In accordance with Mexican Intellectual Property Law, a franchise exists when technical know-how or technicalassistance is provided in addition to issuance of a written license for use of a trademark, so that the franchiseemay produce or sell goods or provide services in a uniform manner while maintaining the same quality, prestigeand image of the products or service that are the subject matter of the franchise agreement. Even though theterms of the franchise agreement are negotiated by the parties, Mexican intellectual property law imposesconditions that must be met so that such agreement is effective. Of particular importance is the obligation by thefranchisor to provide the intended franchisee, at least thirty days prior to the execution of the agreement, withprecise information on the franchise, the age of the issuing company, intellectual property rights included in theagreement, amounts and types of payments to be made, the type of technical assistance to be provided, etc. Inother words, the franchisor is required to provide complete information to the intended franchisee on the generalcontents of the franchise agreement. Likewise, article 142 of the Intellectual Property Law establishes theminimum requirements that the agreement must include. These requirements are noteworthy since few lawsprovide a catalogue of items that should be included for certain agreements to be valid. Among otherrequirements is the obligation to include the following in the agreement: the geographic zone contemplated by thefranchise agreement; location, minimum dimensions and characteristics of investments in infrastructure;inventory policies, marketing and publicity; provision of merchandise and contracting with providers; financingpolicies; methods for determining profit margins; and characteristics of technical and operational training. Whilesuch contents are typical for this type of contract, the law requires that such aspects must be included in all theseagreements. Finally, we note that the law also provides that the contracting parties may not terminate orunilaterally rescind the agreement, unless the duration of such is for an indefinite time or there is just cause fortermination. Early termination of the franchise agreement, whether by mutual agreement or rescission, mustcomply with the causes and procedures provided therein.

On October 12, 2011, the Mexican Department of Finance and Public Credit published the Decree, in the OfficialJournal of the Federation, by which the tax subsidies granted to the maquiladora industry are extended untilDecember 31, 2013. Such tax subsidies were the result of the Decree granting various tax benefits with respect toincome tax and the single rate business tax published on November 5, 2007. The tax incentive granted to themaquiladora industry is in the form of a tax credit applied against the final accumulated single rate business(IETU) tax due by the taxpayer for the fiscal year. This tax incentive was originally in place from 2008 through2011, but the new Decree extends the tax benefits throiugh 2013. It is important to mention that such taxincentive, in accordance with the terms of the Tax Subsidy Decree, will apply only to maquila entities thatcomply with their tax and customs obligations, including, among others, their transfer pricing obligations, byusing the maquiladora transfer pricing methods set forth in article 216 Bis of the Income Tax Law. Consequently,if the maquila entity does not use such methods or has a transfer price authorization issued by the Mexican government which uses a different method, that maquila entity may not obtain the benefits of this new taxincentive.