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MASTER DISTRIBUTION AGREEMENT

Distribution Agreement

MASTER DISTRIBUTION AGREEMENT | Document Parties: INNOVO GROUP INC | JOE'S JEANS,  INC.,  | BEYOND BLUE,INC., You are currently viewing:
This Distribution Agreement involves

INNOVO GROUP INC | JOE'S JEANS, INC., | BEYOND BLUE,INC.,

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Title: MASTER DISTRIBUTION AGREEMENT
Date: 2/27/2004
Industry: Apparel/Accessories     Sector: Consumer Cyclical

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                          MASTER DISTRIBUTION AGREEMENT

 

 

         This Master Distribution   Agreement   ("Agreement") is made effective as

of January 1, 2004,   by and between JOE'S JEANS,   INC., a Delaware   corporation,

with its   principle   place of business at 5804 East   Slauson   Avenue,   Commerce,

California   90040,   USA,   (hereinafter   referred to as "JOE'S") and BEYOND BLUE,

INC.,   a California   corporation,   with its   principle   place of business at 815

Moraga Drive,   Second Floor,   Los Angeles,   California   90049,   USA (hereinafter

referred to as "BBI") and collectively know as (the "Parties").

 

                              W I T N E S S E T H:

                              --------------------

 

WHEREAS,   JOE'S is the owner of the Joe's Jeans   trademark and other   trademarks

("Trademarks") and has been engaged in the manufacture and distribution of men's

and women's   clothing   ("Products")   in the United   States,   and   various   other

countries   and desires to appoint a worldwide   master   distributor,   outside the

United States of America (the "Territory");

 

WHEREAS, BBI is a reputable agent for and distributor of products similar to the

Products;

 

WHEREAS,   JOE'S   wishes to appoint BBI as, and BBI wishes to be appointed to and

assume the   position   of,   the   exclusive   distributor   of the   Products   in the

Territory.

 

NOW, THEREFORE,   the parties to this Agreement   (hereinafter   referred to as the

"Parties") hereby agree as follows:

 

1.        Grant of Distribution Rights.

         -----------------------------

 

1.1       Distribution Rights

         -------------------

 

Under the terms and   conditions of this   Agreement,   JOE'S grants to BBI for the

term of this Agreement the right to purchase the Products from JOE'S,   to import

advertise,   promote,   market,   distribute   and sell the   Products and to use the

Trademarks in the advertising,   promotion,   marketing,   distribution and sale of

the Products in the Territory   only as approved by JOE'S in the manner set forth

in this Agreement ("Distribution Rights").

 

Notwithstanding   anything herein to the contrary, the right to sell or offer for

sale or   authorize   for sale any Product to the   following   or by the   following

means in the Territory,   is reserved   exclusively to JOE'S (or its designee) and

its   affiliated   companies:   (a)   United   States   Government   instrumentalities,

agencies,   departments or activities,   including,   without limitation,   Military

Post Exchanges, if any, in the Territory; (b) airport duty free shops, duty free

zones   and   any   other   areas   similarly   designated   by   local   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-

<PAGE>

 

1.2       Special Conditions.

         -------------------

The Parties   acknowledge   the following   existence of special   conditions to the

grant mentioned in Section 1.1 above.

 

(a)       Canada.   The   distribution   rights of JOE's Products for the country of

         -------

         Canada,   which is   included   in the   Territory   of this   Agreement,   is

         subject to an existing and   previously   executed   written   distribution

         agreement     between    JOE'S    and     Sophistowear     Fashions,     Inc.

         ("Sophistowear")    and   dated    January   7,   2003   (the    "Sophistowear

         Agreement").   The Sophistowear   Agreement shall be assigned by JOE'S to

         BBI by no later than   March 5,   2004,   by an   assignment   agreement   in

         substantial   form as set   forth on   Exhibit   A   attached   hereto.   Upon

         execution of the   assignment   to BBI under this Section   1.2(a),   JOE'S

         shall   notify   in   writing    Sophistowear   and   BBI   to   evidence   said

         assignment.

 

(b)       Japan. The country of Japan and the   distribution   rights for Japan are

         ------

         subject   to a   certain   master   distribution   and   licensing   agreement

         executed between Joe's Jeans, Inc. and Itochu Corporation ("Itochu") on

         July 1, 2003 (the "Itochu Agreement").   Pursuant to Section 28.1 of the

         Itochu Agreement,   the rights and obligations only for the distribution

         of JOE'S products   (excluding   any licensing   rights) shall be assigned

         and transferred to BBI, by an assignment   agreement in substantial form

         as set forth on Exhibit B attached hereto, and the performance   thereof

         shall be subject to the terms and conditions of this Agreement save and

         except as follows:

 

         i.        The discount for purchases made for shipment to Japan shall be

                  at JOE'S then current   wholesale   line price less 25%, and not

                  as stated in Section 6.1 of this Agreement.

 

         ii.       The agreed remuneration   arrangements between JOE'S and BBI as

                  stipulated   in a certain   agent   agreement   dated July 1, 2003

                  shall   remain   in full   force   and   effect   and   shall   not be

                  affected by this Agreement in any way.

 

          Upon   execution of the   assignment   to BBI under this   Section   1.2(b),

         JOE'S   shall   notify   in   writing   Itochu   and   BBI   to   evidence   said

         assignment.

 

1.3       Exclusivity and Competitive Products.

         -------------------------------------

 

                                      -2-

<PAGE>

 

(a)       During the effective term of this   Agreement,   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,

         manufacture or otherwise make   available,   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 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 attempt 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   1.3 (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.

 

1.4       Term.

         ----

 

This   Agreement   shall come into force as of January 1, 2004 and shall remain in

full   force and effect for a period of three (3) years   through   June 30,   2007.

This Agreement shall cover the following fourteen (14) collections (the "Term"):

 

 

         First Year     Spring 2004       Period January 1, 2004 to June 30, 2005

                       Summer 2004

                       Fall 2004

                       Holiday 2004

                       Spring 2005

                       Summer 2005

 

         Second Year    Fall 2005         Period July 1, 2005 to June 30, 2006

                       Holiday 2005

                       Spring 2006

                       Summer 2006

 

         Third Year     Fall 2006         Period July 1, 2006 to June 30, 2007

                       Holiday 2006

                       Spring 2007

                       Summer 2007

 

 

         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 a reasonable time period after the

execution   of this   Agreement,   but in no event   later   than   April 1,   2004,   a

standard   sub-distribution    agreement   (the   "Sub-Distribution    Agreement"   or

"Sub-Distribution   Agreements")   shall be

 

                                      -3-

<PAGE>

 

finalized   for   execution   by certain   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;

 

         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'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

disapproved.

 

BBI agrees to attend at least two JOE'S line   presentations   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-

<PAGE>

 

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:

 

(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.

         -------------------------

 

                                      -5-

<PAGE>

 

(a)       In   view   of the   administration   and   expense   of   shipping   defective

         Products back to the United States to 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 to BBI or otherwise credit BBI's

         account in the amount of the value of one-half of one percent (1/2%) 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 letter of credit to be posted by BBI.

 

The refunds   and   credits   set forth in this   Section 5.8 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:   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 :

 

         o         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,   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 connection with the sales

                  of the Products during the applicable period ("Net Sales").

 

                                      -6-

<PAGE>

 

         o         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


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