Unassociated Document


    July
      25,
      2007

     

    


    Every
      Glory International Group, Inc. 

    100
      N.
      Barranca Ave. #810

    West
      Covina, CA 91791

    Tel:
      626-839-9116

    Fax:
      626-839-9118

     

    Re: Proposed
      Purchase and Sale of Branded Retail Division

     

    Dear
      Mr.
      Kang:

     

    The
      purpose of this letter (the “Letter”) is to set forth certain nonbinding
      understandings and certain binding agreements between Ever-Glory
      International Group, Inc. (“Prospective Buyer”), and Escela V Fashion Co.,
      Ltd. (“Prospective Seller”) with respect to the possible acquisition of all of
      the assets of a business of the Prospective Seller involving a branded
      retail chain in the PRC (the “Business”).

     

    PART
      I: NONBINDING PROVISIONS.

     

    The
      following numbered paragraphs of this Letter (collectively, the “Nonbinding
      Provisions”) reflect our mutual understanding of the matters described in them,
      but each party acknowledges that the Nonbinding Provisions are not intended
      to
      create or constitute any legally binding obligation between Prospective Buyer
      and Prospective Seller, and neither Prospective Buyer nor Prospective Seller
      shall have any liability to the other party with respect to the Nonbinding
      Provisions until a fully integrated, definitive agreement (the “Definitive
      Agreement”), and other related documents, are prepared, authorized, executed and
      delivered by and between all parties. If the Definitive Agreement is not
      prepared, authorized, executed or delivered for any reason, no party to this
      Letter shall have any liability to any other party to this Letter based upon,
      arising from or relating to the Nonbinding Provisions.

     

    1.   Due
      Diligence.
      Prospective Buyer has commenced, and intends to continue, its due diligence
      investigation of the prospects, business, assets, contracts, rights, liabilities
      and obligations of the Business, including financial, marketing, employee,
      legal, regulatory and environmental matters (as applicable). 

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    2.  Proposed
      Form of Agreement.
      Upon
      satisfaction of the condition set forth in B(1) and (2) below, Prospective
      Buyer
      and Prospective Seller intend promptly to begin negotiating to reach a written
      Definitive Agreement, subject to the approval of each party (in their respective
      sole discretion), containing standard representations, warranties, indemnities,
      conditions and agreements by Prospective Seller. 

     

    3.  Conditions
      to Proposed Transaction.
      The
      parties do not intend to be bound to the Nonbinding Provisions or any provisions
      covering the same subject matter until the execution and delivery of the
      Definitive Agreement, which, if successfully negotiated, would provide that
      the
      proposed transaction would be subject to customary terms and conditions,
      including the following:

     

    (a)  Prospective
      Buyer’s obtaining adequate financing for the acquisition of the assets of the
      Business;

     

    (b)  Prospective
      Buyer’s completion of its due diligence review and the results of such due
      diligence being satisfactory to Prospective Buyer in Prospective Buyer’s sole
      discretion; and

     

    (c)  representations
      and warranties of the parties being true at the closing date.

     

    4.  Pre-Closing
      Covenants.
      Prior
      to Closing, the Prospective Seller will conduct the Business in the ordinary
      course consistent with past practices.

     

    5.  Other
      Proposed Terms.
      Prospective Seller would provide training and/or operational support and
      guidance for a reasonable period to be agreed by the parties. 

     

    PART
      II: BINDING PROVISIONS.

     

    Upon
      execution by Prospective Seller of this Letter, or a counterpart thereof, the
      following lettered paragraphs of this Letter (collectively, the “Binding
      Provisions”) will constitute the legally binding and enforceable agreement of
      Prospective Buyer and Prospective Seller.

     

    A.  Nonbinding
      Provisions Not Enforceable.
      The
      Nonbinding Provisions do not create or constitute any legally binding
      obligations between Prospective Buyer and Prospective Seller, and neither
      Prospective Buyer nor Prospective Seller shall have any liability to the other
      party with respect to the Nonbinding Provisions until a Definitive Agreement,
      if
      one is successfully negotiated, is executed and delivered by and between all
      parties. If the Definitive Agreement is not prepared, authorized, executed
      or
      delivered for any reason, no party to this Letter shall have any liability
      to
      any other party to this Letter based upon, arising from or relating to the
      Nonbinding Provisions. Each party acknowledges that it will not take action
      or
      refrain from taking action in reliance on any of the Nonbinding Provisions
      or
      the negotiation thereof, and that any such reliance would be at its own risk.
      No
      subsequent oral agreement or consent of the parties (including partial
      performance) shall be deemed to impose any such obligation or
      liability.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    B.  Acquisition.
      Prospective Buyer and Prospective Seller shall negotiate in good faith and
      undertake best efforts to consummate the proposed Transaction, if and when
      the
      following conditions are met: 

     

    
      	1.  	
              The
                Prospective Seller operates fourteen (14) or more stores worldwide;
                and

            


    

    


    
      	2.  	
              the
                Proposed Seller achieves annual consolidated sales (in any 12 month
                period) of USD $5 million or more. 

            


    

    


    C.  Basic
      Terms

     

    
      	1.  	
              Basic
                Transaction.
                Prospective Buyer would acquire all of the assets of the Business,
                or
                alternatively, acquire 100% equity ownership of the Prospective Seller
                (the “Transaction”). 

            


    

     

    
      	2.  	
              Purchase
                Price.
                The total purchase price for the assets of the Business shall be
                based
                upon a fairness opinion of a reputable third party valuation
                professional.

            


    

     

    D.  Definitive
      Agreement.
      Upon
      satisfaction of the conditions in paragraph B above, Prospective Buyer will
      be
      responsible for preparing the initial draft of the Definitive Agreement. Subject
      to the final sentence of Paragraph C below, Prospective Buyer and
      Prospective Seller shall negotiate in good faith to arrive at a mutually
      acceptable Definitive Agreement for approval, execution and delivery on the
      earliest reasonably practicable date thereafter. 

     

    E.  Access.
      Subject
      to the confidentiality provisions set forth below, upon reasonable notice to
      the
      Prospective Seller, the Prospective Seller shall provide to Prospective Buyer
      complete access to the facilities of the Business, books and records and shall
      cause the directors, employees, accountants and other agents and representatives
      (collectively, “Representatives”) of the Business to cooperate fully with
      Prospective Buyer and Prospective Buyer’s Representatives in connection with
      Prospective Buyer’s due diligence investigation of the Business and the
      Business’s assets, contracts, liabilities, records and other aspects of its
      operations (as described in Paragraph 4 of the Nonbinding Provisions).
      Prospective Buyer shall be under no obligation to continue with its due
      diligence investigation or negotiations regarding the Definitive Agreement
      if,
      at any time, the results of its due diligence investigation are not satisfactory
      to Prospective Buyer for any reason in its sole discretion.

     

    F.  Conduct
      of Business.
      Until
      the Definitive Agreement has been duly executed and delivered by all of the
      parties or the Binding Provisions have been terminated pursuant to
      Paragraph H below, Prospective Seller shall operate the Business in the
      ordinary course, and not engage in any extraordinary transactions without
      Prospective Buyer’s prior consent, including:

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (i)  not
      disposing of any assets of the Business, except in the ordinary course of
      business; and 

     

    (ii)  not
      borrowing any funds, under existing credit lines or otherwise, except as
      reasonably necessary for the ordinary operation of the Business in a manner,
      and
      in amounts, in keeping with historical practices.

     

    G.  Disclosure.
      Except
      as and to the extent required by law, without the prior written consent of
      the
      other party, neither Prospective Buyer nor Prospective Seller shall directly
      or
      indirectly, make any public comment, statement or communication with respect
      to,
      or otherwise disclose or permit the disclosure of the existence of discussions
      regarding, a possible transaction between the parties or any of the terms,
      conditions or other aspects of the transaction proposed in this Letter until
      the
      sooner of the expiration of this Letter or entry into Definitive Agreements.
      

     

    H.  Costs.
      Each of
      Prospective Buyer and Prospective Seller shall be responsible for and bear
      all
      of its own costs and expenses (including any broker’s or finder’s fees) incurred
      in connection with the proposed transaction, including expenses of its
      Representatives, incurred at any time in connection with pursuing or
      consummating the proposed transaction.

     

    I.  Consents.
      Prospective Buyer and each Prospective Seller shall cooperate with each other
      and proceed, as promptly as is reasonably practicable, to seek to obtain all
      necessary consents and approvals from lenders, landlords and other third
      parties, and to endeavor to comply with all other legal or contractual
      requirements for or preconditions to the execution and consummation of the
      Definitive Agreement.

     

    J.  Termination.
      The
      Binding Provisions may be terminated upon written notice by any party to the
      other party if the conditions in paragraph B are not met by July 25, 2008.
      

     

    Please
      sign and date this Letter in the space provided below to confirm the mutual
      agreements set forth in the Binding Provisions and return a signed copy to
      the
      undersigned.

    


    Very
      truly yours,

    


    PROSPECTIVE
      BUYER:

    


    Ever-Glory
      International Group, Inc.

    


    


    ______________________________

    Yi
      Hua
      Kang

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    Acknowledged
      and agreed as to the Binding Provisions:

     

    PROSPECTIVE
      SELLER:

    
 

    
      	
              ______________________________

            	 	Date:
              _____________________
	
              Li
                Ling 

            	 	 


    

    


    
      
        
        

      

      
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