DUSSAULT JEANS INC. Vancouver, BC Canada V6A 1E7

XXXXXXXX JEANS INC.

00 Xxxxxx Xxxxxx

Xxxxxxxxx, XX Xxxxxx X0X 0X0

November 5, 2007

Xxxxxxxx Apparel Inc.

0000 Xxxxxxx Xxxxxx

Xxx Xxxxxxx XX XXX 00000-0000

Attention: Xxxxx Xxxxxxxx, President

Dear Xx. Xxxxxxxx:

Re: Letter of Intent for the combination of Xxxxxxxx Jeans Inc. (“Xxxxxxxx Jeans”) and Xxxxxxxx Apparel Inc. (“Xxxxxxxx Apparel”)

This letter replaces and supercedes the letter agreement dated June 29, 2007 and confirms our mutual intention to enter into negotiations to effect a business combination (the “Transaction”) on the terms set forth below. This letter is not intended to create legally binding obligations except as set out in paragraphs 4 and 6 below but will serve as the basis for negotiating a definitive agreement leading to the completion of the Transaction.

1. The Transaction

1.1 Structure: The Transaction may be effected in one of several different ways, including a merger of Xxxxxxxx Jeans and Xxxxxxxx Apparel, or a share exchange whereby Xxxxxxxx Apparel purchases the shares of Xxxxxxxx Jeans from its shareholders in exchange for shares of Xxxxxxxx Apparel.

The parties will jointly determine the optimum structure for the Transaction in order to best satisfy tax planning, regulatory and other considerations, including mutually agreed upon performance based milestones.

1.2 Exchange ratio: Notwithstanding how the Transaction is structured, on the closing of the Transaction, the shareholders of Xxxxxxxx Jeans will receive one-quarter of one share of Xxxxxxxx Apparel for each share of Xxxxxxxx Jeans held by them. It is currently anticipated that there will be approximately thirteen million eight hundred thousand (13.8 million) shares of Xxxxxxxx Jeans issued and outstanding on the Closing Date.

1.3 Terms and conditions: The definitive agreement under which the parties will agree to carry out the Transaction (the "Transaction Agreement") will contain provisions that are customary for a transaction of this nature, and will include (but not be limited to) representations and warranties of both Xxxxxxxx Jeans and Xxxxxxxx Apparel (and their principal shareholders), including Xxxxxxxx Apparel’s status as a reporting issuer with the U.S. Securities and Exchange Commission Exchange (the “SEC”). The closing conditions in favour of both Xxxxxxxx Apparel and Xxxxxxxx Jeans will include the following:

(a) receipt of all required regulatory approvals to the carrying out of the Transaction;

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(b) approvals of the boards of directors of Xxxxxxxx Jeans and Xxxxxxxx Apparel and shareholders of Xxxxxxxx Jeans;

(c) obtaining all required consents of third parties;

(d) completion of all required audited and unaudited financial statements of Xxxxxxxx Jeans, prepared in accordance with US GAAP and audited and by a PCAOB registered audit firm;

(e) completion, to their respective sole satisfaction, of due diligence by Xxxxxxxx Jeans and Xxxxxxxx Apparel of each other;

(f) no material change in the employment agreements of either party without the prior consent of the other party;

(g) all representations in the Transaction Agreement being accurate as of the closing of the Transaction;

(h) no adverse material change in the business or financial condition of Xxxxxxxx Jeans or Xxxxxxxx Apparel since the execution of the Transaction Agreement;

(i) Xxxxxxxx Apparel shall invest US$1.2 million by way of a short-term bridge loan to Xxxxxxxx Jeans;

(j) closing of the transaction to be completed on a best efforts basis by both parties within the following parameters:

(i) notice of completion of substantial due diligence and board approval by both parties by November 30, 2007;

(ii) execution of Transaction Agreement by November 30, 2007;

(iii) receipt of all required shareholder approvals from Xxxxxxxx Jeans by December 14, 2007; and

(iv) closing of Transaction by December 31, 2007.

Both parties will work diligently during this period but recognize that regulatory and other market delays may require adjustments to this timetable.

2. Due Diligence

Once all parties have signed this letter and a mutually acceptable confidentiality agreement, the due diligence teams of Xxxxxxxx Jeans and Xxxxxxxx Apparel will commence due diligence investigations on the other entity. Xxxxxxxx Jeans and Xxxxxxxx Apparel will give the other full access to all of its:

(a) books, records, financial and operating data and all other information:

(b) assets and operations; and

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(c) personnel. Such information will be kept strictly confidential pursuant to the confidentiality agreement signed by Xxxxxxxx Apparel and Xxxxxxxx Jeans contemporaneously with this Letter of Intent.

In the event that each of Xxxxxxxx Apparel and Xxxxxxxx Jeans do not notify the other in writing prior to 5:00 p.m. (Vancouver time) on November 30, 2007 (or such later date as the parties may mutually agree upon) that the results of their investigations are satisfactory and they are willing to negotiate and enter into the Transaction Agreement, this letter agreement shall terminate and be of no further force or effect.

3. Definitive Agreement

Upon the satisfactory completion of diligence by Xxxxxxxx Jeans and Xxxxxxxx Apparel, the parties shall negotiate the terms of the Transaction Agreement, acting reasonably and in good faith, with a view to executing the agreement on or before November 30, 2007.

4. Standstill

During the period from the satisfactory completion of diligence until this letter agreement is either superseded by the Transaction Agreement or terminated pursuant to section 2, each of Xxxxxxxx Apparel and Xxxxxxxx Jeans agrees that they will:

(a) conduct its business only in, and not take any action except in, the usual, ordinary and regular course of business consistent with past practice, and

(b) not pay any dividends engage in non-arms length transactions with their shareholders, or redeem in excess of 1% of their respective currently outstanding shares.

5. Transaction Costs

In the event that this Transaction does not close, each of the parties will be responsible for all costs (including, but not limited to, financial advisory, accounting, legal and other professional or consulting fees and expenses) incurred by it in connection with the transactions contemplated hereby.

6. Publicity

Neither party will make any announcement, issue any press release or otherwise disclose the existence of this letter, without the prior written consent of the other party.

Xxxxxxxx Jeans acknowledges that, as a reporting issuer, Xxxxxxxx Apparel will be required to give public disclosure about the Transaction if and when it enters into the Transaction Agreement.

7. General

This letter will be governed by and construed in accordance with the laws of British Columbia, Canada. Xxxxxxxx Apparel and Xxxxxxxx Jeans submit to the jurisdiction of the courts of British Columbia with respect to any matters arising out of this letter.

This letter will not constitute an offer capable of acceptance. Upon the written confirmation of the general terms and conditions set out in this letter by the parties to whom it is addressed, it will constitute a non-legally binding memorandum of understanding (except for paragraphs 4 and 6) between us with respect to the principal terms and conditions to be included in a definitive agreement.

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If you are in agreement with the foregoing, please confirm that this letter accurately sets forth your understanding of the terms of the proposed Transaction and the other matters set forth herein, by signing a copy of this letter below and returning it to us prior to 5:00 p.m. (Vancouver time) on November 5th, 2007, failing which this letter shall be null and void.

This letter may be executed in any number of counterparts, each of when executed and delivered (including by way of facsimile) is an original but all of which taken together shall constitute one and the same instrument.

We look forward to working together.

Yours truly,

XXXXXXXX JEANS INC.

By: /s/ Xxxxxx Mintak

Xxxxxx Mintak, President

Agreed and confirmed this 5th day of November, 2007.

XXXXXXXX APPAREL INC.

By:	/s/ Xxxxx Xxxxxxxxxx
	Xxxxx Xxxxxxxxxx, President

CW1494041.1