INNOVO GROUP INC
EX. 10.61 - MASTER DISTRIBUTION AGREEMENT
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>10
<FILENAME>master-distrib_agr.txt
<DESCRIPTION>EX. 10.61 - MASTER DISTRIBUTION AGREEMENT
<TEXT>
                          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 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
Agreement.

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 percent (27.5%).
All prices invoiced to BBI include  packing in accordance with BBI's  reasonable
packing  requirements.  If both

                                      -7-
<PAGE>

parties agree to change the current pricing, the new pricing shall be negotiated
in good faith between the parties.

6.2      Payment Terms.
         --------------

BBI shall  make  payment  to JOE'S  within 30 days of  receipt  of each  invoice
delivered to BBI pursuant to Paragraph 6.1 hereinabove.

6.3      Retail Prices.
         --------------

BBI and JOE'S may work together to determine appropriate suggested retail prices
in the  Territory  to be presented  strictly in  compliance  with law;  provided
however,  that BBI reserves the right to sell Products at such prices as BBI, in
its  discretion,  shall  determine.  BBI shall provide JOE'S on a seasonal basis
with a list  of its  retail  prices  to be  charged  to its  customers  for  the
Products.

7.       Trademarks.
         -----------

7.1      Use of Trademarks.
         ------------------

All Products shall be sold only under the  Trademarks,  which may be registered,
at JOE'S  absolute  discretion  and  control,  in the  Territory in JOE'S or its
affiliate's  name and at JOE'S  expense.  BBI shall sell the Products  only with
their original  packaging to the extent that it is legally  acceptable under law
within the Territory, or with agreed changes to labels where necessary for local
regulatory  purposes.  BBI shall only use the Trademarks in a manner approved by
JOE'S and consistent with all applicable laws within the Territory.

The  Trademarks  are and shall  remain at all times the property of JOE'S and/or
its affiliates.  BBI recognizes  that the Trademarks  belong to JOE'S and/or its
affiliates.  BBI is granted no rights with respect to the Trademarks  except the
right to  market,  advertise,  distribute  and  sell  Products,  which  bear the
Trademarks.  BBI  warrants  that it shall never do anything  to  jeopardize  the
ownership of JOE'S or its affiliates' Trademarks,  including but not limited to:
(a)  claiming  any  right,  title  or  interest  in  or  to  the  Trademarks  by
registration  or  otherwise,  other than the right to use the same under all the
terms and  conditions of this  Agreement;  (b)  questioning  the validity of the
Trademarks;  (c) using its own name,  trade names or  trademarks or those of any
other person or entity in connection or  association  with the Trademarks or the
name of JOE'S or any of JOE'S's  affiliates;  or (d) applying the  Trademarks to
any product, package or container without the express written approval of JOE'S.
BBI shall  promptly  assign to JOE'S any  rights it might  acquire  in or to the
Trademarks  through  use or  otherwise,  except the right to use the  Trademarks
under the terms and conditions hereof.

BBI shall not at any time use, in any combination or manner,  the name of JOE'S,
any Trademark or any other trademark or trade name of JOE'S or its affiliates in
any way in advertisements  except in either (a)  advertisements  which have been
supplied  by JOE'S to BBI and to which BBI has made no change of  substance;  or
(b) advertisements submitted by BBI to JOE'S and approved by JOE'S.

BBI shall give prompt notice in writing to JOE'S of any infringement or possible
infringement of the Trademarks  that may come to its attention.  If requested by
JOE'S to do so, BBI shall,  pursuant to JOE'S's  direction  and control,  and at
JOE'S's  expense,  take such

                                      -8-
<PAGE>

action  as may be  necessary  or  advisable  to  stop  any  infringement  of the
Trademarks or other acts of unfair  competition.  If any sum is recovered in any
such suit,  JOE'S shall be solely entitled  thereto.  JOE'S, at its own cost and
expense and in its absolute  discretion and control,  may (in its own name or in
the name of BBI or in both  names)  take such  action as it deems  necessary  to
prevent infringement of the Trademarks or other acts of unfair competition or to
defend the BBI or its customers in suits,  administrative or otherwise,  brought
against them in connection with the use of the Trademarks.

BBI shall  formally  assign to JOE'S any cause of action it may have  against an
infringer of the  Trademarks  upon the request of JOE'S,  and shall  execute all
documents  and do all acts  deemed  necessary  by JOE'S for JOE'S to control any
infringement suit or proceeding which relates to the Trademarks to the extent it
is legally possible under the applicable law in the Territory.

JOE'S  shall  indemnify  and hold BBI  harmless  from and  against  any claim of
alleged  infringement of any right of a third party due to use of the Trademarks
in accordance with this Agreement.

7.2      Registration.
         -------------

JOE'S has  registered or applied to register the  Trademarks for the Products in
the Territory.  In addition, in the event JOE'S believes that it is advisable to
effect any filing or obtain any governmental approval or sanction for the use by
BBI of any of the Trademarks pursuant to this Agreement, the parties shall fully
cooperate in order to do so. All expenses  relating to the  registration  of the
Trademarks  in the  Territory  for the  Products,  as well as the  making of any
filing or obtaining any governmental approvals for the use the Trademarks by BBI
shall be borne by JOE'S.

8.       Representations and Warranties.
         -------------------------------

8.1      JOE'S represents and warrants to BBI that:

(a)      JOE'S has full authority to enter into this Agreement;
(b)      JOE'S has (i) registered;  (ii) applied to register; or (iii) shall use
         its best  efforts to register  the  Trademarks  for the Products in the
         Territory;
(c)      Execution,  delivery and performance of this  Agreement,  including the
         grant of  Distribution  Rights  set forth in this  Agreement,  will not
         violate the terms or any agreement,  order or other arrangement binding
         upon JOE'S or the Trademarks; and

8.2      BBI represents and warrants to JOE'S that:

(a)      BBI has full authority to enter into this Agreement; and
(b)      Execution,  delivery and performance of this Agreement will not violate
         the terms or any  agreement,  order or other  arrangement  binding upon
         BBI; and
(c)      BBI will market and sell the Products  only in a first class manner and
         in full compliance with the terms of this Agreement.


9.       Termination.
         ------------

9.1      Termination.
         ------------

                                      -9-
<PAGE>

Notwithstanding  the  provisions  of Section 1.4 above,  this  Agreement  may be
terminated in accordance with the following provisions:

Either party may terminate  this  Agreement at any time by giving written notice
to the other party if:

(a)      Other than as specified herein,  any breach of this Agreement which, if
         capable of being  cured,  is not cured  within  thirty  (30) days after
         written notice  thereof,  except that any failure of BBI to make timely
         payments  hereunder  must be cured  within ten (10) days  after  notice
         thereof;

(b)      on  fifteen  (15)  days  notice  for any  breach of this  Agreement  of
         Sections relating to  Confidentiality,  Representations and Warranties,
         Sales Outside the Territory, Trademarks;

(c)      failure of either party to satisfy any final judgment against it.


9.2      Rights and Obligations on Termination.
         --------------------------------------

(a)      Upon  termination  or expiration of this  Agreement,  all  Distribution
         Rights,  rights to use the Trademarks,  and other rights granted to BBI
         under this Agreement shall immediately terminate. BBI shall immediately
         cease using the  Trademarks  in any way, and BBI shall deliver to JOE'S
         or,  upon  JOE'S  request,   shall  destroy  all  advertising,   sales,
         promotional and other  materials and literature  bearing the Trademarks
         or containing trade secrets of JOE'S.


(b)      Notwithstanding  the  provisions  in  Section  9.2 (a)  above,  BBI may
         liquidate  and  sell its  then  existing  inventory  of  Products  on a
         non-exclusive basis for a period of ninety (90) days after the later of
         (A) the  termination  or  expiration  date,  or (B) the  date of  final
         delivery  of all  Products  which  are on order on the  termination  or
         expiration  date. If BBI has not disposed of all Products by the end of
         the (90) day inventory  liquidation period hereunder,  BBI may (i) sell
         to JOE'S such  remaining  Products at the price paid by BBI pursuant to
         Section 6.1 hereinabove less 50%.


(c)      Termination of this  Agreement  shall not release either party from the
         obligation  to make payment of all amounts then or  thereafter  due and
         payable and accrued prior to the termination of this Agreement;

10.      Indemnity.
         ----------

10.1     BBI's Indemnity.
         ----------------

Except  to  the  extent  that  the  same  can  be  shown  to  have  been  caused
substantially by JOE'S, BBI agrees to indemnify, defend and hold harmless JOE'S,
its officers,  directors,  shareholders,  agents, and employees from and against
any and all obligations, liabilities, claims, demands, suits, actions, causes of
action, damages and expenses (including but not limited to reasonable attorneys'
fees and costs) caused by or arising from (a) advertising, promotion, marketing,
distribution or sale of the Products by BBI or any other activity  undertaken by
BBI or its affiliated companies pursuant to this Agreement; (b) unauthorized

                                      -10-
<PAGE>

use by BBI of the  Trademarks  or JOE'S  trade  secrets  or  other  confidential
information;  (c) its performance under this Agreement;  and (d) compliance with
law as set forth in this Agreement.

10.2     JOE'S Indemnity.
         ----------------

(a)      JOE'S agrees to indemnify,  defend and hold harmless BBI, its officers,
         directors,  shareholders, agents and employees from and against any and
         all obligations,  liabilities,  claims, demands, suits, actions, causes
         of action,  damages and expenses (including  reasonable attorneys' fees
         and costs)  caused by or arising from (i) BBI's  authorized  use of the
         Trademarks in accordance with this  Agreement;  (ii) JOE'S conduct as a
         wholesaler of the Products;  (iii) compliance with Product  Regulations
         as set  forth  in  Paragraph  11.2  hereof;  or  (iv)  compliance  with
         applicable  labor  laws  by  JOE'S  or  any  of  its  manufacturers  or
         contractors.

(b)      JOE'S  shall  also  defend  and hold  BBI  harmless  from any  claim or
         liabilities arising from any alleged defect in the Products, including,
         but not limited to,  product  liability and tort claims  arising out of
         the Products or use of the Products.

11.      Compliance with Product Regulations and Law.
         --------------------------------------------

11.1     Definition.
         -----------

As used in this Section,  "Product  Regulations" shall mean all governmental and
quasi-governmental  statutes,  regulations and rules applicable to the Products,
including   without   limitation  all  safety  and  health  oriented   statutes,
regulations and rules applicable to the Products in the Territory.

11.2     Products.
         ---------

Notwithstanding the provisions in Paragraph 12 of this Agreement,  JOE'S will be
responsible  for causing the Products to be  manufactured in accordance with all
Product  Regulations  in the  Territory  known to JOE'S.  If BBI gives notice to
JOE'S  that any  Product  does not comply  with any  Product  Regulation  in the
Territory,  JOE'S will promptly take such actions as may be reasonably necessary
or advisable to cure such  noncompliance.  If JOE'S,  upon  conferring with BBI,
determines  that  cure of the  noncompliance  for any given  Product  will be so
difficult or costly as to make such cure  commercially  unreasonable,  JOE'S may
terminate the  Distribution  Rights with respect to  specifically  such Product,
giving BBI as much advance notice as is legally and practically possible.

11.3     Compliance with Law.
         --------------------

BBI shall take the necessary steps to encourage  sub-distributors to comply with
all applicable laws,  regulations,  ordinances,  decisions,  and other issuances
having  the  effect of law in the  Territory  regarding  the  relationships  and
transactions  contemplated by this  Agreement,  including but not limited to the
importation, storage, warehousing,  advertising, marketing, packaging, and other
aspects of selling and distributing the Products.  Further, BBI will, as soon as
possible   following  its  notice  thereof,   advise  JOE'S  of  any  change  in
manufacturing,  sale,  packaging,  labeling  or other  legal  requirements  with
respect to the sale and distribution of the Products in the Territory.

                                      -11-
<PAGE>

14.      Miscellaneous.
         --------------

14.1     Force Majeure.
         --------------

Neither  party  shall be held  responsible  for  damages  caused by any delay or
default  due  to any  contingency  beyond  its  control  preventing  performance
hereunder,   including  without  limitation,  war,  terrorist  acts,  government
regulations,  embargoes,  export, shipping or remittance restrictions,  strikes,
lockouts,  accidents,  fires,  delays or defaults caused by carriers,  floods or
governmental  seizure,  control or rationing.  The party  claiming Force Majeure
shall  immediately  notify  the other  party of the nature of the event of Force
Majeure, and its cause and possible consequences,  and shall take all reasonably
possible steps necessary to minimize such delay; provided,  however, that if any
party  fails to  perform  as  required  under  this  Agreement  for a period  of
forty-five  (45) days for any of the reasons set forth  herein,  the other party
may elect to terminate this Agreement with no further obligations hereunder.


14.2     Relationship.
         -------------

This Agreement does not make either party an employee,  agent, partner, or legal
representative of the other party for any purpose  whatsoever.  Neither party is
granted  any  right or  authority  to  assume or to  create  any  obligation  or
responsibility,  express  or  implied,  on behalf of or in the name of the other
party or to do  anything  for  which the  other  party or any of its  affiliated
companies  may  become  directly  or  contingently  liable.  In  fulfilling  its
obligations  pursuant  to this  Agreement,  each  party  shall be  acting  as an
independent contractor.

14.3     Confidentiality
         ---------------

Each party agrees that it shall not disclose,  unless otherwise permitted herein
or required  by law,  to any third  party and shall use for the sole  purpose of
this  Agreement  any  proprietary  technical,  economic,  financial or marketing
information  which  it may  receive  from  the  other  party  pursuant  to  this
Agreement. The foregoing sentence does not apply to any information which (1) is
already known to the receiving  party prior to the execution of this  Agreement;
(2) becomes hereafter lawfully available to it from a third party without breach
of this  Agreement;  (3) is in or comes into the public  domain  without  act or
fault  of the  receiving  party;  or  (4) is  acquired  by the  receiving  party
independently  of disclosure of the  confidential  information by the disclosing
party.  In  addition,  neither  party  shall  use any of the  trade  secrets  or
confidential  information  of the other party for any  purpose not  specifically
authorized by this Agreement.

14.4     Assignment.
         -----------

BBI shall not assign or  otherwise  transfer  any of its  rights or  obligations
under this Agreement except with the prior written consent of JOE'S.

14.5     Notices and Approvals.
         ----------------------

All notices and  approvals  provided for herein shall be given in writing at the
addresses set forth below (or such other address as the party may have specified
to the other  party in  writing  in  accordance  with this  Paragraph  14.5,  by
personal delivery, facsimile with confirmation of receipt or via courier:

                                      -12-
<PAGE>

         If to JOE'S:               JOE'S JEANS, INC.
                                    5804 East Slauson Avenue
                                    Commerce, California 90040
                                    U.S.A.
                                    Attn:  Samuel J. Furrow, Jr.
                                    And by Facsimile to: 323.201-3846

         And to:                    INNOVO GROUP INC.
                                    5804 E. Slauson Avenue
                                    Commerce, California 90040
                                    Attention : Samuel J. Furrow, Jr.
                                    And by Facsimile :  323.201-3846



         If to BBI:                 BEYOND BLUE, INC.
                                    815 Moraga Drive, Second Floor
                                    Los Angeles, California 90049
                                    Attn :  Harry Haralambus
                                    And by Facsimile :  310.472-1327

Any notice  given in  accordance  with this Section 14.5 shall be deemed to have
been  given  on the date of the  addressee's  receipt  in the  case of  personal
delivery or three (3) days  aftersending  notice via  courier or upon  confirmed
facsimile transmission.

14.6     Entire Agreement.
         -----------------

This Agreement,  constitute the entire  agreement of the parties with respect to
the subject matter hereof, and supersedes all previous agreements by and between
JOE'S and BBI as well as all prior  proposals,  oral or  written,  and all prior
negotiations,  conversations or discussions  between the parties related to this
Agreement.  Each of JOE'S and BBI  acknowledges  that it has not been induced to
enter into this Agreement by any representations or statements, oral or written,
not  expressly  contained  herein,  and that no other  agreement,  statement  or
promise not contained in this Agreement shall be valid or binding.

14.7     Amendment.
         ----------

This  Agreement  shall not be  deemed  or  construed  to be  modified,  amended,
rescinded, cancelled or waived, in whole or in part, except by written amendment
signed by the parties.

14.8     Publicity.
         ----------

This Agreement is confidential and no party shall issue press releases or engage
in other types of publicity of any nature  dealing with the commercial and legal
details of this  Agreement  without the other party's  prior  written  approval,
which approval shall not be  unreasonably  withheld.  However,  approval of such
disclosure shall be deemed to be given to the extent such disclosure is required
to  comply  with   governmental   rules,   regulations  or  other   governmental
requirements.  In such event,  the publishing party shall furnish a copy of such
disclosure to the other party prior to the  disclosure  and give the other party
as much notice as  reasonably  possible  and the  opportunity  to comment on the
contents  thereof and take such

                                      -13-
<PAGE>

other  action  as may be  legally  permissible  to  prevent  the  disclosure  or
otherwise protect its interests.

14.9     Severability.
         -------------

If any term,  provision,  covenant or condition  of this  Agreement is held by a
court of competent jurisdiction or other competent authority to be invalid, void
or unenforceable, the remainder of the provisions shall remain in full force and
effect and shall in no way be  affected,  impaired  or  invalidated  by the such
term, provision, covenant or condition.

14.10    Counterparts.
         -------------

This  Agreement  shall be  executed in two or more  counterparts  in the English
language,  and each such counterpart shall be deemed an original hereof. In case
of any conflict  between the English version and any translated  version of this
Agreement, the English version shall govern.

14.11    Waiver.
         -------

Failure  of either  party to enforce  at any time any of the  provision  of this
Agreement  or  any  right  with  respect  hereto  or  failure  to  exercise  any
provisions,  rights  or  elections  provided  for  herein  shall  in no  way  be
considered to be a waiver of such  provisions,  rights or elections or in no way
affect the validity of this  Agreement.  The failure of either party to exercise
any of the said  provision,  rights or election  shall not preclude or prejudice
such party from later enforcing or exercising the same or any other  provisions,
rights or elections which it may have under this Agreement.

14.12    Arbitration.
         ------------

(a)      All  disputes,   claims  and  controversies  concerning  the  validity,
         interpretation,  performance or breach of this Agreement  shall, if not
         amicably  solved by the parties  hereto,  be referred to arbitration in
         Los Angeles,  California under the then current Commercial  Arbitration
         Rules  for  International   Commercial   Arbitration  of  the  American
         Arbitration  Association  (the  "Rules").  In the event of any conflict
         between the Rules and this paragraph,  the provisions of this paragraph
         shall govern.

(b)      Each party shall appoint one  arbitrator  within thirty (30) days after
         receipt by the  respondent of the demand for  arbitration,  and the two
         arbitrators  appointed by the parties  shall,  within  thirty (30) days
         after  their  appointment,  appoint a third  presiding  arbitrator.  If
         either party fails to nominate an arbitrator, or if the two arbitrators
         appointed  by the parties are unable to appoint a presiding  arbitrator
         within the stated periods, the second or presiding  arbitrator,  as the
         case may be, shall be appointed  according to the procedures of Rule 13
         of the  Rules.  All  arbitrators  shall be  fluent in  English  and all
         hearings shall be conducted in the English language.

(c)      The  arbitrators  shall,  by majority vote,  tender a written  decision
         stating  reasons  therefor.  Any cash award  shall be payable in United
         States dollars,  net of fees,  taxes and other charges.  The prevailing
         party  shall  be  entitled  to  recover  its  share  of the  costs  and
         reasonable attorneys' fees, as determined by the arbitrators.

                                      -14-
<PAGE>

(d)      The award shall include  interest from the date of any damages incurred
         for breach or other  violation of the  Agreement,  and from the date of
         the  award  until  paid  in  full,  at  a  rate  to  be  fixed  by  the
         arbitrator(s),  but in no event less than the London Interbank Offering
         Rate (LIBOR) per annum quoted for the corresponding  period by The Wall
         Street Journal in U.S. Dollars for immediately available funds.


(e)      The  arbitration  award  shall be final and  binding  upon the  parties
         hereto,  any third  party  beneficiaries  hereof  and their  respective
         successors, assigns, heirs and legal representatives. Judgment upon the
         arbitration  award may be  entered  and  execution  had in any court of
         competent  jurisdiction  or application may be made to such court for a
         judicial acceptance of the award and an order of enforcement.

(f)      The parties  expressly  waive their rights to submit matters in dispute
         to the courts in California and furthermore, hereby expressly waive any
         recourse against the decisions of the arbitration panel,  including the
         final award, except as may be needed to enforce the decisions or awards
         of the arbitration panel as set forth below.

(g)      Notwithstanding the parties' agreement to arbitrate herein, the parties
         hereby agree and acknowledge  that money damages may not be an adequate
         remedy for any breach of the provisions of this Agreement and any party
         hereto in its sole  discretion may apply to the Federal  District Court
         sitting in Los Angeles County,  California or any other court of law or
         equity  of  competent  jurisdiction  for  specific  performance  and/or
         injunctive  relief (without  posting a bond or other security) in order
         to  enforce  or  prevent  any  violation  of  the  provisions  of  this
         Agreement.

14.13    Cost and Expense.
         -----------------

In the  event of any  dispute  arising  out of or  relating  to this  Agreement,
whether suit or other  proceeding is commenced or not, and whether in mediation,
arbitration, at trial, on appeal, in administrative proceedings or in bankruptcy
(including  without  limitation any adversary  proceeding or contested matter in
any bankruptcy case), each party shall pay its own costs and expenses  incurred,
including attorneys' fees.

14.14    Governing Law.
         --------------

This Agreement shall be governed by, and interpreted and construed in accordance
with, the laws of the State of California.

                                      -15-
<PAGE>

IN WITNESS  WHEREOF,  the parties have executed this  Agreement,  as of the date
first written above.



                                        JOE'S JEANS, INC.




                                        By:/s/ Joe Dahan
                                           -------------------------------------

                                        Name
                                        Printed: Joe Dahan
                                                --------------------------------

                                        Title: President
                                              ----------------------------------






                                        BEYOND BLUE, INC.


                                        By:/s/ Harry Haralambus
                                           -------------------------------------

                                        Name
                                        Printed: Harry Haralambus
                                                --------------------------------

                                        Title:
                                              ----------------------------------


                                      -16-

</TEXT>
</DOCUMENT>
