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Exhibit 10.20

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March 10, 2006

Pixior LLC

 

PRIVILEGED AND

Attention: Victor Dahan

 

CONFIDENTIAL

Dear Victor:

        This letter agreement (the "Agreement") memorializes the terms under
which Innovo Group Inc. ("Innovo") and Pixior LLC agree that Innovo shall
outsource to Pixior its product fulfillment services, including, but not limited
to, warehousing, distribution, Electronic Data Interchange (EDI), customer
service, credit, import/export needs for its branded label products (the
"Outsourcing Services").

        This Agreement is intended to be legally and enforceable agreement of
the parties for the term contained herein. The parties hereby agree as follows:

1.    Outsourcing Services    

        (a)   Innovo hereby grants to Pixior the right on an exclusive basis,
beginning as of the Effective Date (as hereinafter defined) to provide all of
the Outsourcing Services, including the right to use any trademarks necessary
for the performance of the Outsourcing Services, for Innovo and Pixior hereby
accepts and agrees to provide to Innovo all of the Outsourcing Services required
to conduct the business of Innovo and its subsidiaries.

        (b)   In providing those Outsourcing Services, Pixior agrees to offer
employment to Innovo's current workforce, as set forth on Schedule A, presently
performing duties related to the Outsourcing Services with salary and benefits
customary to those currently provided (the "Employees"); provided, however, that
Innovo will continue to employ its current operations manager, Clint Gray, to
assist in overseeing the Outsourcing Services between Innovo and Pixior. The
parties agree that since employment is being offered to the Employees within a
reasonable commuting distance to their present employment, Innovo shall not be
required to provide such Employees with advanced notice as required under the
Worker Adjustment and Retraining Notification ("WARN") Act. However, should
Pixior decide to terminate the services of any of the Employees listed on
Schedule A, except those Employees identified as "temporary or "contract"
employees after the time period set forth in Paragraph 1 (c) hereinbelow, then
Pixior shall agree to comply with the advanced notice provisions of the WARN
Act.

        (c)   In addition to any advance notice requirement under the WARN Act,
Pixior shall agree to maintain the employment of all Employees listed on
Schedule A for a period of no less than 90 days following the first date on
which the Employees will be employees of Pixior.

5804 E. Slauson Avenue, Commerce, CA 90040
(Tele) 323.278.6687    •    (Fax) 323.201.3846
www.innovogroup.com

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        (d)   In exchange for the Outsourcing Services, Pixior shall be
compensated as follows:

(i)Payment of Ninety Thousand and No/100 ($90,000.00) Dollars per month, during
a twelve (12) month term of this Agreement.

(ii)In addition, on a monthly basis within fifteen (15) days of the end of the
month, Innovo shall pay to Pixior a fee equal to $0.20 per each garment shipped
after submission of a report acceptable to Innovo detailing the date, number of
units and product shipped.

(iii)Term: Initial Term shall be twelve (12) months beginning on the Effective
Date (as hereinafter defined) and shall be renewable at the option of the
parties for successive twelve (12) month terms; provided, however, that either
party may terminate the definitive Service Agreement upon 90 days' advanced
written notice.

        (e)   Pixior agrees that so long as it is providing Outsourcing Services
to Innovo, Pixior shall obtain a Type 2 SAS 70 report against their operations
on a semi-annual basis. During the first term, compliance must be obtained by
July 2006. Pixior agrees to contract with a mutually acceptable third party CPA
firm to be determined in order to perform the SAS 70 audit. The parties shall
negotiate in good faith by a separate letter agreement the percentage share that
each party shall contribute so that Pixior can achieve and maintain compliance
with SAS 70.

        (f)    Pixior and Innovo agree that the effective date of this Agreement
shall be on or before April 30, 2006 ("Effective Date"), unless otherwise
extended in writing between the parties.

2.    Obligations of Pixior.    Pixior shall perform the following obligations:

        (a)   Pixior shall use its commercially reasonable best efforts to
fulfill all customer purchase orders and to perform the Outsourcing Services in
a timely manner and in a manner customary in the industry.

        (b)   Pixior shall maintain and secure Innovo's Products at its
warehouse for fulfillment of the customer purchase orders (i.e. securing in a
separate and distinct cage or other similar area within its warehouse). Pixior
shall maintain at all times sufficient insurance necessary to cover the risk of
loss of such Innovo Product stored at Pixior's warehouse as well as insurance
sufficient to cover any and all liability associated with performing the
Outsourcing Services.

        (c)   For customer purchase orders fulfilled by Pixior, Pixior shall
provide to Innovo every week a sales report of the Products by retailer, by
door, by style and color, by sales price and by day. Such reports shall include
such information as Innovo may reasonably require for determination of its gross
and net sales of the Products and any other financial reports, statements or
other documentation as Innovo may reasonably request from time to time. In
addition, Pixior shall provide to Innovo a seasonal qualitative and quantitative
recap report by stock keeping unit ("SKU"), pursuant to a template provided by
Innovo.

        (d)   Pixior shall use it best efforts to not cause any harm to the
business of Innovo during the course of performing the Outsourcing Services
pursuant to this Agreement.

        (e)   Pixior shall at all times during the term of this Agreement
provide adequate staffing and operational equipment, including, computer
equipment, hardware, software, telephones, faxes and copiers necessary to ensure
customer service of a similar quality as Innovo provided prior to the execution
of this Agreement.

3.    Obligations of Innovo.    Innovo shall perform the following obligations:

        (a)   Innovo shall use its commercially reasonable best efforts to
provide Pixior with a sufficient quality of Product necessary to fulfill its
customer orders and perform its Outsourcing Services.

        (b)   Innovo shall provide to Pixior a list of its Products on a
seasonal basis as appropriate and endeavor to make such Product available to
Pixior and its customers.

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        (c)   Innovo shall advertise and/or promote Product in a commercially
reasonable manner and shall transmit as reasonably necessary Product information
and promotional materials for its customers to Pixior.

        (d)   Innovo shall agree to maintain proper insurance covering loss or
theft of its products held and/or stored for shipment in Pixior's facility in
such amounts and covering such risk customary under similar conditions.

4.    Representations of Pixior.    Pixior represents and warrants to Innovo the
following:

        (a)   Pixior has full authority to enter into this Agreement;

        (b)   the execution, delivery and performance of this Agreement and the
Outsourcing Services set forth in this Agreement will not violate the terms or
any agreement, order or other arrangement binding upon Pixior; and

        (c)   Pixior shall perform the Outsourcing Services with respect to the
Products only in a first class manner and in full compliance with the terms of
this Agreement.

5.    Representations of Innovo.    Innovo represents and warrants to Pixior the
following:

        (a)   Innovo has full authority to enter into this Agreement; and

        (b)   the execution, delivery and performance of this Agreement and the
Outsourcing Services set forth in this Agreement will not violate the terms or
any agreement, order or other arrangement binding upon Innovo.

6.    Confidentiality.    The parties shall use best efforts to hold in strict
confidence and not disclose to third parties any data and information obtained
from the other party except that each party may disclose such data and
information to its representatives (which shall consist of such party's
officers, directors, employees, agents, and legal or financial advisors and
consultants, collectively "Representatives"). In the event of the termination of
this Agreement, the parties shall either return all such data and information
furnished to it, or destroy all copies of such data and information in its
possession (and cause its Representatives to do the same).

7.    Expenses.    Each of Pixior and Innovo will bear its own costs and
expenses incurred in connection with pursuing or consummating this Agreement,
including all fees and expenses of such party's Representatives.

8.    Indemnity.    

        (a)   Except to the extent that the same can be shown to have been
caused substantially by Innovo, Pixior agrees to indemnify, defend and hold
harmless Innovo, 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) promotion,
distribution or sale of the Products or any other activity undertaken by Pixior
pursuant to this Agreement; (b) unauthorized use by Pixior of the confidential
information; (c) its performance under this Agreement; and (d) compliance with
law as set forth in this Agreement.

        (b)   Innovo agrees to indemnify, defend and hold harmless Pixior, 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 Pixior performance of the Outsourcing Services in accordance
with this Agreement. Innovo shall also defend and hold Pixior 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.

9.    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

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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 ninety (90) days for any of the reasons set forth herein, the other
party may elect to terminate this Agreement with no further obligations or other
notice as required hereunder.

10.    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.

11.    Assignment.    Pixior shall not assign or otherwise transfer any of its
rights or obligations under this Agreement except with the prior written consent
of Innovo.

12.    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 Innovo and Pixior 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 Innovo and
Pixior 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.

13.    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.    Governing Law.    This Agreement will be governed by and construed in
accordance with the laws of the State of California, without giving effect to
any choice-of-law principles.

15.    Amendment.    This Agreement may not be amended or modified except by a
writing signed by all of the parties.

16.    Counterparts.    This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGE TO FOLLOW.]

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        If the foregoing meets with your approval, please indicate Pixior's
acceptance of the terms set forth in this Agreement by having Pixior sign in the
space provided below and by returning the same to Innovo.

    Very truly yours,

   

INNOVO GROUP INC.

   

By:

 

/s/ Marc Crossman

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    Name:   Marc Crossman

    Title:   Interim Chief Executive Officer, President and CFO

 
 
On Behalf of Itself and its wholly-owned Subsidiary,
INNOVO AZTECA APPAREL, INC. and JOE'S
JEANS, INC.

 

ACCEPTED AND AGREED TO THIS
10th DAY OF MARCH, 2006:    
PIXIOR LLC
 
 
By:
 
/s/ Yassine Amallal

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  Name:   Yassine Amallal     Title:   President    

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SCHEDULE A

SEE ATTACHED EXCEL FILE

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INNOVO GROUP
OPERATIONS STAFF

File #
  Name   Position   Rate Type   Status   Hire Date

160102

  Barela, Evangeline M.   EDI Data Input   Salary   Active   9/17/2003

160136

  Chavez, Lily   Shipping/Receiving Supervisor   Hourly   Active   02/02/04

160149

  Chicas, Norma   Admin./Fed Ex   Hourly   Active   03/08/04

160150

  Hurtado Jr., Jesus   Packing   Hourly   Active   03/08/04

160054

  Leon, Rodrigo   Forklift and Receiving   Hourly   Active   06/23/03

160237

  Lott, Charles   Forklift and Receiving   Hourly   Active   05/09/05

160098

  Oneal, Sandra   Import and Credit Manager   Salary   Active   8/19/2003

160050

  Rae, Jessica M.   Credit Turndown Letters, Import Tracking, Factored Credit  
Salary   Active   6/2/2003

160151

  Tenorio, Ana   Returns   Hourly   Active   03/08/04

TEMPORARY PERSONNEL THROUGH STRATUS

Rachel Medina

  Office Clerk

Cristian Moreno

  Packing

Frances Barquero

  Packing

Maria E. Nunez

  Packing

Rita Murrieta

  Packing

Yolanda Lope

  Packing

Jessica Nunez

  Packing

Idalia Martinez

  Packing

Maria Gonzalez

  Packing

Pedro Zepeda

  Packing

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Exhibit 10.20

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE TO FOLLOW.]
SCHEDULE A
SEE ATTACHED EXCEL FILE
INNOVO GROUP OPERATIONS STAFF
TEMPORARY PERSONNEL THROUGH STRATUS