This Distribution Agreement involves
Title: MASTER DISTRIBUTION AGREEMENT
Industry: Apparel/Accessories Sector: Consumer Cyclical
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
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
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.
1.2 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
(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
1.3 Exclusivity and Competitive Products.
(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.
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
Second Year Fall 2005 Period July 1, 2005 to June 30, 2006
Third Year Fall 2006 Period July 1, 2006 to June 30, 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
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
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
2. Minimum advertising requirements, including minimum monetary
obligations and approval by BBI and JOE'S of manner and use of advertising
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
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.
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
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. 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) Identification of the Products ordered;
(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 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.
(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").
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.
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 shall purchase the minimum U.S. dollar amounts of
Products from JOE'S on a seasonal basis, as set forth below, at JOE'S's invoice
price to BBI.
The annual guaranteed purchase amount shall include the amount of purchases
ordered by BBI but cancelled by JOE'S after acceptance by JOE'S.
5.2 Guaranteed Wholesale Sales:
BBI shall achieve the Guaranteed Net Wholesale ("GNW") sales as set forth below:
Year 1: $6,500,000;
Year 2: 8,500,000;
Year 3: To be mutually agreed upon by the parties within
30 days after the end of Year 1; provided, however,
that the parties hereby agree that GNW for Year 3
shall be no less than a 30% increase over Year 1 GNW
minimums, subject to Year 1 GNW minimums being met
pursuant to this agreement.
For purposes of this Agreement, GNW shall be defined as the minimum amount of
purchases by BBI from JOE'S at prices set forth pursuant to Section 6.1 of this
6. Prices and Payments.
6.1 Wholesale Prices.
JOE'S shall invoice BBI for Products on a FOB warehouse basis at JOE'S's then
current wholesale line price less twenty-seven and five tenths perc