AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is entered
into as of the 25th day of June, 2007, by and among Joseph M. Dahan (“Employee”)
and Innovo Group Inc., a Delaware corporation (the “Company”).

W I T N E S S E T H:

WHEREAS, the Company and the Employee previously entered into that certain
Employment Agreement date February 6, 2007;

WHEREAS, the Company desires to employ Employee on the revised terms and
conditions set forth in this Agreement and Employee desires to be employed by
the Company on such revised terms and conditions;

WHEREAS, in connection with the employment, the Company and the Employee have
entered into a separate merger agreement with an entity in which Employee is the
sole stockholder (the “Merger”);

WHEREAS, the parties wish to execute this Agreement as of the date hereof to
become effective without further action by the parties if and when all of the
conditions set forth in Section I.B. are met; and

NOW, THEREFORE, in consideration of the respective representations, warranties
and covenants hereinafter set forth, the parties agree as follows:

I.   EMPLOYMENT.

  A.   The Company agrees to employ Employee and Employee agrees to remain in
the employ of the Company, upon the terms and subject to the conditions provided
herein.

  B.   This Agreement shall become effective immediately after the date on which
all of the following conditions precedent have been fulfilled:

  i)   The Company and Employee have executed this Agreement and consummated the
Merger.

  C.   Nothing herein shall require the Company to use anything other than its
good faith efforts to fulfill the conditions described above. Notwithstanding
anything to the contrary, it is expressly understood that the obligations
contained in this Agreement shall not become effective or enforceable against
the parties until the Effective Date occurs. “Effective Date” shall mean the
date when the condition of Section I.B. is satisfied.

1

II.   POSITION, DUTIES AND RESPONSIBILITIES.

  A.   Employee shall serve as Creative Director of the Brand or in such other
capacity or capacities as shall be mutually agreed upon from time to time by
Employee and Company. For the purpose of this Agreement, the term “Brand” shall
mean the Joe’s® and Joe’s Jeans® branded products, with the exceptions set forth
in this Agreement. Employee shall report directly to the Chief Executive Officer
of Company (the “CEO”), and shall hold the title of “Creative Director” of the
Brand.

  B.   Employee’s duties and responsibilities as Creative Director shall
include, but not be limited to, overseeing, directing and exploiting the Brand.
Such oversight, direction and exploitation shall include management and
supervision of the creative process of the Brand which results in the final
product of the Brand entering the marketplace.

  C.   Employee recognizes the duties and responsibilities set forth hereinabove
are essential and material services being provided to the Company, and as a
result thereof Employee shall devote substantially all of his business time,
attention and efforts in the faithful performance of his duties hereunder in a
manner that shall faithfully and diligently further the business and interests
of the Company. Notwithstanding the foregoing, Employee shall be entitled to
spend certain business time and attention on charitable or personal causes,
provided that such time and attention does not materially interfere with his
duties and responsibilities under this Agreement.

  D.   In the performance of Employee’s duties, he shall use reasonable best
efforts to ensure that the quality of his performance and work in connection
with the Brand maintain the image and presence of the Brand at a level
consistent with such image as of the date of the execution of this Agreement.

  E.   Employee further acknowledges and agrees that, as a result of his
fiduciary obligations to the Company in connection with his position as an
employee of the Company and a member of its Board of Directors, he shall not
take personal advantage of any business opportunity that arises during his
employment with the Company which may be a benefit to the Company (except as
otherwise permitted under Section II.F) unless all material facts regarding such
opportunity are promptly reported to the Board for consideration by the Company
and the disinterested members of the Board determine to reject the opportunity
and to approve Employee’s participation therein.

  F.   Employee and Company further acknowledge that Employee’s spouse is
involved in certain aspects of the apparel industry which, as of the date of the
Merger, are not directly competitive to the Brand. Employee agrees that this
relationship and said spouse’s involvement in the apparel industry shall in no
way interfere with his ability to perform his duties and responsibilities
hereunder. The Employee and Company agree that any direct or indirect financial
or pecuniary interest which Employee may have in any such business may not be
deemed a violation of this Agreement. Company agrees that so long as Employee’s
spouse’s involvement in the apparel industry continues to not directly compete
with the Brand in the premium denim apparel market that such involvement shall
not be deemed a violation of Employee’s obligations hereunder.

  G.   Employee and Company acknowledge that as Creative Director of the Brand
for the Company, Employee shall have the authority to perform his duties and
responsibilities without interference by the Company. However, without the prior
written consent of Company, Employee shall not cause or permit the Company to:

  i)   sell, exchange, lease, mortgage, pledge, charge or otherwise transfer or
encumber all or any portion of any material assets of the Company or any
subsidiary;

  ii)   enter into any material transaction or series of related material
transactions involving capital expenditures, which in the aggregate are deemed
to be material, including incoming lease commitments, purchases of equipment or
inventory or other expenditures that are not consistent with any established
budget of the Company then in effect;

  iii)   enter into or amend any material agreement, commitment or other
transaction, or any series of related agreements, commitments or other
transactions between the Company and any affiliate; or

  iv)   take any material action outside the ordinary course of business.

  v)   For the purposes of this Section II.G., “material” shall mean an amount,
action, inaction, item of significance or importance which if spent, obligated,
performed or not performed or altered may result in an adverse effect upon the
condition (financial or otherwise), earnings, business or business prospects,
properties or operations of the Company and its subsidiaries, considered as one
enterprise.

III.   COMPENSATION AND BENEFITS.

  A.   So long as this Agreement is in full force and effect and except as
otherwise set forth herein, the Company shall pay Employee an annual base salary
in the amount of $300,000 per year (the “Salary”) with such annual adjustments
as the Compensation Committee of the Board of Directors, in its sole and
absolute discretion may award to Employee. All Salary payments shall be made in
accordance with the Company’s regular payroll policy and subject to withholding
for taxes as required by law.

  B.   Employee shall also be entitled to receive those benefits outlined in the
Company’s Employee Handbook in effect during the Term of this Agreement and any
additional benefits received by other named executive officers of Company, if
any, including bonus payments made in the sole and absolute discretion of the
Compensation Committee of the Board of Directors.

  C.   Employee is authorized to incur necessary and customary expenses in
connection with the business of the Company, including expenses for
entertainment, trade association meetings, travel, promotion and similar
matters, consistent with the Company’s policies as in effect from time to time.
The Company will pay or reimburse Employee for such expenses in accordance with
the established expense reimbursement policy then in effect for employees of the
Company.

IV.   TERM. Employee’s employment shall commence on the Effective Date, and
shall terminate five (5) years from the Effective Date, unless terminated sooner
as provided in this Agreement (the “Initial Term”). Thereafter, Employee’s
employment shall continue for consecutive one (1) year periods, unless
terminated sooner as provided in this Agreement (each period a “Renewal Term”).

V.   TERMINATION.

  A.   If Employee is determined to be Disabled (as defined below), Employee’s
employment may be terminated upon sixty (60) days written notice. If Employee’s
employment is terminated under this Section V.A of this Agreement, then the
Company shall pay to Employee (or his legal representative) his salary through
the date of termination as well as any benefits to which Employee may be
entitled as of the date of termination under the benefit plans referred to in
Section III.B of this Agreement, but the Company will be responsible for no
other payments of any nature to employee if termination occurs under this
provision.

For purposes of this Agreement, “Disabled” shall mean the Employee is unable, as
a result of a medically determinable physical or mental illness or incapacity
and notwithstanding reasonable accommodation by the Company, to satisfactorily
perform his duties under this Agreement for a continuous period of 180
consecutive days, or for shorter periods aggregating 270 days during any period
of 12 consecutive months, without any hope or expectation of an ability to
resume such duties in the immediate future. Notwithstanding the foregoing, if an
insurance company providing group long-term disability insurance for the
Company’s employees determines that Employee is entitled to disability benefit
payments thereunder, then it shall conclusively be determined that the Employee
is Disabled. If no such insurance is then in force or if no such determination
has been made, the determination of whether the Employee is Disabled, in the
absence of an insurance company determination for disability benefits, shall be
made by a majority of the independent members of the Company’s Board of
Directors (as “independent director” is defined by Nasdaq corporate governance
rules) (the “Independent Directors”) based on the advice and determination of a
competent medical doctor selected and compensated by the Company. If a physical
examination, medical reports and advice or other evidence is required to enable
such determination, Employee shall submit to such examination by such medical
doctor and shall consent to the transfer and disclosure to the Company of such
information. If Employee withdraws or refuses to provide such consent, then
solely for the purposes of this Agreement, there shall be a presumption upon
which the Company may rely that Employee is Disabled.

  B.   The Company may terminate Employee’s employment for cause (“Cause”) if:

  i)   the Employee is convicted of or enters a plea of guilty or nolo
contendere to a felony or a crime involving moral turpitude;

  ii)   the Employee materially breaches any provision of this Agreement and
such breach is not cured within forty five (45) days of receipt by Employee of
written notice thereof;

  iii)   the Employee encourages, solicits, persuades or attempts to persuade,
any Company employee, consultant, contractor, customer, or potential customer to
engage in any of the acts prohibited by this Agreement; or

  iv)   the Employee violates any of the Company’s policies and procedures as
established from time to time and set forth in the Company’s employee handbook
or the Company’s Code of Ethics for which such violation constitutes a breach of
such Code of Ethics or warrants termination of employment, including the
Company’s sexual harassment policy, or otherwise engages in an act that
constitutes sexual harassment.

If Employee’s employment is terminated under this Section V.B of this Agreement,
then the Company shall pay to Employee his Salary through the date of
termination as well as any benefits to which Employee may be entitled as of the
date of termination under the benefit plans referred to in Section III.B of this
Agreement, but the Company will be responsible for no other payments of any
nature to Employee if termination occurs under this provision.

  C.   The Company may terminate Employee’s employment without Cause at any time
upon two (2) weeks’ written notice to Employee. If Employee is terminated
without Cause, Employee will be entitled to receive, in addition to his Salary
through the date of termination (as determined and calculated under the
provisions of Section III.A) as well as any benefits to which Employee may be
entitled as of the date of termination under the benefit plans referred to in
Section III.B of this Agreement, and an amount equal to the then present value
of the remaining Salary amounts due to Employee through the end of the Initial
Term of the Agreement or the Renewal Term, as applicable (“Termination
Severance”). The Company shall pay the Termination Severance to Employee within
60 days of the date of termination; provided, however, that to the extent
required to avoid taxation under Section 409A(a) of the Internal Revenue Code
(the “Code”) the Company shall pay the Termination Severance on the date that is
six months plus one day after the date of termination. Notwithstanding the
foregoing, if the Company’s funds are not sufficient to pay the Termination
Severance as scheduled without jeopardizing the Company’s solvency, the Company
shall pay the Termination Severance during the first calendar year in which the
Company’s funds are sufficient to do so without jeopardizing the solvency of the
Company. The Company shall also pay a portion of Employee’s COBRA premium under
the same terms as it pays the Company’s other employees’ health insurance
premiums for a period of one (1) year. Any such payments made pursuant to this
Section V.C will be subject to all standard and regular withholdings.

  D.   Employee may terminate Employee’s employment upon written notice to the
Company within 30 days of any event that constitutes “Good Reason,” defined to
mean (i) any material breach of this Agreement by the Company which is not cured
within thirty (30) days of receipt by the Company of written notice thereof; or
(ii) Employee’s decision to terminate employment at any time after 18 months
following a Change in Control (as hereinafter defined). If Employee terminates
for Good Reason, Employee will be entitled to receive an amount equal to the
Termination Severance, as defined in Section V.C hereinabove. The Company shall
pay Employee the Termination Severance within 60 days of the date of
termination; provided, however, that to the extent required to avoid taxation
under Section 409A(a) of the Code, the Company shall pay the Termination
Severance on the date that is six months plus one day after the date of
termination. Notwithstanding the foregoing, if the Company’s funds are not
sufficient to pay the Termination Severance as scheduled without jeopardizing
the Company’s solvency, the Company shall pay the Termination Severance during
the first calendar year in which the Company’s funds are sufficient to do so
without jeopardizing the solvency of the Company. The Company shall also pay a
portion of Employee’s COBRA premium under the same terms as it pays the
Company’s other employees’ health insurance premiums for a period of one
(1) year. Any such payments made pursuant to this Section V.D will be subject to
all standard and regular withholdings.

  E.   If a Change in Control (as hereinafter defined) occurs during the Initial
Term of this Agreement or Renewal Term and at any time within 18 months
following such Change in Control either the Company terminates the Employee’s
employment without Cause, or the Employee terminates employment with the Company
for Good Reason, then the Employee shall be entitled to an amount equal to the
Termination Severance, as defined in Section V.C hereinabove. The Company shall
pay Employee the Termination Severance within 60 days of the date of
termination; provided, however, that to the extent required to avoid taxation
under Section 409A(a) of the Code, the Company shall pay the Termination
Severance on the date that is six months plus one day after the date of
termination. Any such payments made pursuant to this Section V.E will be subject
to all standard and regular withholdings. For purposes of this Agreement,
“Change in Control” shall be deemed to have occurred upon the closing of a
transaction which: (i) the Company sells or otherwise disposes of all or
substantially all of its assets; (ii) there is a merger or consolidation of
Company with any other corporation or corporations, provided that the
shareholders of Company, as a group, do not hold, immediately after such event,
at least fifty percent (50%) of the voting power of the surviving or successor
corporation; (iii) any person or entity, including any “person” as such term is
used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), becomes the “beneficial owner” (as defined in Rule 13(d-3)
under the Exchange Act) of Common Stock of Company representing fifty percent
(50%) or more of the combined voting power of the voting securities of Company
(exclusive of persons who are now officers or directors of Company); or (iv) the
approval by the shareholders of a liquidation or dissolution of the Company.

  F.   Employee may terminate this Agreement at any time for any reason upon ten
business days’ notice. In the event of termination under this Section V.F., then
Employee shall receive his pro rata Salary due as of the date of termination.

VI.   DISCLOSURE OF INFORMATION. Employee shall not, at any time during or after
the expiration of the Initial Term or any Renewal Term, disclose to any Person,
except as required by law or as may be necessary to perform the duties and
responsibilities hereunder, any non-public information (including, without
limitation, non-public information obtained prior to the date hereof) concerning
the business, clients or affairs of the Company, or any affiliate of the
Company, for any reason or purpose whatsoever unless such information becomes
publicly available or known for any reason other than in an unauthorized act of
Employee. Employee shall not make any use of any of such non-public information
for his own purpose or for the benefit of any Person except the Company. Upon
the termination of Employee’s employment at the Company, Employee shall return
to the Company all property of the Company and any affiliate of the Company then
in the possession of Employee and all drawings, designs, sketches, books,
records, computer tapes, discs or other electronic media and all other material
containing non-public information concerning the business, clients or affairs of
the Company or any affiliate of the Company. Employee shall not retain copies of
any material required to be returned to the Company.

VII.   INTELLECTUAL PROPERTY. Employee shall promptly disclose, grant and assign
to the Company for its use and benefit any and all marks, designs, logos,
inventions, improvements, business processes, technical information and
suggestions relating in any way to the business conducted by the Company, or any
affiliate of the Company, which he may develop or which may be acquired by
Employee during the term of Employee’s employment at the Company (whether or not
during usual working hours), together with all trademarks, patent applications,
letters patent, copyrights and reissues thereof that may at any time be granted
for or upon any such mark, design, logo, invention, improvement, process or
technical information, if applicable. In connection therewith:

  A.   Employee shall without charge, but at the expense of the Company,
promptly at all times hereafter execute and deliver such applications,
assignments, descriptions and other instruments as may be necessary or proper in
the sole opinion of the Company to vest title to any such marks, designs, logos,
inventions, improvements, business processes, technical information, trademarks,
patent applications, patents, copyrights or reissues thereof in the Company and
to enable it to obtain and maintain the entire right and title thereto
throughout the world;

  B.   Employee shall render to the Company at its expense all such assistance
as it may require in the prosecution of applications for said trademarks,
patents, copyrights or reissues thereof, in the prosecution or defense of
interferences which may be declared involving any said trademarks, applications,
patents or copyrights and in any litigation in which the Company or any of its
affiliates may be involved relating to any such trademarks, patents, inventions,
improvements, processes or technical information; and

  C.   for the avoidance of doubt, the foregoing provisions shall be deemed to
include an assignment of future copyrights in accordance with Section 201 of the
Copyright Act of 1986 and any amendment or re-enactment thereof relating in any
way to the business conducted by the Company or any affiliate of the Company.

VIII.   HEADINGS. Section and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

IX.   INTEGRATED AGREEMENT. This Agreement constitutes the entire understanding
and agreement among the parties hereto with respect to the subject matter
hereof, and there are no other agreements, understandings, restrictions,
representations or warranties among the parties other than those set forth
herein or provided for herein.

X.   AMENDMENTS. This Agreement may be amended or modified at any time in any or
all respects, but only by an instrument in writing executed by the parties
hereto.

          XI.CHOICE OF LAW. The validity of the Agreement, the construction of
its
terms, and the determination of the rights and duties of the parties hereto
shall be governed by and construed in accordance with the internal laws of
the State of California excluding conflicts of law principles. Each party
irrevocably (i) submits to the exclusive jurisdiction of any California
state or federal court sitting in the Southern District of California, with
respect to matters arising out of or relating hereto, (ii) agrees that all
claims with respect to such action or proceeding may be heard and
determined in such California state or federal court, (iii) waives to the
fullest possible extent, the defense of an inconvenient forum, (iv) waives
the right to a trial by jury and (v) agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by

law.
        XII.NO STRICT CONSTRUCTION. The language used in this Agreement shall be
deemed to be the language chosen by the parties to express their collective
mutual intent, and no rule of strict construction shall be applied against
any Person. The term “including” as used herein shall be by way of example
and shall not be deemed to constitute a limitation of any term or provision

contained herein.
        XIII.ATTORNEY’S FEES AND COSTS. If an action at law or in equity is
necessary to enforce or interpret any provision of this Agreement, each
party shall bear its own expenses associated with enforcing or interpreting

such provision.
        XIV.NOTICES. All notices and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a)
delivered by hand and received by the addressee, or (b) delivered by a
nationally recognized overnight delivery service and received by the

addressee, in each case as follows:
       
If to Employee:
  Joseph M. Dahan
1810 Rising Glen Road Los Angeles, CA 90069
       
With a copy to:
  David P. Markman
 
  Greenberg Traurig
 
  2450 Colorado Avenue
 
  Suite 400E
 
  Santa Monica, CA 90404
If to the Company:
  Marc Crossman or Chief Executive Officer
 
  Innovo Group Inc.
 
  5901 S. Eastern Avenue
 
  Commerce, CA 90040
With a copy to:
  Dustin Huffine or General Counsel
 
  Innovo Group Inc.
 
  5901 S. Eastern Avenue
 
  Commerce, CA 90040

or to such other addresses as a party may designate by notice to the other
parties.

XV. ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors, assigns, heirs, estate,
legatees and legal representatives. The rights and obligations of the Company
under this Agreement may be assigned to or assumed by any other Person.
Employees’ rights or obligations hereunder may not be assigned to or assumed by
any other Person. Any assignment by the Company shall not affect the Employee’s
duties or responsibilities under this Agreement.

XVI. SEVERABILITY. Each provision of the Agreement is intended to be severable.
In the event that any one or more of the provisions contained in this Agreement
shall for any reason be held to be invalid, illegal or unenforceable, the same
shall not affect the validity or enforceability of any other provision of this
Agreement, but this Agreement shall be construed as if such invalid, illegal or
unenforceable provisions had never been contained herein. Notwithstanding the
foregoing, however, no provision shall be severed if it is clearly apparent
under the circumstances that the parties would not have entered into the
Agreement without such provision.
XVII. SURVIVAL. The provisions of Sections VI through XVII shall survive the
termination of the employment period or termination of this Agreement.

XVIII. DISPUTE RESOLUTION PROCEDURES.

  A.   Arbitration.

  i)   Agreement to Arbitrate Disputes. The Company and Employee hereby agree
that any dispute with any party (including the Company’s affiliates, successors,
predecessors, contractors, employees and agents) that may arise from Employee’s
employment with the Company or the termination of Employee’s employment with the
Company and that cannot be resolved after negotiation and mediation, if
applicable, must be submitted for resolution by mandatory, binding arbitration.
The arbitration requirement applies to all statutory, contractual and/or common
law claims arising from employment with the Company including but not limited to
claims arising under Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Equal Pay Act of 1963, the California Fair
Employment and Housing Act, the California Labor Code Sections 200, et seq., 970
and 1050 et seq., the Fair Labor Standards Act and claims of defamation under
California Civil Code Section 44, et seq. or common law. Both the Company and
the Employee shall be precluded from bringing or raising in court or another
forum any dispute that was or could have been submitted to binding arbitration.
This arbitration requirement does not apply to claims for workers’ compensation
benefits, claims arising under ERISA (29 U.S.C. § 1001 et seq.) or provisional
remedies under California Code of Civil Procedure Section 1281.8.

  ii)   Conduct of Arbitration. Binding arbitration under this Agreement shall
be conducted in Los Angeles County, California, in accordance the applicable
rules of Judicial Arbitration and Mediation Service (JAMS) or any successor or
related service and any applicable state or local laws. The arbitration shall be
conducted before a neutral arbitrator selected by both parties in accordance
with such rules. The arbitrator shall be a neutral and impartial lawyer with
excellent academic and professional credentials (i) who is or has been
practicing law for at least 15 years, specializing in either employment
litigation or general corporate and commercial matters, and (ii) who has had
both training and experience as an arbitrator or a judge and who has
successfully arbitrated at least ten cases. Any dispute with any party which
arises from Employee’s employment with the Company or termination of employment
with the Company must be submitted to binding arbitration within the applicable
statute of limitations prescribed by law; provided, however, that the applicable
limitations period will be deemed to be tolled after the provision of a Dispute
Notice during any period within which the parties are actively engaged in
negotiation pursuant to Section VIII.A or mediation pursuant to Section VIII.B.
For this purpose, the parties will be “actively engaged” during the period
subsequent to either party providing the other party with a Dispute Notice
through the date either party provides written notice to the other party that
the negotiation or mediation is terminated (other than the termination of a
negotiation by a Mediation Notice, in which case the tolling will continue).
With the exception of a filing fee that shall not exceed the cost to file a
comparable claim in state or federal court, the Company shall pay the fees and
costs of the Arbitrator, and each party shall pay for its own costs and
attorneys’ fees. However, the Arbitrator may award costs and or attorneys’ fees
to the prevailing party to the extent permitted by law. The parties will be
permitted to conduct discovery as provided by the California Code of Civil
Procedure Section 1283.05. The arbitrator shall, within thirty days of the
conclusion of the arbitration, issue a written opinion setting forth the factual
and legal bases for his or her decision. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.

  iii)   Acknowledgment. EMPLOYEE ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS
AGREEMENT, AND UNDERSTANDS AND AGREES TO ITS TERMS. EMPLOYEE HAS ENTERED INTO
THIS AGREEMENT VOLUNTARILY, AND HAS NOT RELIED UPON ANY PROMISES OR
REPRESENTATIONS OTHER THAN THOSE CONTAINED HEREIN. EMPLOYEE UNDERSTANDS HE IS
GIVING UP HIS RIGHT TO A JURY TRIAL BY ENTERING INTO THIS AGREEMENT.

XIV. DIRECTOR AND OFFICER INSURANCE. Company shall maintain during the Initial
Term and any Renewal Term of this Agreement and for no less than 6 years
thereafter, adequate director and officer insurance to cover any real or
threatened claims, proceedings or lawsuits arising out of or related to
Employee’s employment by Company and performance of his duties and
responsibilities under this Agreement.

XX. CODE SECTION 409A. The Company and Employee acknowledge and agree that the
interpretation of Section 409A of the Code and its application to the terms of
this Agreement is uncertain and may be subject to change as additional guidance
and interpretations become available. Anything to the contrary herein
notwithstanding, all benefits or payments provided by the Company to the
Employee that would be deemed to constitute “nonqualified deferred compensation”
within the meaning of Section 409A of the Code are intended to comply with
Section 409A and, in the event that any such benefit or payment is deemed to not
comply with Section 409A, the Company and Employee agree to renegotiate in good
faith any such benefit or payment so that either (i) Section 409A will not
apply, or (ii) compliance with Section 409A will be achieved. In any event, the
Company makes no representation or warranty and the Company shall have no
liability to Employee or any other person if any provisions of this Agreement
are determined to constitute “nonqualified deferred compensation” within the
meaning of Section 409A of the Code and the terms of such provisions do not
satisfy the additional conditions applicable to nonqualified deferred
compensation under Section 409A of the Code.

[Signature Page to Follow]

2

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.

EMPLOYEE

/s/ Joseph M. Dahan

    Joseph M. Dahan

INNOVO GROUP INC.

By:/s/ Marc Crossman
Name:Marc Crossman
Title:President and CEO

3