July 25, 2007
July
25,
2007
Every
Glory International Group, Inc.
000
X.
Xxxxxxxx Xxx. #000
Xxxx
Xxxxxx, XX 00000
Tel:
000-000-0000
Fax:
000-000-0000
Re: Proposed
Purchase and Sale of Branded Retail Division
Dear
Xx.
Xxxx:
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).
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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.
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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:
______________________________
Yi
Xxx
Xxxx
4
Acknowledged
and agreed as to the Binding Provisions:
PROSPECTIVE
SELLER:
|
______________________________
|
Date: _____________________ | |
|
Li
Ling
|
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