Edgar Filing: ENNIS, INC.

Amendment No. 1 to Form S-4

Index to Financial Statements

As filed with the Securities and Exchange Commission on September 29, 2004

Registration No. 333-118786

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

AMENDMENT NO. 1

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Ennis, Inc.

(Exact name of registrant as specified in its charter)

Texas

2761

75-0256410

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

2441 Presidential Pkwy.

Midlothian, Texas 76065

(972) 775-9801

(Address, including zip code, and

telephone number, including area code

of registrant’s principal executive offices)

Keith S. Walters

Chairman,

CEO and President

Ennis, Inc.

2441 Presidential Pkwy.

Midlothian, Texas 76065

(972) 775-9801

(Name, address, including zip code, and telephone

number, including area code, of agent for service)

With copies to:

Norman R. Miller, Esq.

Paul C. Cancilla, Esq.

Kirkpatrick & Lockhart LLP

2828 N. Harwood Street, Suite 1800

Dallas, Texas 75201-6966

(214) 939-4900

Kenneth Hartmann, Esq.

Joseph H. Greenberg, Esq.

Gardner Carton & Douglas LLP

191 N. Wacker Drive, Suite 3700

Chicago, Illinois 60606

(312) 569-1000

Approximate date of commencement of the proposed sale of the securities to the public: As soon as practicable after the effective date of this registration statement.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said section 8(a), may determine.

Index to Financial Statements

LOGO

Dear Ennis Shareholder:

You are cordially invited to attend a special meeting of shareholders of Ennis, Inc. to be held on November 4, 2004 at the Midlothian Community Center, One Community Circle, Midlothian, Texas commencing at 10 a.m. local time. At this special meeting, you will be asked to vote upon the issuance of shares of Ennis common stock in connection with an amended Agreement and Plan of Merger pursuant to which Centrum Acquisition, Inc. will be merged with and into a subsidiary of Ennis. If the merger is completed, Ennis will issue up to approximately 8.8 million shares of its common stock and will pay between $12.5 million and $20 million in cash to the stockholders of Centrum in exchange for all of the outstanding common stock of Centrum.

The board of directors and stockholders of Centrum have already approved the merger and the amended merger agreement. However, the merger cannot be completed unless Ennis’ shareholders approve the issuance of Ennis common stock at the special meeting. If you were a shareholder of record of Ennis common stock on October 1, 2004, you are entitled to vote at the special meeting. Whether or not you plan to attend the special meeting, please take the time to vote by completing and mailing the enclosed proxy card.

This proxy statement/prospectus also constitutes the prospectus of Ennis for the shares of Ennis common stock to be issued in the merger. Ennis trades on the New York Stock Exchange under the symbol “EBF.” On September 27, 2004, the closing price of Ennis common stock was $20.72.

The board of directors of Ennis believes that the merger is in the best interests of Ennis’ shareholders. The board has approved the merger with Centrum and recommends that you vote in favor of the proposal to approve the share issuance in connection with the merger.

Sincerely,

/s/ Keith S. Walters

Keith S. Walters

Chairman, CEO and President

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE ENNIS COMMON STOCK TO BE ISSUED IN THE MERGER OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

This proxy statement/prospectus provides you with detailed information about the merger, Ennis, Centrum and the shares of Ennis common stock that will be issued if the merger is completed. We encourage you to read this entire document carefully. Please see the section entitled “ Risk Factors” beginning on page 21 for a discussion of potential risks associated with the merger.

This proxy statement/prospectus is dated September 29, 2004 and is first being mailed to Ennis shareholders on or about October 1, 2004.

Index to Financial Statements

ENNIS, INC.

2441 Presidential Pkwy.

Midlothian, Texas 76065

(972) 775-9801

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To Be Held On November 4, 2004

Notice is hereby given that a special meeting of shareholders of Ennis, Inc., a Texas corporation, will be held on November 4, 2004, at the Midlothian Community Center, One Community Center, Midlothian, Texas commencing at 10 a.m., local time, to consider and vote upon the following matters described in the accompanying proxy statement/prospectus:

1. To approve the issuance of shares of Ennis common stock to the holders of all of the capital stock of Centrum Acquisition, Inc. in connection with the merger of Centrum with and into a subsidiary of Ennis pursuant to the terms of the Agreement and Plan of Merger dated as of June 25, 2004 among Ennis, Centrum, and Midlothian Holdings LLC, a subsidiary of Ennis formed solely for the purpose of effecting the merger, as amended by the First Amendment to Agreement and Plan of Merger dated as of August 23, 2004.

2. To act on such other matters as may properly come before the special meeting or any adjournment or postponement of the special meeting.

The merger agreement and first amendment to the merger agreement are more completely described in the accompanying proxy statement/prospectus, and a copy of each is attached as Annex A and Annex B, respectively, to the proxy statement/prospectus. Please review these materials carefully and consider fully the information set forth therein.

Only holders of record of Ennis common stock at the close of business on October 1, 2004 will be entitled to notice of, and to vote at, the special meeting and any adjournment or postponement thereof. Approval of the share issuance requires the affirmative vote of the holders of at least a majority of the votes cast at the special meeting, if the holders of at least a majority of the outstanding shares of Ennis common stock are present in person or by proxy at the special meeting.

The board of directors of Ennis unanimously:

(i) has determined that the merger agreement and the transactions contemplated thereby, including the merger, are fair to, and in the best interests of, Ennis and its shareholders;

(ii) has approved and adopted the merger agreement and approved the merger and the other transactions contemplated thereby; and

(iii) recommends that the shareholders of Ennis vote “FOR” approval of the issuance of shares of Ennis common stock in connection with the merger.

Index to Financial Statements

Your vote is important. Whether or not you plan to attend the special meeting, please complete, date, sign and return the enclosed proxy card promptly. This will assure your representation at the special meeting and may avoid the cost of additional communications. This will not prevent you from voting in person at the special meeting. You may revoke your proxy at any time before it is voted by signing and returning a later dated proxy with respect to the same shares, by filing with the Secretary of Ennis a written revocation bearing a later date, or by attending and voting in person at the special meeting.


		By Order of the Board of Directors, /s/ Keith S. Walters

Midlothian, Texas		Keith S. Walters
September 29, 2004		Chairman, CEO and President

YOUR VOTE IS VERY IMPORTANT

TO VOTE YOUR SHARES, PLEASE COMPLETE, DATE, SIGN AND MAIL THE ENCLOSED PROXY CARD, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING.

Should you have any questions regarding the special meeting or the attached proxy statement/prospectus, please contact our proxy solicitor, Georgeson Shareholder. Banks and brokers should call (212) 440-9800; all others call toll free at (877) 255-0125.

Index to Financial Statements

ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates important business and financial information about Ennis from other documents that are not included in or delivered with this proxy statement/prospectus. Such information is included in documents filed by Ennis with the Securities and Exchange Commission, which are available without charge from the Securities and Exchange Commission’s website at www.sec.gov. See “Where You Can Find More Information” beginning on page 99 for further information about Ennis.

Copies of the documents relating to Ennis may also be obtained free of charge from Ennis on the Internet at www.ennis.com under the “Investor Relations” section. You can also obtain these documents without charge by requesting them in writing or by telephone from Ennis at:

Ennis, Inc.

Attn: Harve Cathey, Vice President—Finance,

Chief Financial Officer and Secretary

2441 Presidential Pkwy.

Midlothian, Texas 76065

(972) 775-9801

If you would like to request any documents, please do so by October 28, 2004 in order to receive them before the Ennis special meeting.

All information in this proxy statement/prospectus concerning Ennis has been furnished by Ennis. All information in this proxy statement/prospectus concerning Centrum has been furnished by Centrum. While the pro forma financial information included in this proxy statement/prospectus reflects the pro forma balance sheet and statements of operations of Ennis after giving effect to the merger, such pro forma balance sheet and statements of operations are based on the financial statements of Ennis and Centrum provided by Ennis and Centrum, respectively (and, in the case of the financial information concerning Crabar/GBF, Inc., or Crabar/GBF, included in the pro forma financial information, such information was provided by the stockholders of Crabar/GBF). Ennis has represented to Centrum, Centrum has represented to Ennis and the stockholders of Crabar/GBF have represented to Ennis, that the information furnished by and concerning it is true and complete in all material respects.

Index to Financial Statements

TABLE OF CONTENTS


		Page
QUESTIONS AND ANSWERS		i

SUMMARY		1

The Companies		1

The Special Meeting and Voting		2

The Merger		3

Matters to be Considered in Deciding How to Vote		3

The Merger Agreement		5

Other Agreements		6

Recent Developments		8

Comparative Per Share Data		9

Comparative Per Share Market Price and Dividend Information		11

SELECTED HISTORICAL FINANCIAL DATA OF ENNIS		12

SELECTED HISTORICAL FINANCIAL DATA OF CENTRUM		13

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION		14

RISK FACTORS		21

THE SPECIAL MEETING		25

Date, Time and Place of the Special Meeting		25

Purpose of the Special Meeting		25

Reasons for the Special Meeting		25

Record Date; Stock Entitled to Vote; Quorum		25

Vote Required		26

Beneficial Ownership of Ennis Officers, Directors and Affiliates		26

Voting of Proxies		26

Revocation of Proxies		26

Expenses of Solicitation		26

Miscellaneous		27

THE MERGER		28

General		28

Background of the Merger		28

Ennis’ Considerations Relating to the Merger and the Share Issuance		30

Recommendation of the Ennis Board of Directors		31

Centrum’s Considerations Relating to the Merger		31

Approval by the Centrum Board of Directors and Stockholders		31

Opinion of Ennis’ Financial Advisor		32

Accounting Treatment of the Merger		36

Index to Financial Statements


		Page
Dissenters’ Rights of Appraisal		36

Material United States Federal Income Tax Consequences of the Merger		36

Regulatory Filings and Approvals Required to Complete the Merger		39

Effective Time of the Merger		39

New York Stock Exchange Listing of Ennis Common Stock to be Issued in the Merger		39

Federal Securities Laws Consequences; Stock Transfer Restrictions		39

Organizational Documents, Directors and Officers of Alstyle Apparel LLC, as the Surviving Entity		39

THE MERGER AGREEMENT		41

General		41

Merger Consideration		41

Directorship of Ennis		42

Conditions to Completion of the Merger		42

No Solicitation of Takeover Proposals		44

Termination		44

Expenses		45

Conduct of Business Pending the Merger		45

Other Covenants		46

Amendment		47

Representations and Warranties by Centrum		47

Representations and Warranties by Ennis		49

Conversion of Centrum Common Stock		49

OTHER AGREEMENTS		50

First Amendment Agreement		50

Centrum Indemnity Agreement		53

Ennis Indemnity Agreement		56

Registration Rights Agreement		56

Stock Pledge and Escrow Agreement		57

Non-Competition Agreement		57

Standstill Agreement		58

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT OF CENTRUM PRIOR TO THE MERGER		59

MANAGEMENT OF CENTRUM PRIOR TO THE MERGER		60

MANAGEMENT OF ENNIS AFTER THE MERGER		60

INTERESTS OF CENTRUM DIRECTORS IN THE MERGER		60

General		60

Non-Competition Payments		60

Index to Financial Statements


		Page
Indemnification and Insurance		60

Roger Brown Employment Agreement		61

INFORMATION CONCERNING ENNIS		62

Ennis’s Business		62

DESCRIPTION OF ENNIS CAPITAL STOCK		62

INFORMATION CONCERNING CENTRUM		64

Centrum’s Business		64

Centrum’s Management’s Discussion and Analysis of Financial Condition and Results of Operations		68

COMPARISON OF STOCKHOLDER RIGHTS		79

WHERE YOU CAN FIND MORE INFORMATION		99

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS		100

LEGAL MATTERS		100

EXPERTS		101

SUBMISSION OF FUTURE SHAREHOLDER PROPOSALS		101

FINANCIAL STATEMENTS OF CENTRUM ACQUISITION, INC. AND AFFILIATES		F-1

ANNEX A—AGREEMENT AND PLAN OF MERGER
ANNEX B—FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
ANNEX C—FAIRNESS OPINION OF BERNSTEIN, CONKLIN & BALCOMBE

Index to Financial Statements

QUESTIONS AND ANSWERS

Q: What am I being asked to vote on?

A: You are being asked to vote on the issuance of up to approximately 8.8 million shares of Ennis common stock to Centrum stockholders in connection with the merger of Centrum with and into a subsidiary of Ennis. This shareholder vote is required under the rules of the New York Stock Exchange, or NYSE, because

•

the aggregate number of shares of Ennis common stock to be issued to Centrum stockholders in the merger will exceed 20% of the total number of shares of Ennis common stock and voting power outstanding immediately prior to the completion of the merger; and

•

the issuance of shares of Ennis common stock to the Centrum stockholders in the merger may result in a “change in control” of Ennis within the meaning of the rules of the NYSE.

Ennis shareholder approval of the issuance of Ennis common stock in connection with the merger is a condition to the consummation of the merger.

Q: Why is the merger being proposed?

A: Ennis is proposing the merger because we believe the combined company will be able to compete more effectively by broadening the range of products we offer to our distribution channels to include complementary activewear. Ennis believes that the merger will favorably position the combined company in strategic distribution channels and will generate significant cash flow.

Q: What will happen if the merger is completed?

A: Ennis will acquire Centrum through the merger of Centrum with and into a wholly-owned subsidiary of Ennis.

Q: When will the merger be completed?

A: The merger will be completed when the conditions described below under “The Merger Agreement-Conditions to Completion of the Merger” are satisfied (or, where permitted, waived). Ennis and Centrum believe that the merger will be completed by November 30, 2004. There can be no guarantee, however, as to when all conditions to the merger will be satisfied (or, where permitted, waived) and the completion of the merger will occur, if at all.

Q: Do the Centrum stockholders need to approve the merger?

A: No. Centrum’s board of directors and all of its stockholders have already approved the merger.

Q: What do I need to do now?

A: After carefully reading and considering the information contained in this proxy statement/prospectus, please fill out, date and sign your proxy card. Please mail your completed proxy card in the enclosed return envelope, as soon as possible so that your shares may be represented at the special meeting. Your proxy will instruct the persons named on the proxy card to vote your shares at the special meeting as you direct on the card.

Q: Can I change my vote after I have mailed my signed proxy?

A: Yes. You may change your vote at any time before your proxy is voted at the special meeting. You can do this in several ways. First, you can send a written notice to the Secretary of Ennis stating that you would like to revoke your proxy. Second, you can complete and submit a new proxy card with a later date. Third, you can attend the special meeting and vote in person. If you have instructed a broker to vote your shares, you must follow directions received from your broker to change your vote. Further information about these procedures is contained in the section entitled “The Special Meeting” on page 25.

Index to Financial Statements

Q: If my shares are held in “street name” by my broker, will my broker vote my shares for me?

A: Your broker will vote your shares only if you instruct your broker on how to vote. Your broker will send you directions on how you can instruct your broker to vote. Your broker cannot vote your shares without instructions from you. You should therefore be sure to provide your broker with instructions on how to vote your shares.

Q: How will my shares be voted if I return a blank proxy card?

A: If you sign, date and send in your proxy card and do not indicate how you want to vote, your proxy will be counted as a vote for approval of the issuance of shares of Ennis common stock in the merger.

Q: What will be the effect if I do not vote?

A: Abstentions will have the effect of a vote against the proposal to issue shares of Ennis common stock in the merger. However, broker non-votes and a failure to vote will not affect the outcome of the vote because they will not be counted as a vote cast either for or against the proposal.

Q: Do I have dissenters’ rights of appraisal?

A: No. Neither Ennis shareholders nor Centrum stockholders will have dissenters’ rights of appraisal in connection with the merger.

Q: How will Ennis shareholders be affected by the merger and share issuance?

A: After the merger, each Ennis shareholder will have the same number of shares of Ennis common stock that such shareholder held immediately prior to the merger. However, because Ennis will be issuing new shares of Ennis common stock to Centrum stockholders in the merger, each outstanding share of Ennis common stock immediately prior to the merger will represent a smaller percentage of the aggregate number of shares of Ennis common stock outstanding after the merger. As a result of the merger, each Ennis shareholder will own shares in a larger company with more assets.

Q: What are the tax consequences of the merger?

A: Ennis and Centrum intend for the merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. For a full description of the material tax consequences of the merger, see “The Merger-Material United States Federal Income Tax Consequences of the Merger” beginning on page .

Q: What vote of Ennis shareholders is required to approve the share issuance?

A: The issuance of shares of Ennis common stock in connection with the merger requires the affirmative vote of a majority of the votes cast in person or by proxy at the Ennis special meeting, if the holders of at least a majority of the outstanding shares of Ennis common stock are present in person or by proxy at the special meeting.

Q: Are there risks associated with the merger that I should consider in deciding how to vote?

A: Yes. You should carefully read the detailed description of the risks associated with the merger in the section entitled “Risk Factors” beginning on page 21.

Q: Whom do I call if I have questions about the meeting or the merger?

A: Please contact Harve Cathey, Vice President—Finance, Chief Financial Officer and Secretary of Ennis, at (972) 775-9801 with any questions about the meeting or the merger.

Index to Financial Statements

SUMMARY

This summary highlights selected information from this proxy statement/prospectus and may not contain all of the information that is important to you. The merger agreement is attached to this proxy statement/prospectus as Annex A and the first amendment to the merger agreement is attached as Annex B. To fully understand the merger and for a more complete description of the terms of the merger, the amended merger agreement and the other agreements executed or to be executed in connection with the merger, you should carefully read this entire document, including the exhibits, and the documents we refer you to under the caption “Where You Can Find More Information” on page 99. Unless the context otherwise requires, all references to the “merger agreement” in this proxy statement/prospectus refer to the merger agreement as amended. Unless the context otherwise requires, all references in this proxy statement/prospectus to “Ennis,” “we,” “us,” and “our” refer to Ennis, Inc. and its subsidiaries, and all references to “Centrum” refer to Centrum Acquisition, Inc. and its subsidiaries. We have included page references parenthetically to direct you to a more complete description of the topics presented in this summary.

The Companies (Page 62)

Ennis, Inc.

2441 Presidential Pkwy.

Midlothian, Texas 76065

(972) 775-9801

Ennis, Inc. prints and constructs a broad line of business forms and other printed business products for national distribution primarily through independent dealers. Ennis operates in three business segments: the Forms Solutions Group, the Promotional Solutions Group and the Financial Solutions Group. The Forms Solutions Group is primarily engaged in the business of manufacturing and selling business forms and other printed business products through distributors located in the United States. The Promotional Solutions Group is primarily engaged in the design, production and distribution of printed and electronic media, presentation products, flexographic printing, advertising specialties and Post-it® Notes. The Financial Solutions Group designs, manufactures and markets printed forms and specializes in internal bank forms, secure and negotiable documents and custom products.

Centrum Acquisition, Inc.

1501 E. Cerritos Ave.

Anaheim, California 92805

(714) 765-0400

Through its subsidiaries, Centrum Acquisition, Inc. operates under the trade name Alstyle Apparel. Centrum is a leading vertically integrated manufacturer and distributor of high-quality basic activewear products to the wholesale imprinted activewear market in North America and Europe. Centrum’s product lines include T-shirts, tank tops and fleece (sweatshirts) in 100% cotton and in a variety of weights, sizes, colors and styles. Centrum’s products are marketed under the “AAA,” Murina®, Tennessee River®, Diamond Star® and Gaziani® brands, as well as offered under private label and re-labeling programs.

Index to Financial Statements

The Special Meeting and Voting (Page 25)

The Special Meeting (Page 25)

The special meeting of Ennis shareholders will be held at the Midlothian Community Center, One Community Circle, Midlothian, Texas, at 10 a.m., local time, on November 4, 2004. At the special meeting, shareholders will be asked to approve the issuance of the shares of Ennis common stock in connection with the merger.

Record Date; Voting Power (Page 25)

Ennis shareholders are entitled to vote at the special meeting if they owned shares as of the close of business on October 1, 2004, referred to as the record date. As of September 15, 2004, there were approximately 16,430,658 shares of Ennis common stock outstanding and entitled to vote at the special meeting. Shareholders will have one vote at the special meeting for each share of Ennis common stock they owned on the record date.

Vote Required (Page 26)

At the special meeting, assuming at least a majority of the outstanding shares of Ennis common stock are present in person or by proxy, the affirmative vote of a majority of the votes cast is required to approve the issuance of shares of Ennis common stock in connection with the merger.

As of September 15, 2004, shares representing approximately 1% of the total outstanding shares of Ennis common stock were held by Ennis’ directors, executive officers and their respective affiliates.

Quorum; Abstentions and Broker Non-Votes (Page 25)

A quorum must be present to transact business at the special meeting. If an Ennis shareholder submits a properly executed proxy card, even if that person abstains from voting, his or her shares will be counted for purposes of calculating whether a quorum is present at the special meeting.

A quorum at the special meeting requires the presence, whether in person or by proxy, of a majority of the Ennis common stock issued and outstanding as of the applicable record date and entitled to vote at the special meeting.

Shares held in “street name” by brokers and other record holders but not voted at the special meeting because such brokers have not received voting instructions from the underlying owners are called “broker non-votes.” An abstention occurs when a shareholder attends a meeting, either in person or by proxy, but abstains from voting. If no instruction as to how to vote is given (including an instruction to abstain) in an executed, duly returned and not revoked proxy, the proxy will be voted for each proposal to be voted on by the Ennis shareholders.

At the special meeting, abstentions and broker non-votes will be counted in determining whether a quorum is present. In addition, abstentions will have the effect of a vote against the issuance of Ennis common stock in the merger. However, broker non-votes and a complete failure to vote will not affect the outcome of the vote since they will not be counted as votes either for or against this proposal.

Index to Financial Statements

The Merger (Page 28)

How the Merger is Structured (Page 28)

To accomplish Ennis’ acquisition of Centrum, Centrum will be merged with and into a subsidiary of Ennis. Following the merger, the subsidiary will be the surviving entity in the merger, and the surviving entity will continue as a subsidiary of Ennis.

What Centrum Stockholders Will Receive in the Merger (Page 41)

In the merger, Centrum stockholders will receive a combination of cash and Ennis common stock in exchange for their Centrum shares. At least three business days prior to the closing of the merger, Ennis will notify the Centrum stockholders of the amount of cash that Ennis elects to pay to the Centrum stockholders at closing. This amount will be not less than $12.5 million and not more than $20 million and is referred to in this proxy statement/prospectus as the cash consideration.

In addition to the cash consideration, Centrum stockholders will also receive a number of shares of Ennis common stock based upon a $242 million valuation of Centrum less (i) Centrum indebtedness for interest-bearing borrowed money and funded debt outstanding as of the day of merger (this amount will be no less than $104 million minus the amount of the cash consideration), (ii) the amount of the cash consideration, and (iii) $400,000 to be paid as consideration for the non-competition agreement (as discussed in this Summary under the heading “Non-Competition Agreement”), subject to certain escrow and other holdback arrangements for indemnification and other obligations. The resulting value will be divided by $15.63, which was the average trading price of Ennis over the 30-day trading period immediately preceding the execution of the merger agreement, to determine the total number of shares of Ennis common stock to be issued in the merger. Depending on the amount of the specified Centrum debt and the cash consideration, we expect this to result in Ennis issuing approximately 8.8 million shares of its common stock in the merger. The total number of shares of Ennis common stock that will be issued in the merger will be distributed among Centrum stockholders in proportion to their ownership of Centrum common stock, subject to certain escrow and other holdback arrangements.

Ownership of Ennis Following the Merger

Depending on the amount of the cash consideration and assumed debt at the closing of the merger, we anticipate that Centrum stockholders will receive approximately 8.8 million shares of Ennis common stock in the merger. Assuming approximately 8.8 million shares are issued, after the merger, former Centrum stockholders will own approximately 35% of the outstanding shares of Ennis common stock and therefore will have the ability to exercise approximately 35% of the total voting power of Ennis. Under this scenario, Ennis shareholders will continue to hold approximately 16.6 million shares or approximately 65% of the outstanding shares of Ennis common stock after the merger.

Matters to be Considered in Deciding How to Vote (Page 31)

Recommendation of the Ennis Board of Directors (Page 31)

The Ennis board of directors believes that the merger agreement and the transactions contemplated thereby, including the merger, are fair to, and in the best interests of, Ennis and its shareholders and unanimously recommends that the Ennis shareholders vote “FOR” approval of the issuance of shares of Ennis common stock in connection with the merger.

Opinion of Ennis’ Financial Advisor (Page 32)

On June 24, 2004, Bernstein, Conklin & Balcombe delivered a written opinion to the Ennis board of directors that, as of such date, the merger, including the $242 million in aggregate merger consideration to be

Index to Financial Statements

paid in a combination of Ennis common stock and assumed liabilities was fair, from a financial point of view, to the holders of Ennis common stock. Subsequently, Bernstein, Conklin & Balcombe was provided a copy of the first amendment to the merger agreement, which provides, among other things, that between $12,500,000 and $20,000,000 of the merger consideration would be in the form of cash rather than the assumption of liabilities. Bernstein, Conklin & Balcombe determined that this first amendment did not affect its opinion or valuation analysis in any material way. The full text of Bernstein, Conklin & Balcombe’s written opinion, dated June 24, 2004, is attached to this proxy statement/prospectus as Annex C. We encourage you to read this opinion carefully in its entirety for a description of the procedures followed, assumptions made, and qualifications and limitations of the review undertaken. Bernstein, Conklin & Balcombe’s opinion was provided to the Ennis board of directors in connection with its consideration of the merger, and does not constitute a recommendation to any shareholder of Ennis as to whether to vote for or against the issuance of the shares of Ennis common stock in connection with the merger.

Approval of Centrum’s Board of Directors and Stockholders (Page 31)

Centrum’s board of directors and all of Centrum’s stockholders have approved the merger, the merger agreement and the transactions and other agreements contemplated by the merger agreement. No additional approval by Centrum’s board or stockholders is required to complete the merger and the other transactions contemplated by the merger agreement.

Material United States Federal Income Tax Consequences of the Merger (Page 36)

It is a condition to the completion of the merger, unless waived by the parties, that each of Ennis and Centrum receives a legal opinion from their respective tax counsel to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. For a full description of the material tax consequences of the merger, see “The Merger—Material United States Federal Income Tax Consequences of the Merger” beginning on page 36.

Dissenters’ Rights of Appraisal (Page 36)

Holders of Ennis common stock and Centrum common stock do not have dissenters’ rights of appraisal in connection with the merger.

Accounting Treatment (Page 36)

The merger will be accounted for using the purchase method of accounting.

Regulatory Matters (Page 39)

Market Price Information (Page 11)

Ennis’ common stock is listed on the New York Stock Exchange and traded under the symbol “EBF.” On June 24, 2004, the last full trading day on the New York Stock Exchange prior to the public announcement of the proposed merger, Ennis common stock closed at $15.66 per share. On September 27, 2004, which was the last practicable full trading day prior to the filing of this proxy statement/prospectus, Ennis common stock closed at $20.72 per share. Market prices of Centrum common stock are not available, as it is a privately held company.

Index to Financial Statements

Material Differences in the Rights of Stockholders (Page 79)

The rights of Centrum stockholders are governed by Delaware law and by Centrum’s certificate of incorporation and bylaws. Upon completion of the merger, Centrum’s stockholders’ rights as shareholders of Ennis will be governed by Texas law and by Ennis’ articles of incorporation and bylaws. Delaware law and Centrum’s certificate of incorporation and bylaws differ from Texas law and Ennis’ articles of incorporation and bylaws in some material respects.

The Merger Agreement (Page 41)

The merger agreement is attached as Annex A to this proxy statement/prospectus and the first amendment to the merger agreement is attached as Annex B to this proxy statement/prospectus, and both are incorporated by reference herein. We encourage you to read the merger agreement. It is the principal document governing the merger.

Consideration to be Received in the Merger (Page 41)

The merger consideration to be received by Centrum stockholders is described above under “—What Centrum Stockholders Will Receive in the Merger.” For a full description of the merger consideration to be received in the merger by Centrum stockholders, see “The Merger Agreement—Merger Consideration” on page 41.

Conditions to the Merger (Page 42)

Ennis and Centrum will be obligated to complete the merger only if certain conditions are satisfied or, in some cases, waived, including the following:

•

approval by Ennis shareholders of the issuance of shares of Ennis common stock in connection with the merger;

•

the receipt of an opinion from each party’s tax counsel to the effect that for federal income tax purposes the merger will be treated as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code; and

•

no law or injunction effectively prohibits the merger.

No Solicitation of Takeover Proposals (Page 44)

The merger agreement contains detailed provisions prohibiting Centrum from seeking an alternative transaction. These “no solicitation” provisions prohibit Centrum and its subsidiaries from taking any action to solicit an acquisition proposal. These provisions also prohibit Centrum from recommending, participating in discussions regarding, entering into a letter of intent or other agreement with respect to or furnishing information with respect to any takeover proposal.

Termination of the Merger Agreement (Page 44)

The merger agreement can be terminated in the following circumstances:

(i) Ennis and Centrum can jointly agree in writing to terminate the merger agreement at any time without completing the merger.

(ii) Either Ennis or Centrum can terminate the merger agreement if:

•

the merger is not completed on or before November 30, 2004, except that if either Ennis or Centrum has breached the merger agreement and the breach has caused the merger not to occur on or before November 30, 2004, then the breaching party may not exercise the right to terminate;

Index to Financial Statements

•

the holders of a majority of the votes cast, in person or by proxy, at the special meeting are not voted in favor of the issuance of the shares of Ennis common stock in connection with the merger; or

•

any order, decree, or ruling by a governmental authority that permanently enjoins, restrains or otherwise prohibits the consummation of the merger has become final and nonappealable.

(iii) Ennis can terminate the merger agreement if:

•

a material breach by Centrum of any of its representations, warranties or covenants in the merger agreement has a material adverse effect on Centrum and is not reasonably cured;

•

Centrum makes certain modifications to its disclosures in the merger agreement; or

•

Ennis is provided with a supplemental disclosure from Amin Amdani or Rauf Gajiani, the previous stockholders of Centrum’s subsidiary, under Section 2(g) of the first amendment agreement (as described under the Summary heading “Other Agreements—First Amendment Agreement”).

(iv) Centrum can terminate the merger agreement if:

•

a material breach by Ennis of any of its representations, warranties or covenants in the merger agreement has a material adverse effect on Ennis and is not reasonably cured; or

•

Ennis makes certain modifications to its disclosures in the merger agreement.

Management and Directors of Ennis After the Merger (Page 60)

Following the merger, Ennis management will not be significantly different from the current Ennis management. Ennis has agreed, however, that as long as the former Centrum stockholders own at least 10% of the outstanding common stock of Ennis, one representative of the former Centrum stockholders will be recommended to the nominating and corporate governance committee of Ennis for nomination as a director of Ennis. In addition, at the closing Ennis will enter into an employment agreement with Roger Brown, President and Chief Executive Officer of Centrum, pursuant to which Mr. Brown will serve as President and CEO of the merged company, which will be renamed Alstyle Apparel LLC, after the merger.

Effective Date of the Merger (Page 39)

We expect the merger to be completed as soon as practicable after shareholder approval of the issuance of Ennis shares in connection with the merger at the special meeting has been received. We expect this to occur prior to November 30, 2004. However, we cannot predict the exact timing because the merger is subject to the satisfaction of various conditions precedent.

Expenses (Page 45)

Each of Ennis and Centrum will bear their respective expenses incurred in connection with the merger.

Other Agreements (Page 50)

Registration Rights Agreement (Page 56)

At the closing of the merger, Ennis will enter into a registration rights agreement with the Centrum stockholders pursuant to which Ennis will agree to register, on a shelf registration statement on Form S-3, the Ennis common stock issued in the merger.

Index to Financial Statements

Standstill Agreement (Page 58)

At the closing of the merger, Ennis and the Centrum stockholders will enter into a standstill agreement which will limit the actions that Centrum stockholders will be able to take for three years after the merger in their capacities as shareholders of Ennis.

Centrum Indemnity Agreement (Page 53)

Ennis and certain principal stockholders of Centrum entered into an indemnity agreement pursuant to which those stockholders agreed to indemnify Ennis against certain breaches by Centrum of any of Centrum’s representations, warranties and covenants contained in the merger agreement and the Crabar/GBF, Inc. stock purchase agreement described below under the Summary heading “Recent Developments,” and against certain liabilities required to be borne by the Centrum stockholders pursuant to the indemnification provisions of the registration rights agreement. Generally, all such indemnification obligations lapse after two years from the closing date and may be satisfied only from a limited number of Ennis shares placed in escrow.

Ennis Indemnity Agreement (Page 56)

Ennis and certain principal stockholders of Centrum entered into an indemnity agreement pursuant to which those stockholders would be indemnified by Ennis against certain breaches by Ennis of any of Ennis’ representations, warranties and covenants contained in the merger agreement, the Crabar/GBF stock purchase agreement and against certain liabilities required to be borne by Ennis pursuant to the indemnification provisions of the registration rights agreement. Generally, all such indemnification obligations lapse after two years from the closing date and indemnification is limited to a total of $5 million for the two years, with the amount of this $5 million available in year two being equal to the lesser of $2.5 million or the amount of the $5 million left after Ennis pays claims in year one.

First Amendment Agreement (Page 50)

In connection with the merger, Ennis entered into a first amendment agreement with Centrum and certain owners of Centrum’s predecessor that amended the stock purchase agreement pursuant to which Centrum acquired A and G, Inc. and provides that, at the closing of the merger, Ennis will assume and prepay certain debt owed by Centrum to the predecessor owners, that the predecessor owners will recognize Ennis as Centrum’s successor under the stock purchase agreement and that Ennis has the benefit of indemnification provisions that were originally for the benefit of Centrum.

Non-Competition Agreement (Page 57)

At the closing of the merger, Ennis and certain principal stockholders of Centrum will enter into a non-competition agreement that will prohibit those principals from competing with Ennis or its subsidiaries for a period of two years following completion of the merger.

Stock Pledge and Escrow Agreement (Page 57)

Upon the closing of the merger, Ennis will enter into a stock pledge and escrow agreement with the Centrum stockholders, and J.P. Morgan Trust Company, NA., as escrow agent. Under the terms of the merger agreement, 319,897 of the shares of Ennis common stock otherwise issuable to the Centrum stockholders at the closing of the merger will be placed in escrow as security for potential indemnity claims by Ennis under the merger agreement, the Crabar/GBF stock purchase agreement, the indemnity agreements and the registration rights agreement.

Index to Financial Statements

Recent Developments

On June 30, 2004, Ennis purchased all of the outstanding common stock of Crabar/GBF, Inc. pursuant to a stock purchase agreement in a separate transaction from substantially the same shareholders who own Centrum. The purchase price was $18 million in cash less certain debt of Crabar/GBF. Headquartered in Dayton, Ohio, Crabar/GBF designs, manufactures and markets a broad product offering of printed business forms primarily to independent distributors. Its customer focus is principally on the financial and common carrier sectors. Crabar/GBF has manufacturing facilities in Texas, Missouri, New Jersey, Ohio, California, Massachusetts and Illinois, as well as eight sales offices located in the central and eastern United States. Generally, if the merger does not close for certain reasons, including if Ennis’ shareholders do not approve the merger at the special meeting, Ennis will be obligated to pay the Crabar/GBF stockholders an additional $2 million in cash for their shares of Crabar/GBF stock, subject to Ennis’ rights to seek recourse against the additional $2 million for breaches by the Crabar/GBF stockholders of their indemnification obligations to Ennis in connection with its purchase of the Crabar/GBF shares.

Index to Financial Statements

Comparative Per Share Data

(unaudited)

Set forth below are the basic earnings, diluted earnings, cash dividends and book value per common share data for Ennis and Centrum on a historical basis, on a pro forma combined basis, and on a pro forma equivalent basis per common share of Centrum. This information is set forth as of or for the three month period ending June 30, 2004, and as of or for the twelve months ended March 31, 2004 for Centrum and as of or for the three month period ending May 31, 2004, and as of or for the twelve months ended February 29, 2004 for Ennis.

The pro forma data was derived by combining the historical consolidated financial information of Ennis and Centrum using the purchase method of accounting for business combinations and assumes the transaction is completed as contemplated.

The Centrum pro forma equivalent share information shows the effect of the merger from the perspective of an owner of Centrum common stock. The information assumes that 8,803,583 shares of Ennis common stock will be issued in the merger and was computed by subtracting assumed cash consideration in the amount of $15 million, $400,000 in noncompetition payments and an assumed $89 million in debt (the actual amount of cash consideration and debt may be higher or lower than these assumed amounts) from the $242 million valuation and divided by $15.63, which was the average trading price of Ennis common stock during the 30 trading days immediately preceding execution of the merger agreement.

You should read the information below together with historical financial statements and related notes and other information included and incorporated by reference in this proxy statement/prospectus. The unaudited pro forma combined data below is for illustrative purposes only. The companies may have performed differently had they always been combined. You should not rely on this information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience after the merger, nor should you rely on the three-month information as being indicative of results expected for the entire year or for any future interim period.


	As of or for the six months ended August 31, 2004		As of or for the twelve months ended February 29, 2004
	(unaudited)
ENNIS COMMON STOCK:

Earnings per share
Historical (basic)	$	.61	$	1.10
Historical (diluted)		.59		1.08
Pro forma combined (basic)		.59		0.84
Pro forma combined (diluted)		.59		0.83
Cash dividends per share
Historical		.31		0.62
Pro forma combined		.31		0.62
Book value per share
Historical		7.05		6.90
Pro forma combined		10.74		14.85

Index to Financial Statements


	As of or for the three months ended June 30, 2004			As of or for the twelve months ended March 31, 2004
	(unaudited)
CENTRUM COMMON STOCK:

Earnings per share
Historical (basic)	$	10,552.50		$	9,110.00
Historical (diluted)	$	10,552.50		$	9,110.00
Pro forma equivalent (basic)	$	0.41		$	0.41
Pro forma equivalent (diluted)	$	0.41		$	0.41
Cash dividends per share
Historical	$	30,000.00		$	61,907.50
Pro forma equivalent	$	1.36		$	2.81
Book value per share
Historical	$	(14,135.00	)	$	9,832.50
Pro forma equivalent	$	(0.64	)	$	0.45

Index to Financial Statements

Comparative Per Share Market Price and Dividend Information

Ennis Common Stock

Ennis common stock is listed for trading on the New York Stock Exchange under the symbol “EBF.” The following table sets forth, for the periods indicated, dividends declared and the high and low sales prices per share of Ennis common stock on the New York Stock Exchange Composite Transactions Tape. For current price information, you should consult publicly available sources. Ennis intends to continue paying its regular quarterly dividend of $0.155 per share after the merger, although all dividends are subject to approval and declaration by the Ennis board. As a result, assuming Ennis issues approximately 8.8 million shares of its common stock in the merger, the total amount of the quarterly cash dividend payment after the merger will increase by approximately $1.36 million.


	High		Low		Dividends
Fiscal Year Ended
February 28, 2003
First Quarter	$	14.18	$	10.34	$	0.155
Second Quarter	$	14.45	$	10.75	$	0.155
Third Quarter	$	13.28	$	11.54	$	0.155
Fourth Quarter	$	13.23	$	10.70	$	0.155

Fiscal Year Ended
February 29, 2004
First Quarter	$	13.67	$	10.90	$	0.155
Second Quarter	$	15.40	$	13.44	$	0.155
Third Quarter	$	14.99	$	13.20	$	0.155
Fourth Quarter	$	17.00	$	14.58	$	0.155

Fiscal Year Ended
February 28, 2005
First Quarter	$	17.11	$	14.70	$	0.155
Second Quarter	$	19.95	$	15.26	$	0.155
Third Quarter (through September 27, 2004)	$	22.23	$	18.31	$	0.155

Centrum Common Stock

There is no established public trading market for Centrum common stock. Centrum is not aware of any transactions in its common stock and, therefore, insufficient information exists to provide representative prices.

Centrum has never declared or paid any cash dividends on its common stock, except in connection with the refinancing of Centrum’s debt, on June 30, 2004 Centrum paid a dividend to its stockholders in an aggregate amount of $12 million. Centrum currently intends to retain any future earnings to finance the growth and development of its business and therefore does not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of the board of directors and will be dependent upon Centrum’s financial condition, results of operations, capital requirements, general business conditions and other factors that the board of directors may deem relevant. In connection with Centrum’s acquisition of A and G on November 10, 2003, a cash dividend in the amount of $17,000,000 and a non-cash dividend of $3,600,000 in the form of undeveloped land, was declared and distributed to the selling stockholders of A and G at closing. Prior to November 10, 2003, A and G had a history of paying dividends to its stockholders to cover their personal tax liabilities that resulted from the pass-through income of A and G.

Index to Financial Statements

SELECTED HISTORICAL FINANCIAL DATA OF ENNIS

The following table sets forth certain historical financial data concerning Ennis as of and for the six months ended August 31, 2004 and 2003 and as of and for each of the fiscal years in the five-year period ended February 29, 2004. The following selected historical financial data as of and for each of the fiscal years in the five-year period ended February 29, 2004 have been derived from Ennis’ audited financial statements. The results of operations and other operating and financial data below as of and for the six months ended August 31, 2004 and 2003 are derived from unaudited financial statements. The unaudited financial statements include all adjustments, consisting of normal recurring accruals, which Ennis considers necessary for a fair presentation of the financial position and the results of operations for these periods. Operating results for the six months ended August 31, 2004, are not necessarily indicative of the results that may be expected for the entire year ending February 28, 2005. The data should be read in conjunction with the consolidated financial statements, related notes, and other financial information incorporated by reference herein.

(Dollars in thousands, except per share data)


	As of or for the six months ended August 31,				As of or for the years ended February 28 or 29,
	2004		2003		2004		2003		2002		2001		2000
	(unaudited)
Summary Statement of Income:
Net sales	$	139,110	$	129,877	$	259,360	$	240,757	$	236,923	$	229,186	$	176,600
Net earnings		9,952		8,601		17,951		15,247		14,966		13,177		15,123

Per Share Information:
Earnings
Basic		0.61		0.53		1.10		0.94		0.92		0.81		0.93
Diluted		0.59		0.52		1.08		0.93		0.92		0.81		0.93
Dividends		0.31		0.31		0.620		0.620		0.620		0.620		0.620

Selected Balance Sheet Data:
Total Assets	$	175,485	$	154,043	$	154,043	$	152,537	$	139,034	$	142,854	$	102,934
Long-tern Debt		16,000		7,800		7,800		18,135		9,170		23,555		462

Index to Financial Statements

SELECTED HISTORICAL FINANCIAL DATA OF CENTRUM

The following table sets forth certain historical financial data concerning Centrum for the six months ended June 30, 2004 and 2003 and for each of the five fiscal years ended December 31, 2003.

(Dollars in thousands, except per share data)


	As of or for the six months ended June 30,						As of or for the year ended December 31,
	2004			2003			2003			2002		2001			2000			1999
	(unaudited)
Summary Statement of Income:

Net sales	$	120,359		$	99,436		$	196,850		$	195,559	$	208,976		$	207,483		$	155,985
Cost of sales		94,815			74,847			153,689			152,681		173,077			169,499			128,776

Gross profit		25,544			24,589			43,161			42,878		35,899			37,984			27,209
Selling, general & administrative expenses		15,891			14,735			31,941			27,656		23,319			21,681			18,960

Income from operations		9,653			9,854			11,220			15,222		12,580			16,303			8,249
Interest expense		4,650			2,065			3,276			4,886		7,916			8,386			3,935
Write-down of investment in land		—			—			—			—		3,301			—			—

Income before provision for income taxes		5,003			7,789			7,944			10,336		1,363			7,917			4,314
Provision for income taxes(1)		712			84			565			766		644			600			68

Net income	$	4,291			7,705		$	7,379		$	9,570	$	719		$	7,317		$	4,246

Balance Sheet Data:
Net Working Capital (Deficiency)	$	(14,279	)	$	(6,413	)	$	(25,572	)	$	2,813	$	(4,833	)	$	(5,549	)	$	(1,918	)
Total Assets	$	142,462		$	96,367		$	134,487		$	103,448	$	100,320		$	116,368		$	76,704
Long term debt	$	67,358		$	16,115		$	49,217		$	20,418	$	29,512		$	37,169		$	25,025
Total debt(2)	$	108,344		$	46,680		$	106,574		$	54,832	$	62,758		$	69,224		$	45,146
Stockholders equity(3), (4)	$	(5,654	)	$	28,032		$	3,829		$	24,844	$	17,083		$	20,117		$	16,420

(1)

Centrum is a Subchapter S corporation for federal and state income taxes, and under the Internal Revenue Code. Centrum is subject to a 1.5% franchise tax, and the individual stockholders of Centrum are liable for federal and state income taxes on their own tax returns. In addition, Centrum’s consolidated and combined results of operations include the results of its Mexican corporations that are subject to their respective foreign income taxes. Accordingly, the income tax provision may not bear a direct relationship to income before income taxes.

(2)	Net of applicable factored receivables.

(3)	In connection with Centrum’s acquisition of A and G on November 10, 2003, a cash dividend in the amount of $17,000,000 and a non-cash dividend of $3,600,000 in the form of undeveloped land, was declared and distributed to the selling stockholders of A and G at closing.

(4)

On June 30, 2004, Centrum declared and distributed a dividend in the amount of $12,000,000 in connection with the refinancing of its credit facility. This dividend is discussed in more detail in the section entitled “Centrum’s Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Index to Financial Statements

UNAUDITED PRO FORMA CONDENSED COMBINED

FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial statements present the pro forma condensed combined balance sheet of Ennis at August 31, 2004, giving effect to the acquisition by Ennis of Centrum as if the transactions were consummated on that date. The pro forma condensed combined balance sheet combines Ennis’ balance sheet as of August 31, 2004 and the balance sheets of Centrum as of June 30, 2004.

Ennis’ fiscal year ends on February 28 or 29, the fiscal years of Crabar/GBF and Centrum end on December 31. The pro forma condensed combined statement of operations for the year ended February 29, 2004 combines the results of Ennis for the year then ended, Centrum’s and Crabar/GBF’s results for the 12 months ended March 31, 2004, as if the transaction were consummated March 1, 2003. The pro forma condensed combined statement of operations for the interim period ended August 31, 2004 combines the results of Ennis for the six months then ended, and Centrum’s results for the six months ended June 30, 2004 and Crabar/GBF’s results for the four months ended June 30, 2004. The Crabar/GBF results for July and August are included in the operating results of Ennis for the six months ended August 31, 2004, as if the transaction were consummated March 1, 2004.

These pro forma financial statements are based on the combined historical statements of Ennis, Crabar/GBF, and Centrum giving effect to the acquisition by Ennis of Centrum and Crabar/GBF under the purchase method of accounting, and to the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements. The pro forma adjustments set forth in the following unaudited pro forma condensed combined financial statements are estimates and may differ from the actual adjustments when they become known.

These unaudited pro forma condensed combined financial statements are based upon the respective historical consolidated financial statements of Ennis, Centrum, and Crabar/GBF. The historical financial data of Ennis for the fiscal year ended February 29, 2004 have been derived from Ennis’ audited financial statements. The results of operations and other operating and financial data below as of and for the six months ended August 31, 2004 are derived from unaudited financial statements. The unaudited financial statements include all adjustments, consisting of normal recurring accruals, which Ennis considers necessary for a fair presentation of the financial position and the results of operations for these periods. Operating results for the six months ended August 31, 2004 , are not necessarily indicative of the results that may be expected for the entire year ending February 28, 2005. The data should be read in conjunction with the consolidated financial statements, related notes, and other financial information incorporated by reference herein. The following financial information should be read in conjunction with the historical consolidated financial statements of Ennis and Centrum, and related notes and “Centrum’s Management’s Discussion and Analysis of Financial Conditions and Results of Operations” on page 68 and, for Ennis, in the reports and other information Ennis has on file with the SEC which are incorporated by reference herein.

Index to Financial Statements

Unaudited Pro Forma Condensed Combined Balance Sheet

as of August 31 and June 30, 2004

(in thousands)


	Ennis		Centrum			Combined Entities			Centrum Adj.			Refi- nancing			Pro Forma
									(a)			(b)
Reporting Date		8/31/04		6/30/04			—			—			—			—

Cash	$	8,452	$	2,865		$	11,317	(a)	$	0	(a)		(8,317	)	$	3,000
Accounts Receivable, Net		33,684		1,767			35,451			0			0			35,451
Inventories		18,742		53,798			72,540			0			0			72,540
Other Current Assets		10,573		7,599			18,172			0			0			18,172

Total Current Assets	$	71,451	$	66,029		$	137,480		$	0		$	(8,317	)	$	128,280

Property, Plant and Equipment, Net		53,008		26,168			79,176			0			0			79,176
Intangible Assets		0		18,460			18,460			0			0			18,460
Goodwill		41,058		29,222			70,280	(b)		139,310			0			209,590
Other Assets		9,587		2,583			12,170			0			5,000			17,170

Total Assets	$	175,104	$	142,462		$	317,566		$	139,310		$	(3,317	)	$	453,559

Notes Payable Banks		0		30,718			30,718			0			21,683			52,401
Accounts Payable		10,000		21,170			31,170			0			0			31,170
Accrued Expenses		17,749		18,602			36,351			0			0			36,351
Current Portion of Capital Leases		0		4,023			4,023			0			0			4,023
Current Portion of Long-Term debt		6,037		6,245			12,286			0			0			12,282

Total Current Liabilities	$	33,786	$	80,758		$	114,544		$	0		$	21,683		$	136,227

Other Long-Term Liabilities		9,635		0			9,635			0			0			9,635
Long Term Debt, net of current portion		15,800		32,358			48,158			0			0			48,158
Subordinated Debt, net of Current Portion		0		35,000			35,000			0			(25,000	)		10,000

Total Liabilities	$	59,221	$	148,116		$	207,337		$	0		$	(3,317	)	$	204,020
Shareholder’s Equity (Deficit)		115,883		(5,654	)		110,224	(d)		139,310			0			249,539

Total Liabilities and Shareholders’ Equity	$	175,104	$	142,462		$	317,566		$	139,310		$	(3,317	)	$	453,559

The accompanying notes are an integral part of the unaudited pro forma

condensed combined financial information.

Index to Financial Statements

Unaudited Pro Forma Condensed Combined Statement of Operations

for the Year Ended February 29 and March 31, 2004

(in thousands)


	Ennis			Crabar/ GBF			Centrum		Total			Crabar/ GBF Adj.			Centrum Adj.			Refi- nancing			Pro Forma
		02/29/04			3/31/04			3/31/04					—			—			—

Net Sales	$	259,360		$	72,314		$	205,039	$	536,713		$	0		$	0		$	0		$	536,713
Cost of Sales		190,812			66,281			163,397		420,490			0			0			0			420,490
Selling, General and Administrative		38,521			5,482			32,666		76,669			0			0	(b)		400	(b)		77,069

Earnings from Operations	$	30,027		$	551		$	8,976	$	39,554		$	0		$	0		$	(400	)	$	39,154
Investment Income		(29	)		0			0		(29	)		0			0			0			(20	)
Interest Expense		830			1,046			4,557		6,433			0			0	(c)		(1,876	)(c)		4,557
Other		336			0			0		336			0			0			0			336

Earnings Before Income Taxes	$	28,890		$	(494	)	$	4,419	$	32,815		$	0		$	0		$	1,476		$	34,281
Provision for Income Taxes		10,939			0			775		11,714			(193	)		948			576			13,045

Net Earnings	$	17,951		$	(494	)	$	3,644	$	21,101		$	193		$	(948	)	$	900		$	21,236

Earnings per share (g):
Basic	$	1.10																			$	.84
Fully diluted	$	1.08																			$	.83

Unaudited Pro Forma Condensed Combined Statement of Operations

for the Six Months Ended August 31, 2004 for Ennis and Six Months Ended

June 30, 2004 for Centrum and Four Months Ended June 30, 2004 for Crabar/GBF


	Ennis			Crabar/ GBF			Centrum		Total			Crabar/ GBF Adj.			Centrum Adj.			Refi- nancing			Pro Forma
Reporting Date		8/31/04			6/30/04			6/30/04		—			—			—			—			—

Net Sales	$	139,110		$	21,781		$	120,359	$	281,250		$	704		$	0		$	0		$	280,546
Cost of Sales		102,698			20,062			94,815		217,575			(1,481	)		0			0			216,094
Selling, General and Administrative		20,199			1,637			15,891		37,727			(342	)		0			200	(b)		37,585

Earnings from Operations	$	16,213		$	82		$	9,653	$	25,948		$	1,119		$	0		$	(200	)	$	26,867
Investment Income		(142	)		0			0		(142	)		0			0			0			(142	)
Interest Expense		301			274			4,650		5,225			0			0	(a)		(2,688	)(c)		2,537
Other		2			(2,092	)		0		(2,090	)		2,092			0	(b)		0			2

Earnings Before Income Taxes	$	16,052		$	1,900		$	5,003	$	22,955		$	(973	)	$	0		$	2,488		$	24,470
Provision for Income Taxes		6,100			0			712		6,812			(362	)(c)		1,673	(e)		(1,420	)(f)		9,543

Net Earnings	$	9,952		$	1,900		$	4,291	$	6,143		$	(611	)	$	(1,673	)	$	1,068		$	14,927

Earnings per share (g):
Basic	$	.61																			$	.59
Fully diluted	$	.59																			$	.59

The accompanying notes are an integral part of the unaudited pro forma

condensed combined financial information.

Index to Financial Statements

Notes to Unaudited Pro Forma Condensed Combined Financial Information

(in thousands)

1. Basis of Presentation

The pro forma financial information for Centrum presents the combination using the purchase method of accounting and assumes that debt assumed and cash consideration paid equals approximately $108 million and that 8.57 million shares of Ennis stock are utilized to consummate the transaction at the average price per share over the 30 trading days prior to executing the Agreement. The shares are valued at $15.63 per share. That would generate an enterprise value of $242 million less debt and cash of $108 million for an equity acquisition price of $134 million. For balance sheet purposes, the transaction is assumed to occur as of the balance sheet date. Ennis will be deemed the acquirer since Ennis shareholders will constitute a majority of the pro forma number of outstanding shares.

For accounting purposes in these pro forma financial statements, the fair value (new basis) of the assets of Centrum is assumed to be the balance as recorded at the interim balance sheet date. These values will be adjusted in the financial statements once the Company has appraised all of the assets and adjusted the values. Accordingly, the assets of Centrum are to be recorded at fair value as of the acquisition date and for purposes of the pro forma balance sheets, existing book values are assumed to be fair value due to the proximity of the valuation of those assets when Centrum acquired A&G, Inc. on November 10, 2003.

The assumed fair values of the Centrum assets are as follows:


	December 31, 2003		June 30, 2004
Current Assets less accounts payable & accrued expenses	$	31,784	$	26,257
Property, Plant & Equipment (Net)		27,578		26,168
Intangibles (Net)		19,406		18,460
Other Assets		2,583		2,583
Goodwill		161,920		168,532

Total Consideration Paid	$	242,000	$	242,000

Ennis amended its existing credit facility and increased it to $30 million to acquire Crabar/GBF on June 25, 2004. Ennis has entered into a committed facility with Lasalle Business Credit to borrow up to $100 million in revolving credit and up to $50 million in Term Credit. For purposes of these Pro Forma Condensed Combined Financial Statements $20 million in Term Credit is assumed with a five-year life and equal principal payments over the five-year period. The interest rates are indexed to leverage and trailing EBITDA calculations with various spreads to LIBOR and Base Rate. The new facility is considerably less expensive than the credit facilities of either Crabar/GBF or Centrum.

Index to Financial Statements

2. Pro Forma Balance Sheet Adjustments:

Interim Period Balance Sheet Adjustments

(a) To record the incremental goodwill in the Centrum Acquisitions and reset equity to the post acquisition balances.


Centrum Goodwill Calculation:

Purchase Price Paid	$	242,000
Outstanding Debt		108,344

Net Asset Value	$	133,656
Shareholder’s Deficit		(5,654	)

Incremental Non Amortizable Goodwill	$	139,310

(b) The Company believes it will consistently, on a consolidated basis, maintain $3 million in cash. As a result, the following adjustment applies the excess cash at the balance sheet date to the reduction of the line of credit.


Total Subordinated Debt Refinanced	$	25,000
Transaction Costs		5,000
Minus: Cash		8,317
Minus: Revolver		21,683

Index to Financial Statements

3. Pro Forma Condensed Combined Statements of Operations

Year Ended March 31, 2004

(a) The Statement of Operations shown are the fiscal period ending March 31, 2004 for both Centrum and Crabar/GBF as shown below:


*Centrum*
Reporting Date	Three Months Ended March 31, 2003		Year Ended December 31, 2003		Three Months Ended March 31, 2004		Last Twelve Months
Net Sales	$	48,155	$	196,850	$	56,344	$	205,039
Cost of Sales		36,188		153,689		45,896		163,397
Selling, General and Administrative		7,060		31,941		7,785		32,666

Earnings from Operations	$	4,907	$	11,220	$	2,663	$	8,976
Interest Expense		1,054		3,276		2,335		4,557
Other		0		0		0		—

Earnings Before Income Taxes	$	3,853	$	7,944	$	328	$	4,419
Provision for Income Taxes		48		565		258		775

Net Earnings	$	3,805	$	7,379	$	70	$	3,644


*Crabar/GBF*
Reporting Date	Three Months Ended March 31, 2003		Year Ended December 31, 2003			Three Months Ended March 31, 2004		Last Twelve Months
Net Sales	$	14,767	$	68,992		$	18,089	$	72,314
Cost of Sales		13,225		63,189			16,317		66,281
Selling, General and Administrative		1,271		5,544			1,209		5,482

Earnings from Operations	$	271	$	259		$	563	$	551
Interest Expense		238		1,033			251		1,046
Other		0		0			0		0

Earnings Before Income Taxes	$	33	$	(774	)	$	312	$	(494	)
Provision for Income Taxes		0		0			0		0

Net Earnings	$	33	$	(774	)	$	312	$	(494	)

(b) To adjust SG&A for amortization of financing costs of $2 million over 5 year period.

(c) To adjust the weighted interest rates in each of the periods presented to reflect the lower interest rates in the Company’s new financing.

(d) To record a tax expense at 39% effective tax rate for the operating earnings of Centrum and loss of Crabar/GBF.

(e) To record the additional tax expense for increased amortization of intangibles and financing costs, reduced by the decrease in interest expense deduction.

Index to Financial Statements

(g) The following table sets forth the number of shares used in calculating the basic and fully-diluted earnings per share numbers for the historical and pro-forma net earnings.


	Year	Interim Period
Shares used in computation:
Historical
Basic	16,358	16,417
Fully-diluted	16,602	16,716

Pro Forma
Basic	25,158	25,217
Fully-diluted	25,402	25,516

The difference between historical and pro-forma is the 8,800 shares expected to be issued in the merger.

4. Interim Period Statement of Operations

(a) To record the reduction in interest expense due to the more favorable terms under the La Salle facility, as well as the offset of cash against the stated balances.

(b) To record the quarterly amortization of financing costs of $2 million amortized over five years.

(c) To record Federal income tax expense on Centrum’s earnings and Crabar/GBF as a Subchapter C entity at a 39% effective tax rate. Centrum already recorded state income taxes on their financials for the period.

(d) To record the additional taxes due to the reduced interest expense deduction offset by the tax impact of the quarterly financing charge amortization.

(e) For each 0.0125% change in interest rates, interest expense on the additional $27,500 million of refinanced subordinated debt will change $342 thousand.

Index to Financial Statements

RISK FACTORS

In addition to the matters addressed in “Cautionary Statement Concerning Forward-Looking Statements” on page 100, the information included in this proxy statement/prospectus and the other documents referred to or incorporated by reference in this proxy statement/prospectus, you should consider the following risk factors carefully in determining whether to vote in favor of the proposal described herein.

Risks Related to the Merger

Ennis may fail to realize the anticipated benefits of the merger.

In determining that the merger is in the best interests of Ennis, the board of directors of Ennis considered that enhanced earnings may result from the consummation of the merger, including the reduction of duplicate costs, improved efficiency and cross-marketing opportunities. However, there can be no assurance that any enhanced earnings will result from the merger.

Future results of the combined companies may materially differ from the pro forma financial information presented in this proxy statement/prospectus.

Future results of the combined company may be materially different from those shown in the pro forma financial statements that only show a combination of the historical results of Ennis and Centrum. We have estimated that the combined company will record approximately $3 million of merger-related charges. The charges may be higher or lower than we have estimated, depending upon how costly or difficult it is to integrate the two companies. Furthermore, these charges may decrease the capital of the combined company that could be used for profitable, income-earning investments in the future.

The concentration of share ownership in the former Centrum stockholders as a result of the completion of the merger will allow them to control or substantially influence the outcome of matters requiring shareholder approval.

Immediately upon completion of the merger, four of the former Centrum stockholders and their affiliates will beneficially own up to approximately 35% of Ennis’ outstanding common stock. At the closing of the merger, Ennis and the Centrum stockholders will enter into a standstill agreement that will provide, among other things, that for a period of three years the Centrum stockholders will not act in concert in voting their Ennis shares, enter into a voting agreement with respect to the voting of their shares or take any other action to acquire or affect control of Ennis. Even without violating the standstill agreement, the Centrum stockholders may still be able to control, by separately voting for the same proposal or nominees by virtue of cumulative voting or otherwise, and they can substantially influence, the outcome of matters requiring approval by Ennis shareholders, including the election of directors, and approval or disapproval of significant corporate transactions.

Ennis may be required to write down goodwill and other intangible assets in the future, causing its financial condition and results of operations to be negatively affected in the future.

When Ennis acquires a business, a portion of the purchase price of the acquisition is allocated to goodwill and other identifiable intangible assets. The amount of the purchase price which is allocated to goodwill and other intangible assets is determined by the excess of the purchase price over the net identifiable assets acquired. At August 31, 2004, Ennis’ goodwill was approximately $42.6 million. As a result of the merger, Ennis expects, based upon pro forma information, that it will acquire approximately $139.3 million of additional goodwill. Under current accounting standards, if Ennis determines goodwill or intangible assets are impaired, it would be required to write down the value of these assets. Ennis conducts an annual review to determine whether goodwill and other identifiable intangible assets are impaired. Ennis completed such an impairment analysis for its fiscal year ended February 29, 2004, and concluded that no impairment charge was necessary for the that year. Ennis

Index to Financial Statements

cannot provide assurance that it will not be required to take an impairment charge in the future, especially with the additional goodwill that the merger is expected to generate. Any impairment charge would have a negative effect on its shareholders’ equity and financial results and may cause a decline in Ennis’ stock price.

Sales of substantial amounts of Ennis shares by the former Centrum stockholders could cause the market price of our shares to decline.

Upon completion of the merger, Ennis will issue to the former Centrum stockholders up to approximately 8.8 million shares of Ennis common stock. This represents approximately 35% of Ennis’ shares that will be outstanding immediately upon completion of the merger. Within 15 days after completion of the merger, Ennis has agreed to file a shelf registration statement with the Securities and Exchange Commission to register for resale the shares it issues to the former Centrum stockholders in the merger. Sales of substantial amounts of these shares at any one time or from time to time, or even the availability of these shares for sale, could adversely affect the market price of Ennis’ shares.

Ennis may encounter integration difficulties.

Ennis and Centrum may not be able to effectively integrate their operations and manage their businesses without encountering difficulties, including the loss of key employees or customers, an interruption, or loss of momentum, of their respective existing businesses or the inability to implement appropriate operational, financial and management systems and controls.

Risks Related to Centrum’s Business

Centrum obtains its raw materials from a limited number of suppliers and any disruption in its relationships with these suppliers, or any substantial increase in the price of raw materials, could have a material adverse effect on Centrum.

Cotton yarn is the primary raw material used in Centrum’s manufacturing processes. Cotton accounts for approximately 40% of the manufactured product cost. Centrum acquires its yarn from five major sources that meet stringent quality and on-time delivery requirements. The largest supplier provides over 50% of Centrum’s yarn requirements and has an entire yarn mill dedicated to Centrum’s production. Centrum is evaluating an investment in its own knitting mill although the company has no commitments to do so. The other major raw material components used in Centrum’s manufacturing processes are chemicals used to treat the fabric during the dyeing process. Centrum sole-sources the supply of these chemicals from one supplier. If Centrum’s relations with its suppliers are disrupted, Centrum may not be able to enter into arrangements with substitute suppliers on terms as favorable as its current terms and Centrum’s results of operations could be materially adversely affected.

Centrum generally acquires its cotton yarn under short-term purchase orders with its suppliers, and has exposure to swings in cotton market prices. Centrum does not use derivatives, including cotton option contracts, to manage its exposure to movements in cotton market prices. Centrum may use such derivatives in the future. While Centrum believes that it will be competitive with other companies in the United States apparel industry in negotiating the price of cotton purchased for future production use, any significant increase in the price of cotton could have a material adverse effect on Centrum’s results of operations.

Centrum faces intense competition to gain market share, which may lead some competitors to sell substantial amounts of goods at prices against which Centrum cannot profitably compete.

Demand for Centrum’s products is dependent on the general demand for T-shirts and the availability of alternative sources of supply. Centrum’s strategy in this market environment is to be a low cost producer and to differentiate itself by providing quality service to its customers. Even if this strategy is successful, its results may be offset by reductions in demand or price declines.

Index to Financial Statements

Apparel industry cyclicality.

The United States apparel industry is sensitive to the business cycle of the national economy. Moreover, the popularity, supply and demand for particular apparel products can change significantly from year to year. Centrum may be unable to compete successfully in any industry downturn due to excess capacity.

Foreign political and economic risk.

Centrum operates cutting and sewing facilities in Mexico, and sources certain product manufacturing in El Salvador, Pakistan, China and Southeast Asia. Centrum’s foreign operations could be subject to unexpected changes in regulatory requirements, tariffs and other market barriers and political and economic instability in the countries where it operates. The impact of any such events that may occur in the future could subject Centrum to additional costs or loss of sales, which could adversely affect its operating results. In particular, Centrum operates its facilities in Mexico pursuant to the “maquiladora” duty-free program established by the Mexican and United States governments. This program enables Centrum to take advantage of generally lower costs in Mexico, without paying duty on inventory shipped into or out of Mexico. There can be no assurance that the government of Mexico will continue the program currently in place or that Centrum will continue to be able to benefit from this program. The loss of these benefits could have an adverse effect on Centrum’s business.

Centrum’s products are subject to foreign competition, which in the past has been faced with significant U.S. government import restrictions.

Foreign producers of apparel often have significant labor cost advantages. Given the number of these foreign producers, the substantial elimination of import protections that protect domestic apparel producers could materially adversely affect Centrum’s business. The extent of import protection afforded to domestic apparel producers has been, and is likely to remain, subject to considerable political considerations.

The North American Free Trade Agreement (NAFTA) became effective on January 1, 1994 and has created a free-trade zone among Canada, Mexico and the United States. NAFTA contains a rule of origin requirement that products be produced in one of the three countries in order to benefit from the agreement. NAFTA has phased out all trade restrictions and tariffs among the three countries on apparel products competitive with those of Centrum. Centrum performs substantially all of its cutting and sewing in five plants located in Mexico in order to take advantage of the NAFTA benefits. Subsequent repeal or alteration of NAFTA could seriously adversely affect Centrum’s business.

The Central American Free Trade Agreement (CAFTA) became effective May 28, 2004 and retroactive to January 1, 2004 for textiles and apparel. It creates a free trade zone similar to NAFTA by and between the United States and Central American countries (El Salvador, Honduras, Costa Rica, Nicaragua and Dominican Republic.) Textiles and apparel will be duty-free and quota-free immediately if they meet the agreement’s rule of origin, promoting new opportunities for U.S. and Central American fiber, yarn, fabric and apparel manufacturing. The agreement will also give duty-free benefits to some apparel made in Central America that contains certain fabrics from NAFTA partners Mexico and Canada. Centrum sources approximately 5% of its sewing to a contract manufacturer in El Salvador, and does not anticipate that this will have a material effect on its operations.

The World Trade Organization (WTO), a multilateral trade organization, was formed in January 1995 and is the successor to the General Agreement on Tariffs and Trade (GATT). This multilateral trade organization has set forth mechanisms by which world trade in clothing is being progressively liberalized by phasing-out quotas and reducing duties over a period of time that began in January of 1995. As it implements the WTO mechanisms, the U.S. government is negotiating bilateral trade agreements with developing countries (which are generally exporters of textile and apparel products) that are members of the WTO to get them to reduce their tariffs on imports of textiles and apparel in exchange for reductions by the United States in tariffs on imports of textiles and apparel.

Index to Financial Statements

In January 2005, United States import quotas are to be removed on knitted shirts from China. The elimination of quotas and the reduction of tariffs under the WTO may result in increased imports of certain apparel products into North America. These factors could make Centrum’s products less competitive against low cost imports from developing countries.

Environmental regulations.

Centrum is subject to extensive and changing federal, state and foreign laws and regulations establishing health and environmental quality standards, and may be subject to liability or penalties for violations of those standards. Centrum is also subject to laws and regulations governing remediation of contamination at facilities currently or formerly owned or operated by Centrum or to which it has sent hazardous substances or wastes for treatment, recycling or disposal. Centrum may be subject to future liabilities or obligations as a result of new or more stringent interpretations of existing laws and regulations. In addition, Centrum may have liabilities or obligations in the future if it discovers any environmental contamination or liability at any of our facilities, or at facilities it may acquire.

Centrum depends upon the talents and contributions of a limited number of individuals, many of who would be difficult to replace.

The loss or interruption of the services of these executives could have a material adverse effect on Centrum’s business, financial condition and results of operations. Although Centrum maintains employment agreements with certain members of key management, it cannot be assured that the services of such personnel will continue.

Centrum’s total assets include substantial intangible assets and the write-off of a significant portion of unamortized intangible assets would negatively affect Centrum’s results of operations.

At December 31, 2003, goodwill and identified intangibles, net, represented approximately 36% of total assets. Intangible assets consist of goodwill and other identified intangible assets associated with the Centrum acquisition of A and G, representing the excess of cost over the fair value of tangible assets acquired. Centrum may not be able to realize the value of these assets. Goodwill and other intangible assets with indefinite lives are not amortized, but are reviewed at least annually for impairment. Acquired intangible assets with definite lives are amortized over their individual useful lives. On at least an annual basis, Centrum assesses whether there has been impairment in the value of goodwill and other intangible assets with indefinite lives. If the carrying value of the asset exceeds the estimated fair value of the related business, impairment is deemed to have occurred. In this event, the amount is written down accordingly. Under current accounting rules, this would result in a charge to operating earnings. Any determination requiring the write-off of a significant portion of unamortized goodwill and identified intangible assets would negatively affect Centrum’s results of operations and total capitalization, which could be material.

Recent Health Insurance Legislation.

On October 5, 2003, the Health Insurance Act of 2003 was signed into law in the State of California (the “Health Insurance Act”). The Health Insurance Act is a “pay or play” law requiring employers to pay a fee to the state to provide health insurance for each worker, and in some cases their dependents, unless the employer provides coverage directly, in which case the fee is waived. The result of the Health Insurance Act is that it makes health coverage a requirement by law versus elective by California employers. Employers with 200 or more persons working in California, such as Centrum, must comply by January 1, 2006. The Health Insurance Act requires that employers and employees share the costs of coverage. Employers are required to contribute at least 80% and employees the remaining amount; however, employee contributions are capped at 5% of wages for low income workers (as defined in the Health Insurance Act). Unless repealed or amended, Centrum believes that the Health Insurance Act could have an adverse effect on the future results of its operations.

Index to Financial Statements

THE SPECIAL MEETING

Ennis is furnishing this proxy statement/prospectus to its shareholders in connection with the solicitation of proxies by the Ennis board of directors for use at the special meeting of its shareholders.

The board of directors of Ennis unanimously:

(i) has determined that the merger agreement and the transactions contemplated thereby, including the merger, are fair to, and in the best interests of, Ennis and its shareholders;

(ii) has approved and adopted the merger agreement and approved the merger and the other transactions contemplated thereby; and

(iii) recommends that the shareholders of Ennis vote “FOR” approval of the issuance of shares of Ennis common stock in connection with the merger.

Date, Time and Place of the Special Meeting

The special meeting will be held on November 4, 2004, at 10 a.m., local time, the Midlothian Community Center, One Community Center, Midlothian, Texas.

Purpose of the Special Meeting

The purpose of the special meeting is to consider and vote upon the issuance of shares of Ennis common stock in connection with the merger pursuant to the merger agreement, and such other matters as may be appropriate for consideration at the special meeting. Approval of this proposal is a condition to the consummation of the merger. Unless Ennis’ shareholders approve this proposal, the merger will not be completed and the merger agreement will be terminated.

Reasons for the Special Meeting

Ennis’ common stock is listed on The New York Stock Exchange or NYSE. The rules governing companies with securities listed on the NYSE require shareholder approval in connection with the issuance of common stock (or securities convertible into or exercisable for common stock) equal to 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance (other than a public offering for cash or in private financings not involving an issuance of common stock for less than the greater of book or market value of the stock). This requirement is set forth in §312.03(c) of the Listed Company Manual of the NYSE. In addition, shareholder approval is required under §312.03(d) of the Listed Company Manual of the NYSE in connection with the issuance of securities that would result in a change of control of an issuer.

Because the merger involves the issuance by Ennis of common stock that would represent more than 20% of the currently outstanding common stock and voting power of Ennis, and because it also involves issuances to the former Centrum stockholders that could also potentially result in a change of control of Ennis for NYSE purposes, shareholder approval of the issuance of Ennis’ common stock in connection with the merger is required to maintain Ennis’ listing on the NYSE.

Record Date; Stock Entitled to Vote; Quorum

Owners of record of shares of common stock of Ennis at the close of business on October 1, 2004, the record date for the special meeting, are entitled to receive notice of and to vote at the special meeting. Ennis’ common stock is the only class of voting securities of Ennis. As of September 15, 2004, approximately 16,430,658 shares of common stock were issued and outstanding and entitled to vote at the special meeting.

Owners of record of Ennis common stock on the record date are each entitled to one vote per share with respect to the issuance of shares of Ennis common stock pursuant to the merger agreement.

Index to Financial Statements

A quorum of Ennis shareholders is necessary to have a valid meeting of shareholders. The holders of at least a majority of the shares of Ennis common stock issued and outstanding and entitled to vote at the Ennis special meeting must be represented in person or by proxy at the special meeting in order for a quorum to be established. Both abstentions and broker non-votes count as present for establishing a quorum. An abstention occurs when a stockholder attends a meeting, either in person or by proxy, but abstains from voting. A broker non-vote occurs on an item when a broker is not permitted to vote on that item without instructions from the beneficial owner of the shares and no instructions are given.

Vote Required

The affirmative vote of a majority of the votes cast in person or by proxy at the special meeting is required to approve the issuance of the shares of Ennis common stock in connection with the merger. Abstentions may be specified with respect to the proposal by properly marking the “ABSTAIN” box on the proxy for such proposal. Abstentions will have the effect of a vote against the share issuance. Broker non-votes and failures to vote will not affect the outcome of the vote, since they will not be counted as votes cast either for or against the proposal.

Beneficial Ownership of Ennis Officers, Directors and Affiliates

On September 15, 2004, the directors, executive officers and affiliates of Ennis owned or controlled the vote of 201,575 shares of Ennis common stock, constituting approximately 1% of the outstanding shares of Ennis common stock. Ennis believes that each of its directors and executive officers intends to vote “FOR” the approval of the issuance of shares of Ennis common stock in connection with the merger.

Voting of Proxies

Shares of Ennis common stock represented by properly executed proxies and received prior to the special meeting will be voted at the special meeting in the manner specified on such proxies. Proxies that are properly executed and timely submitted but which do not contain specific voting instructions will be voted “FOR” approval of the issuance of Ennis common stock in connection with the merger at the special meeting.

Ennis shareholders whose shares are held in “street name” (i.e., in the name of a broker, bank or other record holder) must either direct the record holder of their shares as to how to vote their shares or obtain a proxy from the record holder to vote at the special meeting.

Revocation of Proxies

An Ennis shareholder may revoke a proxy at any time prior to the time the proxy is to be voted at the special meeting by:

•

delivering, prior to the special meeting, to Ennis, Inc., Attn: Corporate Secretary, at 2441 Presidential Pkwy., Midlothian, Texas 76065, a written notice of revocation bearing a later date or time than the revoked proxy;

•

completing and submitting a new, later-dated proxy card; or

•

attending the special meeting and voting in person.

Attending the special meeting will not by itself constitute revocation of a proxy; to do so, a shareholder must vote in person at the meeting. If a broker has been instructed to vote a shareholder’s shares, the shareholder must follow directions received from the broker in order to change the shareholder’s vote.

Expenses of Solicitation

Ennis will bear the costs of printing and mailing this proxy statement/prospectus to its shareholders and the costs of soliciting proxies from its shareholders. In addition to soliciting proxies by mail, directors, officers and

Index to Financial Statements

employees of Ennis, without receiving additional compensation therefor, may solicit proxies by telephone, by e-mail, by facsimile or in person. Arrangements may also be made with brokerage firms and other custodians, nominees and fiduciaries to forward solicitation materials to the beneficial owners of shares held of record by such persons, and Ennis will reimburse such brokerage firms, custodians, nominees and fiduciaries for reasonable out of pocket expenses incurred by them.

In addition, Ennis has retained Georgeson Shareholder to assist in the solicitation of proxies by Ennis for a fee of $7,500 plus reasonable out-of-pocket costs and expenses. For questions or requests regarding proxies or related materials, banks and brokers should call (212) 440-9800 and all others should call toll free (877) 255-0125.

Miscellaneous

In the event that a quorum is not present at the time the special meeting is convened, the special meeting may be adjourned by a vote of the shareholders present in person or by proxy. If Ennis proposes to adjourn the meeting, the persons named in the enclosed form of proxy will vote all shares of Ennis common stock for which they have voting authority in favor of an adjournment. However, proxies voted against the proposal relating to the issuance of Ennis common stock in connection with the merger will not be voted in favor of any adjournment of the special meeting for the purpose of soliciting additional proxies.

It is not expected that any matter not referred to in this proxy statement/prospectus will be presented for action at the special meeting. If any other matters are properly brought before the special meeting, the persons named in the proxies will have discretion to vote on such matters according to their best judgment. The grant of a proxy will also confer discretionary authority on the persons named in the proxy as proxy appointees to vote in accordance with their best judgment on matters incidental to the conduct of the special meeting.

Index to Financial Statements

THE MERGER

The following discussion summarizes certain terms and provisions of the merger and the merger agreement and is qualified in its entirety by reference to the provisions of the merger agreement and first amendment to the merger agreement, which are attached to this proxy statement/prospectus as Annex A and Annex B, respectively, and are incorporated into this proxy statement/prospectus by reference. You are strongly encouraged to read the merger agreement in its entirety. Unless the context otherwise requires, all references to the “merger agreement” in this proxy statement/prospectus refer to the merger agreement as amended.

General

Ennis, its wholly-owned subsidiary, Midlothian Holdings LLC, and Centrum have entered into a merger agreement pursuant to which Ennis will acquire Centrum through the merger of Centrum with and into Midlothian Holdings LLC. Midlothian Holdings LLC will be the surviving entity in the merger and, after the effective time of the merger, will continue as a wholly-owned subsidiary of Ennis. After the merger, the name of Midlothian Holdings LLC will be changed to “Alstyle Apparel LLC.”

Background of the Merger

Ennis’ management and board of directors have discussed from time to time the benefits of acquiring new products or facilities in new markets. Over the previous five years, Ennis has acquired five companies that have contributed to its growth in sales and net income. The management and board of directors of Centrum have also from time to time discussed the benefits of potential business combination transactions as part of Centrum’s strategic business plan to maximize value to the Centrum stockholders.

At a dinner meeting with Roger Brown, President and CEO of Centrum, on May 13, 2004 in Asheville, North Carolina, held at the invitation of Keith Walters, Chairman, CEO and President of Ennis, Mr. Walters indicated his interest in combining Centrum and Ennis. Mr. Walters believed that with most of the Ennis distribution channel moving toward a larger share of promotional products as its primary sales platform, Ennis would be well served to add activewear to its manufacturing capabilities. Mr. Walters also noted that Ennis would like to buy the Crabar/GBF printing facilities in a separate transaction. Mr. Brown indicated that he was not prepared to discuss terms on the Centrum combination but would respond shortly. Mr. Brown and Mr. Walters had several conversations over the next four days to discuss the valuation of Centrum and the form of consideration to be received in exchange for the stock of Centrum. Mr. Brown also consulted with his board of directors.

Mr. Walters discussed the proposals with his management team on May 17, 2004 to elicit their comments or concerns. With the support of management, Mr. Walters invited Mr. Brown to DeSoto, Texas on May 18 and 19 to discuss the proposals in more detail. Mr. Brown had discussed the topic with his board of directors and voting stockholders over the weekend of May 15 and 16 to determine whether there was interest in further discussions. His board instructed him to pursue the matter further.

At the May 19 meeting in DeSoto, Texas, Mr. Walters and Mr. Brown established a target price of $240 million as the valuation for the Centrum combination. A timetable was established for Ennis to seek board approval, firm commitment financing, and orchestrate due diligence required of a transaction of this magnitude. Mr. Brown would seek approval from the Centrum board of directors and arrange for due diligence on his part, with the signing of a definitive agreement targeted for June 25, 2004. On a telephone call with Mr. Walters and Michael Magill on May 20, Mr. Brown indicated that a large amount of capital expenditures were being currently committed by Centrum and believed that Ennis should share in the cost of those expenditures. It was agreed that the target valuation for Centrum would be increased by $2 million with a resulting $242 million enterprise valuation for Centrum. It was separately agreed that the valuation of Crabar/GBF would be in the $18 to $20 million range. During the period from May 20 through May 28, Mr. Walters contacted most members of the board of directors to update them as to the potential of the acquisition of Crabar/GBF and the combination of Centrum with Ennis. All members contacted indicated that the proposal merited consideration by the full board of directors.

Index to Financial Statements

On the evening of May 24, Mr. Brown flew to Dallas and the next morning joined Mr. Walters, Mr. Magill and David Erickson, another member of Ennis management, to discuss progress with the respective boards of directors. Mr. Walters indicated that in the event one or both of the transactions closed, Ennis would need non-compete agreements with Mr. Brown and his partners, as well as standstill agreements. Later on the morning of May 25, Messrs. Walters, Magill, Erickson and Brown met with Lawrence Ashkin, Arthur Slaven, and John McLinden, the other directors of Centrum, at a local airport and then flew to Anaheim, California to see the Centrum facilities. During the flight, Mr. Walters explained why he thought the combination made sense from the Ennis perspective and why Ennis management believed a definitive agreement could be executed by June 25, 2004. Arriving in Anaheim, Messrs. Walters, Magill and Erickson toured the corporate offices and distribution center and viewed the knitting, dyeing and drying facility. The next morning, May 26, Messrs. Brown and McLinden, from Centrum, and Messrs. Walters and Magill from Ennis took a tour of the cutting and sewing facilities in Mexico. The parties then flew back to Anaheim and met with Lawrence Ashkin and Arthur Slaven who, along with Roger Brown and John McLinden comprised the board of Centrum.

On June 1, 2004, Mr. Magill met with Bernstein, Conklin & Balcombe to discuss its role in providing the board of directors of Ennis with a fairness opinion on the combination with Centrum. After receiving a proposal from Bernstein, Conklin & Balcombe, Mr. Magill received approval from members of the Ennis audit committee to engage Bernstein, Conklin & Balcombe to begin the process of reviewing the terms and economics of the combination. Bernstein, Conklin & Balcombe was retained on June 4 and its representatives were in Anaheim on June 7 for a meeting with management of Centrum and a tour of its facilities. On June 8, several members of Ennis management flew to Anaheim to begin due diligence on the Centrum facilities. In addition, on that date certain other members of Ennis management flew to Dayton, Ohio to begin due diligence on the Crabar/GBF acquisition. Centrum began its due diligence on Ennis on June 8 as well and engaged the Keystone Consulting Group to review the financial condition of Ennis and its operational methodology. Ennis retained Eclypse Ventures LLC to prepare pro forma financial analyses and market studies and financial modeling. Counsel to Centrum and Ennis also began legal due diligence with counsel to Ennis conducting on-site due diligence on Centrum from June 8 to June 11 and counsel to Centrum conducting on-site due diligence on Ennis from June 15 to June 17. Ennis requested that Battelle and Battelle, LLP and Moss Adams, LLP perform procedures related to the acquisition of Crabar/GBF and Centrum, respectively.

On June 11, Ennis held a board meeting (with some members attending by telephone) to discuss the status of negotiations. Each board member had previously been provided with a packet of materials or updated by phone as to the nature of the potential transactions. At the meeting, management reviewed the terms of the transactions, the status of due diligence, and the proposed timeline to completion. Later that day Messrs. Magill and Cathey met with BankOne and Compass Bank to discuss the possible acquisition of Crabar/GBF and of the combination with Centrum. A syndicated Revolver/Term Credit Facility of approximately $150 million was also discussed with BankOne. On June 14, Messrs. Magill and Cathey flew to Chicago to meet with LaSalle Business Credit to also discuss financing the acquisition and combination.

On June 17, Ennis held a meeting of its board of directors at which management further updated the board on the progress of due diligence and the status of the fairness opinion and financing alternatives. The board discussed the contemplated merger proposal with management and then invited Roger Brown to join the board meeting to give his view of the transactions. On June 18, all non-management board members met by telephone to discuss the status and merits of the proposals.

On June 21, LaSalle Business Credit provided a draft term sheet for a $150 million syndicated Revolver/Term Credit Facility and agreed to provide a firm commitment prior to June 25, 2004. On June 22, BankOne provided a draft term sheet for a firm commitment for a $110 million credit facility that it believed could be easily expanded if necessary. On June 23 management selected LaSalle Business Credit, which provided a firm commitment letter for the facility to Ennis.

On June 24, 2004 a special board meeting was held in which Bernstein, Conklin & Balcombe rendered its opinion that the proposed combination of Centrum and Ennis utilizing a $242 million valuation and the issuance

Index to Financial Statements

of approximately 8.8 million shares of Ennis common stock at a $15.63 valuation was fair to the current shareholders of Ennis from a financial point of view. Management then outlined and provided a copy of the definitive agreement for the board’s review. Mr. Magill indicated that there was a firm commitment from LaSalle Business Credit for up to $150 million in the form of a Revolver/Term Credit Facility. Counsel to Centrum and Ennis had indicated that a filing under the Hart-Scott-Rodino Act would not be necessary and that one material condition to closing on November 15, 2004 would be the approval by a majority of the Ennis shareholders of the issuance of Ennis common stock, as required by the rules of the New York Stock Exchange because the issuance would be in excess of 20% of Ennis’ outstanding common stock and voting power and may involve a change of control of Ennis within the meaning of the NYSE’s rules. The board then voted to approve the Centrum merger and the Crabar/GBF acquisition, to file a Registration Statement on Form S-4 with the Securities and Exchange Commission and have the stock approved for listing on the New York Stock Exchange, and to file a Registration Statement on Form S-3 for the resale of such shares.

On June 25, 2004, Messrs. Brown, Ashkin, Slaven and McLinden came to Midlothian and at approximately 4:00 p.m. executed the definitive agreements for the purchase of Crabar/GBF and the merger of Centrum with a subsidiary of Ennis. Mr. Walters executed these agreements on behalf of Ennis and its subsidiary.

The stockholders of Centrum intend prior to consummation of the merger to assume and repay $12,000,000 of Centrum indebtedness and to utilize cash at the closing of the merger to pay certain transaction costs. In order to accommodate this, on August 23, 2004, the parties to the merger agreement executed the First Amendment to Agreement and Plan of Merger, which provides that a portion of the merger consideration of between $12.5 million and $20 million (the exact amount of such portion within such range to be within Ennis’ discretion) will be paid in cash.

Ennis’ Considerations Relating to the Merger and the Share Issuance

The Ennis board of directors considered a number of factors in its decision to approve the merger agreement and transactions contemplated by the merger agreement and to recommend the approval by the Ennis shareholders of the issuance of shares of Ennis common stock in connection with the merger, including, without limitation, the following:

•

that the merger will further position Ennis to assist its distributors in meeting their promotional product objectives;

•

that the merger provides attractive growth opportunities in complementary activewear segments including fleece, polos and caps;

•

Centrum’s highly automated and efficient production capabilities;

•

the fact that Centrum is well positioned in strategic distribution channels;

•

Ennis’ familiarity with Centrum’s experienced, proven management;

•

that the merger will likely generate significant cash flow for Ennis; and

•

the opinion of Ennis’ financial advisor that the $242 million consideration to be paid in the merger (including the payment and/or assumption of Ennis’ debt) was fair, from a financial point of view, to the shareholders of Ennis common stock.

The foregoing discussion of the factors considered by the Ennis board of directors in making its decision is not exhaustive, but includes the material factors considered by the Ennis board of directors. In view of the variety of material factors considered in connection with its evaluation of the merger, the Ennis board of directors did not find it practicable to, and did not, quantify or otherwise assign relative or specific weight to any of these factors, and individual directors may have given different weight to different factors. Rather, the Ennis board of directors made its determination based on the totality of the information presented to it.

Index to Financial Statements

Recommendation of the Ennis Board of Directors

At its meeting on June 24, 2004, after due consideration, the Ennis board of directors unanimously adopted resolutions approving and adopting the merger agreement and approving the merger and the transactions and other agreements contemplated by the merger agreement and directed that the issuance of shares of Ennis common stock in the merger be submitted to a vote of the Ennis shareholders at the Ennis special meeting and recommending that Ennis shareholders vote “FOR” the approval of the issuance of shares of Ennis common stock in connection with the merger.

Centrum’s Considerations Relating to the Merger

The Centrum board of directors unanimously approved the merger and the merger agreement and believes that the terms of the merger are fair to, and in the best interests of, Centrum and its stockholders. In the course of reaching its decision to approve the merger agreement, the Centrum board consulted with Centrum’s management, as well as its legal, accounting and other advisors (but did not receive a valuation or opinion of a financial advisor), and considered the following material factors:

•

The risks and potential rewards associated with, as an alternative to the merger, continuing to execute Centrum’s strategic plan as an independent entity. The challenges of operating as an independent entity including, among others, obtaining sufficient capital to respond to growth opportunities while remaining a privately owned company. The rewards including, among others, the ability of existing Centrum stockholders to participate in the potential future growth and profitability of Ennis after the merger.

•

The possibility, as alternatives to the merger, of seeking to be acquired by a company other than Ennis or to engage in a combination with a company other than Ennis and the Centrum board’s conclusion that a transaction with Ennis is expected to yield greater benefits than the likely alternatives. The Centrum board concluded that the transaction with Ennis could be acceptably completed from a timing and regulatory standpoint, and would yield greater benefits than the alternatives.

•

The value of the consideration provided for in the merger agreement based on the then-current market price and historical trading price of Ennis shares over the past year.

•

The ability to complete the merger as a reorganization for U.S. federal income tax purposes.

•

The public market for Ennis common stock will offer the Centrum stockholders liquidity.

In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the Centrum board of directors did not find it useful to and did not attempt to quantify, rank or otherwise assign relative weights to these factors. In addition, the Centrum board did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to the Centrum board’s ultimate determination, but rather the Centrum board conducted an overall analysis of the factors described above, including discussions with and questioning of Centrum’s management and legal, accounting and other advisors.

Approval by the Centrum Board of Directors and Stockholders

At its meeting on June 24, 2004, after due consideration, the Centrum board of directors unanimously adopted resolutions (i) determining that the merger agreement, the merger, in accordance with the terms of the merger agreement, and the other transactions contemplated thereby are advisable and in the best interests of Centrum and its stockholders, (ii) approving the merger and approving and adopting the merger agreement and the other agreements and transactions contemplated by the merger agreement, and (iii) recommending that the Centrum stockholders approve the merger agreement. On June 24, 2004, all of the Centrum stockholders executed a written consent unanimously approving the merger, merger agreement and the other agreements and transactions contemplated by the merger agreement. Accordingly, no further approval of the Centrum stockholders is required to consummate the merger.

Index to Financial Statements

Opinion of Ennis’ Financial Advisor

On June 24, 2004, at a meeting of our board of directors held to consider the merger, Bernstein, Conklin & Balcombe delivered to the Ennis board of directors its opinion that, as of such date and based upon and subject to the assumptions, conditions, limitations and other matters set forth in that opinion, the merger, including the $242 million in aggregate merger consideration to be paid in a combination of Ennis common stock and assumed liabilities was fair, from a financial point of view, to the holders of Ennis common stock. Subsequently, Bernstein, Conklin & Balcombe was provided a copy of the first amendment to the merger agreement, which provides, among other things, that between $12,500,000 and $20,000,000 of the merger consideration would be in the form of cash rather than the assumption of liabilities. Bernstein, Conklin & Balcombe determined that this first amendment did not affect its opinion or valuation analysis in any material way. The merger consideration to be paid in a combination of Ennis common stock, cash and assumed liabilities was determined on the basis of negotiations between Ennis and Centrum.

Bernstein, Conklin & Balcombe is a leading regional business valuation and financial advisory firm. As part of its business, Bernstein, Conklin & Balcombe regularly engages in the valuation of businesses and their securities for use in a wide variety of transactions and situations. Ennis retained Bernstein, Conklin & Balcombe because the firm is a recognized business valuation firm with substantial experience providing valuations of businesses and securities, and because Bernstein, Conklin & Balcombe was familiar with Ennis and its business. Ennis neither provided instructions to nor imposed any limitations on Bernstein, Conklin & Balcombe relating to the preparation of its opinion.

We include the full text of Bernstein, Conklin & Balcombe’s written opinion, dated June 24, 2004, as Annex C, and we incorporate the full text by reference into this proxy statement. The written opinion describes the assumptions Bernstein, Conklin & Balcombe made, the matters it considered and the qualifications and limitations on the review it undertook in connection with the delivery of its opinion. We qualify this summary of Bernstein, Conklin & Balcombe’s opinion in its entirety by reference to the full text of the opinion. We urge you to read the Bernstein, Conklin & Balcombe opinion carefully and in its entirety.

Bernstein, Conklin & Balcombe provided its opinion to our board of directors for the board of directors’ use and benefit. Bernstein, Conklin & Balcombe directed its opinion only to the fairness from a financial point of view to the holders of Ennis common stock of the merger, including the $242 million in aggregate merger consideration, to be paid in a combination of Ennis common stock and assumed liabilities. The opinion does not address any other aspect of the merger and does not constitute a recommendation to any shareholder as to how that shareholder should vote with respect to the proposed issuance of shares of Ennis common stock or any other matter. Bernstein, Conklin & Balcombe expressed no opinion as to the prices at which Ennis common stock would trade subsequent to the announcement of the merger.

In performing its analyses, Bernstein, Conklin & Balcombe made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond Ennis’ control. Any estimates contained in the analyses performed by Bernstein, Conklin & Balcombe are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than these analyses suggest. In addition, estimates of the value of businesses or securities do not purport to be appraisals or to reflect the prices at which these businesses or securities might actually be sold. As a result, these analyses and estimates are inherently subject to substantial uncertainty. The opinion of Bernstein, Conklin & Balcombe was one of several factors taken into consideration by the Ennis board of directors in making its determination to approve the merger. Consequently, you should not view the Bernstein, Conklin & Balcombe analyses described below as determinative of the decision of the Ennis board of directors with respect to the fairness from a financial point of view to the holders of Ennis common stock of the merger, including the $242 million in aggregate merger consideration, to be paid in a combination of Ennis common stock and assumed liabilities.

Index to Financial Statements

In arriving at its opinion, Bernstein, Conklin & Balcombe relied on the following information that was deemed to be relevant.

•

a draft of the Merger Agreement dated June 23, 2004;

•

certain financial information, including financial forecasts, relating to the operations of A and G, the wholly owned operating subsidiary of Centrum Acquisition, Inc., that was furnished by Centrum management;

•

the market prices and valuation multiples for the Ennis common stock;

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the results of operations of A and G and comparison with the results of operations of selected publicly traded companies that it deemed to be relevant;

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the proposed financial terms of the merger and the financial terms of selected other transactions that it deemed to be relevant; and

•

other financial studies and analyses and such other matters as it deemed necessary, including an assessment of general economic, market and monetary conditions.

In addition, Bernstein, Conklin & Balcombe held discussions with the Ennis senior management regarding the operations and financial position of Ennis, business conditions in the business form industry, and the history of negotiations with Ennis. Bernstein, Conklin & Balcombe held discussions with Centrum management regarding the operations and financial positions of A and G, business conditions in the apparel industry, terms of the prior acquisition of A and G and the prospects for A and G’s business going forward.

In connection with its review, Bernstein, Conklin & Balcombe relied upon the accuracy and completeness of all of the financial, accounting and other information discussed or reviewed. As such, Bernstein, Conklin & Balcombe did not assume any responsibility for independently verifying the accuracy or completeness of such financial, accounting, and other information. With respect to the financial forecast information that Ennis furnished to or discussed with Bernstein, Conklin & Balcombe, it assumed that this information had been reasonably prepared. Bernstein, Conklin & Balcombe also assumed that the final form of the merger agreement would be substantially similar to the last draft that it reviewed. Bernstein, Conklin & Balcombe necessarily based its opinion upon market, economic and other conditions as they existed and could be evaluated on, and on the information made available to it as of, the date of the opinion.

Bernstein, Conklin & Balcombe assessed the fair value of Centrum using a number of independent methodologies, including:

•

a comparable company trading analysis using valuation multiples from selected publicly-traded companies;

•

a discounted cash flow analysis; and

•

a transaction analysis employing multiples from selected transactions involving comparable companies.

Each of these methodologies was used to generate implied valuation ranges for Centrum, which was then compared to the proposed merger consideration of $242 million to be paid in a combination of Ennis common stock and assumed liabilities.

Comparable Company Trading Analysis

Bernstein, Conklin & Balcombe compared publicly available financial, operating and stock market information for selected publicly traded companies that it considered comparable in certain respects to Centrum. The companies selected were Delta Apparel Company (DLA), Gildan Activewear (GIL), Russell Corporation (RML), Superior Uniform Group (SGC), Oxford Industries (OXM), and Cutter & Buck (CBUK). In its analysis, Bernstein, Conklin & Balcombe placed greater weight on the valuation multiples derived for Gildan Activewear and Delta Apparel, as they were deemed to be most similar to Centrum.

Index to Financial Statements

Bernstein, Conklin & Balcombe derived an estimated valuation range for Centrum by applying the comparable companies’ market value of invested capital (“MVIC”)¹ multiples of latest twelve months (“LTM”) revenue, earnings before interest, taxes, depreciation, and amortization (“EBITDA”), and earnings before interest and taxes (“EBIT”). Additionally, Bernstein, Conklin & Balcombe incorporated into the analysis multiples of the comparable company’s price per share over the 1-year forward and LTM earnings per share (the “P/E ratios”). The average and median multiples, as well as those selected by Bernstein, Conklin & Balcombe to be applied to Centrum’s earnings streams, are shown in the table below:


	Implied		Selected
	Mean*	Median*	Low	High
LTM MVIC/EBITDA	9.8	10.4	7.5	9.0
LTM MVIC/EBIT	12.6	12.7	10.5	12.0
LTM Price/Net income	17.8	18.1	12.0	14.0
2004 Price/Net income	12.7	12.9	10.5	11.5

(2)

Adjusted to eliminate outlying values.

Bernstein, Conklin & Balcombe selected a range of multiples for Centrum that were below those reported for the comparable companies in order to reflect Centrum’s greater company-specific risks compared with that of the comparable companies. The risks relate to, among other factors, its smaller size, more limited distribution channels, and less diversification of products and markets.

Bernstein, Conklin & Balcombe then applied each of the multiples to the appropriate measure of Centrum’s performance (e.g., EBITDA, EBIT and net income) to arrive at a range of values for Centrum’s aggregate invested capital² of between $220 million and $270 million.

Discounted Cash Flow Analysis

Bernstein, Conklin & Balcombe performed a discounted cash flow analysis based on three separate five year forecasts of Centrum’s expected future performance: high case; base case; and low case. The high case forecast was the expected forecast prepared by A and G management. The base case and low case forecasts were reduced forecasts prepared by our management in testing the sensitivity of the A and G business to various assumptions. In assessing the reasonableness of the forecasts, Bernstein, Conklin & Balcombe interviewed our management and A and G management regarding the basis of each forecast, compared the forecast assumptions with historical performance and tested the assumptions against publicly available benchmark information, including the financial performance of publicly traded companies in the apparel industry. After performing this analysis, Bernstein, Conklin & Balcombe determined to rely primarily on the base case and low case scenarios to formulate a valuation range. Bernstein, Conklin & Balcombe applied a range of discount rates to Centrum’s projected unleveraged cash flows from 11.0 percent to 13.0 percent and terminal EBITDA multiples ranging from 6.0 to 8.0 in determining the range of potential value from each forecast scenario. These rates of returns were deemed to be an appropriate range for a company with Centrum’s risk characteristics and the terminal EBITDA multiples were determined to be appropriate based on the range of multiples identified in the comparable company trading analysis.

¹	MVIC is defined as the market capitalization of a company’s outstanding stock plus the market value of outstanding debt, preferred stock and minority interests less cash.

²	When calculating an aggregate invested capital value using a MVIC multiple, cash was added. When calculating an aggregate invested capital value using a net income multiple, it was necessary to add the Company’s cash and outstanding interest-bearing debt to the calculated aggregate equity.

Index to Financial Statements

Based on the discounted cash flow analysis, Bernstein, Conklin & Balcombe derived a range of the implied values for the aggregate invested capital of Centrum ranging as follows:


High Scenario—	$300 million	to	$370 million
Base Scenario—	$230 million	to	$280 million
Low Scenario—	$210 million	to	$260 million

Transaction Analysis

Bernstein, Conklin & Balcombe reviewed publicly available information for selected acquisition transactions in the apparel industry. Bernstein, Conklin & Balcombe identified a number of transactions in the apparel industry over the last three years and analyzed the terms and nature of these transactions. As a part of its analysis of the transactions and the business and financial performance of the acquired companies represented in those transactions, it noted the following:

•

many acquired companies were fashion apparel manufacturers with a focus on sales directly to retailers;

•

several of the companies were unprofitable;

•

some of the companies were acquired while in bankruptcy; and

•

various other operational and functional differences limited their comparison to Centrum.

Bernstein, Conklin & Balcombe selected nine transactions involving apparel businesses for further analysis. These transactions, along with the date completed, were:

•

acquisition of MJ Soffe Co by Delta Apparel Company (October 3, 2003);

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VF Corporation’s acquisition of Nautica Enterprises, Inc. (August 28, 2003);

•

Salant Corporation’s acquisition of Perry Ellis International (June 23, 2003);

•

acquisition of Garan, Inc. by Berkshire Hathaway, Inc. (September 5, 2002);

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acquisition of Gerber Childrenswear, Inc. by Kellwood Co. (June 27, 2002);

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Berkshire Hathaway, Inc.’s acquisition of Fruit of the Loom, Ltd. (May 1, 2002);

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acquisition of Full Line Distributors, Inc. by Bain Capital Inc. (August 15, 2001);

•

Tropical Sportswear International’s acquisition of Duck Head Apparel Company, Inc. (August 10, 2001); and

•

Jones Apparel Group Inc.’s acquisition of McNaughton Apparel Group, Inc. (June 20, 2001).

The average and median multiples with respect to the analyzed transactions are shown in the table below:


	Implied
	Mean*	Median*
MVIC/Revenue	0.7	0.8
MVIC/EBITDA	6.7	7.2
MVIC/EBIT	7.9	7.5
Price/Net income	8.9	7.3

(2)

Adjusted to eliminate outlying values.

While some attributes of the acquired companies were similar to A and G, none of the transactions identified were identical to the proposed merger and many occurred at times when the economic conditions were worse than at the time of Bernstein, Conklin & Balcombe’s analysis. Given the significant variance in transaction

Index to Financial Statements

multiples, the operational differences between the acquired companies and A and G, and other relevant factors, Bernstein, Conklin & Balcombe did not rely upon the transaction approach in its final conclusion. For informational purposes, Bernstein, Conklin & Balcombe’s application of the above selected multiples to Centrum’s latest LTM earnings streams yielded an aggregate invested capital range of $140 million to $230 million.

Concluded Valuation Ranges

As a result of the above analyses, Bernstein, Conklin & Balcombe the concluded the following valuation ranges:


Comparable Company Analysis—	$220 million	to	$270 million
Income Approach (High Scenario)—	$300 million	to	$370 million
Income Approach (Base Scenario)—	$230 million	to	$280 million
Income Approach (Low Scenario)—	$210 million	to	$260 million
Transaction Analysis—	$180 million	to	$230 million

In reaching its conclusion as to the fairness of the merger from a financial point of view, Bernstein, Conklin & Balcombe determined that the Income Approach (Base Scenario), Income Approach (Low Scenario) and the Comparable Company Analysis provided the most reliable ranges of value.

We paid Bernstein, Conklin & Balcombe a fee of $225,000 for rendering its fairness opinion. In addition, we have agreed to reimburse Bernstein, Conklin & Balcombe for reasonable out-of-pocket expenses (which may include fees and expenses of counsel) it incurred in connection with its engagement. We have also agreed to indemnify Bernstein, Conklin & Balcombe and certain related persons against certain expenses and liabilities, including certain liabilities under the federal securities laws, arising out of its engagement. Bernstein, Conklin & Balcombe has in the past provided financial advisory services to us, unrelated to the merger, for which it has received compensation.

Accounting Treatment of the Merger

Ennis intends to account for the merger in accordance with generally accepted accounting principles under the purchase method for business combinations with Ennis being deemed to have acquired Centrum. This means that the assets and liabilities of Centrum will be recorded, as of the completion of the merger, at their fair values and added to those of Ennis.

Dissenters’ Rights of Appraisal

Holders of Ennis common stock and Centrum common stock do not have dissenters’ rights of appraisal in connection with the merger.

Material United States Federal Income Tax Consequences of the Merger

The following discussion sets forth the material United States federal income tax consequences of the merger to holders of Centrum common stock. This discussion does not address any tax consequences arising under the laws of any state, local or foreign jurisdiction. This discussion is based upon the Internal Revenue Code of 1986, as amended, (the “Code”), the regulations of the U.S. Treasury Department and court and administrative rulings and decisions in effect on the date of this proxy statement/prospectus. These laws may change, possibly retroactively, and any change could affect the continuing validity of this discussion.

For purposes of this discussion, the term U.S. Holder refers to a holder of Centrum common stock that is:

•

A citizen or resident of the United States;

Index to Financial Statements

•

a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States or any of its political subdivisions;

•

a trust if it (i) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (ii) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person; or

•

an estate that is subject to U.S. federal income tax on its income regardless of its source.

If a partnership (including any entity treated as a partnership for U.S. federal income tax purposes) holds Centrum common stock, the tax treatment of a partner will generally depend on the status of the partners and the activities of the partnership. A partner of a partnership holding Centrum common stock should consult his own tax advisor.

This discussion assumes that Centrum common stock is held as a capital asset within the meaning of Section 1221 of the Code. Further, this discussion does not address all aspects of U.S. federal income taxation that may be relevant to a Centrum stockholder under the stockholder’s particular circumstances or that may be applicable to a Centrum stockholder if the stockholder is subject to special treatment under the U.S. federal income tax laws, including if a Centrum stockholder is:

•

a financial institution;

•

a tax-exempt organization;

•

an S corporation or other pass-through entity;

•

an insurance company;

•

a mutual fund;

•

a dealer in securities or foreign currencies;

•

a trader in securities who elects the mark-to-market method of accounting for the securities;

•

subject to the alternative minimum tax provisions of the Code;

•

a Centrum stockholder who received Centrum common stock through the exercise of employee stock options or through a tax-qualified retirement plan;

•

a person that has a functional currency other than the U.S. dollar;

•

a holder of options granted under any Centrum benefit plan;

•

a Centrum stockholder who holds Centrum common stock as part of a hedge, straddle or a constructive sale or conversion transaction; or

•

certain United States expatriates.

The Merger. Ennis and Centrum have structured the merger to qualify as a reorganization within the meaning of Section 368(a) of the Code. As described below, it is a condition to each party’s respective obligations to complete the merger that Ennis and Centrum each receive a legal opinion that the merger will so qualify. In addition, based on representations and covenants contained in tax opinion certificates provided by Ennis and Centrum and on customary factual assumptions, all of which must continue to be true and accurate in all material respects as of the effective time of the merger, and subject to the qualifications and limitations set forth in each opinion, it is the opinion of Kirkpatrick & Lockhart LLP, counsel to Ennis, and Gardner Carton & Douglas LLP, counsel to Centrum, that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. Accordingly, the material U.S. federal income tax consequences of the merger are as follows:

•

Centrum stockholders will not recognize gain or loss upon the exchange of Centrum common stock solely for Ennis common stock, except with respect to cash or any other property received, including

Index to Financial Statements

stockholder liabilities, if any, assumed in the merger (“Boot”). Any gain or loss recognized by a Centrum stockholder will be capital gain or loss in an amount equal to the cash and fair market value of the other Boot, if any, received. Additionally, Centrum stockholders will generally recognize capital gain or loss on any cash received instead of a fractional share of Ennis common stock equal to the difference between the amount of cash received and the tax basis allocated to such fractional share. Any capital gain or loss recognized on the receipt of Boot or cash instead of a fractional share will constitute long-term capital gain or loss if the Centrum stockholder’s holding period in Centrum common stock surrendered in the merger is greater than one year as of the date of the merger. Centrum stockholders will recognize ordinary income on cash received in consideration for entering into the non-competition agreement.

•

the aggregate tax basis in the Ennis common stock that a Centrum stockholder receives in the merger (including any fractional share interest deemed to be received and exchanged for cash) will equal the Centrum stockholder’s aggregate tax basis in the Centrum common stock that the stockholder surrenders less the amount of cash and fair market value of other Boot, if any, the Centrum stockholder receives, plus the amount of any gain the Centrum stockholder recognizes as a result of receiving the cash and other Boot, if any; and

•

the holding period for the Ennis common stock that a Centrum stockholder receives in the merger (including any fractional share interest deemed to be received and exchanged for cash) will include the Centrum stockholder’s holding period for the shares of Centrum common stock that the stockholder surrenders in the exchange.

If a Centrum stockholder acquired different blocks of Centrum common stock at different times and at different prices, the stockholder’s tax basis and holding period in his Ennis common stock may be determined with reference to each block of Centrum common stock.

Backup Withholding. A non-corporate holder of Centrum common stock may be subject to information reporting and backup withholding on any Boot received or any cash received instead of a fractional share interest in Ennis common stock. A Centrum stockholder will not be subject to backup withholding, however, if the stockholder:

•

furnishes a correct taxpayer identification number and certifies that the Centrum stockholder is not subject to backup withholding on the Form W-9 or successor form included in the letter of transmittal to be delivered following the completion of the merger; or

•

is otherwise exempt from backup withholding.

Any amounts withheld under the backup withholding rules will be allowed as a refund or credit against your U.S. federal income tax liability, provided you furnish the required information to the Internal Revenue Service.

Reporting Requirements. A Centrum stockholder that receives Ennis common stock as a result of the merger will be required to retain records pertaining to the merger and will be required to file with the stockholder’s United States federal income tax return for the year in which the merger takes place a statement setting forth facts relating to the merger.

This discussion does not address tax consequences that may vary with, or are contingent on, individual circumstances. Moreover, it does not address any non-income tax or any foreign, state or local tax consequences of the merger. Tax matters are very complicated, and the tax consequences of the merger to an individual Centrum stockholder will depend upon the facts of the stockholder’s particular situation. Accordingly, Centrum stockholders are strongly encouraged to consult with a tax advisor to determine the particular federal, state, local or foreign income or other tax consequences to them of the merger.

Index to Financial Statements

Regulatory Filings and Approvals Required to Complete the Merger

We are not aware of any material governmental or regulatory approval required for completion of the merger, other than compliance with the applicable corporate laws of the State of Delaware and the State of Texas. However, Ennis and Centrum and their respective subsidiaries conduct operations in a number of other jurisdictions where regulatory filings, notifications or approvals with applicable commissions and other authorities may be required or advisable in connection with completion of the merger. Ennis and Centrum are currently in the process of reviewing whether other filings or approvals may be required or desirable in these other jurisdictions. Ennis and Centrum recognize that some of these filings may not be completed before the closing, and that some of these approvals, which are not as a practice required to be obtained prior to effectiveness of a merger, may also not be obtained before the closing.

Effective Time of the Merger

The merger will become effective upon the date on which the certificate of merger is filed with the Secretary of State of the State of Delaware or at such later time as Ennis and Centrum will agree and specify in the certificate of merger.

New York Stock Exchange Listing of Ennis Common Stock to be Issued in the Merger

Ennis common stock currently is listed on the New York Stock Exchange under the symbol “EBF.” Ennis has agreed in the merger agreement that it will use its commercially reasonable efforts to cause the Ennis common stock issuable in the merger to be approved for listing on the New York Stock Exchange prior to the effective time of the merger. Listing of the shares of Ennis common stock, subject to official notice of issuance, is a condition to closing the merger.

Federal Securities Laws Consequences; Stock Transfer Restrictions

Ennis common stock issued in the merger generally will not be subject to any restrictions on transfer arising under the Securities Act of 1933, as amended, except for shares issued to any Centrum stockholder who may be deemed to be an “affiliate” of Centrum or Ennis for purposes of Rule 145 under the Securities Act. Any Centrum stockholders so deemed to be an affiliate will only be able to resell shares of Ennis common stock they receive in the merger pursuant to an effective registration statement, pursuant to Rule 145 or in transactions otherwise exempt from registration. This proxy statement/prospectus does not cover resales of Ennis common stock received by any person upon completion of the merger, and no person is authorized to make any use of this proxy statement/prospectus in connection with any such resale.

In addition, pursuant to a registration rights agreement to be entered into at the closing, Ennis will agree to file and keep effective a registration statement on Form S-3 to register the shares of Ennis common stock issued to the Centrum stockholders. See “The Merger Agreement—Registration Rights Agreement” for a summary of the material terms to be included in the registration rights agreement.

Organizational Documents, Directors and Officers of Alstyle Apparel LLC, as the Surviving Entity

The merger agreement states that the certificate of formation and operating agreement of Midlothian Holdings LLC, as in effect immediately prior to the effective time of the merger, will be the certificate of formation and operating agreement of the entity surviving the merger, until thereafter amended. After the closing of the merger, the name of the entity surviving the merger will be changed to “Alstyle Apparel LLC.” The managers of Midlothian Holdings LLC immediately prior to the effective time of the merger will be the initial managers of the entity surviving the merger and the officers of Midlothian Holdings LLC immediately prior to the effective time of the merger will be the initial officers of the entity surviving the merger, except that Roger Brown will enter into an employment agreement at the closing of the merger pursuant to which Mr. Brown will be the President and CEO of Alstyle Apparel LLC, the surviving entity.

Index to Financial Statements

Refinancing

Upon completion of the merger, Ennis will refinance the combined companies’ indebtedness through senior secured credit facilities from a syndicate of financial institutions for whom LaSalle National Bank NA will act as administrative agent. The facilities will consist of a $100 million revolving credit facility (with a subfacility for letters of credit) and a $50 million term loan facility, which mature five years from the closing date. Additionally, the term loan will be repaid at the rate of $2.5 million per quarter with mandatory prepayments on certain events. The loans will bear interest at a rate per annum over the Base Rate (defined as the higher of the Bank’s prime rate or the Federal Funds rate plus 0.5%) or the LIBOR rate based on the most recent quarter and the total leverage ratio for the trailing twelve month period. The facilities will be guaranteed by all subsidiaries of Ennis and secured by the property of Ennis and its subsidiaries and the equity securities of its subsidiaries. The documentation will contain customary representations, warranties and covenants, including covenants relating to fixed charge coverage ratio, total leverage ratio and minimum net worth.

Index to Financial Statements

THE MERGER AGREEMENT

The following briefly summarizes the material provisions of the merger agreement and first amendment to the merger agreement, copies of which are attached as Annex A and Annex B, respectively, to this proxy statement/prospectus and are incorporated by reference into this summary. Unless the context otherwise requires, all references to the “merger agreement” in this proxy statement/prospectus refer to the merger agreement as amended. The following is not a complete description of all provisions of the merger agreement and is qualified in its entirety by reference to the merger agreement. You are encouraged to read the merger agreement in its entirety for a more complete description of the terms and conditions of the merger.

General

Following the approval of the share issuance by the shareholders of Ennis and the satisfaction or waiver of each of the conditions to the merger, Centrum will be merged with and into a newly formed wholly-owned subsidiary of Ennis, sometimes referred to as “Merger Sub”. Following the merger, Merger Sub will be the surviving entity in the merger, and Merger Sub will continue as a wholly-owned subsidiary of Ennis. After the merger, Merger Sub will be renamed “Alstyle Apparel LLC.”

Merger Consideration

General. In the merger, Centrum stockholders will receive a combination of cash and Ennis common stock in exchange for their Centrum shares. At least three business days prior to the closing of the merger, Ennis will notify the Centrum stockholders of the amount of cash that Ennis elects to pay to the Centrum stockholders at closing. This amount will be not less than $12.5 million and not more than $20 million and is referred to in this proxy statement/prospectus as the cash consideration. If Ennis fails to provide timely notice of the amount of the cash consideration, the cash consideration will be $20 million.

In addition to the cash consideration, Centrum stockholders will also receive a number of shares of Ennis common stock based upon a $242 million valuation of Centrum less (i) Centrum indebtedness for interest-bearing borrowed money and funded debt outstanding as of the day of merger (this amount will be no less than $104 million minus the amount of the cash consideration), (ii) the amount of the cash consideration, and (iii) $400,000 to be paid as consideration for the non-competition agreement (as discussed in this Summary under the heading “Non-Competition Agreement”), subject to certain escrow and other holdback arrangements for indemnification and other obligations. The resulting value will be divided by $15.63, which was the average trading price of Ennis over the 30-day trading period immediately preceding the execution of the merger agreement, to determine the total number of shares of Ennis common stock to be issued in the merger. Depending on the amount of the specified Centrum debt and the cash consideration, we expect this to result in Ennis issuing approximately 8.8 million shares of its common stock in the merger. For example, if the specified Centrum debt at the closing of the merger totals $89 million and the cash consideration is $15 million, Centrum stockholders will receive approximately 8,803,583 shares of Ennis common stock. This total is calculated by subtracting the $89 million of specified Centrum debt, the $15 million cash consideration amount and the $400,000 non-competition payments from the $242 million agreed valuation of Centrum, which would total $137.6 million. That $137.6 million total would then be divided by $15.63, resulting in a total of approximately 8,803,583 shares of Ennis common stock that would be issued to Centrum stockholders under this example. The 8,803,583 shares in this example include shares that would be withheld for the indemnification escrow and Centrum debt described below.

The total number of shares of Ennis common stock that will be issued in the merger will be distributed among Centrum stockholders in proportion to their ownership of Centrum common stock, subject to certain escrow and holdback arrangements for indemnification and other obligations as discussed below. For example, if a Centrum stockholder owned 7% of the total common stock of Centrum prior to the merger, that stockholder would be entitled to receive 7% of the shares of Ennis common stock issued in the merger, subject to the escrow and holdback arrangements.

Index to Financial Statements

Indemnification Escrow. A total of 319,897 shares of Ennis common stock that would otherwise be issued to the Centrum stockholders in the merger will be placed in escrow pursuant a stock pledge and escrow agreement to be entered into at the closing. See the section entitled “Other Agreements—Stock Pledge and Escrow Agreement” beginning on page . Based on the average trading price of Ennis common stock over the 30 trading days immediately preceding the execution of the merger agreement, these shares had a value of approximately $5 million.

Shares Withheld for Centrum Debt. A total of 47,985 shares of Ennis common stock that would otherwise be issued to the Centrum stockholders in the merger will be withheld by Ennis for application to certain Centrum debt if such Centrum debt exceeds the good faith estimate provided by Centrum at the closing of the merger. Based on the average trading price of Ennis common stock over the 30 trading days immediately preceding the execution of the merger agreement, these shares had a value of approximately $750,000. Any shares of Ennis common stock not retained by Ennis on account of an underestimation of Centrum debt will be delivered to the Centrum stockholders in proportion to their ownership of Centrum immediately prior to the merger. Ennis’ sole remedy for the actual Centrum debt exceeding the Centrum debt estimated by Centrum at closing is to retain the withheld 47,985 shares of Ennis common stock. Ennis does not have any remedy if the actual Centrum debt exceeds the Centrum debt estimated by Centrum by more than the value of the retained shares.

Directorship of Ennis

Ennis agreed that, for so long as the Centrum stockholders hold at least ten percent of Ennis’ common stock in the aggregate, a representative of the Centrum stockholders will be recommended to Ennis’ nominating and corporate governance committee by the Chairman of Ennis’ board of directors for nomination as a director of Ennis, in accordance with the Sarbanes-Oxley Act of 2002, the rules of the New York Stock Exchange and the charter of Ennis’ nominating and corporate governance committee. If the representative of the Centrum stockholders is not elected as a director of Ennis, the representative will be permitted to observe all meetings of Ennis’ board of directors.

Conditions to Completion of the Merger

Conditions to Each Party’s Obligation. The obligations of Ennis, Merger Sub and Centrum to complete the merger are subject to the satisfaction or waiver of certain conditions, including the following:

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obtaining all required approvals of the shareholders of Ennis, including approvals required by the New York Stock Exchange;

•

the absence of any order, statute, rule, regulation, executive order, stay, decree, judgment or injunction which prohibits or prevents the consummation of the merger;

•

this proxy statement/prospectus shall have been declared effective and shall not be subject to any stop order suspending the effectiveness;

•

Ennis and Merger Sub shall have received all state securities law authorizations necessary to consummate the merger;

•

the approval of the New York Stock Exchange to list the shares of Ennis common stock to be issued in the merger; and

•

the receipt of any required governmental approvals.

Conditions to the Obligations of Ennis and Merger Sub. The obligations of Ennis and Merger Sub to complete the merger are subject to the satisfaction or waiver of certain conditions, including the following:

•

Centrum’s representations and warranties in the merger agreement must be true and correct in all material respects as of the closing date, as if made on and as of the closing date, unless the failure of such representations to be true and correct is not reasonably likely to have a material adverse effect on Centrum;

Index to Financial Statements

•

Centrum must have performed and complied with in all material respects all covenants of Centrum in the merger agreement and satisfied in all material respects all conditions required of Centrum by the merger agreement, unless the failure to comply or satisfy a covenant or condition is not reasonably likely to have a material adverse effect on Centrum;

•

Centrum must have delivered to Ennis and Merger Sub all certificates and other deliveries required by Centrum under the merger agreement;

•

Ennis must have received an opinion of its tax counsel that the merger will qualify as a reorganization under Section 368(a) of the Internal Revenue Code;

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certain consents required by the merger agreement must have been received;

•

Ennis and Merger Sub must have received an opinion of Centrum’s legal counsel regarding certain legal matters involved in the merger;

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certain of the Centrum stockholders shall have executed and delivered a noncompetition agreement to Ennis and Merger Sub;

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the shareholders agreement among Centrum and the Centrum stockholders must have been terminated;

•

the Centrum stockholders must have executed and delivered to Ennis a mutual release and waiver;

•

the officers and directors of Centrum and its subsidiaries must have resigned from their positions;

•

to the knowledge of Centrum, there must not have been a material breach of any representation, warranty or covenant by any party under the amended and restated stock purchase agreement dated November 10, 2003 among Centrum, Amin Amdani and Rauf Gajiani;

•

each Centrum stockholder must have executed a standstill agreement; and

•

Centrum must have delivered to Ennis evidence that Centrum consummated the acquisition of the equity interests of certain affiliated Mexican companies.

Conditions to the Obligations of Centrum. The obligations of Centrum to complete the merger are subject to the satisfaction or waiver of certain conditions, including the following:

•

Ennis’ and Merger Sub’s representations and warranties in the merger agreement must be true and correct in all material respects as of the closing date, as if made on and as of the closing date, unless the failure of such representations to be true and correct is not reasonably likely to have a material adverse effect on Ennis;

•

Ennis and Merger Sub must have performed and complied with in all material respects all covenants of Ennis and Merger Sub in the merger agreement and satisfied in all material respects all conditions required of Ennis and Merger Sub by the merger agreement, unless the failure to comply or satisfy a covenant or condition is not reasonably likely to have a material adverse effect on Ennis;

•

Ennis and Merger Sub must have delivered to Centrum all certificates and other deliveries required by Ennis and Merger Sub under the merger agreement;

•

the Centrum stockholders must have received an opinion from their tax counsel in the form attached to the merger agreement;

•

the Centrum stockholders must have received an opinion of Ennis’ legal counsel regarding certain legal matters involved in the merger;

•

Ennis and Merger Sub must have executed and delivered to the Centrum stockholders a mutual release and waiver;

•

Ennis and Merger Sub must have executed and delivered to the Centrum stockholders a noncompetition agreement; and

Index to Financial Statements

•

Ennis must have delivered evidence to Centrum that Ennis amended the Rights Agreement dated November 4, 1998 between Ennis and Harris Trust and Savings Bank, as rights agent, in order to permit the merger and other transactions contemplated by the merger agreement without causing any issuance of any preferred stock of Ennis.

No Solicitation of Takeover Proposals

Ennis and Centrum have each agreed not to (and in the case of Ennis, subject to the fiduciary duties of Ennis’ board of directors):

•

encourage, initiate, solicit or take any other action designed to or which could be reasonably expected to facilitate an acquisition proposal, as defined below, or the making, submission or announcement of an acquisition proposal;

•

participate or engage in any discussions or negotiations regarding, or furnish nonpublic information to any person with respect to, an acquisition proposal or to facilitate any inquiries that may lead to an acquisition proposal;

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engage in discussions with any person with respect to an acquisition proposal;

•

approve, endorse or recommend any acquisition proposal; or

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enter into a letter of intent or similar document with respect to an acquisition proposal.

An “acquisition proposal” of a person means any inquiry or proposal regarding any merger, recapitalization, sale of substantial assets, sale or exchange of shares of capital stock of the person or a subsidiary of the person.

Termination

Termination by Agreement. Ennis, Merger Sub and Centrum may agree to terminate the merger agreement at any time before the merger is completed.

Termination by Either Party. Either Ennis or Centrum may terminate the merger agreement if:

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the merger is not completed on or prior to November 30, 2004, except that this termination right is not available to a party whose failure to perform under the merger agreement results in the failure to complete the merger by that date;

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after Ennis has called, given notice of, duly convened and held a meeting of Ennis’ shareholders, the vote the Ennis’ shareholders is insufficient to approve the merger agreement and the transactions contemplated by the merger agreement; or

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any governmental authority has issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the consummation of the merger and the order, decree or ruling or other action has become final and nonappealable.

Termination by Ennis. Ennis may terminate the merger agreement if:

•

Centrum breaches in any material respect any of its representations, warranties, or covenants under the merger agreement, and the breach constitutes a material adverse effect to Centrum and the breach is not reasonably cured prior to November 30, 2004;

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Centrum discloses to Ennis that any information contained in the representations and warranties and related disclosures is incomplete or is no longer correct as of any date after the date of the merger agreement until the closing date, and Ennis does not consent to an update of Centrum’s disclosure schedules to the merger agreement; or

Index to Financial Statements

•

In Ennis’ sole discretion, if Ennis receives a supplement from Amin Amdani and Rauf Gajiani pursuant to the first amendment agreement that the representations and warranties of Amin Amdani and Rauf Gajiani under the amended and restated stock purchase agreement dated November 10, 2003 among Centrum, Amin Amdani and Rauf Gajiani are incorrect in any material respect.

Termination by Centrum. Centrum may terminate the merger agreement if:

•

Ennis or Merger Sub breaches in any material respect any of its representations, warranties, or covenants under the merger agreement, and the breach constitutes a material adverse effect to Ennis and the breach is not reasonably cured prior to November 30, 2004; or

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Ennis or Merger Sub discloses to Centrum that any information contained in the representations and warranties and related disclosures is incomplete or is no longer correct as of any date after the date of the merger agreement until the closing date, and Centrum does not consent to an update of Ennis’ and Merger Sub’s disclosure schedules to the merger agreement.

Effect of Termination and Abandonment. In the event that the merger agreement is terminated, the merger agreement would become null and void, with the exception of certain provisions that survive termination. However, any termination of the merger agreement would not relieve any party from liability for any breach of the merger agreement prior to termination. No party would be liable for any breach occurring prior to termination unless the breach is the basis of the other party’s termination of the merger agreement. In any event, any liability would not exceed the lesser of the actual damages incurred as a result of the breach and $5 million, except for a willful breach by a party of a material covenant in the merger agreement that results in a failure to consummate the merger. If the merger agreement is terminated, neither Ennis nor Centrum will solicit or hire any officer or key management employee of the other.

Expenses

Each of Ennis and Centrum will bear all expenses it incurs in connection with the merger.

Conduct of Business Pending the Merger

Prohibition on Certain Actions. Ennis, Merger Sub and Centrum are subject to various restrictions on their conduct and operations until the merger is completed. In the merger agreement, Ennis, Merger Sub and Centrum each agreed that, prior to the earlier of the effective time of the merger or the termination of the merger agreement, it would operate its business in the ordinary course, and it would not, except in the ordinary course of business:

•

amend or propose to amend its organizational documents;

•

authorize for issuance, issue, grant, sell, pledge or dispose of any shares of its capital stock, other equity securities or securities convertible into capital stock;

•

split, combine or reclassify any shares of its capital stock or declare, pay or set aside any dividend or distribution in respect of its capital stock, or redeem purchase or otherwise acquire shares of its capital stock or other of its securities except as permitted by the merger agreement;

•

create, incur, assume, forgive or make any changes to the terms or collateral of any debt for borrowed money, assume or guarantee the obligations of another person, make capital expenditures, loans or investments in another person, acquire the stock or assets of another person, incur a material liability, or sell or mortgage any assets or properties;

•

engage in any transaction with any of its directors, officers, employees or affiliates, or increase the compensation of its employees or officers or amend or terminate any employment, consulting or collective bargaining agreement or benefit or incentive plan other than as required by agreements in place on the date the merger agreement was executed;

Index to Financial Statements

•

commence or settle any litigation (in the case of Ennis in excess of $1 million) or make any tax election or any material change to its tax or accounting policies;

•

knowingly commit or omit to do any act which causes a breach of a covenant in the merger agreement or is intended to cause a representation or warranty in the merger agreement to be untrue in any material respect;

•

fail to maintain its books, accounts and records in the usual manner;

•

enter into any new line of business;

•

enter into a contract or lease pursuant to which it becomes obligated to pay or incur more than $1 million per year, other than purchases of inventory in the ordinary course of business; or

•

authorize or commit to do any of the foregoing actions.

In addition, Ennis and Centrum agreed to comply in all material respects with all applicable laws and permits.

Notification of Certain Events. Each of Ennis and Centrum agreed to notify the other party of:

•

receipt of written notice from any third party alleging that the third party’s consent is required in connection with the merger;

•

receipt of any material written notice from any governmental authority in connection with the merger (including from the New York Stock Exchange with respect to Ennis); or

•

the commencement or written threat of a proceeding against it which, if pending at the execution of the merger agreement, would have been required to be disclosed.

In addition, Centrum agreed to notify Ennis of the occurrence of an event that would be reasonably likely to have a material adverse effect on Centrum or would be reasonably likely to cause or constitute a material breach of Centrum’s representations, warranties or covenants in the merger agreement. As it is used in the merger agreement, “material adverse effect” with respect to Centrum means any state of facts, event, change or effect that has had or is reasonably likely to have a material adverse effect on the business, operations, prospects or financial condition of Centrum, or would reasonably be expected to have a material adverse effect on the legality, binding nature or enforceability of the merger agreement or prevent or substantially delay the consummation of the merger. However, any state of facts, events, changes and the effects thereof will be disregarded if they are general business or economic conditions, conditions generally affecting Centrum’s industry, the taking of any action contemplated by the merger agreement, or the announcement or pendency of the transactions contemplated by the merger agreement.

In addition, Ennis agreed to notify Centrum of the occurrence of an event with respect to Ennis that triggers any public reporting requirements of a material adverse effect on the business, operations, prospects or financial condition of Ennis.

Other Covenants

Efforts to Complete Merger. Ennis and Centrum have agreed to use their commercially reasonable efforts to take all actions and cause all things to be done to make the merger effective.

Tax Matters. Ennis and Centrum have agreed to cooperate in filing tax returns that are due after the closing date for tax periods that include the closing date and that Ennis shall be responsible for filing these returns. Centrum has also agreed to restrictions limiting its right to file amended returns for tax periods ending before the closing date. Ennis has agreed that any tax refund it receives for tax periods ending before the closing date shall (except to the extent the taxes were paid by Ennis) be paid over to Centrum’s stockholders.

Index to Financial Statements

Indemnification and Insurance. For a period of six years after the effective time of the merger, Ennis and Merger Sub have agreed that the indemnification and exculpation provisions of Merger Sub’s organizational documents will be no less favorable to directors, officers and employees of Merger Sub than the pre-merger organizational documents of Centrum were to directors, officers and employees of Centrum. Ennis and Merger Sub have agreed to use commercially reasonable efforts to maintain Centrum’s pre-merger directors’ and officer’s liability insurance policy for four years after the effective time of the merger, subject to certain limitations.

Ennis Shareholder Approval. Ennis agreed to hold a shareholder meeting for the purpose of approving the merger. In connection with the shareholder meeting, Ennis agreed that its board of directors would recommend approval of the issuance of Ennis common stock in the merger to Ennis’ shareholders and take all reasonable and lawful action to solicit the shareholders’ approval, subject to the fiduciary duties of Ennis’ board of directors as advised by outside counsel.

Release of Guarantees. Ennis agreed to cause certain guarantees provided to Centrum to be released or otherwise replace the guarantors, and Ennis agreed to indemnify the former guarantors against any liabilities arising from the guarantees.

Payment of Shareholder Tax Distribution. Ennis has agreed to distribute to Centrum’s stockholders an amount representing the income taxes payable by the Centrum stockholders on Centrum’s taxable income for the period from January 1, 2004 to the closing date of the merger.

Certain Other Covenants. The merger agreement contains certain other mutual covenants of Ennis and Centrum. The most significant are to:

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provide the other party and its accountants and legal counsel access to its facilities, books and records;

•

refrain from issuing any press release or other announcement or communication with respect to the merger or discuss the merger with the press unless required by law (including, with respect to Ennis, by the New York Stock Exchange), except with prior consultation with the other party;

•

disclose to the other party any information contained in the representations and warranties and related disclosures that is incomplete or is no longer correct as of any date after the date of the merger agreement prior to the closing date, provided that any update will not modify the representations and warranties unless the other party consents to the update, and provided further that the other party may terminate the merger agreement if it does not consent to an update; and

•

keep all information provided by the other party strictly confidential, except as required by law, governmental rules or regulations, a securities exchange or consented to by the other party.

Amendment

The merger agreement may be amended at any time by a written agreement between Ennis and Centrum.

Representations and Warranties by Centrum

The merger agreement contains representations and warranties of Centrum to Ennis and Merger Sub, which are subject to disclosure schedules and to certain materiality thresholds and knowledge qualifiers. The representations and warranties made by Centrum are solely with respect to the period commencing on November 10, 2003, the date on which Centrum acquired the stock of A and G, with certain limited exceptions. With certain limited exceptions, the representations and warranties of Centrum in the merger agreement do not cover inaccuracies or other breaches of the representations and warranties for events prior to November 10, 2003.

As described in the summary of the first amendment agreement below, however, Merger Sub will be recognized by Amin Amdani and Rauf Gajiani as the successor to Centrum’s rights under an amended and

Index to Financial Statements

restated stock purchase agreement whereby Centrum purchased the shares of A and G from Amin Amdani and Rauf Gajiani. These rights include Centrum’s right to indemnification thereunder as restated in the first amendment agreement, and subject to the limitations contained in the first amendment agreement.

The representations and warranties of Centrum under the merger agreement include, without limitation, those as to:

•

due incorporation and good standing;

•

authority and absence of conflicts;

•

capitalization;

•

financial statements;

•

title to properties, absence of encumbrances and sufficiency of assets;

•

accounts receivable;

•

inventory;

•

absence of undisclosed liabilities;

•

taxes;

•

absence of material adverse changes;

•

employee benefits;

•

compliance with laws and legal proceedings;

•

contracts;

•

insurance;

•

environmental matters;

•

employment and labor relations;

•

intellectual property;

•

absence of certain relationships with related persons;

•

absence of brokerage fees or commissions;

•

absence of off-balance sheet arrangements;

•

internal accounting controls;

•

absence of transactions with affiliates and employees;

•

claims under the A and G amended and restated stock purchase agreement; and

•

intention of Centrum stockholders with respect to Ennis stock and absence of short sales by Centrum stockholders.

The representations and warranties of Centrum in the merger agreement are lengthy and detailed and not easily summarized. You are urged to read carefully Article 2 of the merger agreement entitled “Representations and Warranties of the Company.”

Pursuant to the terms of the Centrum indemnity agreement described below under the heading “Other Agreements—Centrum Indemnity Agreement,” all of the representations and warranties of Centrum in the merger agreement will survive for two years after completion of the merger.

Index to Financial Statements

Representations and Warranties by Ennis

The merger agreement contains representations and warranties of Ennis and Merger Sub to Centrum, subject to disclosure schedules and to certain materiality thresholds and knowledge qualifiers. With certain limited exceptions, these representations and warranties are limited to matters that have occurred since January 1, 2003. These include representations and warranties as to:

•

due incorporation and good standing;

•

capitalization;

•

authority and no conflicts;

•

governmental approvals;

•

securities filings;

•

vote required to approve merger, no Ennis ownership of Centrum stock, and inapplicability of state takeover statutes;

•

financial statements;

•

absence of material adverse changes;

•

compliance with laws;

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sufficient financing to perform Ennis’ obligations under the merger agreement;

•

title to properties, absence of encumbrances and sufficiency of assets;

•

accounts receivable;

•

inventory;

•

taxes;

•

employee benefits;

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contracts;

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insurance;

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employment and labor relations;

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intellectual property;

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illegal payments;

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absence of off-balance sheet arrangements; and

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absence of transactions with affiliates and employees.

The representations and warranties of Ennis and Merger Sub in the merger agreement are lengthy and detailed and not easily summarized. You are urged to read carefully Article 3 of the merger agreement entitled “Representations and Warranties of Purchaser.”

Pursuant to the terms of the Ennis indemnity agreement described below under the heading “Other Agreements—Ennis Indemnity Agreement,” all of the representations and warranties of Ennis and Merger Sub in the merger agreement will survive for two years after completion of the merger.

Conversion of Centrum Common Stock

Cancellation of Centrum Shares. After the effective time of the merger, the shares of Centrum capital stock will be cancelled and the Centrum stockholders will cease to have any rights with respect to the shares except the right to receive Ennis common stock or cash in the merger.

Index to Financial Statements

Interest in Merger Sub. After the effective time of the merger, and without any action on the part of Centrum, Ennis or Merger Sub, all equity interests of Merger Sub will become all of the outstanding equity interests of the surviving entity, resulting in Merger Sub remaining a wholly owned subsidiary of Ennis.

Fractional Shares. Ennis will not issue any fractional shares of Ennis common stock pursuant to the merger. Instead, each holder of shares of Centrum common stock exchanged pursuant to the merger who would otherwise have been entitled to receive a fraction of a share of Ennis common stock will be entitled to receive cash for that fractional share in an amount equal to the fractional amount of Ennis common stock multiplied by $15.63, which was the average trading price of Ennis over the 30 trading days immediately preceding the execution of the merger agreement.

Surrender of Shares of Centrum Capital Stock, Stock Transfer Books. All shares of Centrum capital stock will be automatically cancelled and retired as a result of the merger, and after the merger each certificate representing Centrum capital stock will represent the right to receive Ennis common stock or cash in lieu of any fractional shares pursuant to the merger. At the effective time of the merger, Centrum’s stock transfer books will be closed and no transfers may be made.

Treasury Shares. Any shares of Centrum capital stock held by Centrum in treasury will be automatically cancelled and retired at the effective time of the merger, without any right to receive Ennis common stock.

No Dividends or Distributions. No dividends declared will be paid to a Centrum stockholder entitled to receive Ennis common stock until the Centrum stockholder surrenders the certificate representing the Centrum capital stock.

Missing Certificates. If any holder of Centrum capital stock is unable to deliver the certificate representing the Centrum capital stock, then Ennis is obligated to deliver the Ennis common stock only upon the Centrum stockholder’s submission of evidence of ownership of the Centrum capital stock and loss or destruction of the certificate, and security or indemnity reasonably required by Ennis in relation to the lost or destroyed certificate.

OTHER AGREEMENTS

The following is a summary of the material provisions of the first amendment agreement, the Centrum indemnity agreement, the Ennis indemnity agreement, and the anticipated material terms of the registration rights agreement, the stock pledge and escrow agreement, the non-competition agreement and the standstill agreement. The following is not a complete description of all provisions of these agreements and you are encouraged to read these agreements in their entirety. You may request a copy of any of the agreements that have been entered into as of the date of this proxy statement/prospectus from Ennis in the manner described under the heading “Additional Information.” In addition, these agreements have been filed with the SEC as exhibits to this proxy statement/prospectus, so you may also obtain them from the SEC’s website at www.sec.gov. This summary is qualified in its entirety by reference to the full text of these agreements.

First Amendment Agreement

Background—A and G Stock Purchase Agreement. Centrum owns all of the outstanding stock of A and G. Centrum acquired the A and G stock from Amin Amdani and Rauf Gajiani, hereafter referred to as the “A and G principals,” on November 10, 2003 pursuant to the amended and restated stock purchase agreement. In the A and G stock purchase agreement, the A and G principals provided representations, warranties and indemnification to Centrum with respect to A and G, subject to limitations in amount and time.

Condition to Effectiveness of First Amendment Agreement. The effectiveness of the first amendment agreement is conditioned upon the closing of the merger. If the merger is not consummated by December 31, 2004, the first amendment agreement will automatically become null and void.

Index to Financial Statements

Prepayment of Promissory Notes. As partial consideration for the stock of A and G, the A and G principals received promissory notes from Centrum in the aggregate principal amount of $53 million. Ennis has agreed in the merger agreement to prepay the promissory notes in the amount of $43 million plus interest at the closing of the merger in accordance with the first amendment agreement.

Description of Amended and Restated Promissory Notes. Ennis will also deliver to each A and G principal an amended and restated promissory note in the principal amount of $5 million, for an aggregate of $10 million, which are sometimes referred as the amended and restated promissory notes. The amended and restated promissory notes will have the following terms:

•

the principal will bear interest at a rate of 4% per annum, to be paid to the A and G principals and not subject to offset for indemnification claims;

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the notes will be required to be paid in two equal annual installments, subject to offsets against principal for indemnification; and

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the balance of the notes will be reduced by any draws on the letters of credit securing the notes, as described below.

Merger Sub as Successor to Indemnification Rights. Because Centrum has owned A and G since November 10, 2003, Centrum only provided representations, warranties and indemnification in the merger agreement and the Centrum indemnity agreement for the period from November 10, 2003 through the effective time of the merger. However, in exchange for the prepayment of the promissory notes, the A and G principals have agreed to recognize Merger Sub as the successor to the rights and obligations of Centrum under the A and G stock purchase agreement at the effective time of the merger, including its rights to indemnification, pursuant to the first amendment agreement. The first amendment agreement was executed by Ennis, Merger Sub, the A and G principals (and the wife of Mr. Amdani who has an interest in one or more promissory notes), and Centrum contemporaneously with the merger agreement.

Escrow of Amended and Restated Notes and Letters of Credit. The A and G principals will assign their interest in the amended and restated notes to an escrow agent to be held to fund claims by Ennis and Merger Sub under the A and G stock purchase agreement. The amended and restated promissory notes will be supported by letters of credit. Ennis and Merger Sub will deliver to the escrow agent letters of credit totaling the amount of the principal of the amended and restated notes and with the following terms:

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a term of at least 30 days past the second anniversary of the closing of the merger;

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permit a draft to be made upon presentation of a sight draft certificate, signed by the escrow agent and the payee, stating that an amount is due and unpaid under an amended and restated note and is not subject to setoff, and no claim has been made, for indemnification under the first amendment agreement; and

•

the amount would be reduced by any payment on the amended and restated notes and any setoff against the amended and restated notes or any claim for indemnification pursuant to the first amendment agreement.

Bringdown by A and G Principals. The A and G principals agreed in the first amendment agreement to provide Ennis and Merger Sub with a supplement to the A and G principals’ disclosure schedules to the A and G stock purchase agreement disclosing all matters required to make the A and G principals’ representations and warranties in the A and G stock purchase agreement true and correct in all material respects as of the closing date of the merger. The right of Ennis and Merger Sub to indemnification for any matters disclosed in the supplement will be waived if Ennis and Merger Sub consummate the merger, except with respect to the Bureau of Immigration and Customs Enforcement investigation of U.S. work authorizations of certain Centrum workers and the Department of Labor’s investigation of compliance with the H-1B provisions of the Immigration and Nationalization Act in connection with A and G’s hiring of certain foreign nationals (see “Information

Index to Financial Statements

Concerning Centrum—Centrum’s Business—Legal Proceedings”) and the IRS investigation of Centrum’s and A and G’s possible failure to file certain Currency Transaction Reports, and Mexican social security tax liability due as of November 11, 2003 in excess of reserves. Therefore, the only remedy available to Ennis and Merger Sub with respect to those breaches of the A and G stock purchase agreement is to terminate the merger agreement and not close the merger.

Indemnification by A and G Principals. The indemnification provisions of the A and G stock purchase agreement are amended and restated in the first amendment agreement, on the material terms and conditions described below. The indemnities provided under the A and G stock purchase agreement pursuant to the first amendment agreement are broader than the indemnities provided by the indemnifying Centrum stockholders under the Centrum indemnity agreement. Under the first amendment agreement, the A and G principals jointly and severally agree to indemnify and hold harmless Ennis, Merger Sub and Centrum and their respective directors, officers, employees, agents, consultants advisors and other representatives (collectively, “purchaser indemnitees”) in certain circumstances. Under the first amendment agreement, the purchaser indemnitees will be indemnified against losses and damages arising out of or in connection with inaccuracies or breaches of any of the A and G principals’ representations, warranties, covenants and agreements contained in the A and G stock purchase agreement, as amended by the first amendment agreement, and for certain other matters.

Indemnification by Ennis, Merger Sub and Centrum. Under the first amendment agreement, Ennis, Merger Sub and Centrum agreed to indemnify and hold the A and G principals harmless from any breach or alleged breach of a representation, warranty or covenant of Centrum made in the A and G stock purchase agreement, as amended by the first amendment agreement.

Limitations on Indemnification by A and G Principals. The obligation of the A and G principals to provide indemnification to Ennis, Merger Sub and Centrum under the first amendment agreement is subject to the following limitations:

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Time for Claims. The A and G principals are not liable for any indemnification unless a claim is made prior to the second anniversary of the effective time of the merger.

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No Personal Liability. No A and G principal has any personal liability for indemnification except for that caused by the A and G principal’s fraud.

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Recourse Limited to $10 Million Promissory Notes. Except for damages resulting from fraud, the only recourse available to Ennis, Merger Sub and Centrum is to recover against the principal of the amended and restated notes (excluding interest), the aggregate balances of which are $10 million.

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Basket. The A and G principals are not liable for any indemnification claim unless the total damages exceed $500,000, and then only to the extent damages exceed $500,000.

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Fraud Exception. The limitations on the amount of liability, including the basket but not including the limitation on timing of claims, will not apply for breaches attributable to fraud by the A and G principals, for which the A and G principals are jointly and severally liable.

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Application of Insurance. If a claim for indemnification represents a financial loss incurred by Ennis, Merger Sub or Centrum as to which recovery can be made from insurance policies (including title insurance), then Ennis, Merger Sub and Centrum must use commercially reasonable efforts to recover on the claim under such insurance policies, and the A and G principals are only liable for indemnification for damages in excess of the amounts paid under the insurance policies.

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Application of Reserves. If a claim for indemnification represents a financial loss incurred by Ennis, Merger Sub or Centrum as to which a reserve has been specifically established by Centrum prior to the closing of the merger, then Ennis, Merger Sub and Centrum must cause the reserve to be applied to the damages incurred before having a claim for indemnification against the A and G principals.

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Waiver of Breaches Known at Merger Closing. If Ennis or Merger Sub discovers prior to the effective date of the merger that any representation or warranty of the A and G principals in the A and G stock

Index to Financial Statements

purchase agreement is inaccurate or incorrect, then the consummation of the merger will constitute a waiver of all claims for those breaches of representations and warranties, except with respect to the Bureau of Immigration and Customs Enforcement investigation of U.S. work authorizations of certain Centrum workers and the Department of Labor’s investigation of compliance with the H-1B provisions of the Immigration and Nationalization Act in connection with A and G’s hiring of certain foreign nationals (see “Information Concerning Centrum—Centrum’s Business—Legal Proceedings”) and the IRS investigation of Centrum’s and A and G’s possible failure to file certain Currency Transaction Reports, and Mexican social security tax liability due as of November 11, 2003 in excess of reserves. The A and G principals are required to notify Ennis and Merger Sub prior to the closing of the merger of any such breaches. Therefore, the only remedy available to Ennis and Merger Sub with respect to those breaches of the A and G stock purchase agreement is to terminate the merger agreement and not close the merger.

Limitations on Indemnification by Ennis, Merger Sub and Centrum. The obligation of Ennis, Merger Sub and Centrum to provide indemnification to the A and G principals under the first amendment agreement is subject to the following limitations:

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Basket. Ennis, Merger Sub and Centrum are not liable for any indemnification claim unless the total damages exceed $500,000, and then only to the extent damages exceed $500,000.

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$1 Million Cap. The maximum collective liability of Ennis, Merger Sub and Centrum is limited to $1 million. The $1 million limitation does not apply to any claim arising out of the amended and restated notes, any breach of a representation or warranty by Ennis, Merger Sub or Centrum attributable to fraud, or any intentional breach of a covenant by Ennis, Merger Sub or Centrum.

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Time for Claims. Ennis, Merger Sub and Centrum are not liable for any indemnification unless a claim is made by the A and G principals prior to the second anniversary of the effective time of the merger.

Setoff Against Amended and Restated Notes. Any indemnification owed by the A and G principals, except in the case of claims based on fraud, must be setoff against the principal balance of amended and restated notes. On the first anniversary of the effective time of the merger, the escrow agent holding the amended and restated notes will pay to the A and G principals any amounts paid on the amended and restated notes in excess of the claims made against the amended and restated notes in the first year after the effective time of the merger. Similarly, on the second anniversary of the effective time of the merger, the escrow agent holding the amended and restated notes will pay to the A and G principals any amounts paid on the amended and restated notes in excess of the claims made against the amended and restated notes in the first two years after the effective time of the merger. The claims will be valued at the settlement amount if settled or at the amount claimed if not settled. If the A and G principals disagree with the valuation of claims at the end of the second year for purposes of retaining amounts in escrow, they may submit the matter to arbitration.

Centrum Indemnity Agreement

Background. Contemporaneously with the signing of the merger agreement, Ennis entered into a stock purchase agreement whereby it agreed to purchase all of the outstanding stock of Crabar/GBF from Crabar/GBF’s stockholders (substantially the same persons that are the stockholders of Centrum). The stock purchase closed and Ennis became the owner of 100% of the outstanding stock of Crabar/GBF on June 30, 2004. Also at the time of signing the merger and stock purchase agreements, Ennis and the Centrum stockholders agreed to enter into a registration rights agreement at the closing under which Ennis will be obligated to register the Ennis common stock issued in the merger as more fully described below. Finally, Ennis, Merger Sub and certain principal Centrum/Crabar/GBF stockholders, sometimes referred to in this section as the indemnifying stockholders, also entered into an indemnity agreement, referred to as the Centrum indemnity agreement.

Indemnification Rights of Ennis and Merger Sub. The Centrum indemnity agreement provides the terms under which Ennis and Merger Sub may seek indemnification from the indemnifying stockholders for certain

Index to Financial Statements

breaches of the merger agreement, Crabar/GBF stock purchase agreement and registration rights agreement. Under the Centrum indemnity agreement, the indemnifying stockholders jointly and severally agreed to indemnify Ennis and Merger Sub and their respective directors, officers, employees, agents, consultants, other representatives, controlling persons and affiliates, as the case may be, collectively referred to in this section as the purchaser indemnitees. The purchaser indemnitees will be entitled to indemnification for any losses or damages arising from or suffered in connection with (i) any breach of a representation, warranty, covenant or obligation of Centrum in the merger agreement, (ii) any breach of a representation, warranty, covenant or obligation of the Crabar/GBF stockholders or Crabar/GBF in the Crabar/GBF stock purchase agreement, or (iii) any amounts required to be paid by the Centrum stockholders pursuant to the indemnification provisions of the registration rights agreement.

Escrow Fund. Ennis and Merger Sub are restricted to obtaining indemnification from an escrow fund that is to be funded in the following manner:

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If the merger is consummated, then the indemnifying stockholders will deposit 319,897 shares of Ennis common stock that would otherwise be issued to the Centrum Stockholders as consideration for the merger into the escrow fund. If the market price of the shares to be placed in escrow is assumed to be equal to the average trading price of Ennis common stock for the thirty trading days immediately preceding the signing of the merger agreement, then the shares would have an aggregate value of $5 million.

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If the merger agreement is terminated because (i) the Ennis shareholders fail to approve the merger at the shareholder meeting convened for such purpose, (ii) a governmental authority has taken an action which prohibits the merger from taking place, or (iii) Ennis has materially breached a representation, warranty or covenant in the merger agreement and has failed to cure the breach within 10 days of being notified of it, then, under the stock purchase agreement, Ennis will be obligated to pay the Crabar/GBF stockholders an additional $2 million for their shares of Crabar/GBF stock. This additional $2 million will be placed in the escrow fund, in lieu of the estimated $5 million worth of stock discussed above, in order to secure the indemnity obligations of the indemnifying stockholders related to the stock purchase agreement.

If the merger does not occur for any reason other than those described in the above paragraph, then the escrow fund will not be funded and the purchaser indemnitees will not be entitled to indemnification and will have no recourse for breaches of the representations, warranties, covenants or obligations of the Crabar/GBF stockholders or Crabar/GBF in the Crabar/GBF stock purchase agreement, except to the extent that such breaches are attributable to the fraud of an indemnifying stockholder.

Limitations on Indemnification. The obligations of the indemnifying stockholders to provide indemnification to Ennis, Merger Sub and the other purchaser indemnitees under the Centrum indemnity agreement is subject to the following limitations:

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Time for Claims. The indemnifying stockholders will not be liable for any indemnification unless a claim is made prior to the second anniversary of the effective date of the Merger. Also, subject to certain exceptions the representations and warranties of Centrum under the merger Agreement are limited to the period beginning on November 10, 2003, and therefore the indemnification available to the purchaser indemnities under the Centrum indemnity agreement is limited to breaches relating to that period.

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No Personal Liability. No indemnifying stockholder has any personal liability for indemnification except to the extent that the damages or losses for which indemnification are sought arose from or were related to certain breaches or an alleged breaches that are attributable fraud.

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Recourse Limited to Escrow Fund. Except for certain damages attributable to fraud, the only recourse available to Ennis, Merger Sub and the other purchaser indemnities for indemnification is to recover against the assets in the escrow fund.

Index to Financial Statements

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Minimum Claim Amount. The indemnifying stockholders are not liable for any indemnification claim unless the damages exceed $50,000 or the combined value of all claims that are individually less than $50,000 is equal to or in excess of $250,000 in the aggregate, in which case the minimum claim amount will not apply. In addition, claims for breaches of the representations and warranties made in either the merger agreement or the Crabar/GBF stock purchase agreement relating to accounts receivable and inventory may not be made until the minimum amounts for such claims has been exceeded, as set forth in those agreements.

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Additional Amount Limitations. The aggregate damages that may be recovered for claims made during the first year following the date on which assets are deposited in the escrow fund, referred to in this section as the deposit date, is limited to the amount that can be recovered from the assets held in the escrow fund. The aggregate damages that may be recovered for claims made during the second year following the deposit date is limited to the lesser of (i) $2.5 million worth of stock as valued on the first anniversary of the deposit date, in the event that the escrow is funded with stock, or $1 million in the event that the escrow is funded in cash, and (ii) the value of the assets contained in escrow fund on the first anniversary of the deposit date that has not been applied to claims made in the first year following the deposit date. As stated above and assuming that the merger occurs, the escrow fund will be Ennis’ sole source of indemnification for breaches of the merger agreement, the Crabar/GBF stock purchase and registration rights agreement. Therefore, to the extent that Ennis (or any other purchaser indemnitee) files claims for indemnification under the merger agreement, Crabar/GBF stock purchase agreement or registration rights agreement, the pool of escrowed shares of Ennis common stock available for satisfaction of indemnification claims under all of these agreements will be reduced.

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Fraud Exception. The limitations on amount of liability, but not those relating to timing of claims, will not apply to claims based on certain breaches attributable to fraud.

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Application of Insurance. If a claim for indemnification represents a financial loss as to which recovery can be made from insurance policies (including title insurance), then the purchaser indemnitees must use commercially reasonable efforts to recover on the claim under the insurance policies, and the indemnifying stockholders are only liable for indemnification for damages in excess of the amounts paid under the insurance policies.

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Application of Reserves. If a claim for indemnification represents a financial loss as to which a reserve has been specifically established by Centrum or Crabar/GBF in their respective financial records prior to the date of the Centrum indemnity agreement, then the claimant must cause Centrum, Merger Sub or Crabar/GBF to apply the reserve to the damages incurred before having a claim for indemnification against the indemnifying stockholders.

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Waiver of Breaches Known at Merger Closing. If Ennis, Merger Sub or any other purchaser indemnitee discovers, prior to the closing of the merger or the closing of the stock purchase, that any representation or warranty contained in the merger or stock purchase agreement, respectively, is inaccurate or incorrect, then the consummation of the merger or the stock purchase will constitute a waiver of all claims for breach of such representations and warranties, except for damages resulting from the failure of Centrum to be taxed as a Subchapter S corporation.

Release of Escrow Fund Assets. If on the first anniversary of the deposit date, the value of the remaining escrowed assets minus the stated amount of claims made but not settled in the first year, less the amount by which any claims settled in the first year exceeds the amount permitted to be recovered in the second year following the deposit date, then the escrow agent holding the escrowed assets will transfer escrowed assets having a value equal to such excess to the indemnifying stockholders. Similarly, if on the second anniversary of the deposit date, the value of the remaining escrowed assets exceeds the value of the claims made (but not yet settled) or settled in the preceding two years, then the escrow agent will transfer escrowed assets having a value equal to such excess to the indemnifying stockholders. If the indemnifying stockholders disagree with the valuation of pending claims at the end of the second year for purposes of retaining assets in escrow, they may submit the matter to arbitration for resolution.

Index to Financial Statements

Ennis Indemnity Agreement

Background. Contemporaneously with the signing of the merger agreement, Crabar/GBF stock purchase agreement, and Centrum indemnity agreement, Ennis and Merger Sub entered into an indemnity agreement with certain Centrum/Crabar/GBF stockholders (the same persons that are the indemnifying stockholders under the Centrum indemnity agreement), referred to as the Ennis indemnity agreement.

Indemnification Rights of Ennis and Merger Sub. The Ennis indemnity agreement provides the terms under which certain Centrum/Crabar/GBF stockholders and their representatives may seek indemnification from Ennis for certain breaches of the merger agreement and Crabar/GBF stock purchase agreement. Under the Ennis indemnity agreement, Ennis agreed to indemnify certain Centrum/Crabar/GBF stockholders and their respective directors, officers, employees, agents, consultants, other representatives, as the case may be, collectively referred to in this section as the stockholder indemnitees. The stockholder indemnitees will be entitled to indemnification for any losses or damages arising from or suffered in connection with (i) any breach of a representation, warranty, covenant or obligation of Ennis or Merger Sub in the merger agreement, or (ii) any breach of a representation, warranty, covenant or obligation of Ennis in the Crabar/GBF stock purchase agreement.

Limitations on Indemnification. The obligation of Ennis to provide indemnification to the stockholder indemnities under the Ennis indemnity agreement is subject to the following limitations:

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Time for Claims. Ennis will not be liable for any indemnification unless a claim is made prior to the second anniversary of the effective date of the merger.

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Minimum Claim Amount. Ennis is not liable for any indemnification claim unless the damages exceed $50,000 or the combined value of all claims that are individually less than $50,000 is equal to or in excess of $250,000 in the aggregate, in which case the minimum claim amount will not apply. In addition, claims for breaches of the representations and warranties made in the merger agreement relating to accounts receivable and inventory may not be made until the minimum amounts for such claims has been exceeded, as set forth in the merger agreement.

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Aggregate Amount Limitations. The aggregate damages that may be recovered for claims made is limited to $5 million. The aggregate damages that may be recovered for claims made during the second year following the closing date of the merger is limited to the lesser of (i) $2.5 million and (ii) $5 million minus the indemnification claims paid by Ennis in the first year. Therefore, the aggregate damages that may be recovered for breaches of both the merger agreement and Crabar/GBF stock purchase agreement, except in the case of fraud, is limited to $5 million.

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Fraud Exception. The limitations on amount of liability, but not that relating to timing of claims, will not apply to claims based on breaches attributable to fraud by Ennis or Merger Sub.

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Application of Insurance. If a claim for indemnification represents a financial loss as to which recovery can be made from insurance policies held by the stockholder indemnitees, then the stockholder indemnitees must use commercially reasonable efforts to recover on the claim under the insurance policies, and Ennis is only liable for indemnification for damages in excess of the amounts paid under the insurance policies.

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Waiver of Breaches Known at Merger Closing. If any stockholder indemnitee discovers, prior to the closing of the merger or the closing of the Crabar/GBF stock purchase, that any representation or warranty contained in the merger agreement or Crabar/GBF stock purchase agreement, respectively, is inaccurate or incorrect, then the consummation of the merger or the Crabar/GBF stock purchase will constitute a waiver of all claims for breach of such representations and warranties.

Registration Rights Agreement

General. At the closing of the merger, Ennis and the Centrum stockholders will enter into a registration rights agreement with respect to the shares of Ennis issued in the merger. The registration rights agreement will

Index to Financial Statements

require Ennis, within 15 days after completion of the merger, to file a registration statement on Form S-3 with the SEC to register the resale of the Ennis common stock issued in the merger. Ennis will not be obligated to effect an underwritten registration. Additional terms of the registration rights agreement will include:

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Suspension Right. Ennis will be able to require all Centrum stockholders to suspend open market offers and sales of Ennis stock received in the merger if there is material undisclosed information or events regarding Ennis, but not more than three times during any twelve month period.

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Piggyback Registration. The Centrum stockholders will be entitled to one “piggyback” registration, subject to cutback by the underwriter but with priority to all other shareholders having registration rights.

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Holdback in Underwritten Offerings. If Ennis conducts an underwritten offering in which the Ennis shares issued in the merger are not included, the Centrum Stockholders will agree not to sell shares privately or in the public market for 120 days after the effective date of the registration statement.

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Expenses of Registration. All expenses associated with the preparation and filing of the registration statement will be borne by Ennis, except underwriting discounts, selling commissions and legal expenses of the Centrum stockholders.

Indemnification. The registration rights agreement will also provide that, in the event that any shares of Ennis common stock issued in the merger are included in a registration statement pursuant to the registration rights agreement:

By Ennis. Ennis will indemnify the Centrum stockholders against any liabilities to which they become subject under applicable securities laws, excluding those resulting from information provided by the Centrum stockholders. The indemnity is subject to the same limitations contained in the Ennis indemnity agreement relating to Centrum, Crabar/GBF or the Centrum stockholders, including the $5 million cap.

By Holders. The Centrum stockholders will indemnify Ennis against any liabilities to which Ennis may become subject under any applicable securities laws, if such liabilities arise out of information furnished to Ennis in writing by a Centrum stockholder relating to Crabar/GBF, Centrum or the Centrum stockholders to Ennis expressly for use in the registration statement. The indemnity is subject to the same limitations contained in the Centrum indemnity agreement, including the $5 million cap.

Stock Pledge and Escrow Agreement

Upon the closing of the merger, Ennis will enter into a stock pledge and escrow agreement with the Centrum stockholders, and J.P. Morgan Trust Company, NA., as escrow agent. Under the terms of the merger agreement and the expected terms of the stock pledge and escrow agreement, 319,897 of the shares of Ennis common stock otherwise issuable to the Centrum stockholders at the closing of the merger will be placed in escrow as security for potential indemnity claims by Ennis under the merger agreement, the indemnity agreements and the registration rights agreement.

Non-Competition Agreement

At the closing of the merger, Roger Brown, Laurence Ashkin, John McLinden and Arthur Slaven, Centrum’s principal stockholders, will enter into a non-competition agreement with Ennis pursuant to which those stockholders will agree that they will not compete with Ennis or any of its subsidiaries for a period of two years in any state in the United States where Ennis or any of its subsidiaries (including Centrum and its subsidiaries) conducts business as of the date of the non-competition agreement. More specifically, these former Centrum stockholders will not be permitted during the two-year period to own or participate in or solicit business for any competing business of Ennis or Centrum. These former Centrum stockholders will also be prohibited from providing services, whether as an employee, consultant or otherwise, to any business competing with Ennis

Index to Financial Statements

or Centrum. In exchange for these covenants, Ennis will pay $100,000 to each such principal stockholder and $400,000 in the aggregate. Under the merger agreement, the total amount of the non-competition compensation is deducted from the valuation of Centrum in the formula used to calculate the number of shares to be received by Centrum stockholders in the merger.

Standstill Agreement

At the closing of the merger, Ennis and the Centrum stockholders will enter into a standstill agreement that will limit the actions that the Centrum stockholders will be permitted to take following the merger and the issuance of Ennis common stock in the merger. For a three year period after the closing of the merger, the Centrum stockholders will agree not to (a) acquire additional shares of Ennis common stock, except for stock options granted to a non-executive director of Ennis pursuant to a stock option plan adopted by Ennis or Ennis common stock issued upon exercise of the options, and except that a Centrum stockholder may acquire shares of Ennis common stock up to the number of shares issued to the Centrum stockholder in the merger to replace any shares that have been sold by them, (b) enter into a voting trust or similar agreement with respect to the voting of their shares of Ennis common stock, (c) solicit proxies or become a participant in a solicitation, (d) act in concert with any other person for the purposes of acquiring, holding, voting or disposing of shares of Ennis common stock, (e) initiate, propose or solicit a shareholder proposal, or (f) take any action to acquire or affect control of Ennis or to encourage or assist any other person to do so.

Index to Financial Statements

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT OF CENTRUM PRIOR TO THE MERGER

The following table sets forth information with respect to the beneficial ownership of Centrum common stock as of August 17, 2004 for:

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each person or entity known by Centrum to own beneficially more than 5% of Centrum’s outstanding common stock;

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each of Centrum’s executive officers and directors; and

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all of Centrum’s executive officers and directors as a group.

Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. Except as otherwise indicated, all persons listed below have sole voting and investment power with respect to the shares beneficially owned by them, subject to applicable community property laws. The information is not necessarily indicative of beneficial ownership for any other purpose.


Name and Address of Beneficial Owner (1)	Number of Shares of Class A Common Stock Owned	Number of Shares of Class B Common Stock Owned	Percentage of Shares of Class A Common Stock Owned		Percentage of Shares of Class B Common Stock Owned
Roger Brown	1	99	25	%	25	%

Laurence Ashkin (2)	1	99	25	%	25	%

John McLinden (3)	1	99	25	%	25	%

Arthur Slaven (4)	1	99	25	%	25	%

Barbara S. McLinden (5)	—	99	—		25	%

Jane Slaven (6)	—	99	—		25	%

Laurence Ashkin, as Trustee of Nancy Smith Trust	—	24.75	—		6.25	%

Laurence Ashkin, as Trustee of Evan Ashkin Trust	—	24.75	—		6.25	%

Laurence Ashkin, as Trustee of Gary Ashkin Trust	—	24.75	—		6.25	%

Arthur Slaven, as Trustee of Michael Slaven Trust	—	24.75	—		6.25	%

Arthur Slaven, as Trustee of Peter Slaven Grantor Trust	—	24.75	—		6.25	%

All directors and executive officers as a group (4 persons) (2)(3)(4)(5)(6)	4	396	100	%	100	%

(2)	The address of all owners is c/o Centrum Acquisition, Inc., 1501 E. Cerritos Ave., Anaheim, California 92805.

(2)	Includes 24.75 shares of Class B common stock owned of record by each of: (i) Laurence Ashkin, as Trustee of Nancy Smith Trust, (ii) Laurence Ashkin, as Trustee of Evan Ashkin Trust, and (iii) Laurence Ashkin, as Trustee of Gary Ashkin Trust.

(2)	Includes 50 shares of Class B common stock owned of record by Barbara S. McLinden, Mr. McLinden’s wife.

(2)	Includes 24.75 shares of Class B common stock owned of record by each of: (i) Jane Slaven, Mr. Slaven’s wife, (ii) Arthur Slaven, as Trustee of Michael Slaven Trust, and (iii) Arthur Slaven, as Trustee of Peter Slaven Grantor Trust.

(2)	Includes 49 shares of Class B common stock owned of record by John McLinden, Ms. McLinden’s husband.

(2)	Includes 24.75 shares of Class B common stock owned of record by each of: (i) Arthur Slaven, Ms. Slaven’s husband, (ii) Arthur Slaven, as Trustee of Michael Slaven Trust, and (iii) Arthur Slaven, as Trustee of Peter Slaven Grantor Trust.

Index to Financial Statements

MANAGEMENT OF CENTRUM PRIOR TO THE MERGER

The following is a list of Centrum’s executive officers and directors as of August 17, 2004:


Name	Age	Position
Roger Brown	34	President and Director
Laurence Ashkin	76	Vice President, Secretary and Director
John McLinden	49	Vice President, Assistant Secretary and Director
Arthur Slaven	51	Vice President and Director

MANAGEMENT OF ENNIS AFTER THE MERGER

The directors and officers of Ennis after the merger will be the same as the current officers and directors of Ennis, except that one representative of the former Centrum stockholders will be recommended to Ennis’ nominating and corporate governance committee for nomination to the Ennis board of directors as the representative of the Centrum stockholders provided for under the merger agreement. See “The Merger Agreement—Directorship of Ennis” on page 42.

INTERESTS OF CENTRUM DIRECTORS IN THE MERGER

General

Directors of Centrum (who are all significant stockholders of Centrum as well) have interests in the merger that may be different from, or in addition to, the interests of the stockholders of Centrum generally. These interests relate to or arise from, among other things:

•

non-competition payments to the directors of Centrum;

•

the continued indemnification of Centrum directors and officers for actions taken prior to the merger;

•

the extension of Centrum’s existing director and officer insurance policy for a period of four years to cover actions taken prior to the merger; and

•

an employment agreement between Ennis and Roger Brown.

Non-Competition Payments

Pursuant to a non-competition agreement to be entered into at closing between Ennis and each director of Centrum, each director of Centrum will be paid $100,000 during the first two years after the closing of the Merger in exchange for his agreement to refrain for certain activities that might be competitive with or harmful to Ennis. For a more complete description of the non-competition agreement, see “Other Agreements—Non-competition Agreement” on page 57.

Indemnification and Insurance

Pursuant to the merger agreement, the indemnification and exculpation provisions contained in the organizational documents of the surviving entity are required to be at least as favorable to individuals who immediately prior to the closing date were directors, officers, agents or employees of Centrum or its subsidiaries as those contained in the organizational documents of Centrum or its subsidiaries, respectively, and such provisions may not be amended, repealed or otherwise modified for a period of six (6) years after the closing date in any manner that would adversely affect the rights thereunder of any of such individuals. In addition, pursuant to the merger agreement, Ennis is required to use its commercially reasonable efforts to obtain and maintain in

Index to Financial Statements

effect for four years from the effective time, Centrum’s current directors’ and officers’ liability insurance covering those persons who were covered by Centrum’s directors’ and officers’ liability insurance policy immediately prior to the closing date; provided, that Ennis is not to expend in any year an amount in excess of 300% of the annual premiums currently paid by Centrum for such insurance.

Roger Brown Employment Agreement

At the closing of the merger, Ennis will enter into an employment agreement with Roger Brown pursuant to which Mr. Brown will serve as President and CEO of Alstyle Apparel LLC, which will be the name of the surviving entity after the merger. The employment agreement will provide for Mr. Brown’s employment for up to 18 months and compensate him at the rate of $300,000 per year.

Index to Financial Statements

INFORMATION CONCERNING ENNIS

Ennis’s Business

Ennis was organized under the laws of Texas in 1909. Ennis’ principal executive offices are located at 2441 Presidential Pkwy., Midlothian, Texas. The telephone number for Ennis’ principal executive offices is (972) 775-9801. Ennis and its subsidiaries operate in three business segments. The Forms Solutions Group prints and constructs a broad line of business forms and other printed business products for national distribution primarily through independent dealers. The Promotional Solutions Group is primarily in the business of design, production and distribution of printed and electronic media, presentation products, flexographic printing, advertising specialties and Post-it® Notes. The Financial Solutions Group designs, manufactures and markets printed forms and specializes in internal bank forms, secure and negotiable documents and custom products.

Approximately 97% of the business products manufactured by Ennis are custom and semi-custom, printed or constructed in a wide variety of sizes, colors, number of parts and quantities on an individual job basis depending upon the customers’ specifications. Ennis operates thirty manufacturing locations in twelve states. For the year ended February 29, 2004, the sale of business products represented approximately 88% of consolidated net sales.

While it is not possible, because of the lack of adequate statistical information, to determine Ennis’ share of the total business products market, management believes Ennis is one of the largest producers of business forms in the United States distributing primarily through independent dealers, and that its business forms offering is more diversified than that of most companies in the business forms industry.

For further information about Ennis, see “Where You Can Find More Information” on page 99.

DESCRIPTION OF ENNIS CAPITAL STOCK

The summary of the terms of the Ennis capital stock set forth below is qualified by reference to the terms of the articles of incorporation and bylaws, both as amended, of Ennis.

Authorized Capital Stock

Ennis’ authorized capital stock consists of 40,000,000 shares of common stock, par value $2.50 per share, and 1,000,000 shares of preferred stock, $10.00 par value per share.

Common Stock

As of September 15, 2004, there were approximately 16,430,658 shares of Ennis common stock outstanding. Following the merger, Ennis expects there to be approximately 25,234,241 shares of its common stock outstanding, assuming issuance of the maximum of 8,803,583 shares in connection with the merger.

The holders of common stock are entitled to receive ratably, from funds legally available for the payment thereof, dividends when and as declared by resolution of Ennis’ board of directors, subject to any preferential dividend rights which may be granted to holders of any preferred stock authorized and issued by Ennis. In the event of liquidation, each share of common stock is entitled to share pro rata in any distribution of Ennis’ assets after payment or providing for the payment of liabilities and any liquidation preference of any outstanding preferred stock. Each holder of Ennis common stock is entitled to one vote for each share of common stock held of record on the applicable record date on all matters submitted to a vote of stockholders, including the election of directors.

Preferred Stock

Ennis’ board has the authority, without further stockholder approval, to create other series of preferred stock, to issue shares of preferred stock in such series up to the maximum number of shares of the relevant class

Index to Financial Statements

of preferred stock authorized, and to determine the preferences, rights, privileges and restrictions of any such series, including the dividend rights, voting rights, rights and terms of redemption, liquidation preferences, the number of shares constituting any such series and the designation of such series.

Stock Exchange Listing

Ennis’ common stock is listed on the New York Stock Exchange under the symbol “EBF.”

Rights Plan

Pursuant to the rights agreement between Ennis and Harris Trust and Savings Bank, as rights agent, dated November 8, 1998, as amended, one preferred share purchase right was issued to and trades with each outstanding share of Ennis common stock. Each right entitles the registered holder to purchase from one-thousandth of a share of Series A Junior Participating Preferred Stock of Ennis at a price of $27.50.

The rights will be exercisable only if a person or group acquires 15% or more of Ennis’ common stock or announces a tender offer, the consummation of which would result in ownership by a person or group of 15% or more of the common stock without consent of the board of directors. Each right will entitle shareholders to buy one one-thousandth of a share of a new series of junior participating preferred stock at an exercise price of $27.50, subject to adjustment.

If a person or group acquires 15% or more of Ennis’ outstanding common stock without consent of the Board of Directors, each right will entitle its holder (other than such person or members of such group) to purchase, at the right’s then current exercise price, a number of shares of Ennis’ common stock having a market value of twice the exercise price.

If Ennis is acquired in a merger or other business combination transaction after a person or group has acquired 15% or more of Ennis’ outstanding common stock, each right will entitle its holder (other than such person or members of such group) to purchase, at the right’s then current exercise price, a number of shares of the acquiring company’s common stock having a market value of twice the exercise price. Thus, rights holders may purchase shares of the acquiring company’s common stock at a 50% discount.

Following the acquisition by a person or group of beneficial ownership of 15% or more of Ennis’ common stock and prior to an acquisition of 50% or more of the common stock, the board of directors may exchange the rights (other than the rights owned by such person or group), in whole or in part, at an exchange ratio of one share of common stock (or one one-thousandth of a share of the new series of junior participating preferred stock) per right.

Prior to the acquisition by a person or group of beneficial ownership of 15% or more of Ennis’ common stock, the rights are redeemable for one cent ($.01) per right at the option of the board of directors.

Index to Financial Statements

INFORMATION CONCERNING CENTRUM

Centrum’s Business

Overview

Centrum Acquisition, Inc. was incorporated in 2003 under the laws of the State of Delaware. Centrum’s principal executive offices are located at 1501 E. Cerritos Avenue, Anaheim, California. The telephone number for Centrum’s principal executive offices is (714) 765-0400.

Centrum is a leading vertically integrated manufacturer and distributor of high-quality basic activewear products to the wholesale imprinted activewear market in North America and Europe. Through its subsidiaries, Centrum operates under the trade name Alstyle Apparel and Activewear.

Products

Centrum markets high-quality knit basic activewear (T-shirts, tank tops and fleece) across all market segments. Centrum offers approximately 55 different items comprised of approximately 3,500 stock keep units or SKUs. Approximately 88% of Centrum’s net sales are derived from T-shirts, and 94% are in the domestic United States. Its various branded product lines include the following:

AAA—The AAA line is Centrum’s high-end 6 oz. Product line that is pre-approved by many of its retail customers. Short sleeve and long sleeve products are available from juvenile to adult sizes up to 6X, in a variety of colors. AAA is Centrum’s best selling product line. This product line is also offered under the Murina® brand name in limited quantities and is manufactured exclusively in, and marketed as made in, the USA.

Gaziani®—Gaziani® is a higher-margin, women’s activewear line that is more style-focused than Centrum’s other product lines.

Diamond Star®—Diamond Star® is a softer, high-quality ringspun that commands a higher price point.

Tennessee River®—Tennessee River® is a 5.5-ounce value offering that complements Centrum’s AAA product.

Since 2001, Centrum has focused on developing its branded product lines and placed less emphasis on lower-margin custom specification/private label business. The shift in product offerings has simplified operations due to fewer line changeovers and setup downtime.

Marketing

Centrum utilizes a customer-focused internal sales team comprised of 19 dedicated sales representatives assigned to specific geographic territories in the United States and Canada. Sales representatives are allocated performance objectives for their respective territories and are provided financial incentives for achievement of their target objectives. An independent sales representative is used in Europe. Sales representatives are responsible for developing business with large accounts and spend approximately half their time in the field. Centrum employs a staff of customer service representatives that handle call-in orders from smaller customers. Sales personnel sell directly to Centrum’s customer base, which consists primarily of screen printers, embellishers, retailers, and mass marketers.

Approximately 80% of Centrum’s fiscal 2003 sales were related to direct customer, branded products and the remainder related to private label and re-label programs. Generally, sales to screen printers and mass marketers are driven by the availability of competitive products and price considerations, while sales in the private label business are characterized by slightly higher customer loyalty.

Index to Financial Statements

Centrum currently services over 3,000 active customer accounts. No single customer accounted for more than 10% of Centrum’s sales in fiscal year 2003, 2002 or 2001. Centrum’s customer base is diverse, with an average customer order size of approximately 200 dozen (or approximately $4,000) and its top ten customers accounted for no more than 22% of sales in fiscal 2003 and 20% of sales in fiscal 2002.

Centrum’s most popular styles are produced based on forecasts to permit quick shipment and to level production schedules. Some customers place multi-month orders and request shipment at their discretion. Centrum offers same-day shipping and uses third party carriers to ship products to its customers.

Centrum’s sales are seasonal, with sales in the second and third quarters generally being the highest. The general apparel industry is characterized by rapid shifts in fashion, consumer demand and competitive pressures, resulting in both price and demand volatility. However, the imprinted activewear market that Centrum sells to is “event” driven. Blank T-shirts can be thought of as “walking billboards” promoting movies, concerts, sports teams, and “image” brands. Still, the demand for any particular product varies from time to time based largely upon changes in consumer preferences and general economic conditions affecting the apparel industry.

Centrum advertises its products through a variety of print journals and through extensive representation at industry and trade exhibits.

Manufacturing

Centrum utilizes modern, vertically integrated manufacturing operations. Knitting and dyeing and substantially all cutting and sewing processes are performed in-house. This helps Centrum to increase productivity, be responsive to customer needs and achieve production of high-quality products.

At Centrum’s approximately 364,000 square foot leased facility in Anaheim, California, the knitting operation is fully computerized. Yarn is fed into one of approximately 250 circular knitting machines that operate continuously to produce jersey, interlock, and fleece fabrics. Centrum’s dyehouse in the same facility utilizes technologically advanced equipment. Dyes and chemicals are mechanically formulated and mixed to foster color consistency.

Cutting and sewing is performed mainly in four leased and one owned manufacturing facilities aggregating approximately 274,000 square feet and which are located in Hermosillo, Mexico and Ensenada, Mexico. Cutting is a fully automated process utilizing 18 Bierrebi cutting machines to ensure maximum consistency and uniformity. Approximately 90% of Centrum’s sewing needs are fulfilled in-house. Centrum utilizes high-speed automated equipment and modular team techniques to complete and inspect the finished garments. Centrum also utilizes a third party contractor in El Salvador and southern California for certain of its products’ cutting and sewing requirements.

Raw Materials

Cotton yarn is the primary raw material used in Centrum’s manufacturing processes. Cotton accounts for approximately 40% of the manufactured product cost. Centrum acquires its yarn from five major sources that meet stringent quality and on-time delivery requirements. The largest supplier provides over 50% of Centrum’s yarn requirements and has an entire yarn mill dedicated to Centrum’s production. Centrum has been evaluating an investment in its own knitting mill although it has no commitments to do so. The other major raw material components used in Centrum’s manufacturing processes are chemicals used to treat the fabric during the dyeing process. Centrum sole-sources the supply of these chemicals from one supplier. In fiscal 2004 Centrum expects to use over 84 million pounds of cotton yarn. Centrum generally acquires its cotton yarn under short-term purchase orders with its suppliers, and has exposure to swings in cotton market prices. Centrum does not use derivatives, including cotton option contracts, to manage its exposure to movements in cotton market prices. Centrum may use such derivatives or long-term contracts in the future. Centrum believes that it will be competitive with other companies in the United States apparel industry in negotiating the price of cotton purchased for future production use.

Index to Financial Statements

Competition

Centrum competes with many branded and private label manufacturers of knit apparel in the United States and Canada, some of which are larger in size and have greater financial resources than Centrum. Centrum competes on the basis of price, quality, service and delivery. Centrum’s strategy is to provide the best value to its customers by delivering a consistent, high-quality product at a competitive price. Centrum’s competitive disadvantage is that its brand name, Alstyle Apparel, is not as well known as the brand names of its largest competitors, such as Gildan, Delta, Hanes and Russell.

Employees

Centrum and its foreign subsidiaries had approximately 3,600 full time employees at June 30, 2004. An estimated 2,500 employees are unionized, of which 2,400 are represented by two unions in Centrum’s Mexican cutting and sewing facilities, and 100 employees are represented by a union in one of Centrum’s distribution centers. Centrum believes that its relations with its employees are good.

Environmental and Regulatory Matters

Centrum is subject to various federal, state and local environmental laws and regulations concerning, among other things, wastewater discharges, air emissions and solid waste disposal. Centrum’s plants generate very small quantities of hazardous waste, which are either recycled or disposed of off-site. Most of its plants are required to possess one or more discharge permits.

Centrum incurs capital expenditures each year that are aimed at achieving compliance with current and future environmental standards. Centrum does not expect that the amount of these expenditures in the future will have a material adverse effect on its operations, financial condition or liquidity. The extent of Centrum’s liability, if any, for past failures to comply with laws, regulations and permits applicable to its operations cannot be determined. There can be no assurance, however, that future changes in federal, state, or local regulations, interpretations of existing regulations or the discovery of currently unknown problems or conditions will not require substantial additional expenditures.

Properties

As of June 30, 2004, Centrum had 13 principal operating facilities and one administrative/operating facility, which comprise approximately 1.2 million square feet of space. The following table describes the principal facilities and indicates the location, function, approximate size and ownership status of each location. Centrum believes that its facilities are suitable for their present intended purposes and adequate for their present and anticipated level of operations.


Location	Purpose	Facility Size		Ownership
		( square feet)
*United States*

Anaheim, California	Manufacturing	364,065	(1)	Leased
Anaheim, California	Corporate Offices/Distribution	200,000		Leased
Los Angeles California	Distribution Center	31,600		Leased
Chicago, Illinois	Distribution Center	125,000		Leased
Carrollton, Texas	Distribution Center	26,136		Leased
Atlanta, Georgia	Distribution Center	31,958		Leased
Bensalem, Pennsylvania	Distribution Center	41,948		Leased

*Canada*

Mississauga, Ontario	Distribution Center	56,000		Leased

Index to Financial Statements


Location	Purpose	Facility Size	Ownership
		( square feet)
*Mexico*

Ensenada, Baja California	Manufacturing	92,657	Owned
Hermosillo, Sonora	Office	400	Leased
Hermosillo, Sonora	Manufacturing	77,145	Leased
Hermosillo Sonora	Manufacturing	18,298	Leased
Ensenada, Baja California	Warehouse	17,340	Leased
Ensenada, Baja California	Manufacturing	53,820	Leased
Hermosillo, Sonora	Manufacturing	31,820	Leased

		1,168,187

(1)	Net of subleased facilities of 150,000 square feet.

Legal Proceedings

In June 2003, the Bureau of Immigration and Customs Enforcement conducted an I-9 investigation of Centrum and notified Centrum of concerns about the validity of U.S. work authorizations of over 600 workers. All of such workers from Mexico who were still employed by Centrum at the time of such notice have been terminated by Centrum, terminated their employment with Centrum voluntarily or were subsequently found to be validly authorized. While the investigation has not been finally concluded, Centrum believes that it is likely that any fines imposed on it in connection with this investigation will not have a material adverse effect on it and that any material liabilities arising from this matter would be subject to the indemnification provisions of the first amendment agreement.

In August 2003, the U.S. Department of Labor notified Centrum that it was conducting an investigation to determine compliance with the H-1B provisions of the Immigration and Nationalization Act in connection with A and G’s hiring of certain foreign nationals. While the investigation has not been finally concluded, Centrum believes that it is likely that any fines imposed on it in connection with this investigation will not have a material adverse effect on it and that any material liabilities arising from this matter would be subject to the indemnification provisions of the first amendment agreement. In addition, it is possible that the Department of Labor could assess a penalty of debarment preventing Centrum from filing new immigration petitions for a one-year period.

In addition, Centrum is involved in litigation incidental to its business from time to time. Centrum is not currently involved in any litigation in which it believes that an adverse outcome would have a material adverse effect on its business, financial condition, results of operations or prospects.

Index to Financial Statements

Centrum’s Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of our results of operations and financial condition in conjunction with the financial statements and other financial information included elsewhere in this proxy statement/prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Centrum’s actual results may be materially different from those anticipated in these forward-looking statements resulting from a variety of factors, including those discussed elsewhere in this proxy statement/prospectus. Neither Ennis nor Centrum undertakes any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented herein. These statements should be considered only after carefully reading this entire proxy statement/prospectus.

Overview

Centrum was formed in October 2003 to acquire all of the outstanding shares of A and G, Inc. (“A and G”), a Subchapter “S” corporation, for approximately $137,300,000 in cash, notes and assumed debt. Centrum operates solely through its wholly owned subsidiary A and G, which does business as Alstyle Apparel and Activewear. Centrum is a leading, vertically integrated manufacturer and marketer of high quality basic activewear headquartered in Anaheim, California. Centrum’s product lines consist of 100% cotton T-shirts, fleece (sweatshirts) and active activewear in a variety of weights, colors and styles. Centrum’s customers are primarily screen printers and large retailers. Centrum markets its products through seven, company-owned distribution centers in the United States and Canada, and through a sales representative in Europe. Its products are primarily manufactured in six facilities, which include a knitting and dyeing facility located in southern California, and five cutting and sewing facilities located in Ensenada and Hermosillo, Mexico. Centrum employs approximately 3,600 individuals in the United States, Canada and Mexico.

Centrum competes with numerous private label and branded knit apparel companies. The industry is characterized by intense competition based upon price, product quality, customer service and order cycle time. Centrum competes on the basis of delivering a reliable, high quality, value product to its customers while meeting its customers’ demand for rapid order fulfillment by utilizing its proprietary information system. This information system, referred to as the Alstyle Enterprise System or “AES,” is an internally-developed SQL-server platform that serves customer order entry and monitoring, manufacturing process control, and inventory management for Centrum’s distribution centers.

On June 25, 2004, Ennis, Inc. (formerly Ennis Business Forms, Inc.), a manufacturer of printed business products headquartered in Midlothian, Texas, and Centrum signed a definitive agreement to merge. Under the terms of the transaction, Centrum stockholders will receive a combination of Ennis shares and cash. The number of shares received by Centrum stockholders will be determined based upon a $242,000,000 enterprise valuation of Centrum less (i) certain Centrum debt outstanding as of the day of merger, (ii) the total amount of cash consideration paid to Centrum stockholders at the closing and (iii) the $400,000 in non-competition payments. The resulting value will be divided by the average trading price of Ennis over the previous 30-day trading period, which was $15.63 per share. Centrum stockholders will also receive between $12.5 million and $20 million in cash, at the election of Ennis, in the merger.

It is anticipated that, for federal income tax purposes, after the merger Centrum’s business activities will be conducted by a C corporation. Accordingly, it is expected that provisions for income taxes will substantially increase as taxes will be provided at statutory state and federal rates.

Index to Financial Statements

Results of Operations

The following table sets forth, for the periods indicated, Centrum’s operating results expressed as a percentage of net sales.


	Six months ended June 30,				Year ended December 31,
	2004		2003		2003		2002		2001		2000		1999
Net sales	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	78.8	%	75.3	%	78.1	%	78.1	%	82.8	%	81.7	%	82.6	%

Gross profit	21.2	%	24.7	%	21.9	%	21.9	%	17.2	%	18.3	%	17.4	%
Selling, general & administrative expenses	13.2	%	14.8	%	16.2	%	14.2	%	11.2	%	19.5	%	12.2	%

Income from operations	8.0	%	9.9	%	5.7	%	7.7	%	6.0	%	7.9	%	5.3	%
Interest expense	3.9	%	2.1	%	1.7	%	2.5	%	3.8	%	4.0	%	2.5	%
Write-down of investments in land	—	%	—	%	—	%	—	%	1.6	%	—	%	—	%

Income (loss) before provision for income taxes	4.2	%	7.8	%	4.0	%	5.3	%	0.6	%	3.8	%	2.8	%
Provision for income taxes	0.6	%	0.1	%	0.3	%	0.4	%	0.3	%	0.3	%	0.0	%

Net income (loss)	3.6	%	7.8	%	3.7	%	4.9	%	0.3	%	3.5	%	2.7	%

Six months ended June 30, 2004 compared with six months ended June 30, 2003

Net sales of $120,359,000 for the six months ended June 30, 2004 were up $20,923,000, or 21%, compared to the corresponding period in the prior year. Growth in 2004 sales was the result of the continuing effort to grow the brand business, as well as higher unit sales due to improved business conditions, despite a lower average sales price per dozen, which has been eroding over the past several years. Trends in average sale price are partially correlated to the market price of cotton, which has declined over the past several years.

Gross profit was $25,544,000, or 21.2% of net sales, for the six months ended June 30, 2004, compared to $24,589,000, or 24.7% of net sales in the prior year period. The gross margin decreased compared to the prior year period primarily due to a 34% increase in yarn prices, lower average selling prices, and a higher mix of irregular items that Centrum sold off in connection with its facility consolidation plan.

Selling, general and administrative expenses were $15,891,000, or 13.2% of net sales, for the six months ended June 30, 2004 compared with $14,735,000, or 14.8% of net sales, in the corresponding prior year period, an increase of $1,156,000. $947,000 of this increase was due to amortization of intangible assets resulting from the Centrum acquisition of A and G in November 2003, and $460,000 of the increase was due to consulting costs and expenses associated with certain business process improvement initiatives. These amounts were partially offset by lower compensation expense as a result of facility consolidation and headcount reduction in 2004.

Income from operations for the six months ended June 30, 2004 was $9,653,000, $201,000 lower than the corresponding prior year period. As noted above, this decrease resulted primarily from consulting related expenses.

Interest expense was $4,650,000 for the six months ended June 30, 2004, or $2,585,000 higher than the prior year period, primarily as a result of the $53,000,000 in subordinated debt incurred in connection with the Centrum acquisition.

Provision for income taxes was $712,000 for the six months ended June 30, 2004 compared to $84,000 in the corresponding period in the prior year. The increase of $628,000 was primarily due to an increase in the foreign tax provision of Centrum’s Mexican subsidiaries related to higher taxable income than the prior year period, and an increase in the California franchise tax provision as a result of a $189,000 credit provided in the corresponding period in the prior year.

Index to Financial Statements

Net income for the six months ended June 30, 2004 was $4,291,000 compared to net income of $7,705,000 in the prior year period.

Fiscal year ended December 31, 2003 compared with fiscal year ended December 31, 2002

Net sales for the year ended December 31, 2003 were up $1,291,000, or 1%, compared to the prior year. Beginning in 2002, A and G shifted its product strategy by significantly reducing its private label business that offered custom colors and custom specifications and increasing its higher margin, brand-focused offerings—AAA, Murina® and Tennessee River®. Growth in 2003 sales was the result of continuing the effort to grow the brand business, partially offset by a workforce disruption caused by the dismissal of 600 employees that lacked proper INS documentation in the second quarter of 2003.

Gross profit was $43,161,000, or 21.9% of net sales, for the year ended December 31, 2003, compared to $42,878,000, or 21.9% of net sales, in the prior year. The expected gross margin improvement in 2003 from the shift to the higher margin brand strategy was partially offset by $1,200,000 in manufacturing inefficiencies related to the workforce disruption, and an $800,000 increase in workers compensation costs. Centrum expects future gross margin improvements created by this shift, and volume and capacity utilization to be tempered by pressure on selling prices in the future.

Selling, general and administrative expenses were $31,941,000, or 16.2% of net sales, for the year ended December 31, 2003 compared with $27,656,000, or 14.2% of net sales, in the prior year, an increase of $4,285,000. $3,465,000 of this increase was due to higher legal, consulting and professional fees, and the remainder was primarily due to the opening of distribution centers in Los Angeles and Philadelphia, and a cutting facility in Mexico.

Income from operations in 2003 was $4,002,000 lower than the prior year. As noted above, $3,465,000 of this decrease resulted from higher legal and consulting expenses associated with the Centrum acquisition in 2003.

Interest expense was $3,276,000 for the year ended December 31, 2003, or $1,610,000 less than interest expense of $4,886,000 in the prior year. Lower interest expense was the result of a decrease in average borrowings during the course of the year through November 10, 2003, as well as a decline in the LIBOR index from 2002 that reduced interest expense on variable rate debt.

Net income was $7,379,000 for the year ended December 31, 2003 compared to net income of $9,570,000 in the prior year.

Fiscal year ended December 31, 2002 compared with fiscal year ended December 31, 2001

Net sales for the year ended December 31, 2002 declined $13,417,000, or 6%, compared to the prior year. In 2001 most of A and G’s business consisted of producing private label products—custom colors and custom specifications—for major retailers that generated high volume in sales in that year. In 2002 A and G shifted its product strategy away from the low margin, private label business that offered custom colors and custom specifications to higher margin, brand-focused offerings, which accounted for the decline of sales in 2002 compared to the prior year.

Gross profit was $42,878,000, or 21.9% of net sales, for the year ended December 31, 2002, compared to $35,899,000, or 17.2% of net sales, in the prior year. Despite the decline in sales, gross margin improved as a result of instituting manufacturing processes to control fabric costs, and the shift in product mix from private label to higher margin brand offerings.

Selling, general and administrative expenses were $27,656,000, or 14.2% of net sales, for the year ended December 31, 2002 compared with $23,319,000, or 11.2% of net sales, in the prior year, an increase of

Index to Financial Statements

$4,337,000 from the prior year. This increase was primarily attributable to an increase in consulting fees of $1,200,000 associated with manufacturing process improvements, $817,000 in bad debt expense from a bankrupt customer, $800,000 in higher facility costs due to the expansion of Centrum’s Chicago distribution center, and higher advertising expenses due to the shift in product strategy.

Income from operations in 2002 was $2,642,000 higher than the prior year as a result of higher gross margin despite lower net sales.

Interest expense was $4,886,000 for the year ended December 31, 2002, or $3,030,000 lower than interest expense of $7,916,000 in the prior year. Interest expense declined in 2002 as a result of the decline in average outstanding borrowings by approximately $7,000,000, lower overall interest rates on variable rate debt due to the decline in LIBOR rates and the refinancing of fixed rate debt into lower rates.

In 2001 Centrum recorded a non-cash charge of $3,301,000 related to the impairment of certain undeveloped land.

Net income was $9,570,000 for the year ended December 31, 2002 compared to net income of $719,000 in the prior year.

Liquidity and Capital Resources

Current Financial Condition

Centrum’s liquidity requirements consist of working capital needs, ongoing capital expenditures, payments of interest and principal on indebtedness, and dividends to stockholders. Centrum’s primary requirements for working capital are directly related to the level of its operations. Working capital primarily consists of accounts receivable and inventories, which fluctuate with the sales of products.

Centrum’s working capital was $66,029,000 as of June 30, 2004, as compared to $55,869,000 as of December 31, 2003. The increase of $10,160,000 in working capital from December 31, 2003 to June 30, 2004 was primarily due to an increase in inventory to meet increased customer orders and anticipated sales demand, increase in factored and accounts receivable due to higher sales, and increase in other receivables related to costs incurred on behalf of the former A and G stockholders that will be setoff against the subordinated seller notes upon repayment as provided for in Centrum’s agreement to acquire A and G. At June 30, 2004, Centrum’s cash balance was $2,865,000, as compared to $1,656,000 at December 31, 2003.

Cash Flows

At June 30, 2004, Centrum’s cash and credit available under its current credit facility was $6,766,000 compared to $6,296,000 at December 31, 2003. Cash provided by operating activities was $5,276,000 for the six months ended June 30, 2004 and $21,518,000 during the year ended December 31, 2003.

The primary sources of cash during the six months ended June 30, 2004, were net income of $4,291,000, $5,516,000 in depreciation and amortization expense, and an increase in accounts payable and accrued expenses of $12,530,000, and an increase in accrued interest expense of $1,369,000. The primary uses of cash during the six months ended June 30, 2004 were an increase in accounts, other and factored receivables of $14,119,000, an increase in inventories of $3,824,000, and an increase in prepaid expenses of $488,000. The increases in accounts payable, accrued expenses, accounts and factored receivables, and inventories are a direct result of the sequential growth in Centrum’s sales for the first half of 2004 compared to sales levels in the fourth quarter of 2003, a ramp-up in production to meet forecast sales demand, and increases in the unit cost and volume of cotton yarn purchased. Other receivables increased by $1,921,000 as a result of costs accumulated by Centrum on behalf of the former stockholders of A and G. These costs relate to payments associated with the settlement of the US Dyeing suit for $650,000 and other legal settlements and related professional fees, and certain uncollectible accounts receivable aggregating $525,000 that one of the former A and G stockholders has guaranteed. As

Index to Financial Statements

provided for in Centrum’s November 10, 2003 agreement to acquire A and G, these amounts will be setoff against the subordinated seller debt as the related notes mature. The increase in accrued interest expense relates to interest accrued on Centrum’s subordinated seller notes that have features that require interest payments annually and at maturity.

The primary sources of cash during the year ended December 31, 2003 were net income of $7,379,000, depreciation and amortization of $10,101,000, and decreases in inventories and accrued expenses of $2,909,000 and $2,542,000, respectively, due to the intentional reduction in manufacturing activities at year end to address seasonal slow-down and improved manufacturing processes to control inventory levels. The primary uses of cash during the year ended December 31, 2003 were an increase of prepaid expenses of $292,000, an increase in deposits of $121,000, and a decrease in accounts payable of $1,843,000 due to reduced production levels in the fourth quarter of 2003.

The primary use of cash from investing activities during the six months ended June 30, 2004 of $2,113,000 related to capital expenditures for plant modernization.

In June 2004, the former A and G stockholders agreed to a $500,000 reduction in the amounts owed to them under a $1,000,000 short term, interest-bearing advance that originated in the November 2003 acquisition of A and G. In connection with this, Centrum recorded a reduction of $500,000 in these stockholder advances and a related reduction to goodwill to reduce the effective purchase consideration. The remainder of these advances will be paid in the third quarter of 2004.

The primary use of cash from investing activities during the year ended December 31, 2003 was $520,000 related to capital expenditures for plant modernization. The primary source of cash from investing activities during the year ended December 31, 2003 was $121,000 of proceeds from the sale of idle plant equipment.

Capital Spending

Centrum’s capital expenditures, including financed capital expenditures, were $3,204,000 and $556,000 during the six months ended June 30, 2004 and the year ended December 31, 2003, respectively. Centrum anticipates ongoing annual “maintenance” capital expenditures of approximately $3,000,000 to $5,000,000 for the next several years. Centrum has no material commitments for capital expenditures; however, it is currently exploring plant expansion alternatives that may require a capital investment of $30,000,000 to $50,000,000 in the next twelve to twenty-four months. Centrum has, in the past, generally funded its capital expenditures from cash from operations, capital leases, equipment financing and funds available under bank credit facilities. Centrum expects to fund future capital expenditures from cash on hand, from operations and from funds available under current or any future bank credit facility.

Outstanding Debt and Other Financing Arrangements

In June 2004, Centrum entered into several amendments to its credit facility to provide it with additional financial flexibility. The amendments increased the size of the amended and restated credit facility from $40,000,000 to $46,000,000 in connection with Centrum’s refinancing of $12,000,000 of the $18,000,000 of subordinated seller debt outstanding, which was scheduled to mature on June 30, 2004 (“the Term B note”), and the increase in the revolving loan limit by $5,000,000. The Term B note is a secured term loan that will bear interest at the greater of 11% per annum or LIBOR plus 4%, and requires amortization of the original principal balance at the rate of 1.25% per quarter with remaining, unpaid principal due June 2008. The Term B note provides for a prepayment fee of 3% and 2% if prepaid prior to the first and second anniversary, respectively, but no prepayment fee will apply if prepaid prior to January 15, 2005. In addition, an exit fee of 3.5% will be paid on the outstanding Term B principal (as defined) upon maturity or if repaid earlier, but no exit fee will be due if a change of control (as defined) occurs prior to January 15, 2005. The remaining $6,000,000 of the subordinated seller debt was refinanced with the note holders on June 30, 2004 into a new note that bears substantially the same terms as the Term B note.

Index to Financial Statements

Concurrent with closing of the amended and restated credit facility, on June 30, 2004, $12,000,000 was advanced against the credit facility and distributed to the stockholders of Centrum. Under the terms of the credit facility, $12,000,000 of the outstanding indebtedness is secured on a dollar-for-dollar basis by cash or cash equivalents pledged by the Centrum stockholders in favor of the lender. On September 7, 2004, the stockholders of Centrum applied the cash equivalent to repay all of this amount.

The credit facility expires in June 2008, is collateralized by substantially all of Centrum’s assets and bears interest at rates ranging from 300 to 400 basis points over the LIBOR rate as defined in the agreement. At June 30, 2004, indebtedness under the bank credit facility included commitments for standby letters of credit aggregating approximately $1,900,000, which are principally related to Centrum’s workers compensation insurance program.

The amount available under the credit facility’s revolving credit line was approximately $3,900,000 as of June 30, 2004. The credit facility contains customary affirmative covenants, negative covenants and conditions of borrowings, all of which were met as of June 30, 2004. A breach of these covenants, or the covenants under Centrum’s current or any future bank credit facility, that continues beyond any grace period can constitute a default, which can limit the ability to borrow and can give rise to a right of the lenders to terminate the applicable facility and/or require immediate repayment of any outstanding debt. Long-term debt at June 30, 2004 consists principally of 11% senior secured notes due June 2008; 8% subordinated notes due January, 2011; 12% subordinated notes due January, 2014; and capital leases and long term debt collateralized by equipment with interest rates ranging from 5% to 9.68%.

Centrum finances substantially all of its account receivables through factoring agreements with three financial institutions. Under these agreements, the factoring institutions will typically purchase the customer account receivable on a non-recourse basis, and fund 80% to 85% of the receivable amount to Centrum at purchase and the remainder upon collection by the factor from the end customer, net of factoring fees and commissions. Centrum’s outstanding factoring advances are presented net of applicable factored receivables in Centrum’s financial statements included in this proxy/prospectus beginning at page F-1, and as such, are not included in “total debt” referred to in “Selected Historical Financial Data of Centrum” and “Centrum’s Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Factor advances were $24,150,000 at June 30, 2004. Outstanding advances bear interest at the prime rate (as defined) and are collateralized by substantially all of Centrum’s assets. At June 30, 2004, approximately $2,300,000 in factored receivables are recourse (at risk) to Centrum in the event the related customer defaults on its payment to the factor. Such factoring agreements are generally renewable on an annual basis.

In connection with Centrum’s acquisition of A and G in November 2003, the “change in control” and/or “net worth” covenants were violated in certain of Centrum’s capital lease and equipment collateralized debt agreements. Violation of these covenants provides the lender with the right, but not the obligation, to terminate the applicable facility and/or require immediate payment of any outstanding debt. As of June 30, 2004 Centrum is in technical default under capital leases and equipment collateralized loans aggregating approximately $5,600,000, but no notices to terminate the related borrowings have been made. Centrum has been successful in obtaining waivers or refinancing on substantially similar terms $8,200,000 in such related loans and capital leases since December 31, 2003 and anticipates that it will be able to refinance any future demands for payoff through new borrowings.

Centrum’s degree of leverage could adversely limit its ability to obtain additional financing to fund its growth strategy, working capital requirements, capital expenditures, acquisitions, debt service requirements or other general corporate requirements, and Centrum’s exposure to interest rate increases could increase because borrowings under its current bank credit facility are, and borrowings under any future bank credit facility could be, at variable interest rates. Centrum’s substantial indebtedness will require that a significant portion of cash flow be used for debt service, which will limit its ability to use its cash flow for other areas of its business. Centrum’s ability to satisfy its debt service obligations will depend upon, among other things, its future operating

Index to Financial Statements

performance and its ability to refinance indebtedness when necessary. Centrum’s current amended and restated credit facility contains customary affirmative and negative covenants. A failure to comply with the obligations contained in any current or future agreements governing indebtedness could result in an event of default, which could permit acceleration of the related debt and acceleration of debt under other instruments that may contain cross-acceleration or cross-default provisions. Centrum is not certain whether it would have, or be able to obtain, sufficient funds to make any such accelerated payments.

Centrum is a Subchapter “S” Corporation (as defined in the Internal Revenue Code), which requires its stockholders to include Centrum’s net income or loss on their individual income tax returns. Centrum can and will pay dividends to its stockholders up to 40% of the allocable taxable net income (as defined) to fund the individual stockholder’s tax liability, subject to available working capital and compliance with its credit facility.

Contractual Obligations

The following charts reflect Centrum’s known contractual obligations and commercial commitments as of December 31, 2003. Commercial commitments include lines of credit, guarantees and other potential cash outflows resulting from a contingent event that requires performance by Centrum or its subsidiaries pursuant to a funding commitment.


	Year Ending December 31,
	2004		2005		2006		2007		2008		Thereafter		Total
Credit facility and notes payable	$	24,267,000	$	—	$	—	$	—	$	—	$	—	$	—
Other long-term debt		33,090,000		12,188,000		5,657,000		4,496,000		5,054,000		21,822,000		82,307,000
Operating leases, net (1)		5,706,000		5,371,000		4,877,000		4,677,000		4,349,000		3,733,000		28,713,000
Purchase obligations (2)		4,773,975		2,379,966		2,251,966		562,992		—		—		9,968,899

Total	$	67,836,975	$	19,938,966	$	12,785,966	$	9,735,992	$	9,403,000	$	25,555,000	$	120,988,899

Commercial Commitments Letters of Credit	$	—	$	1,880,000	$	—	$	—	$	—	$	—	$	—

(1)	Net of sublease income aggregating $5,187,000.

(2)	Purchase obligations are associated with Centrum’s natural gas supply minimum contractual purchase commitments and a consulting contract related to manufacturing process improvement initiatives.

Occasionally Centrum enters into purchase commitments for cotton yarn, production materials, natural gas and other items, which are reflected in the table above. Centrum also enters into unconditional purchase obligations with various vendors and suppliers of goods and services in the normal course of operations. Such obligations are generally outstanding for periods less than one year and are settled by cash payments upon delivery of goods and services and are not reflected in the total unconditional purchase obligations presented in this line item.

As discussed in more detail under the heading “Outstanding Debt and Other Financing Arrangements,” Centrum entered into several amendments to its credit facility in June 2004. The amendments provided for the refinancing of $18,000,000 in subordinated seller debt and increased the revolving credit line by $12,000,000. This will reduce the contractual obligations that come due in 2004 by $17,000,000; increase the amounts that come due in 2005 by $13,000,000; increase amounts that come due by $1,000,000 in each of the years 2006 and 2007; and increase the amounts that come due in 2008 by $14,000,000.

Index to Financial Statements

In August 2004, Centrum entered into a purchase commitment with one of its principal yarn suppliers to provide certain quantities of yarn at negotiated prices commencing November 2004 and extending through December 2005. This will increase the minimum purchase obligation by $4,000,000 and $36,000,000 in the years ending 2004 and 2005, respectively. Approximately $12,000,000 is subject to a “look back” option that permits Centrum to reset the negotiated price to a lower amount if the underlying commodity price of cotton falls below certain monthly price thresholds.

Centrum believes that its cash flows, together with cash on hand provide it with the ability to fund its operations, make planned capital expenditures and make scheduled debt service payments for the foreseeable future. However, such cash flows are dependent upon its future operating performance, which, in turn, is subject to prevailing economic conditions and to financial, business and other factors, including the conditions of its markets, some of which are beyond its control. If, in the future, Centrum cannot generate sufficient cash from operations to meet its debt service obligations, it will need to refinance such debt obligations, obtain additional financing or sell assets. There can be no assurance that Centrum’s business will generate sufficient cash from operations, or that it will be able to obtain financing from other sources, sufficient to satisfy its debt service or other contractual obligations.

Off-Balance Sheet Arrangements; Lease Arrangements

Centrum finances its use of certain equipment and operating facilities under committed lease arrangements provided by various financial institutions. Since the terms of these arrangements meet the accounting definition of operating lease arrangements, the aggregate sum of future minimum lease payments is not reflected on Centrum’s consolidated balance sheet. At December 31, 2003, future minimum lease payments under these arrangements, net of related sublease income, approximated $28,713,000.

Indemnities, Commitments and Stockholder Guarantees

During the normal course of business, Centrum has made certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These indemnities include non-infringement of patents and intellectual property indemnities to customers in connection with the delivery, design, manufacture and sale of products, indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease, and indemnities to other parties to certain acquisition agreements. The duration of these indemnities, commitments and guarantees varies, and in certain cases, is indefinite. Centrum believes that substantially all of its indemnities, commitments and guarantees provide for limitations on the maximum potential future payments it could be obligated to make. However, Centrum is unable to estimate the maximum amount of liability related to its indemnities, commitments and guarantees because such liabilities are contingent upon the occurrence of events, which are not reasonably determinable. Management believes that any liability for these indemnities, commitments and guarantees would not be material to Centrum’s accompanying condensed consolidated financial statements.

Recent Accounting Pronouncements

In December 2003, the Securities and Exchange Commission released Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition,” which supersedes SAB 101, “Revenue Recognition in Financial Statements.” The adoption of SAB 104 did not have a material impact on Centrum’s revenue recognition policies, nor its financial position or results of operations.

In November 2002, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation (“FIN”) No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” an interpretation of FASB Statements No. 5, 57 and 107, and rescission of FIN No. 34, “Disclosure of Indirect Guarantees of Indebtedness of Others.” FIN No. 45 elaborates on the disclosures to be made by the guarantor in its interim and annual financial statements about its obligations under

Index to Financial Statements

certain guarantees that it has issued. It also requires that a guarantor recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and measurement provisions of this interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. Centrum’s adoption of such interpretation did not have a material impact on its results of operations or financial position.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” which amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” The adoption of SFAS No. 149 had no impact on Centrum’s results of operations or Centrum’s financial position. Centrum currently has no derivative instruments and is not currently involved in hedging activities.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Instruments with Characteristics of both Liabilities and Equity,” (“SFAS 150”) which establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS 150 requires that an issuer classify a financial instrument that is within its scope, which may have previously been reported as equity, as a liability (or an asset in some circumstances). This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003 for public companies. In October 2003, the FASB deferred implementation of paragraphs 9 and 10 of SFAS 150 regarding parent company treatment of minority interest for certain limited life entities. This deferral is for an indefinite period. The adoption of SFAS 150 did not have a material impact on Centrum’s financial statements.

Critical Accounting Policies

The discussion and analysis of Centrum’s financial condition and results of operations is based upon Centrum’s financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires Centrum to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates under different assumptions or conditions. Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. Centrum believes that its critical accounting policies are limited to those described below. For a detailed discussion on the application of these and other accounting policies, see Note 2 in the Notes to Centrum Acquisition, Inc. Financial Statements.

Revenue Recognition

Sales of products are recorded when the earnings process is complete. This generally occurs when the products are shipped to the customer in accordance with the contract or purchase order, risk of loss and title has passed to the customer, collectibility is reasonably assured and pricing is fixed and determinable. Sales are recorded net of estimated returns, chargebacks and other deductions based on Centrum’s judgment and historical experience.

Accounts Receivable

Centrum performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current creditworthiness, as determined by its review of their current credit information. Centrum continuously monitor collections and payments from its customers and maintains an allowance for estimated credit losses based upon its historical experience and any specific customer collection

Index to Financial Statements

issues that Centrum has identified. If the actual uncollected amounts significantly exceed the estimated allowance, Centrum’s operating results would be significantly adversely affected. While such credit losses have historically been within Centrum’s expectations and the provisions established, Centrum cannot guarantee that it will continue to experience the same credit loss rates that it has in the past.

Inventories

Centrum values its inventories at the lower of cost to purchase or manufacture the inventory or the current estimated market value of the inventory. Cost is determined using the standard cost method for Centrum’s manufacturing businesses and the weighted average cost method for Centrum’s distribution businesses. The inventory balance, which includes the cost of raw material, labor and production overhead costs, is recorded net of a reserve for excess, obsolete or unmarketable inventories. Centrum regularly reviews inventory quantities on hand and records a reserve for excess and obsolete inventories for damaged, excess or out of style or otherwise obsolete inventory based primarily on historical usage, historical selling prices and on forecasts of product demand requirements. Centrum’s estimates of future product demand or realizable selling prices may prove to be inaccurate, in which case Centrum may have understated or overstated the provision required for excess and obsolete inventories. In the future, if Centrum’s inventories are determined to be overvalued, Centrum would be required to recognize such costs in its cost of goods sold at the time of such determination. Likewise, if Centrum’s inventories are determined to be undervalued, Centrum may have over-reported its costs of goods sold in previous periods and would be required to recognize such additional operating income at the time of sale.

Long-Lived Assets (including Tangible and Intangible Assets and Goodwill)

The determination of the value of long-lived intangible assets requires management to make estimates and assumptions that affect Centrum’s financial statements. Centrum assesses potential impairment to goodwill and other intangible assets on an annual basis or when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. Centrum’s judgments regarding the existence of impairment indicators and future cash flows related to intangible assets are based on operational performance of its acquired businesses, expected changes in the global economy, clothing industry projections, discount rates and other factors. Future events could cause Centrum to conclude that impairment indicators exist and that goodwill or other acquired tangible or intangible assets associated with Centrum’s acquired businesses is impaired. Any resulting impairment loss could have an adverse impact on Centrum’s results of operations.

Recent Developments

Centrum was a defendant to a lawsuit filed by a former vendor for breach of a production contract, which sought damages in excess of $9,000,000. In June 2004, Centrum reached a settlement in this matter by agreeing to pay this vendor $650,000.

In May 2004, Centrum was notified by the Internal Revenue Service that the IRS would perform a Form 8300 compliance review of Centrum. The IRS identified approximately 20 instances of alleged failure to file Currency Transaction Reports. On August 17, 2004, this matter was settled with the IRS for $501,000.

Quantitative and Qualitative Disclosures About Market Risk

Centrum is exposed to a variety of risks, including foreign currency fluctuations, changes in interest rates affecting the cost of its variable-rate debt, and commodity price fluctuations.

Foreign currency fluctuation

Centrum has direct manufacturing operations in Mexico, and third party contract processing in certain South American countries. In addition, Centrum’s Canadian operations sell their products in their functional currency.

Index to Financial Statements

Accordingly, Centrum is exposed to transaction gains and losses that could result from changes in foreign currency exchange rates relative to the U.S. dollar. However, substantially all of Centrum’s contracts with third party processors in South America, Asia and the Middle East are denominated in U.S. dollars. The largest foreign currency exposure results from activity in Mexican pesos and Canadian dollars. From time to time, Centrum and its foreign subsidiaries may enter into foreign currency exchange contracts to manage risk on transactions conducted in foreign currencies. At June 30, 2004, Centrum had no outstanding forward currency exchange contracts. Centrum has not entered into any other derivative financial instruments.

Interest Rate Sensitivity

At June 30, 2004, Centrum had approximately $37,800,000 of adjustable rate debt under its credit facility and $24,150,000 of adjustable rate factor advances. If interest rates were to increase by 100 basis points above current rates for the entire year on the average credit facility and factoring advance balances, the impact on Centrum’s financial statements would be to reduce pretax income by approximately $620,000. Centrum does not engage in transactions intended to hedge its exposure to changes in interest rates.

Commodity Risk Sensitivity

Centrum purchases cotton yarn from approximately five established suppliers with whom it has had long term relationships. Centrum is subject to swings in commodity prices for raw cotton, reflected in cotton yarn in purchases on purchase orders that fulfill current production requirements. Centrum has historically not entered into long-term purchase commitments for its cotton yarn nor has it entered into derivative contracts to hedge the volatility in the commodity markets for cotton, but it may do so in the future. As discussed under the heading “Outstanding Debt and Other Financing Commitments,” Centrum entered into a noncancellable fixed price commitment in August 2004 to acquire quantities of cotton yarn that represent approximately 40% of its annual requirements in 2005. Approximately one-third of this commitment contains a “look back” option that allows Centrum to reset the negotiated price to a lower amount if the underlying commodity price of cotton falls below certain monthly price thresholds.

Index to Financial Statements

COMPARISON OF STOCKHOLDER RIGHTS

The following is a summary of the material differences between the current rights of Centrum stockholders and the rights of Ennis shareholders. The summary is not a complete statement of the provisions affecting, and the differences between, the current rights of Centrum stockholders and those of Ennis shareholders, and is qualified in its entirety by reference to the Delaware General Corporation Law and the Texas Business Corporation Act, Centrum’s certificate of incorporation and bylaws, and Ennis’ articles of incorporation and bylaws. An indication that some of the differences in the rights are material does not mean that there are not other equally important differences.

Centrum is organized under the laws of the State of Delaware. The rights of Centrum stockholders are currently governed by the Delaware General Corporation Law, which we refer to as the DGCL, and Centrum’s certificate of incorporation and bylaws. Ennis is organized under the laws of the State of Texas. At the effective time of the merger, Centrum stockholders will become Ennis shareholders, and their rights will be governed by the Texas Business Corporation Act, which we refer to as the TBCA, and Ennis’ articles of incorporation and bylaws.

Authorized Capital Stock

Ennis

Centrum

Authorized:

• 40,000,000 shares of common stock, par value $2.50 per share

• 1,000,000 shares of preferred stock, par value $10.00 per share

Outstanding as of August 31, 2004:

• 16,430,713 shares of common stock

• No shares preferred stock

Ennis’ articles of incorporation provide that the shares of preferred stock may be issued from time to time in one or more series, each such series to have such designation as may be fixed by the board of directors prior to the issuance of any shares thereof. Each such series shall have such preferences and relative, participating, optional or other special rights, qualifications, limitations or restrictions thereof as shall be stated in the resolution or resolutions providing for the issue of such series of preferred stock. The preferred stock of any series shall or may be (a) entitled to have such voting powers, full or limited, or be without voting powers, (b) subject to redemption at such time or times and at such price or prices, (c) entitled to receive dividends (which may be cumulative or noncumulative) at such rates, on such conditions and at such times, (d) entitled to such rights upon the dissolution of, or upon the distribution of the assets of, Ennis, and (e) made convertible into, or exchangeable for, shares of any other series of the same or any other class or classes of

Authorized:

• 1,000 shares of Class A common stock, par value $1.00 per share

• 19,000 shares of Class B common stock, par value $1.00 per share

Outstanding as of August 31, 2004:

• Four shares of Class A Common Stock

• 396 shares of Class B Common Stock

The Class A and Class B common stock carry the same rights and privileges, except that the Class A common stock is entitled to one vote per share and the Class B common stock has no voting rights except as otherwise mandated by the DGCL.

Index to Financial Statements

Ennis

Centrum

stock of Ennis, at such price or prices or at such rates of exchange and with such adjustments as shall or may be provided, stated, or expressed in the resolution or resolutions adopted by the board of directors of Ennis providing for the issue of such series.

The common stock of Ennis shall be subject to the prior rights of the preferred stock as may be set forth in the resolution or resolutions by the board of directors providing for the issuance of the preferred stock. Except for such voting rights as may be provided for in the resolution or resolutions creating any one or more series of preferred stock, sole voting rights shall be in the common stock.

Size of Board of Directors

Ennis

Centrum

Ennis’ articles of incorporation provide that the number of directors shall never be less than nine (9).

Ennis’ bylaws provide that the board of directors shall consist of nine (9) persons, who need not be resident of the State of Texas or shareholders of Ennis. The directors shall be divided into three (3) classes, designated Class I, Class II and Class III, with successive three (3)-year terms of office. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no case shall a decrease in the number of directors shorten the term of any incumbent director.

Centrum’s bylaws provide that the board of directors shall consist of at least one (1) and no more than nine (9) persons. The number of directors may be increased or decreased from time to time within the aforementioned range by vote of the board of directors or the stockholders without amendment to the bylaws. Currently, the number of authorized directors has been fixed at four.

The range of the number of directors may be increased or decreased from time to time by amendment of the bylaws by the affirmative vote of a majority of the directors, though less than a quorum, or, by the affirmative vote of a majority in interest of the stockholders, at the annual meeting or at a special meeting called for that purpose, and by like vote the additional directors may be chosen at such meeting to hold office until the next annual election and until their successors are elected and qualify.

No decrease in the number or range of directors shall have the effect of shortening the term of an incumbent director.

Index to Financial Statements

Cumulative Voting

Cumulative voting entitles each shareholder to cast an aggregate number of votes equal to the number of voting shares held, multiplied by the number of directors to be elected. Each shareholder may cast all of his or her votes for one nominee or distribute them among two or more nominees. The candidates receiving the highest number of votes are elected.

Ennis

Centrum

The TBCA provides that cumulative voting shall not be allowed in an election of directors unless the articles of incorporation expressly grant that right, and a shareholder who intends to cumulate his votes as herein authorized shall have given written notice of such intention to the secretary of the corporation on or before the day preceding the election at which such shareholder intends to cumulate his votes. All shareholders entitled to vote cumulatively may cumulate their votes if any shareholder gives the written notice provided for herein.

The TBCA further provides that except as provided by the articles of incorporation, a shareholder of a corporation incorporated before September 1, 2003, has the right to cumulatively vote the number of shares the shareholder owns in the election of directors to the extent permitted by this article of the TBCA. A corporation may limit or deny a shareholder’s right to cumulatively vote any time after September 1, 2003, by amending its articles of incorporation.

Ennis’ articles of incorporation expressly permit cumulative voting and provide that the right to cumulate votes may not be exercised until a shareholder has given written notice of the shareholder’s intention to vote cumulatively to the corporate secretary on or before the day preceding the election. If any shareholder gives such written notice, then all shareholders entitled to vote may cumulate their votes.

Under the DGCL, stockholders do not have the right to cumulate their votes in the election of directors unless such right is granted by the certificate of incorporation.

Centrum’s certificate of incorporation does not permit cumulative voting.

Election of Directors


Ennis		Centrum
Ennis’ articles of incorporation provide that at each annual meeting of the shareholders, the shareholders shall elect a number of directors as nearly as shall be possible equal to one-third of the number of directors then constituting the board of directors. In the event that one director shall be added to the board of directors in any one year, that director shall be elected by the shareholders for a three-year term. In the event that two or more directors are to be added to the board of directors in any given year, then each director shall be elected for a term of one, two or three years, as shall be determined by a majority of the board of directors in		Centrum’s bylaws provide that the holders of shares of outstanding Class A common stock shall elect all directors of the board of directors. Upon the demand of any stockholder, the vote for directors and the vote upon any question before the meeting, shall be by ballot. All elections for directors and other questions shall be decided by majority vote except as otherwise provided by the certificate of incorporation or the laws of the State of Delaware.

Index to Financial Statements

Ennis

Centrum

office at the time of the addition of such new directors so that as nearly as practicable one-third of the total number of directors shall be reelected at each succeeding annual meeting of shareholders.

Ennis’ bylaws provide that a director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office.

Notwithstanding the foregoing, whenever the holders of any one or more classes or series of preferred stock issued by Ennis, if any, shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of shareholders, the election, term of office, filling of vacancies and other features of such directorship shall be governed by the terms of the preferred stock provisions of the amendment to the articles of incorporation applicable thereto, and such directors so elected shall not be divided into classes unless expressly provided by such terms.

Filling Vacancies on the Board


Ennis		Centrum
Ennis’ bylaws provide that unless otherwise provided in the articles of incorporation, vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify.		Centrum’s bylaws provide that if the office of any director becomes vacant, the remaining directors in office, though less than a quorum by a majority vote, may appoint any qualified person to fill such vacancy, who shall hold office for the unexpired term and until his successor shall be duly chosen.

Removal of Directors

Ennis

Centrum

Ennis’ bylaws provide that a director may be removed, with cause, by the affirmative vote of a majority of the shares of Ennis’ capital stock then entitled to vote at an election of directors.

In the event a person serving on the board of directors is removed (either for cause or without cause), resigns or fails or refuses to act for any reason, then a majority of the remaining members of the board of directors shall elect such person’s successor to serve on the board of directors.

Centrum’s bylaws provide that any director or directors may be removed either for or without cause at any time by the affirmative vote of the holders of a majority of all the shares of stock outstanding and entitled to vote, at a special meeting of the stockholders called for that purpose, and the vacancies thus created may be filled, at the meeting held for the purpose of removal, by the affirmative vote of a majority in interest of the stockholders entitled to vote.

Index to Financial Statements

Calling Special Meetings of Stockholders


Ennis		Centrum
Ennis’ bylaws provide that special meetings of the shareholders, for any proper purpose or purposes, unless otherwise prescribed by statute or by the articles of incorporation, may be called at any time by the President and shall be called by the Chairman or the President pursuant to a resolution adopted by a majority of the entire board of directors or at the written request of holders of at least ten percent (10%) of all of the shares of Ennis’ capital stock issued and outstanding and entitled to vote at the proposed special meeting, unless the articles of incorporation provide for a greater number of shares. Such request shall state the purpose or purposes of the proposed meeting. Business transacted at special meetings shall be confined to the purpose or purposes stated in the notice of the meeting.		Centrum’s bylaws provide that special meetings of the stockholders may be called by the President or Secretary or by resolution of the board of directors, and shall be called by the President or Secretary upon the request of a shareholder holding ten percent (10%) or more of Centrum’s outstanding voting shares.

Notice of Meetings


Ennis		Centrum
Ennis’ bylaws provide that written or printed notice stating the place, date and hour of any meeting of shareholders, and in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail or by electronic or telephonic transmission, by or at the direction of the Chairman, the President, a Vice President or the Secretary, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the shareholder at his address as it appears on the stock ledger of Ennis.		Centrum’s bylaws provide that written notice, stating the place, date and time of the meeting, the general nature of the business to be considered, shall be given to each stockholder entitled to vote thereat at his address as it appears on the records of Centrum, not less than ten (10) nor more than sixty (60) days before the date of the meeting. No business other than that stated in the notice shall be transacted at any meeting without the unanimous consent of all the stockholders entitled to vote thereat.

Stockholder Action Without a Meeting


Ennis		Centrum
Ennis’ bylaws provide that any action required or permitted to be taken at a shareholders’ meeting may be taken without a meeting, without written notice and without a vote, if consents in writing setting forth the action so taken shall have been signed by the holders of all of the shares of Ennis’ capital stock issued and outstanding and entitled to vote with respect to the action that is the subject of the consent.		Centrum’s bylaws provide that stockholder action that may be taken at any annual or special meeting may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Every written consent shall bear the date of signature of each stockholder who signs the consent. Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

Index to Financial Statements

Notice of Business


Ennis		Centrum
Ennis’ bylaws provide that at any meeting of shareholders, only such business shall be conducted as shall have been brought before the meeting (a) by or at the direction of the board of directors or (b) by any shareholder of Ennis who is a shareholder of record at the time of giving of the notice provided for in this provision. For business to be properly brought before a meeting of shareholders by a shareholder, the shareholder shall have given timely notice thereof in writing to the Secretary of Ennis. To be timely, a shareholder’s notice shall be delivered or mailed and received at the principal executive officers of Ennis not less than sixty (60) days nor more than one hundred twenty (120) days prior to the meeting; provided, however, that in the event that less than one hundred (100) days’ notice or prior public disclosure of the date of the meeting is given or made to shareholder, notice by the shareholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. Such shareholder’s notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the meeting (a) a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and, in the event that such business includes a proposal to amend either the articles of incorporation or bylaws of Ennis, the language of the proposed amendment, (b) the name and address, as they appear on Ennis’ books, of the shareholder proposing such business, (c) the class and number of shares of capital stock of Ennis which are beneficially owned by such shareholder, and (d) any material interest of such shareholder in such business. Notwithstanding anything in Ennis’ bylaws to the contrary, no business shall be conducted at a meeting of the shareholders except in accordance with the procedures set forth in this provision. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of Ennis’ bylaws, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing provisions, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, with respect to the matters set forth in this provision.		Neither Centrum’s bylaws nor its certificate of incorporation contain a similar provision.

Index to Financial Statements

Designation of Committees


Ennis		Centrum
Ennis’ bylaws provide that the board of directors shall have an executive committee, an audit committee, a nominating committee, an executive compensation and stock option committee and such other committees as the board of directors, acting by majority vote, may designate, each of which shall consist of three (3) or more directors. The board of directors shall appoint the members of each committee and designate the respective chairmen of each committee. The board of directors shall have the power to remove members of committees, with or without cause.		Centrum’s bylaws provide that the board of directors may, by resolution or by resolutions passed by a majority of the whole board, designate one or more committees, each committee to consist of two or more of the directors of Centrum. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member.

Anti-Takeover Statutes

Ennis

Centrum

Pursuant to the TBCA’s Business Combination Law, Article 13.01 through 13.08 of the TCBA, an “affiliated stockholder” who beneficially owns 20% or more of a corporation’s outstanding voting shares is generally prevented from entering into or engaging in a “business combination,” including mergers, sales and leases of assets, issuances of securities and similar transactions with a corporation or a subsidiary, during the three-year period immediately following the affiliated stockholder’s acquisition of shares unless specific conditions are satisfied. The three-year restriction does not apply if either:

• before the date a person became an affiliated stockholder, the board of directors of the corporation approved the business combination or acquisition of shares made by the affiliated stockholder on that date; or

• not less than six (6) months after the date a person became an affiliated stockholder, the business combination is approved by the affirmative vote of at least two-thirds of the corporation’s outstanding voting shares not beneficially owned by the affiliated stockholder or its affiliates or associates.

Section 203 of the DGCL prohibits “business combinations,” including mergers, sales and leases of assets, issuances of securities and similar transactions by a corporation or a subsidiary with an “interested stockholder” who beneficially owns 15 percent or more of a corporation’s voting stock, within three years after the person or entity becomes an interested stockholder, unless:

• the transaction that will cause the person to become an interested stockholder is approved by the board of directors of the target prior to the transaction;

• after the completion of the transaction in which the person becomes an interested stockholder, the interested stockholder holds at least 85% of the voting stock of the corporation not including (a) shares held by officers and directors of interested stockholders and (b) shares held by specified employee benefit plans;

• after the person becomes an interested stockholder, the business combination is approved by the board of directors and holders of at least 66²/3% of the outstanding voting stock, excluding shares held by the interested stockholder.

A Delaware corporation may elect not to be governed by Section 203. Centrum has not opted-out of the application of Section 203 of the DGCL.

Index to Financial Statements

Stockholder Vote Required for Mergers, Sales of Assets and Other Transactions

Ennis

Centrum

Texas law requires that a merger, a disposition of assets not in the regular course of business or a dissolution of a corporation be approved by the holders of at least two-thirds of the shares entitled to vote thereon, unless the corporation’s articles of incorporation require the vote of a different number of shares which may not be less than a majority of the shares entitled to vote thereon.

Ennis’ articles of incorporation provide that in the event of a proposal for the merger, consolidation, or sale of all or substantially all of the assets of Ennis with or into or to any entity which is controlled by, controlling or under common control with any person or “group” of persons, as the term “group” of persons is defined for the purposes of Section 13 of the Securities Exchange Act of 1934 as amended, and the Rules and Regulations promulgated by the SEC thereunder, which owns or had the power to vote and control, either through record or beneficial ownership of shares of Ennis’ voting securities, in excess of five percent (5%) of the total number of any class of voting securities then outstanding (referred to as a “Related Person” or “Related Group”), the proposal shall first be submitted to the entire board of directors and, if approved by not less than two-thirds of the then members of the board of directors plus one additional director, the proposal shall be submitted to the shareholders of Ennis for the approval of the holders of not less than eighty percent (80%) of the total number of shares of voting securities then outstanding and entitled to vote on the proposal.

In the event of any proposal for the recapitalization of Ennis that would have the effect of increasing the voting power of a Related Person or Related Group or any plan or proposal for the liquidation or dissolution of Ennis proposed by, or on behalf of, a Related Person, Related Group, or any entity, controlled by, under common control with, or controlling the Related Person or Related Group, the proposal shall first be submitted to the board or directors and, if approved by not less than two-thirds of the then members of the board of directors plus one additional director, the proposal shall be submitted to the shareholders of Ennis for the approval of the holders of not less than eighty percent (80%) of the total number of shares of voting securities then outstanding and entitled to vote on the proposal.

The above provisions shall not apply to any transaction approved by two-thirds of the then board of directors

The DGCL requires certain mergers and share exchanges to be approved by the holders of a majority of the outstanding shares entitled to vote thereon. The DGCL similarly requires that a sale of all or substantially all of the assets of a corporation be approved by the holders of a majority of the outstanding shares entitled to vote thereon.

Index to Financial Statements

Ennis

Centrum

plus one additional director provided that the terms of such transaction will result in the Related Person or Related Group paying to the holders of all shares of each class and of each series of each class of outstanding voting stock no less than the higher of (i) the highest price per share which such person or group paid to acquire any shares of such class or series pursuant to any tender offer, cash purchase, open market transaction, or privately negotiated sale, not effected on the open market within three years prior to the record date set to determine the stockholders entitled to vote on the proposed transaction, and (ii) the fair market price as defined in Ennis’ articles of incorporation. The consideration to be paid to the holders of shares of any particular class or series shall be in cash or such other form, including debt or equity securities, or part cash and part debt, or part equity securities, so that the aggregate value of such consideration shall be equal to the highest of the above-defined prices per share.

On all other proposals for the merger, consolidation or sale of substantially all of the assets of Ennis, recapitalization, dissolution or liquidation the directors and shareholders votes shall be as required by Part Five of the TBCA.

Transactions with Officers and Directors

Ennis

Centrum

According to the TBCA, an otherwise valid contract or transaction between a corporation and one or more of its directors or officers shall be valid notwithstanding whether the director or officer is present at or participates in the meeting of the board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if any one of the following is satisfied:

• The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors or the committee, and the board or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or

• The material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders

Under the DGCL, a contract between a corporation and one or more of its directors or officers may not be voided if: (a) the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors and the contract or transaction is approved by a majority of the disinterested directors, even though the disinterested directors may be less than a quorum; (b) the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to stockholders entitled to vote thereon and the contract or transaction is approved by the stockholders; or (c) the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified by the board of directors. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors which authorizes the contract or transaction.

Index to Financial Statements

Ennis

Centrum

entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or

• The contract or transaction is fair as to the corporation as of the time it is authorized, approved, or ratified by the board of directors, a committee thereof, or the stockholders.

Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee which authorizes the contract or transaction.

Dividends

Ennis

Centrum

Under Texas law, a board of directors may authorize a corporation to make distributions to its stockholders out of its surplus, subject to any restriction in its articles of incorporation. Texas law does not permit a distribution if the distribution exceeds the surplus of the corporation or would render the corporation insolvent. Texas law provides that determinations of surplus, may, but are not required to, be based on:

• financial statements of the corporation that present the financial condition of the corporation in accordance with generally accepted accounting principles;

• financial statements prepared on the basis of accounting used to file the corporation’s federal income tax return or any other accounting practices and principles that are reasonable in the circumstances;

• financial information, including without limitation condensed or summary financial statements, that is prepared on a basis consistent with the financial statements referred to above;

• projections, forecasts, or other forward-looking information relating to the future economic performance, financial condition, or liquidity of the corporation that is reasonable in the circumstances;

• a fair valuation or information from any other method that is reasonable in the circumstances; or

• any combination of the foregoing.

Delaware law allows a corporation to pay dividends only out of surplus, as determined under Delaware law or, if there is no surplus, out of net profits for the fiscal year in which the dividend was declared and for the preceding fiscal year. Under Delaware law, however, Centrum cannot pay dividends out of net profits if, after payment of the dividend, its capital would be less than the capital represented by the outstanding stock of all classes having a preference upon the distribution of assets.

Centrum’s certificate of incorporation provides that the holders of each class of common stock are entitled to receive dividends when and if declared by the board of directors; provided, however, that each share of common stock of each class receives dividends at the same rate and on the same date as each share of the other class of common stock.

Index to Financial Statements


Ennis		Centrum
Ennis’ bylaws provide that dividends upon the capital stock of Ennis, subject to the provisions of applicable law and of the articles of incorporation, if any, may be declared by the board of directors at any regular or special meeting. Dividends may be declared and paid in cash, in property, or in shares of the capital stock of Ennis, provided that all such declarations and payments of dividends shall be in strict compliance with all applicable law and the articles of incorporation.

Rights Plans

Ennis

Centrum

If Ennis is acquired in a merger or other business combination transaction after a person or group has acquired 15% or more of the Ennis’ outstanding common stock, each right will entitle its holder (other than such person or members of such group) to purchase, at the right’s then current exercise price, a number of shares of the acquiring company’s common stock having a market value of twice the exercise price. Thus, rights holders may purchase shares of the acquiring company’s common stock at a 50% discount.

Centrum has not adopted any rights plans.

Index to Financial Statements

Ennis

Centrum

Dissenters’ Appraisal Rights

Ennis

Centrum

Generally, under Texas law, a shareholder has the right to dissent from any plan of merger or consolidation or disposition to which the corporation is a party if Texas law requires a shareholder vote and appraisal rights upon compliance with the statutory procedures.

Under Texas law, a shareholder of a corporation does not have the right to dissent or to assert appraisal rights if:

• the shares held by the shareholder are part of a class or series, shares of which on the record date fixed to determine the stockholders entitled to vote on the plan of merger or plan of exchange are:

• listed on a national securities exchange;

• listed on the Nasdaq Stock Market Inc.’s National Market System or designated as a national market system security by the National Association of Securities Dealers, Inc.; or

• held of record by not less than 2,000 holders;

• the shareholder is not required by the terms of the plan of merger or plan of exchange to accept for the stockholder’s shares any consideration that is different than the consideration to be provided to any other holder of shares that are part of the same class or series, other than cash in lieu of fractional shares; and

The DGCL provides stockholders of a corporation involved in a merger the right to demand and receive payment of the fair value of their stock in certain mergers. However, appraisal rights are not available to holders of shares:

• listed on a national securities exchange;

• designated as a national market system security on an interdealer quotation system operated by the National Association of Securities Dealers, Inc., or

• held of record by more than 2,000 stockholders unless holders of stock are required to accept in the merger anything other than any combination of:

• shares of stock or depository receipts of the surviving corporation in the merger or

• shares of stock or depository receipts of another corporation that, at the effective date of the merger, will be

• listed on a national securities exchange;