
Code.

 

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(q) None of the assets of the Company or any of its Subsidiaries is property
that the Company or any of its Subsidiaries is required to treat as being owned
by any other person pursuant to the so-called “safe harbor lease” provisions of
former Section 168(f)(8) of the Internal Revenue Code of 1954, as amended.

(r) Neither the Company nor any of its Subsidiaries has engaged in any
transaction that could affect its income Tax liability for any taxable year not
closed by the statute of limitations which is a “listed transaction” within the
meaning of Treasury Regulations Sections 1.6011-4, 301.6011-4 or 301.6112-1
(irrespective of the effective dates).

(s) Neither the Company nor any of its Subsidiaries is required to include an
item of income, or exclude an item of deduction, for Tax purposes for any period
ending on or after the Closing Date as a result of (i) an instalment sale
transaction occurring on or before the Closing governed by Section 453 of the
Code (or any similar provision of foreign, state or local Law); (ii) a
transaction occurring on or before the Closing Date reported as an open
transaction for U.S. federal income tax purposes (or any similar doctrine for
foreign, state or local Tax purposes); (iii) prepaid amounts received on or
prior to the Closing Date; or (iv) intercompany transactions or any excess loss
account (or any corresponding or similar provision or administrative rule of
federal, state, local or foreign income Tax Law). Neither the Company nor any of
its Subsidiaries has made an election (including a protective election) under
Section 108(i) of the Code to defer any income. Neither the Company nor any of
its Subsidiaries has “long-term contracts” subject to a method of accounting
under Section 460 of the Code.

(t) Neither the Company nor any of its Subsidiaries is subject to a Tax holiday
or Tax incentive or grant in any jurisdiction that will terminate (or could be
subject to clawback or recapture) as a result of any transaction contemplated by
this Agreement.

(u) None of the Mexican Subsidiaries will be required to include any material
item of income in, or exclude any material item of deduction from, taxable
income for any taxable period (or portion thereof) ending on or after the
Closing Date as a result of any intercompany transactions in accordance with the
Mexican Income Tax Law.

(v) There are no restrictions or limitations on the deductibility of interest
payable by any of the Mexican Subsidiaries for Mexican income tax purposes, in
accordance with the provisions set forth in Article 27, Section VII and Article
28, Section XXVII of the Mexican Income Tax Law in force as of January 1, 2015,
and the applicable Articles and Sections of the Mexican Income Tax Law in effect
in prior years.

(w) All transactions between the Mexican Subsidiaries, on the one hand, and
Seller or another one of its Affiliates, on the other hand, have been entered on
the same terms as would have been entered by unrelated parties acting at
arm’s-length, including compliance in all material respects with the provisions
set forth in Articles 179 and 180 of the Mexican Income Tax Law and Article 76,
Sections IX and XII, as well as the corresponding articles of the Mexican Income
Tax Law in force prior to 2015.

 

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(x) None of the Mexican Subsidiaries has executed or entered into any
transaction that is required to be reported in format 76 in accordance with
Article 31-A of the Mexican Federal Tax Code (Código Fiscal de la Federación)
with respect to fiscal years 2014 and 2015.

(y) Section 3.22(y) of the Disclosure Schedules sets forth the tax basis (in
Mexican Pesos) in the Mexican shares of each Mexican Subsidiary.

(z) Section 3.22(z) of the Disclosure Schedules sets forth all foreign
jurisdictions in which the Company or any of its Subsidiaries has or should
have, in accordance with applicable Law, filed a Tax Return since March 1, 2013.

For the avoidance of doubt, the representations and warranties made in Sections
3.08(x), 3.09(a)(iii), 3.10(a)(ii), 3.20 and this Section 3.22, in each case to
the extent such representations and warranties explicitly relate to Taxes (such
representations and warranties, to such extent, the “Tax Representations”), are
true and correct and are the only representations and warranties made by the
Company with respect to matters related to Taxes. Nothing in this Article III or
otherwise in this Agreement shall be construed as a representation or warranty
with respect to (i) the amount or availability of any credit, loss or other Tax
attribute of the Company or any of its Subsidiaries, (ii) the Taxes attributable
to any Tax period (or a portion thereof) beginning after the Closing Date, or
(iii) whether any particular Tax position that may be taken (or any particular
determination that may be made as to whether any particular Tax may apply) after
the Closing will be respected.

Section 3.23 Books and Records. True, correct and complete copies of all of the
minute books of the Company and the Subsidiaries have been made available to
Buyer prior to the date hereof. The minute books of the Company contain accurate
and complete records of all meetings, and actions taken by written consent of,
the Board of Managers of the Company, and no meeting, or action taken by written
consent, of the Board of Managers of the Company has been held for which minutes
have not been prepared and are not contained in such minute books. At the
Closing, all of the books and records referred to in this Section 3.23 will be
in the possession of the Company and the Corporate Records will be in compliance
with applicable Law in all material respects.

Section 3.24 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement or any other Transaction Document
based upon arrangements made by or on behalf of Seller.

Section 3.25 Related Party Transactions. Section 3.25 of the Disclosure
Schedules contains a list of all contracts between Seller and its Affiliates
(other than the Company and its Subsidiaries), or the directors, employees or
officers of the Company and its Subsidiaries (each of the foregoing, a “Related
Party”), on the one hand, and any of the Company and its Subsidiaries, on the
other hand (each of the foregoing, a “Related Party Contract”), except for
Company Benefit Plans. As of the Closing Date, none of the Related Party
Contracts will remain in place.

 

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Section 3.26 Bank Accounts; Attorneys in Fact.

(a) Section 3.26(a) of the Disclosure Schedules sets forth all directors,
officers and attorneys-in-fact of the Mexican Subsidiaries and all bank accounts
and safety deposit boxes and similar deposit agreements (designating each
authorized signatory with respect thereto) for each Mexican Subsidiary.

(b) Section 3.26(b) of the Disclosure Schedules sets forth all bank accounts in
the name of the Company and its Subsidiaries (other than the Mexican
Subsidiaries), including the title and number of the account, the individuals
with signatory authority over such account and the financial institution at
which such account is located.

Section 3.27 United Purchase Agreement. Prior to the execution hereof, Seller
and its Affiliates have terminated in accordance with its terms the Unit
Purchase Agreement, dated as of April 1, 2016, between Seller, Alstyle
Operations, LLC and, solely for purposes of Section 10.11 thereof, Steve S.
Hong, providing for the sale of the Company and certain assets of Seller to
Alstyle Operations, LLC (the “United Purchase Agreement”). Pursuant to
Section 5.03 of the United Purchase Agreement, Seller has delivered to Alstyle
Operations, LLC Buyer’s Competing Proposal (as defined therein) and Alstyle
Operations, LLC has not delivered to Seller a Matching Proposal (as defined
therein) within five Business Days of its receipt thereof. Pursuant to the terms
of the United Purchase Agreement, Buyer does not, and shall not, have any
liability for the termination of the United Purchase Agreement, the Termination
Fee (as defined in the United Purchase Agreement) or any other obligation or
liability arising under or related to the United Purchase Agreement.

Section 3.28 No Other Representations or Warranties; Disclosure Schedules.
Except for the representations and warranties contained in this Article III (as
modified by the Disclosure Schedules), all of which are true and correct as of
the date hereof, and any officer’s certificate delivered at the Closing pursuant
to Section 2.03(b), neither the Company nor any other Person makes any other
representation or warranty whatsoever, express or implied, with respect to the
Company or its operations, financial condition, assets, liabilities or
prospects, or the transactions contemplated by this Agreement, and the Company
disclaims any other representations or warranties, whether made by the Company,
Seller, the Subsidiaries, any of their Affiliates or any of their respective
managers, officers, directors, employees, advisors, consultants, agents or
representatives. Except for the representations and warranties contained in this
Article III (as modified by the Disclosure Schedules) and any officer’s
certificate delivered at the Closing pursuant to Section 2.03(b), the Company
hereby disclaims all liability and responsibility for any representation,
warranty, projection, forecast, statement, or information made, communicated, or
furnished (orally or in writing) to Buyer or its Affiliates or representatives
(including any opinion, information, projection, or advice that may have been or
may be provided to Buyer by any manager, director, officer, employee, advisor,
consultants agents or representative of the Company, Seller or any of their
Affiliates). The disclosure of any matter or item in the Disclosure Schedule
shall not be deemed to constitute an acknowledgment that any such matter is
required to be disclosed.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Seller that the statements contained in this
Article IV are true and correct as of the date hereof.

Section 4.01 Organization and Authority of Buyer. Buyer is a corporation duly
organized, validly existing and in good standing under the Laws of Canada. Buyer
has full corporate power and authority to enter into this Agreement and the
other Transaction Documents to which Buyer is a party, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery by Buyer of this Agreement and any other Transaction
Document to which Buyer is a party, the performance by Buyer of its obligations
hereunder and the consummation by Buyer of the transactions contemplated hereby
have been duly authorized by all requisite corporate action on the part of
Buyer. This Agreement has been duly executed and delivered by Buyer, and
(assuming due authorization, execution and delivery by Seller) this Agreement
constitutes a legal, valid and binding obligation of Buyer enforceable against
Buyer in accordance with its terms. When each other Transaction Document to
which Buyer is or will be a party has been duly executed and delivered by Buyer
(assuming due authorization, execution and delivery by each other party
thereto), such Transaction Document will constitute a legal and binding
obligation of Buyer enforceable against it in accordance with its terms.

Section 4.02 No Conflicts; Consents. The execution, delivery and performance by
Buyer of this Agreement and the other Transaction Documents to which it is a
party, and the consummation of the transactions contemplated hereby, do not and
will not: (a) conflict with or result in a violation or breach of, or default
under, any provision of the certificate of incorporation, by-laws or other
organizational documents of Buyer; (b) conflict with or result in a violation or
breach of any provision of any Law or Governmental Order applicable to Buyer; or
(c) require the consent, notice or other action by any Person under any Contract
to which Buyer is a party. No consent, approval, Permit, Governmental Order,
declaration or filing with, or notice to, any Governmental Authority is required
by or with respect to Buyer in connection with the execution and delivery of
this Agreement and the other Transaction Documents and the consummation of the
transactions contemplated hereby, except for such filings as may be required
under the HSR Act and the LFCE and such consents, approvals, Permits,
Governmental Orders, declarations, filings or notices which, in the aggregate,
would not have a material adverse effect on the ability of Buyer to consummate
the transactions contemplated hereby on a timely basis.

Section 4.03 Sophistication; Investigation. Buyer and its representatives are
experienced and sophisticated in all aspects of the evaluation, acquisition and
operation of businesses such as that in which the Company is engaged. Buyer has
(a) evaluated the merits and risks of acquiring the Units on the terms set forth
in this Agreement and has such knowledge and experience in financial and
business matters that Buyer is capable of evaluating the merits and risks of
such acquisition, (b) is aware of and has considered the financial risks and
financial hazards of acquiring the Units on the terms set forth in this
Agreement, and (c) intends to assume both the risks and prospective returns
associated with an acquisition of the Company and the Subsidiaries subject to
the terms set forth in this Agreement. Nothing in this Section 4.03 shall

 

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be deemed to limit Buyer’s rights or remedies with respect to any common law
fraud on the part of Seller or the Company or any director, manager, officer,
employee, equityholder, agent or representative of any of the foregoing.

Section 4.04 Investment Purpose. Buyer is acquiring the Units solely for its own
account for investment purposes and not with a view to, or for offer or sale in
connection with, any distribution thereof. Buyer acknowledges that the Units are
not registered under the Securities Act of 1933, as amended, or any state
securities laws, and that the Units may not be transferred or sold except
pursuant to the registration provisions of the Securities Act of 1933, as
amended or pursuant to an applicable exemption therefrom and subject to state
securities laws and regulations, as applicable.

Section 4.05 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder’s or other fee or commission in connection with the
transactions contemplated by this Agreement or any other Transaction Document
based upon arrangements made by or on behalf of Buyer.

Section 4.06 Financing. Buyer will have sufficient funds to make the payments
required by Section 2.02 of this Agreement and to otherwise consummate the
transactions contemplated hereby as of the Closing Date.

Section 4.07 No Other Representations or Warranties. Except for the
representations and warranties contained in this Article IV, all of which are
true and correct as of the date hereof, and any officer’s certificate delivered
at the Closing pursuant to Section 2.03(a), neither Buyer nor any other Person
makes any other representation or warranty whatsoever, express or implied, with
respect to Buyer, any of its Affiliates, the operations, financial condition,
assets, liabilities or prospects of Buyer or any of its Affiliates or the
transactions contemplated by this Agreement, and Buyer disclaims any other
representations or warranties, whether made by Buyer, any of its Affiliates or
any of their respective managers, officers, directors, employees, advisors,
consultants, agents or representatives. Except for the representations and
warranties contained in this Article IV and any officer’s certificate delivered
at the Closing pursuant to Section 2.03(a), Buyer hereby disclaims all liability
and responsibility for any representation, warranty, projection, forecast,
statement, or information made, communicated, or furnished (orally or in
writing) to the Company or its Affiliates or representatives (including any
opinion, information, projection, or advice that may have been or may be
provided to the Company by any manager, director, officer, employee, advisor,
consultants agents or representative of Buyer or any of its Affiliates).

ARTICLE V

COVENANTS

Section 5.01 Conduct of Business Prior to the Closing. From the date hereof
until the Closing, except as otherwise provided in this Agreement or consented
to in writing by Buyer (which consent shall not be unreasonably withheld or
delayed), Seller shall, and shall cause the Company to, (x) conduct the business
of the Company in the ordinary course of business consistent with past practice;
and (y) use reasonable best efforts to maintain and preserve intact the current
organization, business and franchise of the Company and to preserve

 

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the rights, franchises, goodwill and relationships of its employees, customers,
lenders, suppliers, regulators and others having business relationships with the
Company. For purposes of this Article V, all references to the Company shall
include the Subsidiaries unless context otherwise indicates. Without limiting
the foregoing, from the date hereof until the Closing Date, Seller shall:

(a) cause the Company to preserve and maintain all of its Permits and reasonably
cooperate in the transfer of any permits that may be legally transferred to
Buyer, the Company or any Subsidiary;

(b) cause the Company to pay its debts, Taxes and other obligations when due;

(c) cause the Company to maintain the properties and assets owned, operated or
used by the Company in the same condition as they were on the date of this
Agreement, subject to reasonable wear and tear;

(d) provide evidence, satisfactory to Buyer, that title to the Real Properties
known as Parcela 17 Z-1 P-1 Fracc. E, Ejido Chapultepec, Ensenada, Baja
California, with a total surface area of 5,806.25 square meters; and Parcela 17
Z-1 P-1 Fracc. D, Ejido Chapultepec, Ensenada, Baja California, with a total
surface area of 5,273.68 square meters is vested in name of Alvest, S.A. de
C.V.;

(e) cause the Company to continue in full force and effect without modification
all Insurance Policies, except as required by applicable Law;

(f) cause the Company to defend and protect its properties and assets from
infringement or usurpation;

(g) cause the Company to perform all of its obligations under all Contracts
relating to or affecting its properties, assets or business;

(h) cause the Company to maintain its books and records in accordance with past
practice and to identify and provide to Buyer all corporate and other records
for the Company and its Subsidiaries which have been maintained by Seller, the
Company or any Subsidiary and otherwise as required by Law;

(i) cause the Company not to (a) accelerate its collection of receivables or
delay its payment of payables, or (b) offer terms, dating or discounts to
customers outside the ordinary course of business consistent with past practice;

(j) cause the Company to comply in all material respects with all applicable
Laws and to identify to Buyer all Permits which support the representation in
Section 3.18; and

(k) cause the Company not to take or permit any action that would cause any of
the changes, events or conditions described in Section 3.08 to occur.

 

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Notwithstanding any other provision of this Section 5.01 to the contrary,
Seller’s only obligations prior to the Closing with respect to Taxes shall be
governed exclusively by Article VI hereof.

Section 5.02 Access to Information; Cooperation. From the date hereof until the
Closing, Seller shall, and shall cause the Company and each of its Subsidiaries
to, (a) afford Buyer and its Representatives reasonable access (which may
include day-to-day access during normal business hours) to and the right to
inspect all of the Real Property, properties, assets, premises, books and
records, Contracts and other documents and data related to the Company and its
Subsidiaries; (b) furnish Buyer and its Representatives with such financial,
operating and other data and information related to the Company as Buyer or any
of its Representatives may reasonably request; and (c) instruct the
Representatives of Seller and the Company to cooperate with Buyer and its
Representatives in their investigation of the Company and its Subsidiaries.
Without limiting the foregoing, Seller shall permit Buyer and its
Representatives to conduct environmental due diligence of the Company and the
Real Property, including the collecting and analysis of samples of indoor or
outdoor air, surface water, groundwater or surface or subsurface land on, at,
in, under or from the Company and the Real Property. Any investigation pursuant
to this Section 5.02 shall be conducted in such manner as not to interfere
unreasonably with the conduct of the business of Seller or the Company. No
investigation by Buyer or other information received by Buyer shall operate as a
waiver or otherwise affect any representation, warranty or agreement given or
made by Seller in this Agreement. Notwithstanding anything else to the contrary
in this Section 5.02, nothing in this Section 5.02 shall require Seller to
provide Buyer, its Affiliates, or any Representatives of Buyer any Tax Returns
(or supporting work papers and other documents) filed on a consolidated,
combined or similar basis with Seller or any of its Affiliates (except for
information pertaining to any tax attributes or tax positions applicable to the
Company or any Subsidiary), or otherwise not pertaining to the business or
assets of the Company.

Section 5.03 No Solicitation of Other Bids. Seller shall not, and shall not
authorize or permit any of its Affiliates (including the Company) or any of its
or their Representatives to, directly or indirectly, (i) encourage, solicit,
initiate, facilitate or continue inquiries regarding a Competing Proposal; or
(ii) enter into any agreements or other instruments (whether or not binding)
regarding a Competing Proposal. Seller shall immediately cease and cause to be
terminated, and shall cause its Affiliates (including the Company) and all of
its and their Representatives to immediately cease and cause to be terminated,
all existing discussions or negotiations with any Persons conducted heretofore
with respect to, or that could lead to, a Competing Proposal. For purposes
hereof, “Competing Proposal” shall mean any proposal or offer from any Person
(other than Buyer or any of its Affiliates) concerning (1) a merger,
consolidation, liquidation, recapitalization, share exchange or other business
combination transaction involving the Company; (2) the issuance or acquisition
of Units of capital stock or other equity securities of the Company; or (3) the
sale, lease, exchange or other disposition of any significant portion of the
Company’s properties or assets.

 

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Section 5.04 Notice of Certain Events. From the date hereof until the Closing,
Seller shall promptly notify Buyer in writing of:

(a) any fact, circumstance, event or action the existence, occurrence or taking
of which (i) has had, or could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect, (ii) has resulted in, or could
reasonably be expected to have, any representation or warranty made by Seller
hereunder not being true and correct or (iii) has resulted in the failure of any
of the conditions set forth in Section 7.02 to be satisfied;

(b) any notice or other communication from any Person alleging that the consent
of such Person is or may be required in connection with the transactions
contemplated by this Agreement;

(c) any notice or other communication from any Governmental Authority in
connection with the transactions contemplated by this Agreement; and

(d) any Actions commenced or, to Seller’s Knowledge, threatened against,
relating to or involving or otherwise affecting Seller or the Company that, if
pending on the date of this Agreement, would have been required to have been
disclosed pursuant to Section 3.17 or that relates to the consummation of the
transactions contemplated by this Agreement.

Section 5.05 Resignations. Seller shall deliver to Buyer written resignations,
effective as of the Closing, of the Board of Managers of the Company, the
governing board of each of the Subsidiaries (other than the Mexican
Subsidiaries) and the board members of each Mexican Subsidiary.

Section 5.06 Confidentiality. From and after the Closing, Seller shall, and
shall cause its Affiliates to, hold, and shall use its reasonable best efforts
to cause its or their respective Representatives to hold, in confidence any and
all information, whether written or oral, concerning the Company, except to the
extent that such information (a) is generally available to and known by the
public through no fault of Seller, any of its Affiliates or their respective
Representatives; (b) is lawfully acquired by Seller, any of its Affiliates or
their respective Representatives from and after the Closing from sources which
are not prohibited from disclosing such information by a legal, contractual or
fiduciary obligation; or (c) is required by Law to be disclosed, or is
reasonably necessary to be disclosed to a Tax Authority. If Seller or any of its
Affiliates or their respective Representatives are compelled to disclose any
information by judicial or administrative process or by other requirements of
Law (excluding disclosure to a Tax Authority, which is governed by the
immediately preceding sentence), Seller shall promptly notify Buyer in writing
and shall disclose only that portion of such information which Seller is advised
by its counsel in writing is legally required to be disclosed, provided that
Seller shall use reasonable best efforts to obtain an appropriate protective
order or other reasonable assurance that confidential treatment will be accorded
such information.

Section 5.07 Non-competition; Non-solicitation.

(a) For a period of five years commencing on the Closing Date (the “Restricted
Period”), Seller shall not, and shall not permit any of its controlled
Affiliates to, directly or indirectly, (i) engage in or assist others in
engaging in the Restricted Business anywhere in the world; (ii) have a material
interest in any Person that engages directly or indirectly in the Restricted
Business anywhere in the world in any capacity, including as a

 

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partner, shareholder, member, employee, principal, agent, trustee or consultant;
or (iii) intentionally interfere in any material respect with the business
relationships (whether formed prior to or after the date of this Agreement)
between the Company and customers or suppliers of the Company. Notwithstanding
the foregoing, Seller may (A) own, directly or indirectly, solely as an
investment, securities of any Person traded on any national securities exchange
if Seller is not a controlling Person of, or a member of a group which controls,
such Person and does not, directly or indirectly, own 5% or more of any class of
securities of such Person, (B) continue to operate its retained businesses as
such retained businesses have been conducted prior to and on the date of this
Agreement, and (C) perform any services for Buyer or its Affiliates, including
such services as are contemplated under the Transition Services Agreement.

(b) For a period of 18 months commencing on the Closing Date, Seller shall not,
and shall not permit any of its controlled Affiliates to, directly or
indirectly, hire or solicit any employee of the Company or encourage any such
employee to leave such employment or hire any such employee who has left such
employment, except pursuant to a general solicitation which is not directed
specifically to any such employees; provided, that nothing in this
Section 5.07(b) shall prevent Seller or any of its controlled Affiliates from
hiring (i) any employee whose employment has been terminated by the Company or
Buyer or (ii) after 180 days from the date of termination of employment, any
employee whose employment has been terminated by the employee.

(c) During the Restricted Period, Seller shall not, and shall not permit any of
its controlled Affiliates to, directly or indirectly, solicit or entice, or
attempt to solicit or entice, any clients or customers of the Company or
potential clients or customers of the Company for purposes of diverting their
business or services from the Company.

(d) Seller acknowledges that a breach or threatened breach of this Section 5.07
would give rise to irreparable harm to Buyer, for which monetary damages would
not be an adequate remedy, and hereby agrees that in the event of a breach or a
threatened breach by Seller of any such obligations, Buyer shall, in addition to
any and all other rights and remedies that may be available to it in respect of
such breach, be entitled to equitable relief, including a temporary restraining
order, an injunction, specific performance and any other relief that may be
available from a court of competent jurisdiction (without any requirement to
post bond).

(e) Seller acknowledges that the restrictions contained in this Section 5.07 are
reasonable and necessary to protect the legitimate interests of Buyer and
constitute a material inducement to Buyer to enter into this Agreement and
consummate the transactions contemplated by this Agreement. In the event that
any covenant contained in this Section 5.07 should ever be adjudicated to exceed
the time, geographic, product or service, or other limitations permitted by
applicable Law in any jurisdiction, then any court is expressly empowered to
reform such covenant, and such covenant shall be deemed reformed, in such
jurisdiction to the maximum time, geographic, product or service, or other
limitations permitted by applicable Law. The covenants contained in this
Section 5.07 and each provision hereof are severable and distinct covenants and
provisions. The invalidity or unenforceability of any such covenant or provision
as written shall not invalidate or render unenforceable the remaining covenants
or provisions hereof, and any such invalidity or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such covenant or
provision in any other jurisdiction.

 

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(f) Notwithstanding anything herein to the contrary, nothing in this
Section 5.07 shall restrict Seller or any of its Affiliates from taking
commercially reasonable steps to carry out its rights and obligations under any
of the Transaction Documents.

Section 5.08 Governmental Approvals and Consents.

(a) Each party hereto shall, as promptly as possible, (i) make, or cause or be
made, all filings and submissions (including those under the HSR Act and the
LFCE) required under any Law applicable to such party or any of its Affiliates;
and (ii) use reasonable best efforts (excluding any payment of money or
divestiture of assets) to obtain, or cause to be obtained, all consents,
authorizations, orders and approvals from all Governmental Authorities that may
be or become necessary, in each case, for its execution and delivery of this
Agreement and the performance of its obligations pursuant to this Agreement and
the other Transaction Documents. Each party shall cooperate fully with the other
party and its Affiliates in promptly seeking to obtain all such consents,
authorizations, orders and approvals. The parties hereto shall not wilfully take
any action that will have the effect of delaying, impairing or impeding the
receipt of any required consents, authorizations, orders and approvals.

(b) Seller and Buyer shall use reasonable best efforts to give all notices to,
and obtain all consents from, all third parties that are described in
Section 3.05 of the Disclosure Schedules.

(c) Without limiting the generality of the parties’ undertakings pursuant to
subsections (a) and (b) above, each of the parties hereto shall use all
reasonable best efforts to:

 

  (i) respond to any inquiries by any Governmental Authority regarding antitrust
or other matters with respect to the transactions contemplated by this Agreement
or any Transaction Document;

 

  (ii) avoid the imposition of any order or the taking of any action that would
restrain, alter or enjoin the transactions contemplated by this Agreement or any
Transaction Document; and

 

  (iii) in the event any Governmental Order adversely affecting the ability of
the parties to consummate the transactions contemplated by this Agreement or any
Transaction Document has been issued, to have such Governmental Order vacated or
lifted.

(d) If any consent, approval or authorization necessary to preserve the rights
or benefits under any Contract listed on Section 5.08(d) of the Disclosure
Schedules is not obtained prior to the Closing, Seller shall, subsequent to the
Closing, cooperate with Buyer and the Company in attempting to obtain such
consent, approval or authorization as promptly thereafter as practicable. Until
such consent, approval or authorization is obtained (or if such consent,
approval or authorization cannot be obtained), Seller shall use its reasonable
best efforts to provide the Company with the rights and benefits of such
Contract for the term thereof, and, if Seller provides such rights and benefits,
the Company shall assume all obligations and burdens thereunder.

 

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(e) All analyses, appearances, meetings, discussions, presentations, memoranda,
briefs, filings, arguments, and proposals made by or on behalf of either party
before any Governmental Authority or the staff or regulators of any Governmental
Authority, in connection with the transactions contemplated hereunder (but, for
the avoidance of doubt, not including any Tax Returns, any interactions between
Seller or the Company with Governmental Authorities in the ordinary course of
business, any disclosure which is not permitted by Law or any disclosure
containing confidential information) shall be disclosed to the other party
hereunder in advance of any filing, submission or attendance, it being the
intent that the parties will consult and cooperate with one another, and
consider in good faith the views of one another, in connection with any such
analyses, appearances, meetings, discussions, presentations, memoranda, briefs,
filings, arguments, and proposals. Each party shall give notice to the other
party with respect to any meeting, discussion, appearance or contact with any
Governmental Authority or the staff or regulators of any Governmental Authority,
with such notice being sufficient to provide the other party with the
opportunity to attend and participate in such meeting, discussion, appearance or
contact.

(f) Notwithstanding the foregoing, nothing in this Section 5.08 shall require,
or be construed to require, Buyer or any of its Affiliates to agree to (i) sell,
hold, divest, discontinue or limit, before or after the Closing Date, any
assets, businesses or interests of Buyer, the Company or any of their respective
Affiliates; (ii) any conditions relating to, or changes or restrictions in, the
operations of any such assets, businesses or interests which, in either case,
could reasonably be expected to result in a Material Adverse Effect or
materially and adversely impact the economic or business benefits to Buyer of
the transactions contemplated by this Agreement; or (iii) any material
modification or waiver of the terms and conditions of this Agreement.

Section 5.09 Books and Records.

(a) In order to facilitate the resolution of any claims made against or incurred
by Seller prior to the Closing, or for any other reasonable purpose, for a
period of five years after the Closing, Buyer shall:

 

  (i) retain the books and records (including personnel files) of the Company
relating to periods prior to the Closing in a manner reasonably consistent with
the prior practices of the Company; and

 

  (ii) upon reasonable notice, afford the Representatives of Seller reasonable
access (including the right to make, at Seller’s expense, photocopies), during
normal business hours, to such books and records;

provided, however, that any books and records related to Tax matters shall be
retained pursuant to the periods set forth in Article VI.

 

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(b) In order to facilitate the resolution of any claims made by or against or
incurred by Buyer or the Company after the Closing, or for any other reasonable
purpose, for a period of five years following the Closing, Seller shall:

 

  (i) retain the books and records (including personnel files) of Seller which
relate to the Company and its operations for periods prior to the Closing; and

 

  (ii) upon reasonable notice, afford the Representatives of Buyer or the
Company reasonable access (including the right to make, at Buyer’s expense,
photocopies), during normal business hours, to such books and records;

provided, however, that any books and records related to Tax matters shall be
retained pursuant to the periods set forth in Article VI.

(c) Neither Buyer nor Seller shall be obligated to provide the other party with
access to any books or records (including personnel files) pursuant to this
Section 5.09 where such access would violate any applicable Law.

Section 5.10 Irshad Ahmad.

(a) Seller shall pay, when due, to Irshad Ahmad all benefits to which he is
entitled under the deferred compensation plan in which he participates, in
accordance with Section 409A of the Code and will indemnify and hold Buyer
harmless from any claim Irshad Ahmad may have with respect to any such plan. For
the avoidance of doubt, Seller shall retain (and indemnify and hold Buyer
harmless from) all Liabilities in respect of the Defined Benefit Retirement
Plan.

(b) Seller shall indemnify and hold Buyer harmless from all Liabilities in
respect of the Ahmad Employment Agreement and Irshad Ahmad’s employment with or
termination of employment from the Company and its Affiliates that arise during
the one (1) year period following the Closing Date (subject to the
indemnification procedures set forth in Section 8.05(a)); provided, however,
that this Section 5.10(b) shall not apply in respect of (i) ordinary course
compensation or benefits arising after the Closing Date under the terms of the
Ahmad Employment Agreement for Irshad Ahmad’s employment after the Closing Date,
(ii) any Liabilities arising as a result of any breach after the Closing Date by
the Company or any of its Affiliates of any of the Company’s obligations as set
forth in the Ahmad Employment Agreement or (iii) any incremental increase in any
Liabilities that arise as a result of any actions taken or omitted to be taken
by the Company or any of its Affiliates after the Closing Date that results in
such incremental increase in Liabilities above and beyond the Liabilities set
forth in the Ahmad Employment Agreement in the event that such actions or the
omission of such actions had not occurred.

Section 5.11 Employment-Related Liabilities. Effective as of the Closing Date,
Buyer shall assume all Liabilities resulting from any workers’ compensation
claim by any former or current employee of the Company that results from an
accident, incident or event occurring, or from an occupational disease which
becomes manifest, before the Closing Date to

 

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the extent such Liabilities would have been borne by Seller. If Buyer is unable
to assume any such Liability (or any portion thereof) or the administration of
any such claim because of the operation of applicable Law or for any other
reason, Seller shall retain such Liability and Buyer shall reimburse and
otherwise fully indemnify Seller for such Liability, including the costs of
administering the plans, programs or arrangements under which any such
Liabilities have accrued or otherwise arisen.

Section 5.12 Joinder Agreement. The Parties acknowledge and agree that the
Joinder Agreement shall continue in full force and effect from and after the
Closing Date. Buyer agrees not to, and to cause its Affiliates not to, take any
action or omit to take any action, as the case may be, that has the effect of
triggering any obligation of Seller under the Joinder Agreement. In the event
that Buyer or any of its Affiliates takes any action or omits to take any
action, as the case may be, that gives rise to any Liability of Seller pursuant
to the terms of the Joinder Agreement, then Buyer shall reimburse and otherwise
fully indemnify Seller for such Liability.

Section 5.13 Closing Conditions. From the date hereof until the Closing, each
party hereto shall, and Seller shall cause the Company to, use reasonable best
efforts to take such actions as are necessary to expeditiously satisfy the
closing conditions set forth in Article VII hereof.

Section 5.14 Public Announcements. Unless otherwise required by applicable Law
(including the Securities Exchange Act of 1934 and applicable stock exchange
requirements, based upon the reasonable advice of counsel), prior to the Closing
no party to this Agreement shall make any public announcements in respect of
this Agreement or the transactions contemplated hereby or otherwise communicate
with any news media regarding such matters without the prior written consent of
the other party (which consent shall not be unreasonably withheld or delayed),
and the parties shall cooperate as to the timing and contents of any such
announcement.

Section 5.15 Alstyle Apparel Limited. Immediately prior to the Closing, Seller
shall cause A and G, Inc. to distribute to Alstyle Apparel LLC and Alstyle
Apparel LLC to distribute to Seller all of the shares of Alstyle Apparel Limited
in a distribution that is described as pursuant to a plan of liquidation deemed
adopted by this Agreement and make an election for such transaction to be
governed by Section 338(h)(10) of the Code. Seller shall provide to Buyer
evidence of such distribution in form reasonably satisfactory to Buyer.

Section 5.16 Transfer of Acquired Assets. Prior to the Closing, Seller shall
approve and effect a transfer (or transfers, as necessary) of assets, comprising
the Acquired Assets, to the Company, and provide to Buyer evidence of such
actions in form reasonably satisfactory to Buyer.

Section 5.17 IMMEX Status. From and after the Closing, Buyer agrees to cooperate
with Seller to take commercially reasonable steps to reinstitute the IMMEX
status of the Mexican Subsidiaries at Seller’s sole expense.

Section 5.18 Further Assurances. Following the Closing, each of the parties
hereto shall, and shall cause their respective Affiliates to, execute and
deliver such additional documents, instruments, conveyances and assurances and
take such further actions as may be

 

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reasonably required to carry out the provisions hereof and give effect to the
transactions contemplated by this Agreement. Further, Seller shall cooperate in
good faith with requests from Buyer, between the date hereof and the Closing
Date, to restructure the transactions contemplated hereunder (whether for
purposes of maximizing the integration of the Company and its operations with
Buyer’s operations, for purposes of preserving tax efficiency, or for other
purposes), including, for the avoidance of doubt, transferring any of the assets
or Subsidiaries of the Company or any of the Acquired Assets to an entity
designated by Buyer; provided, however, that any such restructuring shall
(i) not cause Seller to be in a worse position than if this Agreement had been
implemented without such restructuring, including, but not limited to, by
causing Seller or any of its Affiliates to incur any additional Taxes or
adversely affecting the Tax characterization of any gain or loss arising
pursuant to this Agreement than would be the case if such restructuring had not
taken place, (ii) in the case of any conversion of the corporate form of the
Mexican Subsidiaries, be carried out as a so-called “F Reorg” and (iii) not
include any check-the-box election that is effective as of or retroactive to any
date prior to the Closing Date; and provided further, that in no event shall any
actions taken by Buyer pursuant to this Section 5.18 delay the Closing in the
event that all other conditions to the Closing have been satisfied. For the
avoidance of doubt, if any restructuring requested by Buyer pursuant to this
Section 5.18 resulted in a higher amount of the Taxes described in
Section 6.01(d) than would be the case without such restructuring, Buyer shall
be responsible for such excess.

ARTICLE VI

TAX MATTERS

Section 6.01 Tax Covenants.

(a) All transfer (including real property transfer or gains), documentary,
sales, use, stamp, registration, excise, recordation, value added and other
similar Taxes and fees (including any penalties and interest) that may be
imposed on or assessed as a result of the transactions contemplated by this
Agreement, together with any interest, additions or penalties with respect
thereto (“Transfer Taxes”) shall be borne 100% by Buyer. The parties shall
cooperate in the preparation and filing of any Tax Returns for Transfer Taxes.
Buyer shall file all necessary Tax Returns and other documentation with respect
to all such Transfer Taxes and, if required by applicable Law, the parties to
this Agreement shall, and shall cause their Affiliates to, join in the execution
of any such Tax Returns or other documentation. Expenses incurred in connection
with filing all necessary Tax Returns and other documentation with respect to
all such Transfer Taxes shall be borne 100% by Buyer.

(b) Seller shall prepare, or cause to be prepared, all Tax Returns required to
be filed by the Company or any of its Subsidiaries after the Closing Date with
respect to a Pre-Closing Tax Period. Any such Tax Return shall be prepared in a
manner consistent with past practice (unless otherwise required by Law) and
without a change of any election or any accounting method and shall be submitted
by Seller to Buyer (together with schedules, statements and, to the extent
requested by Seller, supporting documentation) at least 45 days prior to the due
date (including extensions) of such Tax Return. If Buyer objects to any item on
any such Tax Return, it shall, within ten days after delivery of such Tax
Return, notify Seller in writing that it so objects, specifying with
particularity any such item and stating the specific factual or legal basis for
any such objection. If a notice of objection shall be duly delivered,

 

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Buyer and Seller shall negotiate in good faith and use their reasonable best
efforts to resolve such items. If Buyer and Seller are unable to reach such
agreement within ten days after receipt by Seller of such notice, the disputed
items shall be resolved by a nationally recognized accounting firm selected by
Buyer and reasonably acceptable to Seller (the “Accounting Referee”) and any
determination by the Accounting Referee shall be final. The Accounting Referee
shall resolve any disputed items within twenty days of having the item referred
to it pursuant to such procedures as it may require. If the Accounting Referee
is unable to resolve any disputed items before the due date for such Tax Return,
the Tax Return shall be filed as prepared by Seller and then amended to reflect
the Accounting Referee’s resolution. The costs, fees and expenses of the
Accounting Referee shall be borne equally by Buyer and Seller. The preparation
and filing of any Tax Return of the Company that does not relate to a
Pre-Closing Tax Period shall be exclusively within the control of Buyer;
provided, however, that, pursuant to the terms set forth in the Transition
Services Agreement, Seller shall prepare on Buyer’s behalf any Sales and Use Tax
Return of the Company that relates to the period of time from the Closing Date
through the date on which the Transition Services Agreement terminates pursuant
to its terms. For the avoidance of doubt, Buyer shall have no responsibility for
preparing or filing any Tax Return of Seller or any Affiliate of Seller (other
than the Company or any of its Subsidiaries) or any Tax Return of an Affiliated
Group of which Seller or any Affiliate of Seller (other than the Company or any
of its Subsidiaries) is a member.

(c) Following the Closing, Buyer will not, unless required under applicable Tax
Law, (i) file (or cause or permit the Company or any of its Subsidiaries to
file) an amended Tax Return with respect to the Company or any of its
Subsidiaries for a Tax period beginning before the Closing Date without the
prior written consent of Seller or (ii) cause or permit the Company or any of
its Subsidiaries to make any Tax election that has retroactive effect to any Tax
period ending on or before the Closing Date without the prior written consent of
Seller (which consent shall not be unreasonably withheld or delayed).

(d) Notwithstanding anything to the contrary but subject to Section 5.18, Seller
shall be responsible for any Mexican source capital gains or income Taxes and
fees (including penalties and interest) that may result from the indirect
transfer of the Mexican Subsidiaries pursuant to the Transactions contemplated
by this Agreement.

Section 6.02 Tax Indemnification. Seller shall indemnify the Company, Buyer, and
each Buyer Indemnitee and hold them harmless from and against (a) any Loss
attributable to any breach of or inaccuracy in any of the Tax Representations;
(b) any Loss attributable to any breach or violation by Seller of, or failure of
Seller to fully perform, any covenant, agreement, undertaking or obligation in
this Article VI; (c) all Taxes of the Company or relating to the business of the
Company for all Pre-Closing Tax Periods, including but not limited to, any
income tax, value added tax, customs duties or similar taxes resulting from any
breach of the IMMEX status of the Mexican Subsidiaries in Pre-Closing Tax
Periods; (d) all income or franchise Taxes of any member of an Affiliated Group
(other than an Affiliated Group that includes Buyer or any of its Affiliates
(other than the Company and its Subsidiaries)) of which the Company or any of
its Subsidiaries (or any predecessor of the Company or its Subsidiaries) is or
was a member on or prior to the Closing Date that are imposed on the Company or
its Subsidiaries under Treasury Regulation Section 1.1502-6 or any comparable
provisions of foreign, state or local Law (but excluding any such liability for
such Taxes to the extent directly

 

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or indirectly attributable to membership in any Affiliated Group for any period
(or any portion of a period) beginning after the Closing Date); and (e) any and
all Taxes of any Person imposed on the Company or its Subsidiaries arising under
the principles of transferee or successor liability or by contract, if the
liability for such Taxes relates to an event or transaction both occurring
before the Closing Date and effected or entered into by the Company or any of
its Subsidiaries prior to the Closing Date, in each of the above cases, together
with any out-of-pocket fees and expenses (including attorneys’ and accountants’
fees) incurred in connection therewith; provided, however, that Seller shall not
be responsible for, and shall have no obligation to indemnify and hold Company,
Buyer, or any Buyer Indemnitee harmless from and against (1) Taxes resulting
from (A) any transactions occurring on the Closing Date after the Closing
outside the ordinary course of business or (B) any breach by Buyer of
Section 6.01(c), or (2) Taxes, to the extent such Taxes are treated as a
liability in the calculation of Closing Working Capital. Seller shall reimburse
Buyer for any Taxes of the Company that are the responsibility of Seller
pursuant to this Section 6.02 within ten (10) Business Days after payment of
such Taxes by Buyer or the Company, which reimbursements, in the aggregate,
shall not exceed an amount equal to the Purchase Price.

Section 6.03 Straddle Period. In the case of Taxes that are payable with respect
to a taxable period that begins on or before and ends after the Closing Date
(each such period, a “Straddle Period”), the portion of any such Taxes that are
treated as Pre-Closing Taxes for purposes of this Agreement shall be:

(a) in the case of Taxes based upon, or related to, income or receipts, deemed
equal to the amount which would be payable if the taxable year ended on the
Closing Date; and

(b) in the case of other Taxes, deemed to be the amount of such Taxes for the
entire period multiplied by a fraction the numerator of which is the number of
days in the period ending on the Closing Date and the denominator of which is
the number of days in the entire period.

Section 6.04 Election.

(a) Election.

 

  (i)

Buyer and Seller agree (1) to make an Asset Sale Election with respect to the
purchase and sale of the Units of the Company hereunder and (2) that, solely
with respect to the deemed purchase (as applicable for Tax purposes) of the
Equity Securities of the Mexican Subsidiaries, Buyer is permitted to make an
election, if available under applicable Tax Law, under Section 338(g) of the
Code (together with any corresponding elections under state, local, or foreign
Law), provided that such election under Section 338(g) of the Code (together
with any corresponding elections under state, local, or foreign Law) must be
made within one year after the Closing Date and Buyer must notify Seller in
writing within five Business Days of making such elections.

 

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  (ii) At any time prior to the two year anniversary following the Closing Date,
Seller may, by written notice to Buyer (the “Additional Tax Gross-Up Notice”),
demand payment for any additional amount necessary to cause Seller’s after-Tax
net proceeds (after taking into account any Tax with respect to payments made
under this Section 6.04(a)(ii) and any liability under Section 6.04(a)(iii)
(which for this purpose shall be treated as a Tax)) from the sale of the Units
and Acquired Assets to be equal to the after-Tax net proceeds that Seller would
have received had the Asset Sale Election and any election under Section 338(g)
of the Code (together with any corresponding elections under state, local, or
foreign Law) not been made, taking into account all appropriate federal, state,
local and foreign Tax implications (such additional amount, the “Additional Tax
Gross-Up Amount”); provided, however, that Buyer shall not be liable for any
such Additional Tax Gross-Up Amount to the extent Seller’s additional Tax
liability relates to the failure of any of the representations set forth in
Section 3.22 to be true and correct in accordance with the terms of this
Agreement. The Additional Tax Gross-Up Notice shall include an itemized
calculation in reasonable detail of the Additional Tax Gross-Up Amount along
with appropriate supporting documentation and work papers used in the
preparation thereof, but may exclude any information that is not directly
related to the calculation of the Additional Tax Gross-Up Amount. Buyer shall
have 30 days following receipt of the Additional Tax Gross-Up Notice during
which to review the Additional Tax Gross-Up Amount, together with the supporting
documentation, work papers and any other information Buyer may reasonably
request, and to notify Seller in writing of any dispute of the Additional Tax
Gross-Up Amount, which notice shall set forth in reasonable detail each disputed
item, if any, and the basis for such dispute. If Buyer does not provide written
notice to Seller within such 30 day period disputing Seller’s calculation of the
Additional Tax Gross-Up Amount, then Seller’s calculation of such amount shall
be deemed final. If Seller and Buyer are unable to resolve any dispute with
respect to the Additional Tax Gross-Up Amount within 45 days following the
delivery by Seller of an Additional Tax Gross-Up Notice, such dispute shall be
resolved by the Independent Accountants. The fees and expenses of such
accounting firm shall be borne by Buyer unless the change in the Additional Tax
Gross-Up Amount is in favor of Buyer by an amount greater than ten percent
(10%) of the Additional Tax Gross-Up Amount as set forth in the Additional Tax
Gross-Up Notice, in which case Seller shall bear all fees and expenses of the
Independent Accountants. Within five Business Days after the Additional Tax
Gross-Up Amount is finally determined under this

 

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  Section 6.04(a)(ii), Buyer shall pay such amount to Seller. Notwithstanding
the foregoing, provided that Buyer has not made any election under
Section 338(g) of the Code (or any corresponding elections under state, local,
or foreign Law) other than as permitted in this Section 6.04(a), Buyer’s
obligation under this Section 6.04(a)(ii) shall not exceed $350,000.

 

  (iii) Subject to Section 6.04(a)(ii), Seller shall be liable for (and shall
indemnify Buyer and the Company against any adverse consequences arising out of
any failure to pay) any Tax (other than Transfer Taxes, if any) directly
attributable to the deemed sales resulting from making the Asset Sale Election
and any election permitted to be made under Section 338(g) of the Code (together
with any corresponding elections under state, local, or foreign Law) pursuant to
Section 6.04(a)(i). To the extent any indemnification obligation under this
Section 6.04(a)(iii) is determined after the final determination of the
Additional Tax Gross-Up Amount, Seller’s indemnification obligation shall be
reduced by the amount by which the Additional Tax Gross-Up Amount would have
been increased if such indemnification obligation had been taken into account
under Section 6.04(a)(ii).

 

  (iv) Except as provided in Section 6.04(a)(i), Buyer agrees not to make any
election under Section 338(g) of the Code (or under any corresponding or similar
provision of state, local or foreign Law).

(b) Allocation of Purchase Price. In connection with the Asset Sale Election and
any elections made under Section 338(g) of the Code (together with any
corresponding elections under state, local, or foreign Law) pursuant to
Section 6.04(a)(i), Seller and Buyer agree that the Purchase Price and the
Liabilities of the Company and the applicable Subsidiaries (plus other relevant
items) shall be allocated among the assets of the Company, the assets of
applicable Subsidiaries, and the Acquired Assets as shown on the allocation
schedule (the “Allocation Schedule”). A draft of the Allocation Schedule shall
be prepared by Seller and delivered to Buyer within 60 days following the
Closing Date for its approval. If Buyer notifies Seller in writing that Buyer
objects to one or more items reflected in the Allocation Schedule, Seller and
Buyer shall negotiate in good faith to resolve such dispute; provided, however,
that if Seller and Buyer are unable to resolve any dispute with respect to the
Allocation Schedule within 30 days following the Closing Date, such dispute
shall be resolved by the Accounting Referee. The fees and expenses of such
accounting firm shall be borne equally by Seller and Buyer. Buyer, the Company
and Seller shall file all Tax Returns (including amended returns and claims for
refund) and information reports in a manner consistent with the Allocation
Schedule, except to the extent otherwise required by a determination (within the
meaning of Section 1313(a) of the Code). Any adjustments to the Purchase Price
pursuant to Section 2.04 herein shall be allocated in a manner consistent with
the Allocation Schedule.

Section 6.05 Contests. Buyer agrees to give written notice to Seller of the
receipt of any written notice by the Company, Buyer or any of Buyer’s Affiliates
which involves

 

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the assertion of any claim, or the commencement of any Action, in respect of
which an indemnity may be sought by Buyer pursuant to this Article VI (a “Tax
Claim”); provided, that failure to comply with this provision shall not affect
Buyer’s right to indemnification hereunder. Seller shall be entitled (at its own
expense) to participate and, at its option, take control of the defense of any
pending or threatened Tax Claim, in whole or in part (including any resulting
litigation), and to employ counsel of its choice at its expense. If Seller
elects to assume the defense of a Tax Claim, Seller shall keep Buyer reasonably
informed of all material developments relating to such Tax Claim, and shall
allow Buyer sufficient notice and opportunity to participate in the Tax Claim to
the extent of any claims for Taxes for which Buyer (or the Company or any
Subsidiary) may be liable. Neither Buyer nor Seller shall settle or compromise
(or cause to be settled or compromised) a matter involving a claim for Taxes for
which the other party may be liable under this Agreement without the prior
written consent of such other party, which consent shall not be unreasonably
delayed, conditioned or withheld. To the extent Seller elects to control a Tax
Claim pursuant to this Section 6.05, Seller shall use (and shall cause its
Affiliates to use) its commercially reasonable efforts to separate from any such
Tax Claim any item in respect of which an indemnity is not sought by Buyer
pursuant to this Article VI, and to permit, to the greatest extent possible,
Buyer to control the contest of any such item.

Section 6.06 Cooperation and Exchange of Information. Seller and Buyer shall
provide each other with such cooperation and information as either of them
reasonably may request of the other in filing any Tax Return pursuant to this
Article VI or in connection with any audit or other proceeding in respect of
Taxes of the Company or any of its Subsidiaries. Such cooperation and
information shall include providing copies of relevant Tax Returns or portions
thereof, together with accompanying schedules, related work papers and documents
relating to rulings or other determinations by any Tax Authority. Each of Seller
and Buyer shall retain all Tax Returns, schedules and work papers, records and
other documents in its possession relating to Tax matters of the Company and any
of its Subsidiaries for any taxable period beginning before the Closing Date
until the expiration of the statute of limitations of the taxable periods to
which such Tax Returns and other documents relate, without regard to extensions
except to the extent notified by the other party in writing of such extensions
for the respective Tax periods. Prior to transferring, destroying or discarding
any Tax Returns, schedules and work papers, records and other documents in its
possession relating to Tax matters of the Company or any of its Subsidiaries for
any taxable period beginning before the Closing Date, Seller or Buyer (as the
case may be) shall provide the other party with reasonable written notice and
offer the other party the opportunity to take custody of such materials.
Notwithstanding anything in this Section 6.06 or elsewhere in this Agreement to
the contrary, Seller shall not be required to furnish to Buyer any Tax Returns
(or information related thereto) of Seller or its Affiliates (other than the
Company and its Subsidiaries), including any Tax Return of an Affiliated Group
of which Seller or any Affiliate of Seller (other than the Company or any of its
Subsidiaries) is a member.

Section 6.07 Tax Treatment of Indemnification Payments. Any indemnification
payments pursuant to this Article VI shall be treated as an adjustment to the
Purchase Price by the parties for Tax purposes, unless otherwise required by
Law.

Section 6.08 Survival. Notwithstanding anything in this Agreement to the
contrary, the Tax Representations and this Article VI shall survive for the full
period of all applicable statutes of limitations (giving effect to any waiver,
mitigation or extension thereof) plus 60 days.

 

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Section 6.09 Overlap. To the extent that any obligation or responsibility
pursuant to Article VIII may overlap with an obligation or responsibility
pursuant to this Article VI, the provisions of this Article VI shall govern.

Section 6.10 Tax Refunds. If Buyer or any of its Affiliates receives a Tax
refund arising with respect to Tax periods of the Company or any of its
Subsidiaries ending on or before to the Closing Date, within fifteen (15) days
following the receipt of such Tax refund, Buyer shall pay the amount of such Tax
refund to Seller. Notwithstanding the foregoing, nothing in this Section 6.10
shall require that Buyer make any payment with respect to any refund for a Tax
(and such refunds shall be for the benefit of Buyer and the Company) that is
with respect to (i) any refund of Tax that is the result of the carrying back of
any net operating loss or other Tax attribute or Tax credit incurred in a
Post-Closing Tax Period (or portion of any Straddle Period beginning on or
before the Closing Date); (ii) any refund of Tax resulting from the payments of
Taxes made on or after Closing Date to the extent Seller has not indemnified
Buyer or the Company for such Taxes; or (iii) any refund for Tax that gives rise
to a payment obligation by the Company to any Person under applicable Law or
pursuant to a provision of a contract or other agreement entered (or assumed) by
the Company on or prior to the Closing Date.

ARTICLE VII

CONDITIONS TO CLOSING

Section 7.01 Conditions to Obligations of All Parties. The obligations of each
party to consummate the transactions contemplated by this Agreement shall be
subject to the fulfilment, at or prior to the Closing, of each of the following
conditions:

(a) The filings of Buyer and Seller pursuant to the HSR Act and the LFCE, if
any, shall have been made and the applicable waiting period and any extensions
thereof shall have expired or been terminated and with respect to the filing to
be made before the COFECE, the approval from the COFECE shall have been
obtained.

(b) No Governmental Authority shall have enacted, issued, promulgated, enforced
or entered any Governmental Order which is in effect and has the effect of
making the transactions contemplated by this Agreement illegal, otherwise
restraining or prohibiting consummation of such transactions or causing any of
the transactions contemplated hereunder to be rescinded following completion
thereof.

(c) Seller shall have received (copies of which shall have been delivered to
Buyer) all consents, authorizations, orders and approvals referred to in
Section 3.05(c), in each case, in form and substance reasonably satisfactory to
Buyer and Seller, and no such consent, authorization, order and approval shall
have been revoked.

 

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Section 7.02 Conditions to Obligations of Buyer. The obligations of Buyer to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfilment or Buyer’s waiver, at or prior to the Closing, of each of the
following conditions:

(a) Other than the representations and warranties of Seller contained in
Sections 3.01, 3.02, 3.03, 3.06, 3.24 and 3.27, the representations and
warranties of Seller contained in this Agreement and any certificate or other
writing delivered pursuant hereto shall be true and correct in all respects
(disregarding all qualifications contained therein relating to materiality or
Material Adverse Effect) on and as of the date hereof and on and as of the
Closing Date with the same effect as though made at and as of such date (except
those representations and warranties that address matters only as of a specified
date, the accuracy of which shall be determined as of that specified date in all
respects) except where the failure of such representations and warranties to be
so true and correct, individually or in the aggregate, has not had and would not
reasonably be expected to have a Material Adverse Effect. The representations
and warranties of Seller contained in Sections 3.01, 3.02, 3.03, 3.06, 3.24 and
3.27 shall be true and correct in all respects on and as of the date hereof and
on and as of the Closing Date with the same effect as though made at and as of
such date (except those representations and warranties that address matters only
as of a specified date, the accuracy of which shall be determined as of that
specified date in all respects).

(b) Seller shall have duly performed and complied in all material respects with
all agreements, covenants and conditions required by this Agreement and each of
the other Transaction Documents to be performed or complied with by it prior to
or on the Closing Date.

(c) No Action shall have been commenced against Buyer, Seller or the Company,
which would prevent the Closing. No injunction or restraining order shall have
been issued by any Governmental Authority, and be in effect, which restrains or
prohibits any transaction contemplated hereby.

(d) From the date of this Agreement, there shall not have occurred any Material
Adverse Effect, nor shall any event or events have occurred that, individually
or in the aggregate, with or without the lapse of time, could reasonably be
expected to result in a Material Adverse Effect.

(e) The Transaction Documents (other than this Agreement) shall have been
executed and delivered by the parties thereto and true and complete copies
thereof shall have been delivered to Buyer.

(f) Buyer shall have received a certificate, dated the Closing Date and signed
by a duly authorized officer of Seller, that each of the conditions set forth in
Section 7.02(a), Section 7.02(b) and Section 7.02(d) have been satisfied.

(g) Buyer shall have received a certificate of the Secretary or an Assistant
Secretary (or equivalent officer) of Seller certifying that attached thereto are
true and complete copies of all resolutions adopted by the board of directors of
Seller authorizing the execution, delivery and performance of this Agreement and
the other Transaction Documents and the consummation of the transactions
contemplated hereby, and that all such resolutions are in full force and effect
and are all the resolutions adopted in connection with the transactions
contemplated hereby.

 

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(h) Buyer shall have received a certificate of the Secretary or an Assistant
Secretary (or equivalent officer) of Seller certifying the names and signatures
of the officers of Seller authorized to sign this Agreement, the Transaction
Documents and the other documents to be delivered hereunder.

(i) Buyer shall have received resignations of the Board of Managers of the
Company and governing boards of the non-Mexican Subsidiaries pursuant to Section
5.05.

(j) Seller shall have delivered to Buyer a good standing certificate (or its
equivalent) for the Company (and each Subsidiary) from the Secretary of State or
similar Governmental Authority of the jurisdiction under the Laws in which the
Company (or Subsidiary) is organized.

(k) Seller shall have delivered to Buyer a certificate pursuant to Treasury
Regulations Section 1.1445-2(b) that Seller is not a foreign person within the
meaning of Section 1445 of the Code.

(l) Seller shall have delivered, or caused to be delivered, to Buyer stock
certificates evidencing the Units, free and clear of Encumbrances, duly endorsed
in blank or accompanied by stock powers or other instruments of transfer duly
executed in blank and with all required stock transfer tax stamps affixed.

(m) Seller shall deliver, or cause to be delivered, terminations and releases
with respect to the Company and the Subsidiaries for all debt for borrowed
money, including any obligations under the existing credit facility of Seller
and its subsidiaries for which Bank of America is the agent, and all security
interests and liens related to any of the foregoing shall be released and
terminated (and including any pledges and liens on the Equity Securities of the
Subsidiaries) and Buyer shall have received customary payoff letters in form and
substance reasonably satisfactory to it evidencing such termination and
releases.

(n) Seller shall have complied with the provisions of Section 5.10.

(o) Buyer shall have received possession (in Mexico) of original copies of the
Corporate Records.

(p) Buyer shall have received the original share certificates of each Mexican
Subsidiary reflecting the capital structure set forth in Section 3.04(b) of the
Disclosure Schedules.

(q) Buyer shall have received the original executed counterparts of the
unanimous shareholder consent of each Mexican Subsidiary, approving:

 

  (i) the resignations, effective as of the Closing Date, of the board members
of each Mexican Subsidiary, expressly releasing, effective as of the Closing
Date, the respective Mexican Subsidiary, Seller and Buyer from any and all
claims and actions;

 

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  (ii) the appointment of new board members (or equivalent) of the respective
Mexican Subsidiary as determined by Buyer; and

 

  (iii) the revocation of all powers of attorney in existence as of the Closing
(except for those identified by Buyer in writing to Seller no later than five
Business Days prior to the Closing Date) and the granting of powers of attorney
to the Persons determined by Buyer.

(r) Seller shall have delivered to Buyer such other documents or instruments as
Buyer reasonably requests and are reasonably necessary to consummate the
transactions contemplated by this Agreement.

Section 7.03 Conditions to Obligations of Seller. The obligations of Seller to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfilment, or Seller’s waiver, at or prior to the Closing, of each of the
following conditions:

(a) Other than the representations and warranties of Buyer contained in
Section 4.01 and Section 4.05, the representations and warranties of Buyer
contained in this Agreement, the other Transaction Documents and any certificate
or other writing delivered pursuant hereto shall be true and correct in all
respects (in the case of any representation or warranty qualified by
materiality) or in all material respects (in the case of any representation or
warranty not qualified by materiality) on and as of the date hereof and on and
as of the Closing Date with the same effect as though made at and as of such
date (except those representations and warranties that address matters only as
of a specified date, the accuracy of which shall be determined as of that
specified date in all respects). The representations and warranties of Buyer
contained in Section 4.01 and Section 4.05 shall be true and correct in all
respects on and as of the date hereof and on and as of the Closing Date with the
same effect as though made at and as of such date.

(b) Buyer shall have duly performed and complied in all material respects with
all agreements, covenants and conditions required by this Agreement and each of
the other Transaction Documents to be performed or complied with by it prior to
or on the Closing Date.

(c) No injunction or restraining order shall have been issued by any
Governmental Authority, and be in effect, which restrains or prohibits any
material transaction contemplated hereby.

(d) The Transaction Documents (other than this Agreement) shall have been
executed and delivered by the parties thereto and true and complete copies
thereof shall have been delivered to Seller.

(e) Seller shall have received a certificate, dated the Closing Date and signed
by a duly authorized officer of Buyer, that each of the conditions set forth in
Section 7.03(a) and Section 7.03(b) have been satisfied.

(f) Seller shall have received a certificate of the Secretary or an Assistant
Secretary (or equivalent officer) of Buyer certifying that attached thereto are
true and

 

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complete copies of all resolutions adopted by the board of directors of Buyer
authorizing the execution, delivery and performance of this Agreement and the
other Transaction Documents and the consummation of the transactions
contemplated hereby, and that all such resolutions are in full force and effect
and are all the resolutions adopted in connection with the transactions
contemplated hereby.

(g) Seller shall have received a certificate of the Secretary or an Assistant
Secretary (or equivalent officer) of Buyer certifying the names and signatures
of the officers of Buyer authorized to sign this Agreement, the Transaction
Documents and the other documents to be delivered hereunder.

(h) Buyer shall have delivered to Seller cash in an amount equal to the Base
Amount, subject to any adjustment pursuant to Section 2.04(a) and net of the
Escrow Amount, by wire transfer in immediately available funds, to an account or
accounts designated at least two (2) Business Days prior to the Closing Date by
Seller in a written notice to Buyer.

(i) Buyer shall have delivered to Seller such other documents or instruments as
Seller reasonably requests and are reasonably necessary to consummate the
transactions contemplated by this Agreement.

ARTICLE VIII

INDEMNIFICATION

Section 8.01 Survival. Subject to the limitations and other provisions of this
Agreement, the representations and warranties contained herein (other than the
Tax Representations which are subject to Article VI) shall survive the Closing
and shall remain in full force and effect until the date that is 18 months from
the Closing Date; provided, that the representations and warranties in Sections
3.01, 3.03, 3.24, 3.27, 4.01 and 4.05 shall survive indefinitely. All covenants
and agreements of the parties contained herein (other than any covenants or
agreements contained in Article VI which are subject to Article VI) shall
survive the Closing indefinitely or for the period explicitly specified therein.
Notwithstanding the foregoing, any claims asserted in good faith with reasonable
specificity (to the extent known at such time) and in writing by notice from the
non-breaching party to the breaching party prior to the expiration date of the
applicable survival period shall not thereafter be barred by the expiration of
the relevant representation or warranty and such claims shall survive until
finally resolved.

Section 8.02 Indemnification By Seller. Subject to the other terms and
conditions of this Article VIII, Seller shall indemnify and defend each of Buyer
and its Affiliates (including the Company) and their respective Representatives
(collectively, the “Buyer Indemnitees”) against, and shall hold each of them
harmless from and against, and shall pay and reimburse each of them for, any and
all Losses incurred or sustained by, or imposed upon, the Buyer Indemnitees
based upon, arising out of, with respect to or by reason of:

(a) any inaccuracy in or breach of any of the representations or warranties of
Seller contained in this Agreement (other than in respect of the Tax
Representations, it being understood that the sole remedy for any such
inaccuracy in or breach

 

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thereof shall be pursuant to Article VI), as of the date such representation or
warranty was made, or as if such representation or warranty was made on and as
of the Closing Date (except for representations and warranties that expressly
relate to a specified date, the inaccuracy in or breach of which will be
determined with reference to such specified date); or

(b) any breach or non-fulfilment of any covenant, agreement or obligation to be
performed by Seller pursuant to this Agreement (other than any breach or
violation of, or failure to fully perform, any covenant, agreement, undertaking
or obligation in Article VI, it being understood that the sole remedy for any
such breach, violation or failure shall be pursuant to Article VI).

Section 8.03 Indemnification By Buyer. Subject to the other terms and conditions
of this Article VIII, Buyer shall indemnify and defend each of Seller and its
Affiliates and their respective Representatives (collectively, the “Seller
Indemnitees”) against, and shall hold each of them harmless from and against,
and shall pay and reimburse each of them for, any and all Losses incurred or
sustained by, or imposed upon, the Seller Indemnitees based upon, arising out
of, with respect to or by reason of:

(a) any inaccuracy in or breach of any of the representations or warranties of
Buyer contained in this Agreement (other than in respect of the Tax
Representations, it being understood that the sole remedy for any such
inaccuracy in or breach thereof shall be pursuant to Article VI), as of the date
such representation or warranty was made or as if such representation or
warranty was made on and as of the Closing Date (except for representations and
warranties that expressly relate to a specified date, the inaccuracy in or
breach of which will be determined with reference to such specified date); or

(b) any breach or non-fulfilment of any covenant, agreement or obligation to be
performed by Buyer pursuant to this Agreement (other than any breach or
violation of, or failure to fully perform, any covenant, agreement, undertaking
or obligation in Article VI, it being understood that the sole remedy for any
such breach, violation or failure shall be pursuant to Article VI).

Section 8.04 Certain Limitations.

(a) Seller shall not be liable to the Buyer Indemnitees for indemnification
under Section 8.02(a) (other than with respect to a claim for indemnification
based upon, arising out of, with respect to or by reason of any inaccuracy in or
breach of any representation or warranty in Sections 3.01, 3.02, 3.03, 3.19,
3.20, 3.24 and 3.27 (the “Buyer Basket Exclusions”)), until the aggregate amount
of all Losses in respect of indemnification under Section 8.02(a) (other than
those based upon, arising out of, with respect to or by reason of the Buyer
Basket Exclusions) exceeds $1,100,000.00, at which point Seller will indemnify
the Buyer Indemnitees for all Losses in excess of $1,100,000.00.

(b) Buyer shall not be liable to the Seller Indemnitees for indemnification
under Section 8.03(a) (other than with respect to a claim for indemnification
based upon, arising out of, with respect to or by reason of any inaccuracy in or
breach of any representation or warranty in Sections 4.01 and 4.05, or with
respect to a claim for

 

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indemnification arising under Section 5.11 (the “Seller Basket Exclusions”))
until the aggregate amount of all Losses in respect of indemnification under
Section 8.03(a) (other than those based upon, arising out of, with respect to or
by reason of the Seller Basket Exclusions) exceeds $1,100,000.00, at which point
Buyer will indemnify the Seller Indemnitees for all Losses in excess of
$1,100,000.00.

(c) The maximum amount of losses for which either party is obligated to
indemnify the other pursuant to this Article VIII shall be $11,000,000.00 (the
“Indemnity Cap”); provided that the Indemnity Cap shall not apply to Losses
incurred by Buyer as a result of a breach of Sections 3.01, 3.02, 3.03, 3.12,
3.19, 3.22, 3.27 and Article VI or to Losses incurred by Seller as a result of a
breach of Sections 4.01 or 4.03, which Losses shall not exceed the Purchase
Price in the aggregate.

(d) For purposes of this Article VIII, any inaccuracy in or breach of any
representation or warranty shall be determined without regard to any
materiality, Material Adverse Effect or other similar qualification contained in
or otherwise applicable to such representation or warranty.

(e) The amount of any Losses under Section 8.02 or Section 8.03 for which Seller
or Buyer, as the case may be, may become obligated to hold harmless, indemnify,
compensate or reimburse any Buyer Indemnitee or Seller Indemnitee, as the case
may be (such indemnifying party, the “Indemnitor” and such Buyer Indemnitee or
Seller Indemnitee, as the case may be, the “Indemnitee”), shall be reduced by
(i) any Tax benefits actually realized by the Indemnitee on or prior to the date
of the claim that result from or arise out of such Losses, net of any
corresponding Tax costs incurred by such party and (ii) any amounts recovered by
the Indemnitee under applicable insurance policies or from any other Person
alleged to have responsibility. Each Indemnitor shall pursue in good faith all
claims available under such third-party insurance coverage and from any Person
alleged to have responsibility. If the Indemnitee receives any amounts under
applicable insurance policies, or from any other Person alleged to be
responsible for any Losses (which were not earlier taken into account in
calculating Losses), subsequent to an indemnification payment by the Indemnitor,
then the Indemnitee shall promptly reimburse the Indemnitor for any payment made
or out-of-pocket expense incurred by the Indemnitor in connection with providing
such indemnification payment up to the amount actually received by the
Indemnitee.

Section 8.05 Indemnification Procedures. The party making a claim under this
Article VIII is referred to as the “Indemnified Party”, and the party against
whom such claims are asserted under this Article VIII is referred to as the
“Indemnifying Party”.

(a) Third Party Claims. If any Indemnified Party receives notice of the
assertion or commencement of any Action made or brought by any Person who is not
a party to this Agreement or an Affiliate of a party to this Agreement or a
Representative of the foregoing (a “Third Party Claim”) against such Indemnified
Party with respect to which the Indemnifying Party is obligated to provide
indemnification under this Agreement (including without limitation
Section 5.10(b)), the Indemnified Party shall give the Indemnifying Party
reasonably prompt written notice thereof, but in any event not later than 15
days after receipt of such notice of such Third Party Claim. The failure to give
such prompt written notice shall not,

 

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however, relieve the Indemnifying Party of its indemnification obligations,
except and only to the extent that the Indemnifying Party forfeits rights or
defenses by reason of such failure. Such notice by the Indemnified Party shall
describe the Third Party Claim in reasonable detail, shall include copies of all
material written evidence thereof and shall indicate the estimated amount, if
reasonably practicable, of the Loss that has been or may be sustained by the
Indemnified Party. The Indemnifying Party shall have the right to participate
in, or by giving written notice to the Indemnified Party, to assume the defense
of any Third Party Claim at the Indemnifying Party’s expense and by the
Indemnifying Party’s own counsel, and the Indemnified Party shall cooperate in
good faith in such defense; provided, that if the Indemnifying Party is Seller,
such Indemnifying Party shall not have the right to defend or direct the defense
of any such Third Party Claim that (x) is asserted directly by or on behalf of a
Person that is a supplier or customer of the Company, or (y) seeks an injunction
or other equitable relief against the Indemnified Party. In the event that the
Indemnifying Party assumes the defense of any Third Party Claim, subject to
Section 8.05(b), it shall have the right to take such action as it deems
necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to
any such Third Party Claim in the name and on behalf of the Indemnified Party.
The Indemnified Party shall have the right to participate in the defense of any
Third Party Claim with counsel selected by it subject to the Indemnifying
Party’s right to control the defense thereof. The fees and disbursements of such
counsel shall be at the expense of the Indemnified Party, provided, that if in
the reasonable opinion of counsel to the Indemnified Party, (A) there are legal
defenses available to an Indemnified Party that are different from or additional
to those available to the Indemnifying Party; or (B) there exists a conflict of
interest between the Indemnifying Party and the Indemnified Party that cannot be
waived, the Indemnifying Party shall be liable for the reasonable fees and
expenses of counsel to the Indemnified Party in each jurisdiction for which the
Indemnified Party determines counsel is required. If the Indemnifying Party
elects not to compromise or defend such Third Party Claim, fails to promptly
notify the Indemnified Party in writing of its election to defend as provided in
this Agreement, or fails to diligently prosecute the defense of such Third Party
Claim, the Indemnified Party may, subject to Section 8.05(b), pay, compromise,
defend such Third Party Claim and seek indemnification for any and all Losses
based upon, arising from or relating to such Third Party Claim. Seller and Buyer
shall cooperate with each other in all reasonable respects in connection with
the defense of any Third Party Claim, including making available (subject to the
provisions of Section 5.06) records relating to such Third Party Claim and
furnishing, without expense (other than reimbursement of actual out-of-pocket
expenses) to the defending party, management employees of the non-defending
party as may be reasonably necessary for the preparation of the defense of such
Third Party Claim.

(b) Settlement of Third Party Claims. Notwithstanding any other provision of
this Agreement, the Indemnifying Party shall not enter into settlement of any
Third Party Claim without the prior written consent of the Indemnified Party,
except as provided in this Section 8.05(b). If a firm offer is made to settle a
Third Party Claim without leading to liability or the creation of a financial or
other obligation on the part of the Indemnified Party and provides, in customary
form, for the unconditional release of each Indemnified Party from all
liabilities and obligations in connection with such Third Party Claim and the
Indemnifying Party desires to accept and agree to such offer, the Indemnifying
Party shall give written notice to that effect to the Indemnified Party. If the
Indemnified Party fails to consent to such firm offer within ten days after its
receipt of such notice, the Indemnified Party may continue to contest or defend
such Third Party Claim and in such event, the maximum liability of the
Indemnifying Party as to

 

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such Third Party Claim shall not exceed the amount of such settlement offer. If
the Indemnified Party fails to consent to such firm offer and also fails to
assume defense of such Third Party Claim, the Indemnifying Party may settle the
Third Party Claim upon the terms set forth in such firm offer to settle such
Third Party Claim. If the Indemnified Party has assumed the defense pursuant to
Section 8.05(a), it shall not agree to any settlement without the written
consent of the Indemnifying Party (which consent shall not be unreasonably
withheld or delayed).

(c) Direct Claims. Any Action by an Indemnified Party on account of a Loss which
does not result from a Third Party Claim (a “Direct Claim”) shall be asserted by
the Indemnified Party giving the Indemnifying Party reasonably prompt written
notice thereof, but in any event not later than 15 days after the Indemnified
Party becomes aware of such Direct Claim. The failure to give such prompt
written notice shall not, however, relieve the Indemnifying Party of its
indemnification obligations, except and only to the extent that the Indemnifying
Party forfeits rights or defenses by reason of such failure. Such notice by the
Indemnified Party shall describe the Direct Claim in reasonable detail, shall
include copies of all material written evidence thereof and shall indicate the
estimated amount, if reasonably practicable, of the Loss that has been or may be
sustained by the Indemnified Party. The Indemnifying Party shall have 30 days
after its receipt of such notice to respond in writing to such Direct Claim. The
Indemnified Party shall allow the Indemnifying Party and its professional
advisors to investigate the matter or circumstance alleged to give rise to the
Direct Claim, and whether and to what extent any amount is payable in respect of
the Direct Claim and the Indemnified Party shall assist the Indemnifying Party’s
investigation by giving such information and assistance (including access to the
Company’s premises and personnel and the right to examine and copy any accounts,
documents or records) as the Indemnifying Party or any of its professional
advisors may reasonably request. If the Indemnifying Party does not so respond
within such 30 day period, the Indemnifying Party shall be deemed to have
rejected such claim, in which case the Indemnified Party shall be free to pursue
such remedies as may be available to the Indemnified Party on the terms and
subject to the provisions of this Agreement.

(d) Cooperation. Upon a reasonable request by the Indemnifying Party, each
Indemnified Party seeking indemnification hereunder in respect of any Direct
Claim, hereby agrees to consult with the Indemnifying Party and act reasonably
to take actions reasonably requested by the Indemnifying Party in order to
attempt to reduce the amount of Losses in respect of such Direct Claim. Any
costs or expenses associated with taking such actions shall be included as
Losses hereunder.

(e) Tax Claims. Notwithstanding any other provision of this Agreement, the
control of any claim, assertion, event or proceeding in respect of Taxes of the
Company (including, but not limited to, any such claim in respect of a breach of
the Tax Representations or any breach or violation of or failure to fully
perform any covenant, agreement, undertaking or obligation in Article VI) shall
be governed exclusively by Article VI hereof.

Section 8.06 Payments. Once a Loss is agreed to by the Indemnifying Party or
finally adjudicated to be payable pursuant to this Article VIII, the
Indemnifying Party shall satisfy its obligations within fifteen (15) Business
Days of such final, non-appealable adjudication by wire transfer of immediately
available funds. The parties hereto agree that should

 

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an Indemnifying Party not make full payment of any such obligations within such
15 Business Day period, any amount payable shall accrue interest from and
including the date of agreement of the Indemnifying Party or final,
non-appealable adjudication to but including the date such payment has been made
at a rate per annum equal to the interest rate applicable to Buyer’s senior
debt. Such interest shall be calculated daily on the basis of a 365-day year and
the actual number of days elapsed.

Section 8.07 Tax Treatment of Indemnification Payments. All indemnification
payments made under this Agreement shall be treated by the parties as an
adjustment to the Purchase Price for Tax purposes, unless otherwise required by
Law.

Section 8.08 Effect of Investigation. The representations, warranties and
covenants of the Indemnifying Party, and the Indemnified Party’s right to
indemnification with respect thereto, shall not be affected or deemed waived by
reason of any investigation made by or on behalf of the Indemnified Party
(including by any of its Representatives) or by reason of the fact that the
Indemnified Party or any of its Representatives knew or should have known that
any such representation or warranty is, was or might be inaccurate or by reason
of the Indemnified Party’s waiver of any condition set forth in Section 7.02 or
Section 7.03, as the case may be.

Section 8.09 Mitigation of Damages. Each Indemnified Party shall take
commercially reasonable steps to mitigate Losses in respect of any claim for
which such Indemnified Party is seeking or may seek indemnification under this
Article VIII and shall use commercially reasonable efforts to avoid any costs or
expenses associated with such claim and, if such costs and expenses cannot be
avoided, to minimize the amount thereof (including making good faith efforts to
recover any Losses from insurers of such Indemnified Party or its Affiliates
under applicable insurance policies); provided, however, any reasonable
third-party costs or expenses incurred by such Indemnified Party for which it
the prevailing party (determined as contemplated above) in connection therewith
shall be Losses for purposes of this Article VIII. No Indemnified Party shall be
required to procure or maintain any particular insurance coverage or take any
action or pursue or obtain any recovery prior to seeking recovery for any Losses
from any other party in accordance with this Agreement.

Section 8.10 Other Recoveries. No Indemnified Party shall be entitled to recover
any Loss under this Article VIII to the extent such Indemnified Party has
recovered, reduced or setoff, or with respect to clause (i) of this Section 8.10
has the ability to receive the benefit of, such Loss from a third party based
upon the same claim giving rise to such Damage under this Article VIII,
including (i) amounts actually recovered, reduced or setoff pursuant to
indemnification under any Contract or (ii) amounts actually recovered, reduced
or setoff pursuant to any insurance policies held by or for the benefit of such
Indemnified Party (including, for these purposes, any rights of the Company
under any Contract or insurance policy to which it is a party or by which it
receives benefits) (but no Indemnified Party shall be required to procure or
maintain any particular insurance coverage) and the amount of any Loss shall be
reduced by any amount actually received by such Indemnified Party with respect
to such damages under any such insurance coverage; provided, however, that such
recovery, reduction or setoff shall (A) be net of any reasonable third-party
costs or expenses incurred by such Indemnified Party in obtaining such recovery,
reduction or setoff, (B) not include any loans,

 

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contributions or payments from any Affiliate of such Indemnified Party to such
Indemnifying Party (to the extent such Affiliate has not sought or is not
seeking indemnification from the Indemnifying Party for such Damage) and (C) not
include any amounts which are self-insured (whether through retention or
otherwise). If such a recovery, reduction or setoff is actually received or
enjoyed by an Indemnified Party after it receives payment under this Agreement
with respect to any Loss from an Indemnifying Party, then a refund equal in
aggregate amount of such recovery, reduction or setoff (net of reasonable
third-party costs and expenses incurred in obtaining such recovery, reduction or
setoff) will be made promptly to such Indemnifying Party, but only to the extent
of the payment made by such Indemnifying Party to such Indemnified Party, with
respect to such Loss.

Section 8.11 Exclusive Remedies. Subject to Sections 5.07 and 10.10, the parties
acknowledge and agree that their sole and exclusive remedy with respect to any
and all claims (other than claims arising from fraud, criminal activity or
wilful misconduct on the part of a party hereto in connection with the
transactions contemplated by this Agreement) for any breach of any
representation, warranty, covenant, agreement or obligation set forth herein or
otherwise relating to the subject matter of this Agreement, shall be pursuant to
the indemnification provisions set forth in Article VI and this Article VIII. In
furtherance of the foregoing, each party hereby waives, to the fullest extent
permitted under Law, any and all rights, claims and causes of action for any
breach of any representation, warranty, covenant, agreement or obligation set
forth herein or otherwise relating to the subject matter of this Agreement it
may have against the other parties hereto and their Affiliates and each of their
respective Representatives arising under or based upon any Law, except pursuant
to the indemnification provisions set forth in Article VI and this Article VIII.
Nothing in this Section 8.11 shall limit any Person’s right to seek and obtain
any equitable relief to which any Person shall be entitled or to seek any remedy
on account of any Person’s fraudulent, criminal or wilful misconduct.

ARTICLE IX

TERMINATION

Section 9.01 Termination. This Agreement may be terminated at any time prior to
the Closing:

(a) by the mutual written consent of Seller and Buyer;

(b) by Buyer by written notice to Seller if:

 

  (i) Buyer is not then in material breach of any provision of this Agreement
and there has been a breach, inaccuracy in or failure to perform any
representation, warranty, covenant or agreement made by Seller pursuant to this
Agreement that would give rise to the failure of any of the conditions specified
in Article VII and such breach, inaccuracy or failure has not been cured by
Seller within 30 days of Seller’s receipt of written notice of such breach from
Buyer; or

 

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  (ii) the Closing shall not have occurred on or before September 1, 2016,
unless such failure shall be due to the failure of Buyer to perform or comply
with any of the covenants, agreements or conditions hereof to be performed or
complied with by it prior to the Closing;

(c) by Seller by written notice to Buyer if:

 

  (i) Seller is not then in material breach of any provision of this Agreement
and there has been a breach, inaccuracy in or failure to perform any
representation, warranty, covenant or agreement made by Buyer pursuant to this
Agreement that would give rise to the failure of any of the conditions specified
in Article VII and such breach, inaccuracy or failure has not been cured by
Buyer within 30 days of Buyer’s receipt of written notice of such breach from
Seller; or

 

  (ii) the Closing shall not have occurred on or before September 1, 2016,
unless such failure shall be due to the failure of Seller to perform or comply
with any of the covenants, agreements or conditions hereof to be performed or
complied with by it prior to the Closing;

(d) by Buyer or Seller in the event that (i) there shall be any Law that makes
consummation of the transactions contemplated by this Agreement illegal or
otherwise prohibited or (ii) any Governmental Authority shall have issued a
Governmental Order restraining or enjoining the transactions contemplated by
this Agreement, and such Governmental Order shall have become final and
non-appealable.

Section 9.02 Effect of Termination.

(a) In the event of the termination of this Agreement in accordance with this
Article IX, this Agreement shall forthwith become void and there shall be no
liability on the part of any party hereto except:

 

  (i) as set forth in this Article IX, Section 5.06 and Article X hereof;

 

  (ii) in the event that this Agreement is terminated (a) by Buyer pursuant to
Section 9.01(b)(ii) or Seller pursuant to Section 9.01(c)(ii) and in each case
the only condition to Closing set forth in Article VII that has not been
satisfied or waived (other than the conditions which, by their nature, are to be
satisfied at the Closing) is the condition set forth in Section 7.01(a), or
(b) by Buyer or Seller pursuant to Section 9.01(d) due to any Governmental Order
issued under or in accordance with any antitrust or competition Law, then Buyer
shall reimburse Seller for all of Seller’s documented out of pocket expenses
incurred in connection with its entry into this Agreement and the United
Purchase Agreement, up to an amount not to exceed $1,500,000 in the aggregate;
and

 

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  (iii) that nothing herein shall relieve any party hereto from liability for
any wilful breach of any provision hereof.

ARTICLE X

MISCELLANEOUS

Section 10.01 Expenses. Except as otherwise expressly provided herein, all costs
and expenses, including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses, whether or not the Closing shall have occurred;
provided, however, Buyer shall be solely responsible for all filing and other
similar fees payable in connection with any filings or submissions under the HSR
Act and the LFCE.

Section 10.02 Notices. All notices, requests, consents, claims, demands, waivers
and other communications hereunder shall be in writing and shall be deemed to
have been given (a) when delivered by hand (with written confirmation of
receipt); (b) when received by the addressee if sent by a nationally recognized
overnight courier (receipt requested); (c) on the date sent by facsimile or
e-mail of a PDF document (with confirmation of transmission) if sent during
normal business hours of the recipient, and on the next Business Day if sent
after normal business hours of the recipient or (d) on the third day after the
date mailed, by certified or registered mail, return receipt requested, postage
prepaid. Such communications must be sent to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 10.02):

If to Seller:

Ennis, Inc.

2441 Presidential Parkway

Midlothian, Texas 76065

Attention: Michael D. Magill

Fax: (800) 759-4271

Email: Michael_Magill@ennis.com

with a copy to:

Baker Botts, LLP

2001 Ross Avenue

Dallas, Texas 75201

Attention: Neel Lemon

Fax: (214) 661-4954

E-mail: neel.lemon@bakerbotts.com

 

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If to Buyer:

Gildan Activewear Inc.

600 de Maisonneuve Boulevard West, 33rd Floor

Montréal, Quebec H3A 3J2

Attention: Lindsay Matthews

Fax: (514) 734-8379

E-mail: LMatthews@gildan.com

with a copy to:

Sullivan & Cromwell LLP

125 Broad Street

New York, New York 10004

Attention: Brian E. Hamilton

Fax: (212) 291-9067

E-mail: Hamiltonb@sullcrom.com

Section 10.03 Interpretation.

(a) For purposes of this Agreement, (i) the words “include,” “includes” and
“including” shall be deemed to be followed by the words “without limitation”;
(ii) the word “or” is not exclusive; (iii) the words “herein,” “hereof,”
“hereby,” “hereto” and “hereunder” refer to this Agreement as a whole; and
(iv) the phrase “to the extent” shall mean the degree to which a subject or
other thing extends, and such phrase shall not mean simply “if”.

(b) Unless the context otherwise requires, references herein: (i) to Articles,
Sections, Disclosure Schedules and Exhibits mean the Articles and Sections of,
and Disclosure Schedules and Exhibits attached to, this Agreement; (ii) to an
agreement, instrument or other document means such agreement, instrument or
other document as amended, supplemented and modified from time to time to the
extent permitted by the provisions thereof and (iii) to a statute means such
statute as amended from time to time and includes any successor legislation
thereto and any regulations promulgated thereunder.

(c) This Agreement shall be construed without regard to any presumption or rule
requiring construction or interpretation against the party drafting an
instrument or causing any instrument to be drafted.

(d) The Disclosure Schedules and Exhibits referred to herein shall be construed
with, and as an integral part of, this Agreement to the same extent as if they
were set forth verbatim herein.

(e) Whenever this Agreement refers to a number of days, such number shall refer
to calendar days unless Business Days are specified. When calculating the period
of time before which, within which or following which, any act is to be done or
step taken pursuant to this Agreement, the date that is the reference date in
calculating such period shall be excluded. If the last day of such period is a
non-Business Day, the period in question shall end on the next succeeding
Business Day.

 

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(f) All accounting terms used herein and not expressly defined herein shall have
the meanings given to them under GAAP, as applied in accordance with the
Accounting Principles.

(g) All amounts payable pursuant to this Agreement shall be paid in U.S.
dollars.

Section 10.04 Headings. The headings in this Agreement are for reference only
and shall not affect the interpretation of this Agreement.

Section 10.05 Severability. If any term or provision of this Agreement is
invalid, illegal or unenforceable in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other term or provision of
this Agreement or invalidate or render unenforceable such term or provision in
any other jurisdiction. Except as provided in Section 5.07(e), upon such
determination that any term or other provision is invalid, illegal or
unenforceable, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the greatest
extent possible.

Section 10.06 Entire Agreement. This Agreement and the other Transaction
Documents constitute the sole and entire agreement of the parties to this
Agreement with respect to the subject matter contained herein, and supersede all
prior and contemporaneous understandings and agreements, both written and oral,
with respect to such subject matter. In the event of any inconsistency between
the statements in the body of this Agreement and those in the other Transaction
Documents, the Exhibits and Disclosure Schedules (other than an exception
expressly set forth as such in the Disclosure Schedules), the statements in the
body of this Agreement will control.

Section 10.07 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Neither party may assign its rights or obligations
hereunder without the prior written consent of the other party, which consent
shall not be unreasonably withheld or delayed; provided, however, that prior to
the Closing Date, Buyer may, without the prior written consent of Seller, assign
all or any portion of its rights under this Agreement to one or more of its
direct or indirect wholly-owned subsidiaries. No assignment shall relieve the
assigning party of any of its obligations hereunder.

Section 10.08 No Third-party Beneficiaries. Except as provided in Section 6.02
and Article VIII, this Agreement is for the sole benefit of the parties hereto
and their respective successors and permitted assigns and nothing herein,
express or implied, is intended to or shall confer upon any other Person or
entity any legal or equitable right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.

Section 10.09 Amendment and Modification; Waiver. This Agreement may only be
amended, modified or supplemented by an agreement in writing signed by each
party hereto. No waiver by any party of any of the provisions hereof shall be
effective unless explicitly

 

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set forth in writing and signed by the party so waiving. No waiver by any party
shall operate or be construed as a waiver in respect of any failure, breach or
default not expressly identified by such written waiver, whether of a similar or
different character, and whether occurring before or after that waiver. No
failure to exercise, or delay in exercising, any right, remedy, power or
privilege arising from this Agreement shall operate or be construed as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege.

Section 10.10 Governing Law; Dispute Resolution.

(a) This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Delaware without giving effect to any choice or
conflict of law provision or rule (whether of the State of Delaware or any other
jurisdiction) that would cause the application of Laws of any jurisdiction other
than those of the State of Delaware.

(b) The sole and exclusive method for resolving any claim or dispute (“Claim”)
arising out of or relating to the rights and obligations of the parties under
this Agreement (other than with respect to the procedures set forth in
Section 2.04(c) relating to and Disputed Amounts), whether such Claim arose or
the facts on which such Claim is based occurred prior to or after the execution
and delivery of this Agreement shall be mediation and arbitration as provided in
this Section 10.10.

(c) Either party may give notice of a Claim in writing to the other party and
the parties shall designate a mutually agreed mediator to resolve the Claim. If
the parties are unable to agree on a mediator, they shall submit the Claim to
JAMS, Inc. in Wilmington, Delaware, and request a panel of prospective neutrals
to conduct a mediation process, who shall be individuals with substantial
experience with equity purchase agreements and complex commercial contracts as
well as familiarity with Delaware law relevant to transactions of this type. The
mediation shall be convened within thirty (30) days of the notice of the Claim,
or as soon thereafter as is feasible. If the mediation is unsuccessful in
resolving the Claim, either party may give notice of its intention to arbitrate
the Claim in accordance with Section 10.10(d).

(d) Any arbitration to resolve a Claim shall be administered by JAMS, Inc. in
accordance with its Comprehensive Arbitration Rules and Procedures (the
“Arbitration Rules”) before one arbitrator to be appointed pursuant to the
Arbitration Rules to conduct any such arbitration. The arbitrator shall have
substantial experience with equity purchase agreements and complex commercial
contracts as well as familiarity with Delaware law relevant to transactions of
this type. All meetings of the parties and all hearings with respect to any such
arbitration shall take place in Wilmington, Delaware, or such other place as the
parties may designate. Each party to the arbitration shall bear its own costs
and expenses (including all attorneys’ fees and expenses, except to the extent
otherwise required by applicable Law), and all costs and expenses of the
arbitration proceeding (such as filing fees, the arbitrator’s fees, hearing
expenses, etc.) shall be borne equally by the parties; provided, however, that
the arbitrator may, in the arbitrator’s discretion, award costs and expenses to
the prevailing party in the arbitration.

 

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(e) In the event that any party or any of such party’s Affiliates, associates or
representatives is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand or similar process) to disclose any information concerning
an arbitration or mediation proceeding conducted in accordance with this
Agreement (the “Disclosing Party”), such Disclosing Party shall notify the other
parties promptly of the request or requirement so that any such other party may
seek an appropriate protective order or waive compliance with the provisions of
this Section 10.10. If, in the absence of a protective order or the receipt of a
waiver hereunder, the Disclosing Party or any of its Affiliates, associates or
representatives believes in good faith, upon the advice of legal counsel, that
it is compelled to disclose any such information, such Disclosing Party may
disclose such portion of the information as it believes in good faith, upon the
advice of legal counsel, it is required to disclose; provided that the
Disclosing Party shall use reasonable efforts to obtain, at the request and
expense of such other party, an order or other assurance that confidential
treatment shall be accorded to such portion of the Arbitration Information
required to be disclosed as such other party shall designate. Notwithstanding
anything in this Section 10.10 to the contrary, the parties shall have no
obligation to keep confidential any Arbitration Information that becomes
generally known to and available for use by the public other than as a result of
the disclosing party’s acts or omissions or the acts or omissions of such
party’s Affiliates, associates or representatives. The parties agree that,
subject to the right of any party to appeal or move to vacate or confirm any
decision, judgment, ruling, finding, award or other determination of an
arbitration as provided in this Section 10.10, the decision, judgment, ruling,
finding, award or other determination of any arbitration under the Arbitration
Rules shall be final, conclusive and binding on all of the parties hereto and
any party may institute litigation to enforce any final decision, judgment,
ruling, finding, award or other determination of the arbitration.

Section 10.11 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall be deemed
to be one and the same agreement. A signed copy of this Agreement delivered by
facsimile, e-mail or other means of electronic transmission shall be deemed to
have the same legal effect as delivery of an original signed copy of this
Agreement.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above by their respective officers thereunto duly
authorized.

 

ENNIS, INC. By:  

/s/ Keith S. Walters

Name:   Keith S. Walters Title:   President, Chief Executive Officer and
Chairman of the Board GILDAN ACTIVEWEAR INC. By:  

/s/ Jonathan Roiter

Name:   Jonathan Roiter Title:   Senior Vice President, Corporate Development

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

EXHIBIT A

Acquired Assets

 

Alstyle Server Inventory

Location

  

Host Name

  

VMware

  

Server Name

  

OS

  

Applications and Key
Services Performed

 

Used By

 

Model

  

Serial #

Midlothian    VMHOST09    ESXi 5.0    ASRV08    2008 R2    Alstyle Exchange
Server - Production   Alstyle Locations   x3650 M3 7945-AC1    KQ03T00
Midlothian    VMHOST08    ESXi 5.0    TS2    2008 R2    AES Terminal Server  
Alstyle Anaheim CSR   x3650 M3 7945-AC1    KQ0533G          TS3    2008 R2   
AES Terminal Server   Alstyle Managers, Sales Reps      Midlothian    VMHOST07
   ESXi 5.0    ASRV03    2003    Alstyle Exchange Server - Production   Alstyle
Locations   x3650 M3 7945-AC1    KQ998NH          ASRV04    2008 R2    Alstyle -
Domain Controller   Alstyle Locations               ASRV07    2008 R2    SQL
Server for ConnectShip and Tress Payroll   Alstyle Locations               CS1
   2008 R2    ConnectShip Application Server   Entire Company               TS9
   2008 R2    AES Terminal Server   Alstyle AP      Midlothian    VMHOST06   
ESXi 5.0    ASRV06    2008 R2    Alstyle - Tress Payroll Application, AES2  
Alstyle Mexico Locations   x3650 M3 7945-AC1    KQ86K0T          TVM    2008 R2
   Alstyle Print Server, Jantek App Server   Alstyle Locations      Midlothian
   VMHOST05    ESXi 5.0    TS7    2008 R2    AES Terminal Server   Alstyle
Chicago   x3650 M3 7945-AC1    KQ86K1G          TS10    2008 R2    AES Terminal
Server   Alstyle AP               TS11    2008 R2    AES Terminal Server  
Alstyle Locations      Anaheim    VMHOST1       AAASRV01    2008 R2    Alstyle
Anaheim Print Server   Alstyle Locations      Anaheim    MAIL2       MAIL2   
2003    Alstyle Old Exchange Server - Offline   Alstyle Locations     
Midlothian    ASRV01       ASRV01    2008 R2    Alstyle AES2 SQL Server -
Production   Alstyle Locations      KQ86K2Z Midlothian    ASRV10       ASRV10   
2012    Alstyle Production Web Server   Alstyle Locations & Customers     

 

A-1

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Midlothian    ASRV05       ASRV05    2008 R2    Alstyle old web server   Alstyle
Locations & Customers      Anaheim    DC1       DC1    2003    Domain Controller
  Alstyle Locations      Anaheim    DC2       DC2    2003    Domain Controller  
Alstyle Locations      Chicago    DC1-ALSCHI       DC1-ALSCHI    2003    Domain
Controller   Alstyle Locations      Chicago    DC3-ALSCHI       DC3-ALSCHI   
2003    Domain Controller   Alstyle Locations      Canada    DC2-ALSCAN      
DC2-ALSCAN    2008 R2    Domain Controller   Canada   x3200 M2 736742U    Agua
Prieta    APHOST1    ESXi 4.1    DC2-ALSAP    2008 R2    Domain Controller  
Agua Prieta   x3650 M3 7945-AC1    KQ998PK          SVR1-ALSAP    2008 R2   
Application Test Server   Agua Prieta      Agua Prieta    DC1-ALSAP      
DC1-ALSAP    2008 R2      Agua Prieta      KQ916FZ Agua Prieta    ALS-ADAPTIVE1
      ALS-ADAPTIVE1    2008 R2      Agua Prieta      KQYAPWA Agua Prieta   
ALS-ADAPTIVE2       ALS-ADAPTIVE2    2008 R2      Agua Prieta      KQYAPWK
Anaheim    WWW2       WWW2    2003    Web Shipping Service   Alstyle Locations  
  

The Acquired Assets will also include:

 

•   The alstyle.mx domain name.

 

•   The Alstyle Enterprise System source code stored on a computer to be
provided to Buyer at the Closing.

 

•   The desktop/laptop computers and peripheral equipment (printers, monitors,
mouses, external hard drives, etc.) individually and specifically assigned to
and utilized by any of Seller’s employees whose employment has been or will be
transferred to the Company on or before the Closing Date, all as reasonably
determined by Seller in consultation with Buyer. Such additional equipment will
not include computer or printing equipment that is jointly used by Seller’s
employees generally.

 

A-2

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EXHIBIT B

Sample Working Capital Statement

 

(in U.S. dollars)

   February 29,
2016  

CURRENT ASSETS

  

Cash (held in Mexican and Canadian disbursing and petty cash bank accounts)(1)

   $ 788,373   

Temporary Investments

   $ —     

Trade Receivables, net

   $ 18,060,111   

Other Receivables

   $ 55,631   

Prepaid Expenses

   $ 3,673,674   

Inventories, net

   $ 72,690,861   

Other Current Assets

   $ —        

 

 

 

TOTAL CURRENT ASSETS

   $ 95,268,650      

 

 

 

CURRENT LIABILITIES

  

Accounts Payable

   $ (7,840,972 ) 

Accrued Compensation & Benefits

   $ (4,064,931 ) 

Taxes other than Income

   $ (59,924 ) 

Other Accrued Expense

   $ (363,617 )    

 

 

 

TOTAL CURRENT LIABILITIES

   $ (12,329,444 )    

 

 

 

WORKING CAPITAL

   $ 82,939,205      

 

 

 

 

(1) Excludes cash in the BOA Alstyle US lockbox account (#488015453141), the BOA
Alstyle CAD lockbox account (#7114-48263208), and all but $100K in cash held in
the HSBC Alvest bank account (#4020270385).

The parties acknowledge and agree that the foregoing Sample Working Capital
Statement reflects certain of the items included in the determination of Closing
Working Capital on the Company’s unaudited balance sheet as of February 29,
2016. The Closing Working Capital Statement shall include the same items listed
on this Sample Working Capital Statement and such additional line items on the
Closing Balance Sheet as of the Closing Date as would typically be included
under the calculation of current assets and current liabilities in accordance
with GAAP based upon the Accounting Principles. All line items, amounts and
calculations relating to working capital determinations under this Agreement
shall be based on the Accounting Principles.

 

B-1

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EXHIBIT C

Form of Sublease

See attached.

 

C-1

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SUBLEASE AGREEMENT

THIS SUBLEASE AGREEMENT (this “Sublease”) is entered into as of [●], 2016 (the
“Effective Date”), by and between A and G, Inc., an Illinois corporation
(“Sublandlord”), and Crabar/GBF, Inc., a Delaware corporation d/b/a GenForms
(“Subtenant”).

WITNESSETH:

WHEREAS, Sublandlord is presently the lessee of approximately 200,000 square
feet (as further described in the Master Lease, the “Premises”) comprising a
portion of the building commonly known as and located at 1501 E. Cerritos
Avenue, Anaheim, California (the “Building”) pursuant to that certain Standard
Form Multi-Tenant Industrial Lease (Net) dated August 11, 2000, as amended by
that certain First Amendment to Standard Form Multi-Tenant Industrial Lease
(Net) dated April 23, 2010 and that certain Second Amendment to Standard Form
Multi-Tenant Industrial Lease (Net) (“Second Amendment”) dated July 2, 2015
(collectively, the “Master Lease”), between Inland Empire Realty Holding Co.,
Inc. (“Master Landlord”), Alstyle Apparel & Activewear Manufacturing Company
(which entity has been merged into Sublandlord) and Sublandlord, which Master
Lease is attached hereto as Exhibit A; and

WHEREAS, Sublandlord is willing to sublet to Subtenant approximately 47,000
square feet of the Premises (as described and depicted on Exhibit B attached
hereto) (the “Subleased Premises”) on the terms and conditions contained herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Sublandlord and Subtenant hereby agree as
follows:

1. DEFINED TERMS. All capitalized terms used and not defined herein shall have
the meanings ascribed thereto in the Master Lease.

2. LEASED PREMISES. Sublandlord subleases to Subtenant, and Subtenant hereby
subleases from Sublandlord, the Subleased Premises. Immediately following the
Effective Date, the Subleased Premises shall be measured using current standards
for industrial space. The result of this measurement shall be conclusive for all
purposes under this Sublease. If necessary to properly access the Subleased
Premises and to conduct Subtenant’s operations therein, Subtenant shall be
permitted to access the Premises on a basis as shall be mutually determined by
Subtenant and Sublandlord acting in good faith. The Sublandlord shall provide
the Subleased Premises in their “as is” condition. Sublandlord makes no
representations or warranties, whether express or implied, with respect to the
Subleased Premises or any furniture, equipment and systems used in connection
with the Subleased Premises, and Sublandlord shall have no obligation whatsoever
to prepare the Subleased Premises for Subtenant’s occupancy.

3. TERM. The term of this Sublease shall commence as of the Effective Date and
shall terminate on the expiration of the Master Lease in accordance with the
provisions thereof (the “Term”), provided that if Sublandlord elects, as
permitted under the provisions of the Master Lease, to terminate the Master
Lease prior to the normal expiration date thereof (any such circumstance, an
“Early Termination Event”), Sublandlord shall provide Subtenant with not less

 

C-2

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than one hundred eighty 180 days written notice in advance of an Early
Termination Event in order to provide Subtenant with sufficient time to locate
alternative space. Further, upon the occurrence of an Early Termination Event,
Sublandlord shall share with Subtenant, on a proportionate basis based on the
percentage that the Subleased Premises comprise of the Premises, any economic
benefit to Sublandlord attributable to such Early Termination Event.

4. MASTER LEASE. This Sublease is subject and subordinate to the Master Lease
and to the matters to which the Master Lease is or shall be subordinate. Except
as may be inconsistent with the terms and provisions hereof, the terms and
provisions of the Master Lease shall be applicable to this Sublease as they
relate to the Subleased Premises, and shall be incorporated into this Sublease,
as if Sublandlord was the lessor under the Master Lease and Subtenant was the
lessee under the Master Lease. If the terms of this Sublease conflict with the
terms of the Master Lease, then the terms of this Sublease shall control.
Sublandlord agrees to use its best efforts not to cause a default under the
Master Lease. Notwithstanding anything to the contrary contained in this
Sublease, Subtenant shall not be deemed to have assumed any obligations of
Sublandlord under the Master Lease for the benefit of Master Landlord, as this
Sublease is not a direct lease with Master Landlord, and Master Landlord shall
not be a third party beneficiary hereof. Without limiting the foregoing,
Sublandlord shall make all payments to Master Landlord under the Master Lease.

The Subtenant shall not commit or permit to be committed on the Premises any act
which would violate any term or condition of the Master Lease (provided that
Subtenant shall not be responsible for any acts or omissions by Sublandlord or
its Affiliates).

At Subtenant’s request, Sublandlord will exercise the rights and remedies
Sublandlord has under the Master Lease with respect to the Premises (including
the Subleased Premises), and at law or in equity, so designated by Subtenant in
its request, including without limitation, the enforcement of Sublandlord’s
remedies against Master Landlord for Master Landlord’s failure to perform under
the Master Lease. Such rights and remedies shall be pursued diligently by
Sublandlord. Subtenant shall be entitled to a proportionate share of the damages
and other sums obtained as the result of the exercise of any such rights or
remedies by Sublandlord insofar as they relate to the Subleased Premises. If any
such default by Master Landlord is not cured to Subtenant’s reasonable
satisfaction, in addition to the remedies contained in the Master Lease and this
Sublease, Subtenant shall have the right to terminate this Sublease by
furnishing written notice to Sublandlord.

5. SECURITY DEPOSIT. Subtenant shall not be required to deposit a security
deposit as a condition to this Sublease.

6. RENT; UTILITY EXPENSES. Subtenant shall pay to Sublandlord (i) a monthly base
rent of $0.71 per square foot (“Monthly Base Rent”) for each calendar month (or
a pro rata portion thereof for any partial calendar month during the Term based
on the number of days in such month) during the first partial year of the
Extended Term as set forth in the Second Amendment on the 30th day of each such
calendar month, and (ii) $7,000 in respect of property taxes for each calendar
year (or a pro rata portion thereof for any partial calendar year during the
Term based on the number of days in such year) during the Term on the 30th day
of January, commencing on January 30, 2017 (it being agreed that the
above-referenced payment in respect

 

C-3

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of property taxes shall be subject to a proportionate annual increase or
decrease, as applicable, based on annual changes in governmental property tax
assessments relating to the Premises calculated based on the percentage that the
Subleased Premises comprise of the Premises). The Monthly Base Rent shall
increase three percent (3%) per annum on January 1 of each year of the Term,
consistent with the Second Amendment. The Monthly Base Rent and the property
taxes payable by Subtenant to Sublandlord during the Term of the Sublease, as
provided in the two immediately preceding sentences, shall not be affected by
any modifications or amendments to the Master Lease. All rent due under this
Sublease shall be paid to Sublandlord at the address for notice set forth in
Paragraph 7 below in lawful money of the United States of America. Subtenant
shall not be obligated to pay to Sublandlord or to the Master Landlord the Base
Rent or any other amounts payable by Sublandlord as contemplated by the Master
Lease.

Sublandlord and Subtenant acknowledge that the Premises (including the Subleased
Premises) may share common access to applicable utility services. Sublandlord
and Subtenant will meet and confer from time to time (at least semi-annually) in
order to mutually agree upon a proportionate expense sharing arrangement, based
on the historical and anticipated use of the Premises (including the Subleased
Premises), with respect to their respective usage of such utilities.

7. NOTICES. Sublandlord shall specify that Master Landlord send copies to
Subtenant of all notices Master Landlord gives to Sublandlord pursuant to the
Master Lease. Additionally, Sublandlord shall send to Subtenant copies of all
notices received from Master Landlord (promptly following receipt thereof) or
delivered to Master Landlord by Subtenant (simultaneously with delivery to
Master Landlord) under the Master Lease.

Any notice, demand, objection, statement or other communication which either
party is required or desires to give to the other shall be in writing and shall
be delivered either in person or by United States registered or certified mail,
return receipt requested, with postage thereon fully prepaid, addressed as
follows:

 

If to Sublandlord:    A and G, Inc.    [●]    Attn: [●]    Fax: [●]    Email:
[●] If to Subtenant:    Crabar/GBF, Inc. (d/b/a GenForms)    2441 Presidential
Parkway    Midlothian, Texas 76065    Attn: Michael D. Magill    Fax: (800)
759-4271    Email: Michael_Magill@ennis.com

Notices sent by registered or certified mail as required above shall be deemed
received on the 3rd Business Day following deposit in the mail and notice sent
by personal delivery shall be deemed received upon receipt. Either party may
change its address by furnishing 15 days prior written notice to the other party
of such change.

 

C-4

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8. KEYS/LOCKS; INTERNET/DATA/PHONE LINES.

Sublandlord shall furnish Subtenant with such number of keys or access cards
(collectively, the “Access Equipment”) as it shall reasonably request for each
corridor door entering the Subleased Premises or the Premises (if necessary to
gain access to the Subleased Premises) (and additional Access Equipment on an
order signed by Subtenant, at Sublandlord’s cost). Subtenant shall have the
right at its sole cost and expense to install and operate such additional access
control systems as it shall determine for the purpose of limiting access to the
Subleased Premises provided such systems are located solely within the Subleased
Premises and comply with legal requirements.

Sublandlord and Subtenant acknowledge that the Premises (including the Subleased
Premises) are served by internet, data and phone lines, the use of which shall
be allocated and shared between Sublandlord and Subtenant. Sublandlord and
Subtenant will meet and confer from time to time (at least semi-annually) in
order to mutually agree upon such sharing arrangement, which shall be documented
in a mutually acceptable letter agreement.

9. PEACEFUL ENJOYMENT. Subtenant shall, and may peacefully have, hold and enjoy
the Subleased Premises, subject to the other terms hereof, so long as a default
by Subtenant under this Sublease has not occurred or if it has occurred, the
cure period for such default has not expired.

10. COMPLIANCE WITH LAWS. The Subtenant shall comply in all material respects
with all governmental laws, ordinances and regulations applicable to the use by
the Subtenant of the Subleased Premises and shall promptly comply with all
governmental orders and directives for the correction, prevention and abatement
of any public or private nuisance under California law or unpermitted use in or
upon, or connected with, the Subleased Premises, all at the Subtenant’s sole
expense. The Subtenant shall furnish the Sublandlord with evidence of all
required licenses and permits for operation of the Subtenant’s business at the
Subleased Premises. The Subtenant shall not permit at the Subleased Premises any
action that would constitute a public or private nuisance under California law.

11. STANDARDS OF THE BUILDING. As of the Effective Date, the Premises and the
Subleased Premises are in compliance with the Master Lease and all legal
requirements and no hazardous materials are located in therein in violation of
legal requirements.

12. CONDEMNATION AND CASUALTY. Sublandlord shall not exercise any rights or make
any decision with respect to a casualty or condemnation arising under the Master
Lease without Subtenant’s approval. Subtenant shall have the right to terminate
this Sublease at any time that Sublandlord has the right to terminate the Master
Lease.

13. INDEMNIFICATION BY THE SUBTENANT. Except to the extent caused by the
Sublandlord’s gross negligence or willful misconduct, its breach of the Master
Lease or this Sublease, or its acts on the Premises or the Subleased Premises,
the Subtenant agrees to indemnify, protect and defend the Sublandlord and the
Master Landlord against and hold the Sublandlord and the Master Landlord
harmless from any and all loss, cost, liability, damage and expense, including,
without limitation, penalties, fines and counsel fees and

 

C-5

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disbursements, and any claims by any persons by reason of injury or death to
persons or damage to property occasioned by any use, occupancy, condition,
occurrence, happening, act, omission or negligence (collectively, “Claims”),
incurred in connection with or arising from: (a) any default by the Subtenant in
the observance or performance of any of the terms, covenants or conditions of
this Sublease on the Subtenant’s part to be observed or performed; or (b) the
use or occupancy or manner of use or occupancy of the Premises by the Subtenant
or any person claiming through or under the Subtenant, or of the employees,
agents, licensees or invitees of the Subtenant, in, on, or about the Premises
during the term of this Sublease, including, without limitation, any act,
omission or negligence in the making or performing of any alterations.

14. INDEMNIFICATION BY THE SUBLANDLORD. Except to the extent caused by the
Subtenant’s gross negligence or willful misconduct, its breach of the Master
Lease or this Sublease, or its acts on the Premises or the Subleased Premises,
the Sublandlord agrees to indemnify, protect and defend the Subtenant against
and hold the Subtenant harmless from any and all Claims incurred in connection
with or arising from: (a) any default by the Sublandlord in the observance or
performance of any of the terms, covenants or conditions of this Sublease on the
Sublandlord’s part to be observed or performed; or (b) the use or occupancy or
manner of use or occupancy of the Premises by the Sublandlord or any person
claiming through or under the Sublandlord, or of the employees, agents,
licensees or invitees of the Sublandlord, in, on, or about the Premises during
the term of this Sublease, including, without limitation, any act, omission or
negligence in the making or performing of any alterations.

15. INSURANCE. The Subtenant shall obtain and maintain during the entire Term a
policy of Commercial General Liability Insurance against claims for bodily
injury, personal injury and property damage based upon, involving or arising out
of the Subtenant’s occupation, use or maintenance of the Subleased Premises and
all areas appurtenant to the Subleased Premises, and the Subtenant’s business
operations. Such insurance shall be on an occurrence basis providing coverage in
an amount not less than Two Million Dollars ($2,000,000.00) for each occurrence.
Neither the minimum insurance requirements set forth in this Sublease, nor the
limits of such insurance, shall limit the liability of the Subtenant under this
Sublease. The Sublandlord and the Master Landlord and any lenders or other
parties specified by the Sublandlord from time to time shall be named as
additional insureds under the Subtenant’s insurance. All insurance companies
providing insurance pursuant to this Section shall be rated at least A-XII in
Best’s Key Rating Guide and shall be otherwise reasonably acceptable to the
Sublandlord and licensed and qualified to do business in the State of
California. Insurance provided by the Subtenant shall be primary as to all
covered claims and any insurance carried by the Sublandlord is not excess and is
non-contributing. The Subtenant authorizes the Sublandlord to contact the
Subtenant’s insurance company directly in the event that the Sublandlord elects
to make a claim under the Subtenant’s insurance. Copies of policies or original
certificates of insurance with respect to each policy shall be delivered to the
Sublandlord prior to the Effective Date and thereafter, at least thirty
(30) days before the expiration of each existing policy.

16. WAIVER OF SUBROGATION RIGHTS. Anything in this Sublease to the contrary
notwithstanding, Sublandlord and Subtenant each hereby waives any and all rights
of recovery, claim, action or cause-of-action, against the other, its agents
(including partners, both general and limited), officers, directors,
shareholders, customers, invitees, or employees, for any loss or damage that may
occur to the Subleased Premises, or any improvements thereto, or

 

C-6

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any improvements thereon, or any personal property of such party therein, by
reason of fire, the elements or any other cause which is actually insured
against by Sublandlord or Subtenant or which could be insured against under a
standard fire and extended coverage insurance policy, regardless of cause or
origin, including negligence of the other party hereto, its agents, partners,
shareholders, officers, directors, customers, invitees or employees, and
covenants that no insurer shall hold any right of subrogation against such other
party. Sublandlord and Subtenant shall advise insurers of the foregoing waiver
and such waiver shall be a part of each policy maintained by Sublandlord and
Subtenant.

17. ATTORNEYS’ FEES. In the event Subtenant or Sublandlord defaults in the
performance of any of the terms, covenants, agreements or conditions contained
in this Sublease and the nondefaulting party places the enforcement of this
Sublease, or any part thereof, or the collection of any sums due, or to become
due hereunder, or recovery of the possession of the Premises, in the hands of an
attorney, or files suit upon the same, the defaulting party agrees, to the
extent permitted by applicable law, to pay the nondefaulting party all
reasonable attorneys’ fees incurred by the nondefaulting party if such suit is
successful.

18. SUBTENANT’S OBLIGATIONS UPON TERMINATION OF THIS SUBLEASE. The Subtenant
shall keep the Premises in good order and condition and as otherwise required
pursuant to the Master Lease as incorporated herein. At the expiration or sooner
termination of this Sublease, the Subtenant shall surrender and deliver up the
Premises “broom clean” and in the same condition as required to be surrendered
and delivered up to the Master Lessor upon termination of the Master Lease
pursuant to the terms of the Master Lease. The Subtenant shall repair any damage
to the Subleased Premises, the Premises or the Building caused by the
Subtenant’s move into or out of the Subleased Premises, the removal from the
Subleased Premises of any personal property and any alterations, additions,
improvements or installations required or permitted to be removed by or on
behalf of the Subtenant, and any damage otherwise caused by the Subtenant its
agents, contractors or employees. Any of the Subtenant’s personal property,
fixtures, signs or equipment which shall remain in or about the Subleased
Premises after the expiration or sooner termination of this Sublease shall be
deemed conclusively to have been abandoned and either may be retained by the
Sublandlord as its property or may be disposed of in such manner as the
Sublandlord may see fit, at the Subtenant’s sole cost and expense.

19. SUCCESSORS. This Sublease shall be binding upon and inure to the benefit of
Sublandlord and Subtenant and their respective successors and permitted assigns.

20. ENTIRETY. This instrument and any attached addenda or exhibits signed by the
parties hereto constitute the entire agreement between Sublandlord and
Subtenant. No prior or contemporaneous promises, inducements, representations or
agreements, oral or otherwise, between the parties hereto not embodied herein
shall be binding or have any force or effect.

21. AMENDMENTS. This Sublease may not be altered, changed or amended, except by
an instrument in writing, signed by both parties hereto.

 

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22. BROKERS. Subtenant agrees to indemnify and hold harmless Sublandlord from
and with respect to any claims for a brokerage commission, finder’s fee or
similar payment with respect to this Sublease that is made by any party claiming
by, through or under Subtenant. Similarly, Sublandlord agrees to indemnify and
hold harmless Subtenant from and with respect to any claims for a brokerage fee,
finder’s fee or similar payment with respect to this Sublease that is made by a
party claiming by, through or under Sublandlord.

23. ASSIGNMENT AND SUBLETTING. Subtenant shall have the right to assign this
Lease or sublease any portion of the Premises to a subtenant or assignee
approved in writing by Sublandlord. Notwithstanding the foregoing, Subtenant may
assign this Sublease or sublet all or any portion of the Leased Premises to an
Affiliate of Subtenant without Sublandlord’s consent. As used herein,
“Affiliate” shall mean any person or entity controlling, controlled by, or under
common control with, another person or entity.

24. NO LIABILITY. Notwithstanding anything to the contrary contained in the
Master Lease and this Sublease, in no event shall Subtenant be obligated to pay
any sums owing under the Master Lease which result from a default by Sublandlord
under the Master Lease and not Subtenant’s default under this Sublease.

25. SUBTENANT DEFAULTS. The following shall be deemed to be events of default by
Subtenant under this Sublease: (i) Subtenant shall fail to pay when due any
installment of rent or any other payment required pursuant to this Sublease and
Subtenant shall fail to cure such nonpayment within five (5) Business Days after
receipt of written notice thereof from Sublandlord; or (ii) Subtenant shall fail
to comply with any term, provision or covenant of this Sublease (including the
terms of the Master Lease incorporated herein as modified by the provisions
hereof), other than one requiring the payment of money, and the failure is not
cured with thirty (30) days after Subtenant receives written notice thereof from
Sublandlord or if the default is of such character as to require more than
thirty (30) days to cure, Subtenant fails to commence curing such default within
said thirty (30) day period or diligently proceed thereafter. Upon the
occurrence of an uncured default by Subtenant, Sublandlord shall have all the
remedies available at law and in equity, including, without limitation, the
right to terminate this Sublease.

26. SUBLANDLORD DEFAULTS. If Sublandlord should fail to observe, perform or
comply with any term, provision or condition of this Sublease or the Master
Lease to be performed by Sublandlord, and if such failure continues for thirty
(30) days (five (5) Business Days in the event of a failure to pay money)
following Sublandlord’s receipt of notice thereof from Subtenant or Master
Landlord, Sublandlord shall be in default under this Sublease; provided,
however, that if such failure, other than the payment of money, is of such a
character as to require more than thirty (30) days to cure, Sublandlord shall
not be in default unless Sublandlord does not commence such cure within thirty
(30) days and thereafter diligently proceed curing such failure. Upon the
occurrence of an uncured default by Sublandlord, Subtenant shall have all the
remedies available at law and in equity, including, without limitation, the
right to terminate this Sublease, and if Subtenant exercises a right to cure any
such default by Sublandlord and Sublandlord fails to reimburse Subtenant for the
costs reasonably incurred by Subtenant to effect such cure within thirty
(30) days of Subtenant’s request therefor, in addition to Subtenant’s remedies
at law and in equity, Subtenant may offset such sums against sums due and owing
by Subtenant to Sublandlord under this Sublease.

 

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27. CONSENT BY MASTER LANDLORD. Notwithstanding all of the other terms and
provisions of this Sublease, this Sublease is conditioned upon and shall not be
effective until the full execution of the Consent Agreement (herein so called)
attached hereto as Exhibit C by all parties thereto.

28. AUTOMATIC TERMINATION. If the Master Lease expires or is terminated for any
reason whatsoever, this Sublease shall terminate automatically, and the parties
hereto shall be relieved of all liabilities and obligations hereunder, except
for those which accrued prior to the date of such termination.

29. COUNTERPARTS. This Sublease may be executed in any number of counterparts,
and each such counterpart hereof shall be deemed to be an original instrument,
but all such counterparts together shall constitute but one and the same
agreement.

30. MISCELLANEOUS. This Sublease is declared to be a California, and all of the
terms hereof shall be construed according to the laws of the State of
California. Except to the extent expressly provided to the contrary in this
Sublease, all references to days in this Sublease shall refer to calendar days.
All references to “Business Days” in this Sublease shall refer to days that
national banks are open for business in Anaheim, California. This Sublease shall
not be deemed or construed to create or establish any relationship (other than
that of landlord and tenant) or partnership or joint venture or similar
relationship or agreement between Sublandlord and Subtenant hereunder.

EXECUTED effective as of the day and year first above written.

 

A AND G, INC. By:  

 

Name:  

 

Title:  

 

CRABAR/GBF, INC. (D/B/A GENFORMS) By:  

 

Name:   Keith S. Walters Title:   President

 

C-9

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EXHIBIT A

MASTER LEASE

[See Attached]

 

C-10

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EXHIBIT B

SUBLEASED PREMISES

 

LOGO [g179968g07t73.jpg]

 

C-11

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EXHIBIT C

CONSENT AGREEMENT

THIS CONSENT AGREEMENT (this “Agreement”) is made and entered into as of [●],
2016, by and among Inland Empire Realty Holding Co., Inc. (“Landlord”), A and G,
Inc. (“Tenant”), and Crabar/GBF, Inc. (d/b/a Genforms) (“Subtenant”).

WITNESSETH:

WHEREAS, Tenant is presently the lessee of approximately 200,000 square feet (as
further described in the Master Lease, the “Premises”) comprising a portion of
the building commonly known as and located at 1501 E. Cerritos Avenue, Anaheim,
California, pursuant to that certain Standard Form Multi-Tenant Industrial Lease
(Net) dated August 11, 2000, as amended by that certain First Amendment to
Standard Form Multi-Tenant Industrial Lease (Net) dated April 23, 2010 and that
certain Second Amendment to Standard Form Multi-Tenant Industrial Lease (Net)
dated July 2, 2015 (the “Master Lease”), between Inland Empire Realty Holding
Co., Inc. (“Master Landlord”), Alstyle Apparel & Activewear Manufacturing
Company (which entity has been merged into Sublandlord) and Sublandlord;

WHEREAS, Tenant, as sublandlord, and Subtenant, as sublessee, have executed that
certain Sublease dated [●], 2016 (“Sublease”) with respect to the portion of the
Premises referenced therein (the “Subleased Premises”), a true and correct copy
of which has been delivered to Landlord by Tenant and Subtenant; and

WHEREAS, Landlord, Tenant and Subtenant desire and agree to enter into this
Agreement on the terms and conditions hereinafter provided.

NOW, THEREFORE, for and in consideration of Ten Dollars and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and confessed, and in consideration of the mutual covenants and
agreements herein contained, Landlord, Tenant and Subtenant hereby agree as
follows:

1. All capitalized terms used herein and not defined herein shall have the
meaning set forth in the Master Lease.

2. Landlord consents to Tenant’s entering into the Sublease with Subtenant and
to the terms and conditions of the Sublease, to the extent not inconsistent with
the provisions of the Master Lease. Notwithstanding the foregoing, Tenant shall
remain fully liable for the performance of the obligations under the Master
Lease and under no circumstances is Subtenant assuming any liabilities or
obligations under the Master Lease. Landlord will, however, accept the
performance of the obligations under the Master Lease by Subtenant on behalf of
Tenant insofar as such performance relates to the Subleased Premises. No failure
by Subtenant to perform its obligations under the Sublease shall constitute a
defense, offset, claim or counterclaim to Tenant’s obligations under the Master
Lease, which shall exist independent from the Sublease and irrespective of
Subtenant’s performance thereunder.

 

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3. Landlord and Tenant agree to deliver to Subtenant all notices and other
written communications sent by Landlord or Tenant (as applicable) under the
Master Lease at Subtenant’s address stated in the Sublease, by postage prepaid,
certified or registered mail, return receipt requested. No notice or other
written communication under the Master Lease will be effective, and the
applicable periods of time to cure such defaults will not begin to run, until
Subtenant receives such notice at the location designated above. Subtenant may
change its address by furnishing fifteen (15) days prior written notice to
Landlord and Tenant of such change in address. Any and all notices required to
be given or served by the terms of this Agreement shall be in writing and shall
be deemed to have been given three (3) Business Days following deposit in the
mail as provided above.

4. If Tenant defaults under the terms of the Master Lease, Subtenant shall have
the right, but not the obligation, to cure such default on behalf of Tenant so
long as such cure occurs during the applicable cure period, if any, granted to
Tenant under the Master Lease. Landlord shall accept such cure from Subtenant to
the same effect and extent as if Tenant had cured such default under the Master
Lease. Subtenant’s failure to cure a default by Tenant under the Master Lease
that is not a default by Subtenant under the Sublease shall not affect
Subtenant’s rights under Paragraph 6 of this Agreement to continue the Sublease
after a Termination Event as long as Subtenant complies with Paragraph 5 of this
Agreement.

5. In the event the Master Lease is terminated or cancelled for any reason
(“Termination Event”), including without limitation, as the result of a default
by Tenant under the Master Lease, (a) the Sublease shall automatically
terminate, (b) Subtenant shall have no further obligation to Tenant under the
Sublease, other than payment of all amounts owing to Tenant and compliance with
all provisions of this this Sublease, pursuant to the terms of the Sublease, and
(c) Subtenant shall have no obligation for any sums due and owing by Tenant to
Landlord under the Master Lease.

6. This Agreement shall inure to the benefit of and shall be binding upon
Landlord, Tenant and Subtenant and their successors and assigns.

7. If any provision of this Agreement shall be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not apply to or affect any other provision hereof, but this Agreement
shall be construed as if such invalidity, illegality, or unenforceability did
not exist.

8. This Agreement shall be governed and construed by the laws of the State of
California. This Agreement shall not be recorded by either party hereto. This
Agreement may not be modified, altered or amended without a writing signed by
Landlord, Tenant and Subtenant.

 

INLAND EMPIRE REALTY HOLDING CO., INC. By:  

 

Name:  

 

Title:  

 

 

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A AND G, INC. By:  

 

Name:  

 

Title:  

 

CRABAR/GBF, INC. (D/B/A GENFORMS) By:  

 

Name:   Keith S. Walters Title:   President

 

C-14

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EXHIBIT D

Form of Transition Services Agreement

See attached.

 

D-1

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TRANSITION SERVICES AGREEMENT

This TRANSITION SERVICES AGREEMENT (this “Agreement”) is made and entered into
as of [●], 2016 by and among Ennis, Inc., a Delaware corporation (“Ennis”), and
Gildan Activewear Inc., a Canadian corporation (“Buyer”). Ennis, in its capacity
as a provider of Services (as hereinafter defined) hereunder, is referred to
herein as “Service Provider”, and Buyer, in its capacity as a recipient of
Services hereunder, is referred to herein as “Service Recipient”.

W I T N E S S E T H:

WHEREAS, Ennis and Buyer have entered into a Unit Purchase Agreement, dated as
of May 4, 2016 (as it may be amended, restated, or supplemented in accordance
with its terms, the “Purchase Agreement”), pursuant to which, among other
things, Ennis will sell, convey, transfer and assign to Buyer, and Buyer will
acquire from Ennis, Alstyle Apparel, LLC and its Subsidiaries (the “Company”);

WHEREAS, from and after the Closing, Ennis has agreed to provide to Buyer and
its subsidiaries the Services, on a temporary basis, in connection with the
transfer of ownership of the Company to Buyer, on the terms set forth in this
Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements of the
parties contained herein, the parties agree as follows:

1. Definitions. Capitalized terms used in this Agreement but not defined herein
shall have the meanings given to them in the Purchase Agreement.

2. Services Provided.

(a) During the term of this Agreement, Service Provider shall, or shall cause
one or more of its designated subsidiaries to, provide to Service Recipient and
its subsidiaries, each of the services (each, a “Service”, and collectively, the
“Services”) described in Exhibit A, to be performed for the period set forth in
Exhibit A (the “Transition Period”), and on the additional terms and conditions
set forth herein and in Exhibit A, as applicable. All Services to be provided
hereunder shall be provided by Service Provider or its designated subsidiaries,
or by other third-party providers retained by Service Provider or its designated
subsidiaries upon the prior written approval of Service Recipient, which
approval shall not be unreasonably withheld or delayed. To the extent that any
Service is provided by a subsidiary of Service Provider or an approved
third-party provider, Service Provider shall cause such subsidiary or
third-party provider to comply with the terms and conditions of this Agreement
relating to the provision of Services as if such subsidiary or third-party
provider were a party hereto. The parties agree that no Service (including any
Additional Service (as hereinafter defined)) shall extend beyond the Transition
Period specified in Exhibit A.

(b) If Service Recipient reasonably determines after the date hereof that there
are additional services that Service Provider historically has provided to the
Company that are not included in the Services and which are necessary for the
orderly transition of the ownership of the Company to Buyer, Service Recipient
may request that Service Provider provide such

 

D-2

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additional services (each, an “Additional Service”) and Service Provider agrees,
to the extent such Additional Services can be provided by Service Provider
without undue effort or expense, to provide such Additional Services on the
terms and conditions set forth in this Agreement. The parties shall amend
Exhibit A to add any such Additional Services, but a failure to amend Exhibit A
shall not void Service Provider’s obligations to provide such Additional
Services.

3. Software. The parties hereby expressly acknowledge and agree that nothing in
this Agreement shall be deemed to grant Service Recipient during the term of
this Agreement or after the termination or expiration of this Agreement or any
Transition Period, by implication, estoppel or otherwise, any ownership right,
license or sublicense right or use right (except for the use rights through
Service Provider provided hereunder during any Transition Period) with respect
to any software owned or licensed by provided by Service Provider. Further,
nothing in this Agreement shall require Service Provider in connection with the
provision of Services hereunder to violate the terms of any software license
maintained by Service Provider with any third party software provider. In event
that any such third party software provider determines that the provision by
Service Provider of any Services hereunder requires that either Service Provider
or Service Recipient to pay any license fee in connection therewith, then
Service Recipient agrees that it shall be responsible for the payment of such
license fee and shall reimburse and indemnify Service Provider for any such
license fee or other amounts that Service Provider may be required pay to such
third party software provider. Service Recipient, in connection with its receipt
of Services hereunder agrees to conduct its operations in a manner reasonably
designed not result in a violation of any such software license.

4. Consideration.

(a) Fees. In consideration for each Service provided hereunder during the
Transition Period, Service Recipient will compensate Service Provider with the
amounts set forth in Exhibit A.

(b) Costs. In addition to the fees payable to by Service Recipient to Service
Provider as set forth in Section 4(a), except as otherwise provided herein or in
Exhibit A, as applicable, Service Recipient shall reimburse Service Provider
for:

(i) any third party costs, without markup, which have been historically incurred
by Service Provider in connection with the provision of the Services, provided
that Service Provider has advised Service Recipient regarding such third party
costs prior to such third party costs being incurred and that Service Recipient
has provided prior written approval of such third party and for such third party
costs to be incurred; and

(ii) any travel expenses incurred by any employee of Service Provider if such
travel is necessary (as mutually agreed to between Service Recipient and Service
Provider, in advance) in connection with the provision of any Services.

(c) Invoices and Payment. With respect to the fees and costs payable pursuant to
Sections 4(a) and 4(b), Service Provider shall invoice Service Recipient at the
beginning of each month, beginning the first day of the first month next
following the date of this Agreement, for the Services provided hereunder for
the previous month, which invoice shall set forth a

 

D-3

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description of the Services provided and costs incurred during such period.
Service Recipient shall remit full payment of any invoiced amounts by wire
transfer of immediately available funds to an account designated by Service
Provider from time to time within thirty (30) Business Days after Service
Recipient’s receipt of such invoice. Any invoice not timely paid by Service
Recipient in accordance with this Section 4(c) shall bear interest on the unpaid
portion thereof from time to time at a floating per annum rate, determined
daily, equal to the prime rate (as published in the “Money Rates” table of the
Eastern U.S. Edition of The Wall Street Journal) in effect from time to time,
such interest to accrue commencing on the last day of such thirty (30) Business
Day period in respect of such invoice, and continuing through the date of
payment by Service Recipient. In addition, Service Recipient shall reimburse
Service Provider for any reasonable collection costs and expenses connected with
any overdue invoice.

(d) Invoice Disputes. The parties shall seek to resolve all such disputes
expeditiously and in good faith, provided that all invoices transmitted pursuant
to Section 4(c) must be paid in full upon the applicable due date therefor and
will not be delayed merely because of a dispute. To the extent that the
resolution of a dispute results in a refunded amount by Service Provider to
Service Recipient, then such refunded amount shall bear interest at the rate
specified from time to time in Section 4(c) from the original date on which such
refunded amount was first paid by Service Recipient to Service Provider and
continuing through the date such refunded amount is paid by Service Provider to
Service Recipient. Service Provider shall continue performing the Services in
accordance with this Agreement pending resolution of any dispute.

(e) Terminated Services. To the extent that Service Provider terminates any
Service in accordance with Section 12, no fees or costs shall accrue in respect
of such Service(s) after the effective date of such termination. To the extent
that any Services are provided for less than a full month, any fees for such
Services will be pro-rated on a calendar day basis.

(f) Taxes. Service Recipient shall be responsible for all applicable state sales
and use taxes required to be paid in connection with payment for Service
Provider’s performance of the Services. Service Provider shall cooperate with
Service Recipient in good faith and at Service Recipient’s expense in order to
permit Service Recipient to establish any exemption from or reduction to, or
obtain any credit or refund of, any such sales and use taxes.

5. Certain Obligations of the Parties.

(a) Service Recipient shall: (i) provide one Service Recipient-designated point
of contact for Service Provider to use for all questions and issues relating to
a specific Service, (ii) provide sufficient qualified personnel who are capable
of performing Service Recipient duties, responsibilities and obligations related
to the Services, (iii) provide Service Provider with access to Service
Recipient’s facilities during normal business hours and otherwise as reasonably
requested by Service Provider in order to facilitate Service Provider’s ability
to timely perform the Services, (iv) provide Service Provider with such
reasonable and necessary working space and office support (including access to
telephones, photocopying equipment and the like) as Service Provider may
reasonably request in order to facilitate Service Provider’s ability to timely
perform the Services, (v) cooperate in good faith with Service Provider in all
matters relating to the provision and receipt of the Services, (vi) fully
cooperate with and work in good faith with any third party providers of goods
and services to Service Provider, and (vii) provide to Service

 

D-4

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Provider any data or other information reasonably necessary to enable Service
Provider to provide Services in the same format, and with the same level of
detail, as any such data or other information may have been provided prior to
the date hereof.

(b) Service Provider shall: (i) provide one Service Provider-designated point of
contact for Service Recipient to use for all questions and issues relating to a
specific Service, (ii) provide sufficient qualified personnel who are capable of
performing Service Provider’s duties, responsibilities and obligations related
to the Services, (iii) fully cooperate with and work in good faith with any
third party providers of goods and services to Service Recipient, (iv) when on
the premises of Service Recipient or when given access to any equipment,
computer, software, network or files owned or controlled by Service Recipient or
its Affiliates, conform in all material respects to the Privacy Agreements
concerning access, health, safety and security which are made known to Service
Provider and Service Provider’s Project Manager (as hereinafter defined) by
Service Recipient, and (v) cooperate in good faith with Service Recipient in all
matters relating to the provision and receipt of the Services.

(c) Service Provider and Service Recipient shall each appoint a project manager
(“Project Manager”) who shall: (i) serve as such party’s primary representative
and contact under this Agreement, have day-to-day responsibility for managing
and coordinating the performance of such party’s obligations under this
Agreement, (ii) be authorized to act for and on behalf of such party with
respect to all matters relating to this Agreement, (iii) respond to such other
party’s Project Manager promptly and during normal business hours and at such
other reasonable times regarding any problems and issues under this Agreement,
(iv) coordinate and work diligently to resolve problems and issues under this
Agreement, and (v) escalate any problems and issues within the such party’s
organization, as necessary, with respect to any matters pertaining to this
Agreement. The Project Manager shall be available during normal business hours
and at such other reasonable times in connection with its duties hereunder.
Neither party shall replace their respective Project Manager unless and until a
substitute Project Manager shall have been designated and introduced to such
other party (excluding from this provision circumstances involving the death,
disability, leave of absence or termination of employment of a Project Manager).

6. Performance Standard; Confidentiality. Service Provider shall provide, or
cause its designated subsidiaries to provide, the Services in good faith and in
the same general manner as Service Provider has generally provided the same or
similar level of services to the Company prior to the date hereof. Without
limiting Section 14, each party will handle and protect from disclosure all
proprietary and confidential information disclosed to it by the other party in
the same general manner as it handles and protects its own information that it
considers proprietary and confidential.

7. Security.

(a) During the term of this Agreement, Service Recipient’s access to Service
Provider’s information technology infrastructure for applications, if any, shall
be through secured controlled processes determined by Service Provider in
consultation with Service Recipient. Service Provider shall not transfer to
Service Recipient, and Service Recipient shall not have rights in or access to,
application software/systems source code associated with shared

 

D-5

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systems through which Service Provider is providing Services to Service
Recipient hereunder. Service Recipient shall not, through reverse engineering or
any other technique or means, attempt to access such source code, and Service
Recipient will use the application software/systems only for its intended use.
Upon prior written notice to Service Recipient, Service Provider shall have the
right to deny specific personnel of Service Recipient access to Service
Provider’s systems in the event Service Provider reasonably believes that such
personnel pose a security concern.

(b) During the term of this Agreement, Service Provider’s access to Service
Recipient’s information technology infrastructure for applications, if any,
shall be through secured controlled processes determined by Service Recipient in
consultation with Service Provider. Service Recipient shall not transfer to
Service Provider, and Service Provider shall not have rights in or access to,
application software/systems source code associated with Service Recipient
systems through which Service Provider is providing Services to Service
Recipient hereunder. Service Provider shall not, through reverse engineering or
any other technique or means, attempt to access such source code, and Service
Provider will use the application software/systems only for its intended use.
Upon prior written notice to Service Provider, Service Recipient shall have the
right to deny specific personnel of Service Provider and its subsidiaries access
to Service Recipient’s systems in the event Service Recipient reasonably
believes that such personnel pose a security concern.

(c) If a security breach that relates to the Services is discovered by either
party, or if either party determines that any personnel of the other party poses
a security concern as provided above, then such party shall promptly notify the
other party of such event or determination. The parties shall, subject to any
applicable Law, cooperate with each other regarding the timing and manner of
(i) notification to their respective customers, potential customers, employees
or agents concerning a breach or potential breach of security and
(ii) disclosures to appropriate Governmental Authorities as required by
applicable law regarding such security breach or attempted security breach and
regarding the resolution of any such security concerns.

(d) Service Provider shall maintain data security protocols, disaster recovery
and contingency plans in connection with the Services and the data and other
information used or generated in connection therewith consistent with the data
security protocols, disaster recovery and contingency plans Service Provider
generally maintains with respect to the same or similar services to and data and
other information of its own business units and subsidiaries during the
Transition Periods.

8. Record Retention; Access. Each of Service Provider and Service Recipient
shall maintain full and accurate books and records relating to the Services
provided hereunder, in accordance with past practices. With respect to
accounting, transactional and other records or information created by or for a
party by reason of its performance hereunder and necessary for a party’s use in
the Company’s business or otherwise or for a party’s accounting, tax or
compliance purposes, on a party’s request the other party will provide copies of
such records or information (to the extent in existence) in the form maintained
by such furnishing party within twenty (20) Business Days after such request.
For a period of three years after the termination or expiration of this
Agreement (or such longer period as may be required by any Governmental
Authority or by the Purchase Agreement or reasonably requested by a party in
connection with

 

D-6

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disputes or litigation), upon a party’s reasonable request, the other party and
their representatives and counsel will use commercially reasonable efforts not
to dispose of or destroy any of the books and records relating to the Services
provided hereunder without first offering to turn over possession thereof to
such requesting party (at a requesting party’s sole expense, including
reimbursing the furnishing party for any third party expenses), by written
notice to the requesting party to the extent practicable at least thirty
(30) days prior to the proposed date of such disposition or destruction.
Notwithstanding the foregoing, upon request by a party, the other party (to the
extent legally permitted to erase or destroy any such information and subject to
the right of such party to maintain an archive copy of such information (subject
to confidentiality obligations set forth in this Agreement or the Purchase
Agreement) to the extent necessary to comply with its regulatory, accounting or
record retention requirements, in connection with any litigation or dispute
resolution process) shall erase or destroy all or any part of the requesting
party’s confidential information in such other party’s possession or control
following the completion of all Transition Periods in which such information is
necessary for the performance of Services hereunder. Each party shall provide or
make available to the other party and its Representatives reasonable access
during regular business hours and upon two Business Days advance notice to all
relevant information, documentation and staff of such other party connected with
the Services hereunder, to the extent reasonably requested during or after the
term hereof to enable such party to verify such other party’s compliance with
this Agreement and to inspect, copy and otherwise use the books and records
relating to the Services in connection with the Company’s business. Such access
right shall terminate sixth months from the termination or expiration of this
Agreement.

9. Force Majeure; Reduction of Services.

(a) Neither party shall be liable for any loss or damage whatsoever arising out
of any delay or failure in the performance of its obligations pursuant to this
Agreement to the extent such delay or failure results from events beyond the
control of that party, including but not limited to acts of God, acts or
regulations of any Governmental Authority, war, terrorism, riots, insurrection
or other hostilities, accident, fire, flood, strikes, lockouts, industrial
disputes, shortages of fuel or financial system disruptions or delays (a “Force
Majeure Event”). A party experiencing a Force Majeure Event shall only be
excused from performance of its obligations pursuant to this Agreement for the
duration of the Force Majeure Event. Upon the occurrence of a Force Majeure
Event applicable to a party, such party shall promptly give written notice to
the other party of the Force Majeure Event and its expected duration. Any delays
or failures that are excused pursuant to this Section 9 shall automatically
extend the time period for the affected Service equal to the duration of the
Force Majeure Event. If any Force Majeure Event substantially prevents, hinders
or delays performance of the Services for more than three (3) consecutive days,
Service Recipient may terminate the Services (in whole or in part) upon two
(2) days written notice to Service Provider.

(b) Whenever a Force Majeure Event causes a Service Provider to allocate limited
resources between or among Service Provider, its subsidiaries and Service
Recipient, Service Provider shall not provide priority to its own business unit
or subsidiaries over Service Recipient.

10. Dispute Resolution. In the event of any dispute between the parties with
respect to the provision of the Services pursuant to this Agreement (excluding
disputes regarding a party’s

 

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compliance with the applicable confidentiality provisions hereof), each party
shall designate an employee as its representative to attempt to resolve the
dispute and each such representative will use commercially reasonable efforts to
resolve the dispute promptly. If the individuals designated by the parties are
unable to resolve the dispute promptly, the dispute will be submitted to a
member of senior management of each party. Such members of senior management
will meet in person or by telephone conference at least once in the ten-day
period following the submission of the dispute to them and will use commercially
reasonable efforts to resolve the dispute promptly. If such members of senior
management are unable to resolve the dispute within 15 days of the submission of
the dispute to them, the parties may exercise any rights or remedies available
to them set forth elsewhere in this Agreement.

11. Disclaimers; Limited Liability.

(a) Except as otherwise provided in Section 6, Service Provider make no express
or implied representations, warranties or guarantees relating to the Services to
be performed under this Agreement, including, without limitation, any warranty
of merchantability or fitness for a particular purpose. Upon Service Recipient’s
request, Service Provider shall pass through benefits of any express warranties,
if any, received from third parties relating to the Services to the extent
permitted by the terms thereof, and shall (at Service Recipient’s expense,
including reimbursing Service Provider for any third party expenses) assist
Service Recipient with any warranty claims related thereto. Notwithstanding
anything to the contrary set forth elsewhere in this Agreement, Service
Recipient acknowledges and agrees that Service Provider shall only be
responsible for compiling information from either Service Recipient’s systems or
from entries prepared by and received from the Service Recipient in a
bookkeeping function, and are not responsible for the certification or the
accuracy of reserves, accruals, or cut-off accuracy of working capital items of
Service Recipient’s financial statements, internal controls over financial
reporting, or compliance (including compliance reporting) under its credit
facilities.

(b) Notwithstanding anything in this Agreement to the contrary, in no event will
either party or its subsidiaries be liable, whether in negligence, breach of
contract or otherwise, for any damages, losses or expenses suffered or incurred
by any other party or Person arising out of or in connection with the rendering
of Services or any failure to render Services except to the extent that such
damages, losses or expenses are caused by the willful misconduct (including
willful refusal to perform) or gross negligence of the responsible party or any
of its subsidiaries. Furthermore, in no event shall either party or its
subsidiaries be liable for any indirect, special, punitive, exemplary,
incidental or consequential losses, damages or expenses of any kind, including
without limitation, loss of profits, regardless of the form of action or the
theory of recovery, even if such party has been advised of the possibility of
such damages. Each party and its subsidiaries’ maximum liability for any action,
regardless of the form of action, whether in tort or contract, arising under
this Agreement shall be limited to the amount of fees payable to such party by
the other party under this Agreement. Subject to the limitation of liability set
forth in the immediately preceding sentence and the provisions of Section 3,
each party agrees to indemnify, defend and hold harmless the other party and its
subsidiaries from and against any damages, losses or expenses suffered or
incurred by any of them as a result of, or arising from, any material breach by
such indemnifying party of any covenant or agreement herein, except to the
extent that such damages, losses or expenses are caused by the willful
misconduct or gross negligence of the other party or any of its subsidiaries.
The limitations on the types and amount

 

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of damages set forth in this Section 11(b) shall not apply to any damages,
losses or expenses resulting from the following: (i) any breach of Section 14,
(ii) personal injury or property damage caused by the acts or omissions of
either party, its Affiliates or its Representatives, (iii) any fraud, gross
negligence, or willful misconduct (including willful refusal to perform) of a
party, and (iv) any failure of a party or its Affiliates to remit any funds
collected on behalf the other party or its Affiliates under this Agreement.

12. Term and Termination.

(a) This Agreement shall become effective on the date hereof and, unless sooner
terminated pursuant to the terms hereof, shall continue in effect for any
Service through the Transition Period.

(b) Service Recipient may terminate any or all of the Services prior to the
expiration of the term of this Agreement by providing to Service Provider
written notice of termination not less than 30 days before the date of such
earlier termination, and the provision of such Services shall terminate at the
end of such notice period.

(c) This Agreement may be terminated in whole, but not in part, by either party
if:

(i) such party makes a general assignment for the benefit of creditors or
becomes insolvent, or a receiver is appointed for, or a court approves
reorganization or arrangement proceedings on, such party;

(ii) the other party is in material breach of any provision of this Agreement,
provided that the party seeking to terminate this Agreement for breach shall
notify the other party of such breach and provide such other party with 15 days
to cure such breach; or

(iii) with respect to a particular Service, to the extent that such Service is
prohibited by applicable Law.

(d) The terms of Sections 3, 4, 7, 8, 10, 11, 12(d) and 13-25 shall survive the
expiration or termination of this Agreement. In addition, such other terms set
forth herein, as the context requires, shall survive to the extent required to
provide full force and effect to the parties’ obligations and remedies with
respect thereto.

13. Non-Solicitation of Employees. For a period of one year from the date of
this Agreement, neither party nor any of its subsidiaries or Affiliates shall,
without the prior written approval of the other party, directly or indirectly,
solicit any employees of the other party or any of their respective subsidiaries
or Affiliates providing, receiving, coordinating or participating in the
provision, receipt or coordination of Services hereunder, to terminate their
relationship with such other party or such subsidiary or Affiliate, either for
itself or for any other person or entity. To the extent consistent with the
Purchase Agreement, the foregoing prohibition shall not apply to individuals
hired as a result of the use of an independent employment agency (so long as the
agency was not directed to solicit a particular individual) or as a result of
the use of a general solicitation (such as a newspaper advertisement or on radio
or television) not specifically directed to employees of the other party or its
subsidiaries providing, receiving, coordinating or participating in the
provision, receipt or coordination of Services hereunder.

 

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14. Nondisclosure of Proprietary Data. Section 5.6 of the Purchase Agreement
shall apply to the information disclosed in connection with this Agreement,
whether orally, electronically, in writing or otherwise or otherwise learned,
acquired, retained or generated in connection with this Agreement.

15. Independent Contractor. The parties hereto understand and agree that this
Agreement does not make either of them an agent or legal representative of the
other for any purpose whatsoever. No party is granted, by this Agreement or
otherwise, any right or authority to assume or create any obligation or
responsibilities, express or implied, on behalf of or in the name of any other
party, or to bind any other party in any manner whatsoever without the other
party’s prior written consent. The parties expressly acknowledge (i) that
Service Provider is an independent contractor with respect to Service Recipient
in all respects, including, without limitation, the provision of Services
hereunder, and (ii) that the parties are not partners, joint venturers,
employees or agents of or with each other.

16. No Third Party Beneficiaries. This Agreement is for the sole benefit of the
parties hereto and their respective subsidiaries, and nothing expressed or
implied shall give or be construed to give any other person any legal or
equitable rights hereunder, whether as a third party beneficiary or otherwise.

17. Entire Agreement. The Transaction Documents, including all Exhibits attached
hereto (as may be amended from time to time to reflect the inclusion of
Additional Services), constitute the entire agreement of the parties pertaining
to the subject matter hereof, and supersedes all prior agreements and
understandings of the parties in connection therewith. Except as otherwise
specified herein, in the event of a conflict between a provision in this
Agreement and a provision in the Purchase Agreement, the provisions in this
Agreement shall control with respect to the subject matter described herein.

18. Amendment; Waiver. This Agreement and any Exhibit attached hereto may be
amended only by an agreement in writing among all the undersigned parties
hereto. No waiver of any provision nor consent to any exception to the terms of
this Agreement or any agreement contemplated hereby shall be effective unless in
writing and signed by the party to be bound and then only to the specific
purpose, extent and instance so provided. No failure on the part of any party to
exercise or delay in exercising any right hereunder shall be deemed a waiver
thereof, nor shall any single or partial exercise preclude any further or other
exercise of such or any other right.

19. Notices. All notices, requests, consents, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
given (a) when delivered by hand (with written confirmation of receipt);
(b) when received by the addressee if sent by a nationally recognized overnight
courier (receipt requested); (c) on the date sent by facsimile or e-mail of a
PDF document (with confirmation of transmission) if sent during normal business
hours of the recipient, and on the next Business Day if sent after normal
business hours of the recipient or (d) on the third day after the date mailed,
by certified or registered mail, return receipt requested, postage prepaid. Such
communications must be sent to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 19):

If to Seller:

Ennis, Inc.

2441 Presidential Parkway

Midlothian, Texas 76065

Attention: Michael D. Magill

Fax: (800) 759-4271

Email: Michael_Magill@ennis.com

 

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with a copy to:

Baker Botts, LLP

2001 Ross Avenue

Dallas, Texas 75201

Attention: Neel Lemon

Fax: (214) 661-4954

E-mail: neel.lemon@bakerbotts.com

If to Buyer:

Gildan Activewear Inc.

600 de Maisonneuve Boulevard West, 33rd Floor

Montréal, Quebec H3A 3J2

Attention: Lindsay Matthews

Fax: (514) 734-8379

E-mail: LMatthews@gildan.com

with a copy to:

Sullivan & Cromwell LLP

125 Broad Street

New York, New York 10004

Attention: Brian E. Hamilton

Fax: (212) 291-9067

E-mail: Hamiltonb@sullcrom.com

20. No Assignment. Neither this Agreement nor any rights or obligations under it
are assignable by a party without the prior written consent of the other party,
and any such purported assignment is void and the assignee will acquire no
rights from such purported assignment; provided, however, either party may make
an assignment in whole or part of its rights, duties and obligations hereunder
to a controlled subsidiary thereof, and provided further that such assignment
shall not relieve the assigning party of its obligations under this Agreement.

21. Construction. All terms defined herein have the meanings assigned to them
herein for all purposes, and such meanings are equally applicable to both the
singular and plural forms of the terms defined. “Include,” “includes” and
“including” shall be deemed to be followed by “without limitation” whether or
not they are in fact followed by such words or words of like

 

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import. “Writing,” “written” and comparable terms refer to printing, typing,
lithography and other means of reproducing words in a visible form. Any
instrument or law defined or referred to herein means such instrument or law as
from time to time amended, modified or supplemented, including (in the case of
instruments) by waiver or consent and (in the case of any law) by succession of
comparable successor laws and includes (in the case of instruments) references
to all attachments thereto and instruments incorporated therein. References to a
Person are, unless the context otherwise requires, also to its successors and
assigns. Any term defined herein by reference to any instrument or law has such
meaning whether or not such instrument or law is in effect. “Shall” and “will”
have equal force and effect. “Hereof,” “herein,” “hereunder” and comparable
terms refer to the entire instrument in which such terms are used and not to any
particular article, section or other subdivision thereof or attachment thereto.
References in an instrument to “Article,” “Section” or another subdivision or to
an attachment are, unless the context otherwise requires, to an article, section
or subdivision of or an attachment to such instrument. References to any gender
include, unless the context otherwise requires, references to all genders, and
references to the singular include, unless the context otherwise requires,
references to the plural and vice versa. All accounting terms not otherwise
defined herein have the meaning assigned under GAAP.

22. Counterparts; Effectiveness. This Agreement and any amendment hereto or any
other agreement (or document) delivered pursuant hereto may be executed in one
or more counterparts and by different parties in separate counterparts. All of
such counterparts shall constitute one and the same agreement (or other
document) and shall become effective (unless otherwise provided therein) when
one or more counterparts have been signed by each party and delivered to the
other party.

23. Headings. The descriptive headings of the Articles, Sections and subsections
of this Agreement are for convenience only and do not constitute a part of this
Agreement.

24. Severability. If any provision of this Agreement is determined to be
invalid, illegal or unenforceable by any Governmental Authority, the remaining
provisions of this Agreement to the extent permitted by law shall remain in full
force and effect; provided that the essential terms and conditions of this
Agreement for both parties remain valid, binding and enforceable; and provided
that the economic and legal substance of the transactions contemplated by this
Agreement is not affected in any manner materially adverse to any party. In
event of any such determination, the parties agree to negotiate in good faith to
modify this Agreement to fulfill as closely as possible the original intents and
purposes hereof. To the extent permitted by law, the parties hereby to the same
extent waive any provision of law that renders any provision hereof prohibited
or unenforceable in any respect.

25. Governing Law; Dispute Resolution.

(a) This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Delaware without giving effect to any choice or
conflict of law provision or rule (whether of the State of Delaware or any other
jurisdiction) that would cause the application of Laws of any jurisdiction other
than those of the State of Delaware.

 

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(b) The sole and exclusive method for resolving any claim or dispute (“Claim”)
arising out of or relating to the rights and obligations of the parties under
this Agreement (other than with respect to the procedures set forth in
Section 10), whether such Claim arose or the facts on which such Claim is based
occurred prior to or after the execution and delivery of this Agreement shall be
mediation and arbitration as provided in this Section 25.

(c) Either party may give notice of a Claim in writing to the other party and
the parties shall designate a mutually agreed mediator to resolve the Claim. If
the parties are unable to agree on a mediator, they shall submit the Claim to
JAMS, Inc. in Wilmington, Delaware and request a panel of prospective neutrals
to conduct a mediation process, who shall be individuals with substantial
experience with equity purchase agreements and complex commercial contracts as
well as familiarity with Delaware law relevant to transactions of this type. The
mediation shall be convened within thirty (30) days of the notice of the Claim,
or as soon thereafter as is feasible. If the mediation is unsuccessful in
resolving the Claim, either party may give notice of its intention to arbitrate
the Claim in accordance with Section 25(d).

(d) Any arbitration to resolve a Claim shall be administered by JAMS, Inc. in
accordance with its Comprehensive Arbitration Rules and Procedures (the
“Arbitration Rules”) before one arbitrator to be appointed pursuant to the
Arbitration Rules to conduct any such arbitration. The arbitrator shall have
substantial experience with equity purchase agreements and complex commercial
contracts as well as familiarity with Delaware law relevant to transactions of
this type. All meetings of the parties and all hearings with respect to any such
arbitration shall take place in Wilmington, Delaware, or such other place as the
parties may designate. Each party to the arbitration shall bear its own costs
and expenses (including all attorneys’ fees and expenses, except to the extent
otherwise required by applicable Law), and all costs and expenses of the
arbitration proceeding (such as filing fees, the arbitrator’s fees, hearing
expenses, etc.) shall be borne equally by the parties; provided, however, that
the arbitrator may, in the arbitrator’s discretion, award costs and expenses to
the prevailing party in the arbitration.

(e) In the event that any party or any of such party’s Affiliates, associates or
representatives is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand or similar process) to disclose any information concerning
an arbitration or mediation proceeding conducted in accordance with this
Agreement (the “Disclosing Party”), such Disclosing Party shall notify the other
parties promptly of the request or requirement so that any such other party may
seek an appropriate protective order or waive compliance with the provisions of
this Section 25. If, in the absence of a protective order or the receipt of a
waiver hereunder, the Disclosing Party or any of its Affiliates, associates or
representatives believes in good faith, upon the advice of legal counsel, that
it is compelled to disclose any such information, such Disclosing Party may
disclose such portion of the information as it believes in good faith, upon the
advice of legal counsel, it is required to disclose; provided that the
Disclosing Party shall use reasonable efforts to obtain, at the request and
expense of such other party, an order or other assurance that confidential
treatment shall be accorded to such portion of the Arbitration Information
required to be disclosed as such other party shall designate. Notwithstanding
anything in this Section 25 to the contrary, the parties shall have no
obligation to keep confidential any Arbitration Information that becomes
generally known to and available for use by the public other than as a result of
the disclosing party’s acts or omissions or the acts or omissions of such
party’s

 

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Affiliates, associates or representatives. The parties agree that, subject to
the right of any party to appeal or move to vacate or confirm any decision,
judgment, ruling, finding, award or other determination of an arbitration as
provided in this Section 25, the decision, judgment, ruling, finding, award or
other determination of any arbitration under the Arbitration Rules shall be
final, conclusive and binding on all of the parties hereto and any party may
institute litigation to enforce any final decision, judgment, ruling, finding,
award or other determination of the arbitration.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.

 

ENNIS, INC. By:  

 

Name:   Keith S. Walters Title:   President, Chief Executive Officer and
Chairman of the Board GILDAN ACTIVEWEAR INC. By:  

 

Name:   Title:  

 

D-14

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Exhibit A

To The

Transition Services Agreement

The below chart includes without limitation the Services to be provided under
the Agreement, for the fees and term set forth below, by Service Provider in
favor of Service Recipient.

Service Provider shall perform the Services in accordance with the performance
standards and the other provisions of the Agreement.

Term and Pricing:

1. For the period of the Closing Date to six (6) months from the Closing Date,
Service Recipient will be billed by Service Provider solely for all documented
out of pocket expenses of Service Provider in providing the Services.

2. For the period of six (6) months from the Closing Date to twelve (12) months
from the Closing Date, Service Recipient will be billed by Service Provider for
all documented out of pocket expenses of Service Provider in providing the
Services, plus a set fee of $20,000 per month (until all Services are terminated
in accordance with the provisions of the Agreement).

3. For the period of twelve (12) months from the Closing Date to eighteen
(18) months from the Closing Date, Service Recipient will be billed by Service
Provider for all documented out of pocket expenses of Service Provider in
providing the Services, plus a set fee of $30,000 per month (until all Services
are terminated in accordance with the provisions of the Agreement).

 

Shared Services Record to Report   1.    Books and Records General Ledger   1.
   Balance Sheet Account Recon & Setup   2.    General Accounting (Monthly
Close, Monthly Reporting, Mgr Support) Fixed Assets   1.    Asset Accounting  
       a.    Capital Expenditures, Retirements, Disposals and Assets sales
transactions          b.    Based on Buyer valuations and depreciation schedules
  2.    JE Preparation / Posting          a.    Inventory Revaluation Entries  
       b.    Allocations Liquidations Entries          c.    Misc. Inventory
Entries          d.    Approved Post Tax Entries Sales Order Management   1.   
Misc. Sales/Invoicing (2 batches – cr. Memos)   2.    Sales uploads from AES to
JDE – daily & posted to A/R and G/L nightly

 

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Inventory management   1.    Validation of item numbers and G/L Accounts for
sales uploaded into JDE (no actual inventory control)   2.    Cash Accounting
(only related to A/R, A/P and payroll)          a.    Vendor set up   3.   
Rebate Accounting   4.    Allocation Booking   5.    Bank Account Management
(Accounting only) PayPal reconciliation   6.    Misc. Cash Receipts
(transactions) received into Ennis Bank Accounts for Buyer          a.   
Handling miscellaneous checks that are not associated with an invoice   7.   
JE’s/Financial statements   8.    Sales & Use Tax Returns   9.    Foreign
Currency lookup/entry   10.    Recon/JE’s/Insur/1099’s/reports   11.   
Reconciliation’s/JE’s/Insurance/Rent Invoice to Cash   1.    Invoicing, credit
servicing, collections, deductions   2.    Cash Application   3.    Post
utilizing bank lockbox info and electronic feed Accounts Receivable   1.   
Invoicing          a.    Generate invoices          b.    Distribute invoices
(mail / electronic)   2.    Credit (based upon Ennis practices except as noted)
         a.    Review customer credit profile for new and ongoing business     
    b.    Make recommendations on credit levels          c.    Order review and
release          d.    Manage reserves per Buyer policies   3.    Collections  
       a.    Manage receivables per Buyer policies          b.    Contact
customers, facilitate payment arrangements   4.    Adjustments / Deductions     
    a.    Provide recommendation or resolution of deduction items          b.   
Resolve deduction items by collecting the unearned discount, create offset or
write-off and forward to cash applications   5.    Customer Maintenance / Setup
         a.    Create/Update new customer accounts on behalf of Buyer   6.   
Reporting          a.    Provide reporting on monthly receivables and monthly
measurement requirements Procure to Pay: Accounts Payable and Purchasing   1.   
Procurement invoicing, PO’s, GR/IR resolution   2.    Invoice Entry & Exceptions
         a.    Process paper and electronic invoices          b.    Includes
Invoice/Receipt/PO Matching and Account Reconciliation activities.          c.
   Work with supplier, receiving and Newco as needed to research and resolve
invoicing exceptions

 

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         d.    Freight invoice processing   3.    Payment Processing (check /
card / EFT / wire transfer)   4.    1099 Processing at year-end - File
extract/generation ONLY (Buyer provides their own 1099 reporting until
negotiated with Ennis)   5.    Account Reconciliation   6.    PO processing and
Administration   7.    Create/Update new supplier accounts on behalf of the
buyer   8.    Miscellaneous Procurement Treasury   1.    Forwarding / receiving
funds - Normal Business Transactions (costs are included with Invoice-to-Cash
and Procure-to-Pay services) Human Resources   1.    Assist in transition of
health care benefits at year end and employee plan administration   2.    Assist
in rollover of 401k balances   3.    Provide payroll services for U.S. based
employees until transitioned to new provider   4.    Assist new company when
requested in the resolution of pre-acquisition workers comp claims   5.   
Assist new company as requested in the establishment of new providers of benefit
administrators services, such as health care, life insurance, 401k, voluntary
benefits and workman’s comp.   6.    Assist when requested in the transition of
Union CBA’s to new company   7.    Mexican labor reporting & compliance –
Handled by Tress in Mexico and owned by Alstyle   8.    Canadian labor reporting
& compliance – Handled by ADP in Canada   9.    Permit any employee of the
Company, whose primary place of work is in a building or office of Seller, to
remain in such place of work for a reasonable period of time following the
Closing Date, to be agreed in good faith between Buyer and Seller Time &
Materials – Optional Services   1.    Tax Services Collect/Extract Tax Data -
Tax data from accounting services for payroll, sales/use, property, escheat
Information Technology      General   1.    Availability and services of proper
knowledgeable employees (or secure consultants) that previously developed and
know the AES, JDE, e-commerce, other critical systems and knowledgeable of the
interfaces between systems   2.    Detailed up to date systems infrastructure
and architectures documentations (or sufficient employee resources to ensure
support for such systems)

 

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Reporting/Consolidation   1.    JDE Provide data to allow for compilation of
monthly results Financial Applications & Systems   1.    JDE Provide data to
allow for compilation of monthly results Operational Business Systems   1.   
AES eCommerce & Integration Technologies and Alstyle Technologies   1.   
Website Hosting Telecommunications   1.    WAN Circuits; Data support   2.   
VPN Connectivity   3.    Voice Circuits/Voice Telecomm, PBX services / equipment
under Ennis corporate agreement Exchange Email / Calendar   1.    Exchange
E-mail (Ennis domain), (Alstyle Domain goes with them and s/b no problem)
Calendaring, e-mail filtering Support Services   1.    Help Desk Alstyle Server
Inventory   1.    Until the Services relating to information technology are no
longer required by Buyer, permit any of the Alstyle Server Inventory included in
the Acquired Assets located in a building or office of Seller to remain in such
building or office, at which point Seller will reasonably cooperate with Buyer
in the removal of such Acquired Assets

 

D-18