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.
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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.
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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
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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
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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.
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<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
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<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
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3.1 Best
Efforts. BBI agrees to use its best efforts to promote and
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stimulate the sale of the Products in the Territory.
3.2
Marketing.
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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.
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<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.
-------------------------
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<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.
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(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").
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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.
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JOE'S independent auditors, shall, upon reasonable advance
notice, have access
to BBI's records, at mutually agreeable times during
the term of this
