government and authorities; and (c) the Internet or other electronic means now known or to be developed (the “Internet”).

Neither BBI nor any of its affiliated companies shall, directly or indirectly, solicit customers for Products in the United States of America.  Neither BBI nor any of its affiliated companies shall, directly or indirectly, sell or offer to sell Products outside the Territory or to anyone that it knows or, upon reasonable inquiry, should know is likely to resell such Products outside of the Territory.  BBI shall promptly refer all inquires it receives concerning sales outside the Territory to JOE’S.

1.2                                  Exclusivity and Competitive Products .

(a)                                  During the effective term of this Agreement (as hereinafter defined), JOE’S shall not grant to any other person, firm or corporation the Distribution Rights for the Products in the Territory, nor shall JOE’S distribute, lease, market or sell, directly or indirectly, the Products in the Territory except through BBI.

(b)                                  BBI shall submit to JOE’S a list of the products other than JOE’S which are primarily jeans and potentially competitive products to the Products and JOE’S that it currently distributes or plans to distribute in the Territory (“Competitive Products”).   When, during the term of this Agreement, BBI directly or indirectly, through an Affiliate or otherwise, is considering to act as an official distributor to the retail trade in the Territory for any product which could be competitive with any of the Products, BBI will notify JOE’S and use its best efforts to resolve any issues that could negatively impact BBI’s distribution of the Products.  The contents of this Section are not intended to be a restriction or impediment in any way to BBI’s efforts to act as a licensing agent or consultant to entities manufacturing or selling products which may be considered competitive to the Products; the Parties agree that this Section 1.2(b) refers to and is intended to be a consideration for official distribution activities controlled or prompted by any distribution agreements between BBI and a third party manufacturing or selling Competitive Products.

1.3                                  Term .

This Agreement shall come into force as of the Effective Date and shall remain in full force and effect for a period of four (4) years through August 8, 2009 (the “Term”).  For purposes of this Agreement, the first year of the Term shall be an eighteen (18) month period.  The following represent the collections for each year of the Term:

First Year (Period February 9, 2005 to August 8, 2006):

Summer 2005

Fall 2005

Holiday 2005

Spring 2006

Summer 2006

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Second Year (Period August 9, 2006 to August 8, 2007)

Fall 2006

Holiday 2006

Spring 2007

Summer 2007

Third Year (Period August 9, 2007 to August 8, 2008)

Fall 2007

Holiday 2007

Spring 2008

Summer 2008

Fourth Year (Period August 9, 2008 to August 8, 2009)

Fall 2008

Holiday 2008

Spring 2009

Summer 2009

Any renewal of the term of this Agreement shall be determined six (6) months prior to the expiration of the Term by mutual agreement between the parties.

2.                                       Sub-Distribution.

The parties hereby agree that within ninety (90) days from the date of the first shipment to each sub-distributor by BBI, a standard sub-distribution agreement (the “Sub-Distribution Agreement” or “Sub-Distribution Agreements”) shall be finalized for execution by the sub-distributors during the term of this Agreement.  BBI shall be responsible for entering into the Sub-Distribution Agreements with various sub-distributors (“Sub-Distributors”) in the Territory, which shall act as local distributors and/or agents to distribute the Product within certain areas of the Territory as more specifically defined in the Sub-Distribution Agreements.  BBI shall cooperate with JOE’S regarding approval or disapproval of any Sub-Distributor, and shall seek final written approval for Sub-Distributors from JOE’S prior to execution of the Sub-Distribution Agreements.  BBI shall be responsible for all aspects of the Sub-Distribution Agreements, including enforcing the rights and obligations of each Sub-Distributor under said Sub-Distribution Agreements.  The Sub-Distribution Agreements shall, at a minimum include the following:

1.  Minimum sample charges to be paid by each Sub-Distributor for samples;

2.  Minimum advertising requirements, including minimum monetary obligations and approval by BBI and JOE’S of manner and use of advertising expenditures;

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3.  An assignment provision whereby, in the event that this Agreement is terminated for any reason whatsoever, each Sub-Distribution Agreement shall be assigned to JOE’S, and each Sub-Distributor shall be bound to JOE’S as the assignee for its obligations under the Sub-Distribution Agreements, and each Sub-Distribution Agreement shall remain in full force and effect.

Each Sub-Distribution Agreement shall be considered an Addendum to this Agreement, and shall be incorporated upon each Sub-Distribution Agreement’s respective execution.

3.                                       Sales Promotion

3.1                                  Best Efforts .  BBI agrees to use its best efforts to promote and stimulate the sale of the Products in the Territory.

3.2                                  Marketing .

JOE’S shall cooperate with BBI to allow BBI to use its best efforts to advertise, promote, market and sell the Products in the Territory.  Twice a year, as specified herein, BBI shall furnish JOE’S with seasonal marketing plans for the ensuing year which shall be due no later than the last day of November for the Spring/Summer Collection and by the last day of April for the Fall/Winter/Holiday collection.  JOE’S shall notify BBI of its approval or comment on needed changes to such marketing plans within one (1) month of receipt of same from BBI.  BBI shall secure JOE’S approval prior to initiating any changes in its existing or proposed sales and marketing plans.

All advertising, promotional and marketing materials prepared by BBI shall be subject to the prior written approval of JOE’S.  JOE’S shall have ten (10) business days following receipt of such materials in which to review and approve or disapprove the materials, which approval JOE’S may withhold in its sole discretion. If JOE’S does not approve or disapprove any such materials in writing within that time period, such materials will be deemed to be approved.

BBI agrees to attend at least two JOE’S line presentations for the Products during each year of the Agreement. BBI will attend and show the Products at a minimum of two trade fairs during each year of the Agreement.

4.                                       Orders For Products, Defects and Deficiencies, Reports and Access .

4.1                          Purchase Orders .

BBI shall submit purchase orders for the Products to JOE’S in writing prior to the order cut-off date as communicated by JOE’S to BBI, which shall set forth at a minimum:

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(a)                                   Identification of the Products ordered;

(b)                                  Quantities;

(c)                                   Sizes;

(d)                                  Requested delivery dates, and

(e)                                   Shipping instructions (including shipping address).

4.2                                  Acceptance of Orders .

JOE’S shall accept orders placed by BBI in writing at its principal offices in Los Angeles, U.S.A.  After acceptance, an order may not be modified or changed except with the written request by BBI and the approval of JOE’S.

4.3                                  Delivery, Risk and Title

(a)                                   Unless otherwise agreed in writing, all Products purchased by BBI from JOE’S shall be  packed according to BBI’s reasonable instructions and made available to BBI’s designated forwarder.  JOE’S shall advise BBI when the Products are available for shipment.

(b)                                  Unless otherwise agreed, the Products shall be delivered FOB, the JOE’S warehouse or the warehouse of JOE’S’s supplier  and delivery shall be deemed to have been completed once the Products have been picked up at JOE’S’s warehouse by BBI’s freight forwarder.

(c)                                   All title and risk of loss and damage shall pass to BBI when the Products have been effectively delivered to BBI’s freight forwarder.

4.4                                  Modification of Orders .

No accepted purchase order shall be modified or cancelled except upon the written agreement by both parties.   BBI’s purchase orders or mutually agreed change orders shall be subject to all provisions of this Agreement.

4.5                                  Import Documentation .

BBI shall be the exporter of record with respect to all Products.  BBI shall be responsible, at its expense, for obtaining and maintaining all licenses and permits and for satisfying all formalities as may be required to import Products into the Territory in accordance with the then prevailing law or regulations, and all permits and other governmental approvals for the sale of the Products in the Territory. BBI shall also bear all transportation costs associated with shipping the Products from JOE’S to BBI.

4.6                                  Defects and Deficiencies .

(a)                       In view of the administration and expense of shipping defective Products back to the United States from the Territory, provided that BBI is in compliance with the terms and conditions of this Agreement, at the end of each season, JOE’S  will pay

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to BBI or otherwise credit BBI’s account in the amount of the value of one percent (1%) of the net invoice price of all purchases of the Products to accommodate BBI for any damaged or defective Products which may have been received by BBI. BBI shall destroy and dispose of such defective products in the Territory, and shall promptly inform JOE’S of same.

(b)                      In the case of Products that were delivered in quantities less than those set forth in JOE’S’s invoices with respect thereto, BBI shall give JOE’S notice of such deficiency within thirty (30) days following delivery to BBI’s warehouse in the Territory.   If JOE’S, through its own sources, confirms that the deficiencies in such deliveries existed as of the time of delivery to the common carrier for shipment, then JOE’S shall allow a credit to BBI for such deficiencies, as set forth herein.  JOE’S shall not in any event be responsible for any deficiency that arises following delivery to the common carrier for shipment.  All claims for deficiencies shall first be made to BBI’s common carrier, notwithstanding the required notice to JOE’S specified in this Section. If JOE’S is found to be ultimately responsible for the deficiency, the invoice price of the goods that were not shipped shall be deducted from the amount of the next payment to JOE’S to be made by BBI.

The refunds and credits set forth in this Section 4.6 may be offset by JOE’S against any amounts due JOE’S at the time that the refunds or credits are to be given or applied.

4.7                                  Reports.

(a)                                   Retail Sales: If applicanle, for retail sales made by BBI, BBI shall provide to JOE’S every two (2) weeks with a sales report of the Products by door, by style and color, by sales price and by day.

(b)                                  Sales to Retail Stores. For its sales to the retail trade, BBI shall provide JOE’S with  quarterly and annual reports as set forth below :

•                   Quarterly Reports .  BBI shall, within thirty (30) business days after the end of each fiscal quarter of JOE’S, deliver to JOE’S a report of gross sales and net sales (as defined hereinbelow) by price, by style and color, and by retail entity, including all documentation relevant to the calculation of Net Sales as defined herein, for the immediately preceding fiscal quarter and such other financial reports and statements as JOE’S may reasonably request from time to time. In addition, upon reasonable request by JOE’S, BBI shall provide to JOE’S a seasonal qualitative and quantitative recap report by stock keeping unit (“SKU”), pursuant to a template provided by JOE’S.  For purposes of this Agreement, Gross Sales shall mean the full amount of all sales of the Products in the Territory.  Net sales shall be defined as the gross sales of all of the Products sold in the Territory to the trade by BBI, less refunds for returned Products and less value added, sales and similar taxes, if any, incurred in

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connection with the sales of the Products during the applicable period (“Net Sales”).

•                   Annual Reports .  Within thirty (30) days following the end of the fiscal year of JOE’S, BBI shall deliver to JOE’S an annual report of gross sales and Net Sales including all documentation relevant to the calculation of Net Sales as defined herein for the immediately preceding calendar year.

4.8                                  Access .

JOE’S independent auditors, shall, upon reasonable advance notice, have access to BBI’s records, at mutually agreeable times during the term of this Agreement for the purpose of:  (a) review BBI’s inventory of Products;  (b) reviewing and auditing BBI’s books and records relating to the reports to be given by BBI to JOE’S, including without limitation, all books, records and supporting documentation relative to BBI’s Net Sales, advertising of the Products and advertising and marketing expenditures; and/or (c) reviewing BBI’s compliance with this Agreement. In no case shall such a review take place more than once every two (2) years, unless, however, JOE’S independent auditors shall require a review more than once every two years for an unforeseen reason such as a governmental inquiry, audit, investigation or other reason beyond JOE’S control in the ordinary course of business.

5.                                       Guaranteed Purchases and Sales

5.1                                  Guaranteed Purchase Amount

BBI shall purchase all Products exclusively from JOE’S or from sources acceptable to JOE’S.  BBI shal