Exhibit 10.1

EXECUTION VERSION

UNIT PURCHASE AGREEMENT

between

ENNIS, INC.,

as Seller,

ALSTYLE OPERATIONS, LLC,

as Buyer,

and

STEVE S. HONG

dated as of

April 1, 2016

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TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS

     1   

ARTICLE II PURCHASE AND SALE

     12   

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 Equipment Lease.

     17   

Section 2.06 Sublease.

     17   

Section 2.07 Transition Services Agreement.

     17   

Section 2.08 Bill of Sale.

     18   

Section 2.09 Closing.

     18   

ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER

     18   

Section 3.01 Organization and Authority of Seller.

     18   

Section 3.02 Organization, Authority and Qualification of the Company.

     19   

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.

     28   

Section 3.16 Insurance.

     29   

Section 3.17 Legal Proceedings; Governmental Orders.

     29   

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.

     39   

Section 3.27 No Other Representations or Warranties; Disclosure Schedules.

     39   

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER

     40   

Section 4.01 Organization and Authority of Buyer.

     40   

Section 4.02 No Conflicts; Consents.

     40   

Section 4.03 Sophistication; Investigation.

     40   

Section 4.04 Investment Purpose.

     41   

Section 4.05 Brokers.

     41   

Section 4.06 Financing.

     41   

Section 4.07 No Other Representations or Warranties.

     41   

 

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ARTICLE V COVENANTS

     41   

Section 5.01 Conduct of Business Prior to the Closing.

     41   

Section 5.02 Access to Information; Cooperation.

     43   

Section 5.03 No Solicitation of Other Bids.

     44   

Section 5.04 Notice of Certain Events.

     45   

Section 5.05 Resignations.

     46   

Section 5.06 Confidentiality.

     46   

Section 5.07 Non-competition; Non-solicitation.

     46   

Section 5.08 Governmental Approvals and Consents.

     47   

Section 5.09 Books and Records.

     49   

Section 5.10 Irshad Ahmad.

     50   

Section 5.11 Employment-Related Liabilities.

     50   

Section 5.12 Joinder Agreement.

     50   

Section 5.13 Closing Conditions.

     50   

Section 5.14 Public Announcements.

     50   

Section 5.15 Further Assurances.

     50   

ARTICLE VI TAX MATTERS

     51   

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.

     55   

Section 6.07 Tax Treatment of Indemnification Payments.

     56   

Section 6.08 Survival.

     56   

Section 6.09 Overlap.

     56   

Section 6.10 Tax Refunds.

     56   

ARTICLE VII CONDITIONS TO CLOSING

     56   

Section 7.01 Conditions to Obligations of All Parties.

     56   

Section 7.02 Conditions to Obligations of Buyer.

     57   

Section 7.03 Conditions to Obligations of Seller.

     59   

ARTICLE VIII INDEMNIFICATION

     60   

Section 8.01 Survival.

     60   

Section 8.02 Indemnification By Seller.

     61   

Section 8.03 Indemnification By Buyer.

     61   

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.

     65   

Section 8.08 Effect of Investigation.

     65   

Section 8.09 Mitigation of Damages.

     65   

Section 8.10 Other Recoveries.

     66   

Section 8.11 Exclusive Remedies.

     66   

ARTICLE IX TERMINATION

     67   

Section 9.01 Termination.

     67   

Section 9.02 Effect of Termination.

     68   

 

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ARTICLE X MISCELLANEOUS

     68   

Section 10.01 Expenses.

     68   

Section 10.02 Notices.

     68   

Section 10.03 Interpretation.

     69   

Section 10.04 Headings.

     69   

Section 10.05 Severability.

     69   

Section 10.06 Entire Agreement.

     70   

Section 10.07 Successors and Assigns.

     70   

Section 10.08 No Third-party Beneficiaries.

     70   

Section 10.09 Amendment and Modification; Waiver.

     70   

Section 10.10 Governing Law; Dispute Resolution.

     71   

Section 10.11 Seller Remedies.

     72   

Section 10.12 Counterparts.

     72   

 

Exhibit A    Acquired Assets Exhibit B    Retained Assets Exhibit C    Sample
Working Capital Statement Exhibit D    Form of Equipment Lease Exhibit E    Form
of Sublease Exhibit F    Form of Transition Services Agreement Exhibit G    Form
of Bill of Sale

 

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UNIT PURCHASE AGREEMENT

This Unit Purchase Agreement (this “Agreement”), dated as of April 1, 2016, is
entered into between Ennis, Inc., a Texas corporation (“Seller”), Alstyle
Operations, LLC, a Delaware limited liability company (“Buyer”), and, solely for
purposes of Section 10.11, Steve S. Hong, an individual (“Hong”).

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”); and

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

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 2.06.

“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” means those assets of Seller set forth on Exhibit A to this
Agreement.

“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.

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

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

 

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“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.

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

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

“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.

“Bill of Sale” has the meaning set forth in Section 2.08.

“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).

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

“Buyer’s Accountants” means Cho & Khang Accounting.

 

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“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 2.09.

“Closing Date” has the meaning set forth in Section 2.09.

“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), 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).

 

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

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

“Disputed Amounts” 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 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

 

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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.

“Equipment Lease” has the meaning set forth in Section 2.05.

“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.

“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.

“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).

 

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

“Financing” means the senior secured revolving loan and term loan facility in
the amount up to $85,000,000 provided to the Company and certain of its
Subsidiaries for which Wells Fargo Bank, National Association is the
administrative and collateral agent and the lender for the revolving facility
and GACP Finance Co., LLC is the lender for the term loan facility.

“Financing Sources” means Wells Fargo Bank, National Association, in its
capacity as administrative and collateral agent and lender, GACP Finance Co.,
LLC as lender and any other lender under the Financing, together with their
respective successors and assigns.

“Financing Term Sheet” means the letter dated April 1, 2016 from the Financing
Sources to Buyer, evidencing their commitment to provide the Financing and the
relevant terms and conditions related thereto.

“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 and/or its regulations; (iv) capable of causing harm to
the Environment or to human health from exposure thereto in accordance with
Environmental Laws; and/or (v) any used recipients or containers that may have
contained or stored Hazardous Substances, including above-ground or underground
storage tanks or underground pipes or aboveground pipelines.

 

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

“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 8.04(e).

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

“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).

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

“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 and Ronald M. Graham.

“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.

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

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

“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.

“Matching Proposal” has the meaning set forth in Section 5.03(b).

“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.

“Obligations” has the meaning set forth in Section 10.12(a).

“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).

“Prime Rate” means the “Prime rate” for the “U.S.” as published in the “Money
Rates” table of The Wall Street Journal from time to time.

“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 and/or monitoring on, about or in any real property. The term
“Remediate” (when used as a verb), means to conduct a Remedial Action.

“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 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).

“Retained Assets” means those assets of the Company or any of its Subsidiaries
set forth on Exhibit B to this Agreement.

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

“Sample Working Capital Statement” means the statement attached hereto as
Exhibit C 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).

“Scheduled Closing Date” has the meaning set forth in Section 2.09.

“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

 

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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).

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

“Sublease” has the meaning set forth in Section 2.06.

“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, Diaco USA, LLC,
a California limited liability company, and (v) 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).

“Termination Fee” has the meaning set forth in Section 5.03(c).

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

 

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“Transaction Documents” means this Agreement, the Transition Services Agreement,
the Equipment Lease, the Bill of Sale 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 2.07.

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

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

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

“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 $76,000,000 (the “Base Amount”), subject to adjustment
pursuant to Section 2.04 hereof (the Base Amount as so adjusted, the “Purchase
Price”). 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), 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.

 

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(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

(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”),

 

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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 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 and/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

 

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agreement of Buyer and Seller (the “Independent Accountants”) who, acting as
experts 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 of
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 the 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 the 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 and/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 Closing Working Capital Statement,
after all Disputed Items 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;

 

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  (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 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;

 

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  (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 Equipment Lease. 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, an equipment lease in the form attached hereto as Exhibit D
(the “Equipment Lease”), whereby Buyer shall agree to lease from Seller the
Retained Assets on the terms and conditions set forth therein.

Section 2.06 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 E (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 2.07 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 F (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.

 

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Section 2.08 Bill of Sale. Effective as of the Closing Date, Buyer and Seller
shall execute a Bill of Sale in the form attached hereto as Exhibit G (the “Bill
of Sale”) pursuant to which Seller shall transfer to Buyer and Buyer shall
accept from Seller the Acquired Assets.

Section 2.09 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 April 29, 2016 (the “Scheduled Closing Date”); provided,
however, that the Scheduled Closing Date may be extended by Buyer for up to
fifteen (15) days in the event that, notwithstanding the good faith and
commercially reasonably efforts of Buyer, any of the conditions to Closing set
forth in Article VII have not been satisfied or waived (other than conditions
which, by their nature, are to be satisfied at the Closing) as of April 29,
2016; provided further, that, subject to Section 9.01, in the event that the
conditions set forth in Section 7.01(a) have not been satisfied as of the
Scheduled Closing Date, the Scheduled Closing Date shall automatically be
extended to the date that is three (3) Business Days following the date on which
the conditions set forth in Section 7.01(a) are satisfied (the date on which the
Closing occurs, 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 to consummate the transactions
contemplated hereby. 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 the consummation by Seller of the
transactions contemplated hereby 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.

 

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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 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.

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 Laws. 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) 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.

(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.

 

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(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 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 28, in each of the years 2015 and 2014 and the related statements of
income for the years then ended (the “Annual Financial Statements”), and
consolidated unaudited financial statements consisting of the balance sheet of
the Company as at January 31, 2016 and the related statement of income for the
11 month period then ended (the “Interim Financial Statements” and, together
with the Annual Financial Statements, the “Financial Statements”) are included
in the Disclosure Schedules. The Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis throughout the period
involved, subject to (a) the absence of notes (that, if presented, would not
differ materially from those presented in Seller’s annual consolidated audited
financial statements) and (b) in the case of the Interim Financial Statements,

 

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normal and recurring year-end adjustments (the effect of which will not be
materially adverse). 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 January 31, 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 and/or non-recurring items for the periods covered by the
Financial Statements that are not individually and separately identified in the
Financial Statements.

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, and/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 capital stock, units or other ownership interests);

(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 capital stock, units or
other ownership interests);

(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,

 

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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;

(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) any 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;

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

 

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

(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) any 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;

 

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provided, however, that a Contract shall not be 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 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) any other Contract that is material to the Company and not previously
disclosed pursuant to this Section 3.09.

(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

 

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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.

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 included. 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 before whom such Real Property was granted. With respect
to owned Real Property, Seller has delivered or made available to Buyer 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 true, complete and correct
copies of any leases affecting the Real Property. The

 

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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 to the Knowledge of
Seller 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 equipment and other
tangible personal property to be leased by A&G pursuant to the Equipment lease
as of the Closing, 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;

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

 

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(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;

(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 and/or 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 or jointly with other Persons, 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.

(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.

 

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(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.

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.

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 and/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.

 

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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 the 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.
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 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.

 

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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.

(b) All Permits required for the Company and its Subsidiaries to conduct their
business have been obtained by it and are valid and in full force and effect,
except for any Permits the absence of which would not disrupt or have a Material
Adverse Effect on the Company’s operations. 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 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 or have a Material Adverse Effect on the
Company’s operations. To the Knowledge of the 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).

 

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(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.

(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) 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.

 

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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 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, 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 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

 

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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 the 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 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.

 

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(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) To the Knowledge of Seller, 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 (upon the assignment of the Ahmad
Employment Agreement to A&G in accordance with Section 5.10), is eligible for
benefits under any deferred compensation plan that is subject to Section 409A of
the Code.

(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.

 

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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. 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) To the Knowledge of Seller, 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 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 to Seller’s Knowledge, 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.

 

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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 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 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) 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.

 

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(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.

(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.

(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

 

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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.

(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) Less than 50% of the value of the Mexican Subsidiaries’ allocation in the
Purchase Price derives directly or indirectly from real estate located in
Mexico.

(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.

 

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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. 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 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.

Section 3.26 Bank Accounts; Attorneys in Fact. Section 3.26 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.

Section 3.27 No Other Representations or Warranties; Disclosure Schedules.
Except for the representations and warranties contained in this Article III (as
modified by the Disclosure Schedule) and any officer’s certificate delivered at
the Closing pursuant to Section 2.03(a), all of which are true and correct as of
the date hereof, 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 Schedule) and any officer’s
certificate delivered at the Closing pursuant to Section 2.03(a), 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 limited liability
company duly organized, validly existing and in good standing under the Laws of
the state of Delaware. 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) except as set forth in Section 4.02 of the Disclosure Schedules, 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.

Section 4.03 Sophistication; Investigation. Buyer and its representatives are
experience 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

 

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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 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. Except for Mazzone & Associates, 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, from its own sources and from the Financing
Sources (as reflected in the Financing Term Sheet), will, upon satisfaction of
the conditions in this Agreement, 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 and any officer’s
certificate delivered at the Closing pursuant to Section 2.03(b), all of which
are true and correct as of the date hereof, 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(b), 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 the Purchaser 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

 

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(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 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 and 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) Seller will 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 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

(j) 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, its Financing Sources and its and their Representatives
reasonable access 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, its
Financing Sources and its and their Representatives with such financial,
operating and other data and information related to the Company as Buyer or any
of its Representatives may reasonably request; (c) instruct the Representatives
of Seller and the Company to cooperate with Buyer and its Financing Sources in
its investigation of the Company and its Subsidiaries; and (d) provide Buyer and
its Financing Sources, at the expense of Buyer, all cooperation that is
reasonably requested by Buyer in connection with the Financing,
including: (i) participating in due diligence sessions with the Financing
Sources, (ii) executing and delivering at the Closing any necessary pledge and
security documents and otherwise facilitating the granting of the first priority
perfected security interests in and liens upon the collateral contemplated under
the Financing (and including mortgages as to any real property collateral and
agreements by Seller to allow the Financing Sources to use the assets subject to
the Equipment Lease, to receive the benefits of the services under the
Transition Services Agreement and otherwise relating to the handling of
collections of accounts receivable and other matters concerning the collateral
for the Financing) and providing customary deliverables, (iii) obtaining
surveys, title insurance, customary landlord, warehouse and bailee lien and
access waivers and deposit and investment account control agreements at the sole
expense of and as requested by Buyer on behalf of the Financing Sources,
(iv) taking all corporate actions, subject to the occurrence of the Closing,
necessary to permit the consummation of the Financing and to permit the proceeds
thereof to be made available to the Company, including entering into one or more
credit agreements, indentures and/or other instruments on terms satisfactory to
Buyer in connection with the Financing, in each case to be effective immediately
prior to the Closing to the extent direct borrowings or debt incurrence by the
Company is contemplated in the Financing. 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.

 

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Section 5.03 No Solicitation of Other Bids.

(a) 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.

(b) In the event that Seller receives an unsolicited Competing Proposal from any
Person, Seller may participate in discussions with such Person, disclose any
information concerning the Company to such Person and permit such Person to
conduct customary due diligence review of the Company and the Subsidiaries,
provided that Seller may not disclose any of the terms of this Agreement which
have not been publicly disclosed in accordance with applicable Law. If the Board
of Directors of Seller, in the exercise of its fiduciary duties to Seller’s
stockholders, deems an unsolicited Competing Proposal to be superior to the
terms of the transactions contemplated by this Agreement, Seller shall promptly,
and in any event within three (3) Business Days of the determination by its
Board of Directors, advise Buyer orally and in writing of the terms of the
Competing Proposal and, subject to Seller’s and the Company’s compliance with
any applicable confidentiality agreement, provide copies of the Competing
Proposal to Buyer. Upon receipt of written notification, Buyer shall have five
(5) Business Days in which to indicate that it will match all of the terms of
the Competing Proposal, including, but not limited to, the price (such proposal,
a “Matching Proposal”). For purposes of this Section 5.03, Buyer shall be deemed
to match the price term of a Competing Proposal if the revised price offered by
Buyer is equal to the price in the Competing Proposal minus the Termination Fee
payable to Buyer in accordance with Section 5.03(c); provided that, for the
avoidance of doubt, if Buyer’s revised price term is deemed to match the price
term of the Competing Proposal but Buyer does not otherwise match each of the
other terms of the Competing Proposal (other than terms related to the structure
of the transaction if the structure proposed by the Competing Proposal is a
sale, lease, exchange or other disposition of the Company’s properties or
assets), such revised price shall not be deemed to constitute a Matching
Proposal for purposes of this Section 5.03. If Buyer delivers to Seller a
Matching Proposal within five Business Days, Seller shall immediately cease
discussions with the Person making the Competing Proposal and Seller’s rights
under this Section 5.03(b) to engage in discussions concerning an unsolicited
Competing Proposal shall terminate. For the avoidance of doubt and
notwithstanding anything to the contrary herein, a Competing Proposal may not be
deemed to be superior to the terms of the transactions contemplated by this
Agreement unless such Competing Proposal exceeds the material economic and
non-economic terms of this Agreement (other than any terms set forth herein
related to the timing of the Closing and any regulatory approvals required by
this Agreement or the transactions contemplated hereby) and shall not provide
any material concessions to the buyer under the Competing Proposal that are not
made available to Buyer under this Agreement.

(c) In the event that Buyer does not deliver to Seller a Matching Proposal
within five (5) Business Days of Buyer’s receipt of the Competing Proposal from
Seller, Seller may terminate this Agreement in accordance with Section
9.1(c)(iii) and shall, upon termination of this Agreement, pay to Buyer the
amount of $3,000,000 (the “Termination Fee”), which shall be Buyer’s sole right
and remedy with respect to a termination of the Agreement in accordance with
this Section 5.3 and Section 9.1(c)(iii).

 

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Section 5.04 Notice of Certain Events.

(a) From the date hereof until the Closing, Seller shall promptly notify Buyer
in writing of:

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

(ii) 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;

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

(iv) 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.

(b) If any event, condition, fact or circumstance that is required to be
disclosed pursuant to this Section 5.04 requires any change in the Disclosure
Schedule, or if any such event, condition, fact or circumstance would require
such a change assuming the Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then Seller shall promptly deliver to Buyer an update to the
Disclosure Schedule specifying such change. Each update shall be deemed to
supplement or amend the Disclosure Schedule for the purpose of determining the
accuracy of any representation or warranty made by the Company or Seller in this
Agreement, whether for purposes of Article VIII or otherwise under this
Agreement (other than in connection with any willful breach, intentional
misrepresentation or fraud), but shall not be deemed to supplement and amend the
Disclosure Schedule for the purpose of determining whether any of the conditions
set forth in Section 7.02 has been satisfied.

 

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Section 5.05 Resignations. Seller shall deliver to Buyer written resignations,
effective as of Closing Date, of the Board of Managers of the Company and the
governing board of each of the non-Mexican Subsidiaries, as well as the
resignation of the board members of each Mexican Subsidiary, in each case to be
effective on the Closing.

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 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

 

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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.

(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

 

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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. 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.

(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.

 

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(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.

(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 Law.

 

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Section 5.10 Irshad Ahmad. Prior to the Closing Date, Seller shall transfer and
assign all of its rights and obligations under the Ahmad Employment Agreement to
A&G. 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.

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

(a) 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.

(b) Buyer shall use commercially reasonable efforts to take or cause to be
taken, all actions necessary and proper to obtain the Financing on the terms and
conditions set forth in the Financing Term Sheet. Buyer shall keep Seller
informed on a current basis and in reasonable detail of the status of its
efforts to obtain the Financing.

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), 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 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 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 reasonably required to carry out the
provisions hereof and give effect to the transactions contemplated by this
Agreement.

 

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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; provided, however, that
in the event that any value added or other similar Taxes are due and payable as
a result of the transfer of any of the Retained Assets by the Company or any of
its Subsidiaries to Seller or any of its Affiliates on or prior to the Closing
Date, such Taxes shall be borne 100% by Seller. 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, 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

 

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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 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 the terms
set forth therein. 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).

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
Article VI; (c) all Taxes of the Company or relating to the business of the
Company for all 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 predecessor of the Company) 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 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 and/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.

 

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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 with 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.

(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,
and/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

 

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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 calendar 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 Section 6.04(a)(ii), Buyer shall pay such
amount to the 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, and/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).

 

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(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 for all purposes (including Tax and
financial accounting) 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 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.

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. 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 tax authorities. 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 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

 

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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 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.

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 the Buyer make any payment with respect to any refund for a
Tax (and such refunds shall be for the benefit of the 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 the
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.

 

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(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.

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 and 3.24, 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 (in the case
of any representation or warranty qualified by materiality or Material Adverse
Effect) or in all material respects (in the case of any representation or
warranty not qualified by 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). The representations and
warranties of Seller contained in Sections 3.01, 3.02, 3.03, 3.06 and 3.24 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.

 

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(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) and Section 7.02(b) 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.

(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 Interests of the
Subsidiaries) and Buyer shall have received customary payoff letters in form and
substance reasonably satisfactory to it evidencing such termination and
releases.

 

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(n) All conditions of the Financing Sources to fund the Financing, as reflected
in the Financing Term Sheet, which are related to Seller and/or the Company
and/or its Subsidiaries, have been satisfied.

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

(p) Buyer shall have received possession (in Mexico) of original copies of the
Corporate Records;

(q) 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;

(r) 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;

(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 no later than five Business
Days prior to the Closing Date) and the granting of powers of attorney to the
Persons determined by Buyer.

(s) 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 Material
Adverse Effect) or in all material respects (in the case of any representation
or warranty not qualified by 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). 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.

 

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(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 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 Purchase
Price (as adjusted pursuant to Section 2.04(a)) 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, 4.01 and 4.05 shall survive indefinitely. All covenants and
agreements of the parties contained herein (other than any

 

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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 thereof shall be pursuant to Article VI), as of the date
such representation or warranty was made, as supplemented by any update to the
Disclosure Schedules pursuant to Section 5.04(b), 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, 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 Article VI, it being
understood that the sole remedy for any such breach thereof shall be pursuant to
Article VI).

 

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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, 3.03, 3.19, 3.20 and
3.24 (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 $760,000.00, at which point Seller will indemnify the Buyer
Indemnitees for all Losses in excess of $760,000.00.

(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 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
$760,000.00, at which point Buyer will indemnify the Seller Indemnitees for all
Losses in excess of $760,000.00.

(c) The maximum amount of losses for which either party is obligated to
indemnify the other pursuant to this Article VIII shall be $7,600,000.00 (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, 3.12, 3.19, 3.22 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.

 

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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, the Indemnified Party shall give the
Indemnifying Party reasonably prompt written notice thereof, but in any event
not later than 15 calendar days after receipt of such notice of such Third Party
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
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

 

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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 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 calendar 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

 

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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 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
excluding/and 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.

 

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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, 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, 10.10 and 10.11, 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 intentional misconduct.

 

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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

(ii) any of the conditions set forth in Section 7.01 or Section 7.02 shall not
have been, or if it becomes apparent that any of such conditions will not be,
fulfilled by June 30, 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) any of the conditions set forth in Section 7.01 or Section 7.03 shall not
have been, or if it becomes apparent that any of such conditions will not be,
fulfilled by June 30, 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; or

(iii) Seller complies with the terms of Section 5.03 and accepts a Competing
Proposal.

(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.

 

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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 5.03, Section 5.06 and Article X
hereof; and

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

(b) Notwithstanding anything to the contrary in this Agreement, no Financing
Source or any of its Representatives shall have any liability to Seller or any
of its Affiliates relating to or arising out of this Agreement, the Financing or
in respect of any other document or theory of law or equity or in respect of any
oral representations made or alleged to be made in connection herewith or
therewith, whether at law or equity, in contract, in tort or otherwise, and
neither Seller nor any of its Affiliates shall be entitled to bring or maintain
any Action against any Financing Source or its Representatives in connection
with this Agreement or the Financing, any of the transactions contemplated
hereby or thereby (or the abandonment or termination thereof) or any matters
forming the basis for such termination.

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 and Seller shall be equally responsible for all filing
and other similar fees payable in connection with any filings or submissions
under the HSR Act and the LFCE and Buyer shall pay all amounts payable to
Mazzone & Associates.

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

 

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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:    Alstyle Operations, LLC    1237 W.
Walnut Street    Compton, CA 90220    Attention:    Steve S. Hong       Kirby
Schnebly    Fax:    (310) 537-7096    E-mail:    united-mrhong@hotmail.com      
kirbyscn@hotmail.com with a copy to:    Lamb and Kawakami, LLP    333 S. Grand
Ave. Suite 4200,    Los Angeles, CA 90071    Attention:    Andrew J. Demetriou ,
Esq.    Fax:    (213) 630-5555    Email:    ademetriou@lkfirm.com

Section 10.03 Interpretation. For purposes of this Agreement, (a) the words
“include,” “includes” and “including” shall be deemed to be followed by the
words “without limitation”; (b) the word “or” is not exclusive; and (c) the
words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this
Agreement as a whole. Unless the context otherwise requires, references herein:
(x) to Articles, Sections, Disclosure Schedules and Exhibits mean the Articles
and Sections of, and Disclosure Schedules and Exhibits attached to, this
Agreement; (y) 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 (z) to a
statute means such statute as amended from time to time and includes any
successor legislation thereto and any regulations promulgated thereunder. 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. 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.

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

 

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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; (a) 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; and (b) except that Buyer may
assign any of its rights or interests hereunder or under the Transition Services
Agreement or any of the other related agreements or documents to a Financing
Source or any agent for any of them and their respective successors and assigns
as security for amounts owing to them. 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, except that the Financing Sources shall be
express third-party beneficiaries of Sections 5.02(a) - (d), 9.02(b), 10.06,
10.07(b), 10.09 and 10.10(f).

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 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. The provisions of this Agreement for which the Financing
Sources are third party beneficiaries as set forth in Section 10.08 shall not be
terminated or modified in such a manner as to adversely affect the rights of any
Financing Sources unless the affected Financing Sources shall have consented in
writing, such consent not to be unreasonably withheld, to such termination or
modification.

 

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Section 10.10 Governing Law; Dispute Resolution.

(a) Except as set forth in Section 10.10(f), 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) Except as set forth in Section 10.10(f), 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.

(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

 

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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.

(f) Notwithstanding anything to the contrary herein, each of the Parties hereto
agrees that it will not bring or support any Action of any kind or description,
whether in contract, tort, equity, or otherwise, against a Financing Source in
any way relating to this Agreement or any of the transactions contemplated
hereby, including any dispute arising out of or relating in any way to the
Financing, in any forum other than the Supreme Court of the State of New York
sitting in the Borough of Manhattan in the City of New York, or, if under
applicable Law exclusive jurisdiction is vested in the federal courts, the
United States District Court for the Southern District of New York (and
appellate courts thereof) sitting in the Borough of Manhattan in the City of New
York. To the maximum extent permitted by applicable law, each of the Parties
hereto irrevocably waives any and all rights to a trial by jury in respect of
any claim, controversy or dispute (whether based in contract, tort or otherwise)
against a Financing Source.

Section 10.11 Seller Remedies.

(a) In the event that this Agreement is terminated by Buyer as a result of the
unavailability of the Financing by June 30, 2016 for any reason other than due
to the action or inaction of Seller, Hong hereby agrees to pay to Seller a sum
equal to $500,000, which shall be Seller’s sole right and remedy with respect to
a termination of the Agreement pursuant to this Section 10.11(a).

(b) In the event that this Agreement is terminated by Seller as a result of any
breach of this Agreement by Buyer other than as set forth in Section 10.11(a),
then Seller shall have the right to pursue any and all rights and remedies
available to Seller pursuant to this Agreement and any applicable Law.

Section 10.12 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

 

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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 ALSTYLE OPERATIONS, LLC By:  

/s/ Steve S. Hong

Name:   Steve S. Hong Title:   Manager

/s/ Steve S. Hong

Steve S. Hong

 

[Signature Page to Unit Purchase Agreement]

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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      

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Midlothian    ASRV01       ASRV01    2008 R2    Alstyle AES2 SQL Server -
Production    Alstyle Locations       KQ86K2Z Midlothian    ASRV10       ASRV10
   2012    Alstyle Production Web Server    Alstyle Locations & Customers      
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 Enterprise System source code stored on the computer in the
possession of Irshad Ahmad.

 

  •   The desktop/laptop computers and peripheral equipment (printers, monitors,
mouses, external hard drives, etc.) individually and specifically assigned to
and utilized by any Ennis, Inc. employees whose employment will be transferred
to Alstyle Apparel, LLC on or before the Closing Date, all as reasonably
determined by Ennis, Inc. in consultation with Irshad Ahmad. Such additional
equipment will not include computer or printing equipment that is jointly used
by Ennis, Inc. employees generally.

 

2

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EXHIBIT B

Retained Assets

See Exhibit A to the Equipment Lease which is incorporated by reference herein.

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

EXHIBIT C

Sample Working Capital Statement

 

(in U.S. dollars)

   January 31,
2016  

CURRENT ASSETS

  

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

   $ 905,499   

Temporary Investments

   $ —     

Trade Receivables, net

   $ 17,553,726   

Other Receivables

   $ 54,322   

Prepaid Expenses

   $ 3,714,093   

Inventories, net

   $ 71,175,949   

Other Current Assets

   $ —        

 

 

 

TOTAL CURRENT ASSETS

   $ 93,403,589      

 

 

 

CURRENT LIABILITIES

  

Accounts Payable

   $ (6,448,021 ) 

Accrued Compensation & Benefits

   $ (3,894,793 ) 

Taxes other than Income

   $ (36,869 ) 

Other Accrued Expense

   $ (356,697 )    

 

 

 

TOTAL CURRENT LIABILITIES

   $ (10,736,380 )    

 

 

 

WORKING CAPITAL

   $ 82,667,209      

 

 

 

 

(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 January 31, 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.

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EXHIBIT D

Form of Equipment Lease

See attached.

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EXHIBIT E

Form of Sublease

See attached.

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EXHIBIT F

Form of Transition Services Agreement

See attached.

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EXHIBIT G

Form of Bill of Sale

See attached.