SETTLEMENT AGREEMENT AND RELEASE

Joe’s Jeans, Inc. (“JJI”) and Beyond Blue, Inc. (“BBI”) have reached the
following agreement (the “Agreement” or “Settlement Agreement”), as of the 3rd
day of July, 2007 (“Effective Date”). JJI and BBI together shall be hereinafter
referred to as the “Parties.”

WHEREAS, JJI and BBI entered into a Master Distribution Agreement, dated as of
January 1, 2004, as amended by that certain First Amendment to Master
Distribution Agreement, dated as of February 14, 2005 (collectively, the “MDA”);
and 

WHEREAS, JJI and BBI entered into a Dissolution Agreement dated as of
February 1, 2007 (“Dissolution Agreement”), pursuant to which, among other
things, JJI and BBI agreed to dissolve the MDA, provided, however, that the
Parties each reserved certain rights and obligations under the MDA, as more
particularly set forth in the Dissolution Agreement; and

WHEREAS, on May 24, 2007 BBI filed a complaint titled Beyond Blue, Inc. v. Joe’s
Jeans, Inc., Innovo Group Inc., and Does 1 to 10, Case No. BC371641 in Los
Angeles County Superior Court in the State of California (the “Litigation”); and

WHEREAS, on May 25, 2007 JJI filed an arbitration claim titled Joe’s Jeans, Inc.
v. Beyond Blue, Inc., Claim No. 002-OM9-VHS with the American Arbitration
Association (the “Arbitration”); and

WHEREAS, the Parties mutually desire to resolve all claims that each may have
against the other, including but not limited to any and all outstanding claims
arising out of the MDA, the Dissolution Agreement, or which were made or could
have been made in either the Litigation or the Arbitration, and forever release
the other party from any liability whatsoever, except as may otherwise be set
forth below in this Agreement.

NOW, THEREFORE, in consideration of the following covenants and agreements and
for other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties have agreed as follows:

1. BBI shall pay to JJI a total of Two Hundred Thousand and No/100 (USD
$200,000.00) Dollars on or before August 1, 2007. Said payment shall be made by
wire transfer of immediately available funds in accordance with the following
wire instructions:

BANK NAME:  WELLS FARGO BANK

BANK ADDRESS:  420 MONTGOMERY STREET, SAN FRANCISCO, CA  94103

SWIFT CODE:  XXXXX

ACCOUNT NAME:  XXXXX

ACCOUNT NUMBER:  XXXXXX

2. Within three (3) business days of the Effective Date of this Agreement, the
Parties will jointly submit a Motion to Stay the Arbitration until such time as
the conditions set forth in Paragraph 1 have been satisfied. Upon the
satisfaction of such conditions, JJI will promptly cause to be filed a dismissal
of the Arbitration with prejudice.

3. Within three (3) business days of the Effective Date of this Agreement, BBI
shall cause its counsel to submit a letter to the counsel of JJI extending to
August 13, 2007, the time allotted for filing a response in the Litigation.
Thereafter, in the event of a filing of a dismissal of the Arbitration with
prejudice (mentioned in paragraph 2. above), BBI shall cause its counsel to
simultaneously file a dismissal of the Litigation with prejudice, and shall
promptly serve such dismissal with prejudice to JJI.

4. It is understood and agreed that this Settlement Agreement supercedes the MDA
and Dissolution Agreement, and/or any other verbal or written agreement between
the Parties, and/or by and among the BBI Releasors, the BBI Releasees, the JJI
Releasors and the JJI Releasees (collectively hereinafter defined), once this
Settlement Agreement is executed by the Parties and that the only continuing
rights and obligations between the Parties are those set forth or referenced in
this Settlement Agreement.

5. The Parties agree that certain trading covenants shall form an integral part
of this Agreement, and are listed in Exhibit A.

6. Subject to BBI’s full and complete compliance with all material obligations
set forth in this Agreement, JJI, Innovo Group Inc. and their past, present and
future representatives, agents, consultants, shareholders, officers, directors,
employees, affiliates, successors and assigns (“JJI Releasors”) hereby fully and
forever release and discharge BBI and all of its representatives, agents,
shareholders, officers, directors, employees, parents, affiliates, successors
and assigns (“BBI Releasees”) from any and all claims, demands, losses, costs,
damages, rights and causes of action, debts, liabilities and obligations
whatsoever, at law or in equity, arising out of or related to the Litigation
and/or Arbitration, which JJI ever had, now has or hereafter can, shall or may
have for, upon, or by reason of any matter, cause or thing, whether or not
previously asserted or assertable, known or unknown, other than claims to
enforce this Settlement Agreement.

7. (a) In the event of a default by BBI of its obligations set forth in
Sections 1 or 3 of this Agreement, which is not cured in accordance with
Section 14 hereof, JJI may either: (i) invoke its rights provided by Section 15
hereof and sue to enforce such rights under this Agreement; or (ii) declare the
releases provided by this Agreement to be rescinded, thereby restoring all
rights, remedies and claims of the parties as existed prior to entering this
Agreement, whether under the MDA, Dissolution Agreement or otherwise.

(b) In the event of a default by BBI of any of its other material obligations
set forth in this Agreement, which is not cured in accordance with Section 14
hereof, JJI may invoke its rights provided by Section 15 hereof and sue to
enforce such rights under this Agreement.

8. Subject to JJI’s full and complete performance with all material obligations
in this Agreement, BBI and its representatives, agents, consultants,
shareholders, officers, directors, employees, affiliates, successors and assigns
(“BBI Releasors”) hereby fully and forever release and discharge JJI, Innovo
Group Inc. and all of their past, present or future representatives, agents,
shareholders, consultants, officers, directors, employees, parents,
subsidiaries, affiliates (including but not limited to JD Design, LLC and its
successors-in-interest), and their successors and assigns (“JJI Releasees”) from
any and all claims, demands, losses, costs, damages, rights and causes of
action, debts, liabilities and obligations whatsoever, at law or in equity,
arising out of or related to the Litigation and/or Arbitration, which BBI ever
had, now has or hereafter can, shall or may have for, upon, or by reason of any
matter, cause or thing, whether or not previously asserted or assertable, known
or unknown, other than claims to enforce this Settlement Agreement.

9. (a) In the event of a default by JJI of its obligations set forth in
Section 2 of this Agreement, which is not cured in accordance with Section 14
hereof, BBI may either: (i) invoke its rights provided by Section 15 hereof and
sue to enforce such rights under this Agreement; or (ii) declare the releases
provided by this Agreement to be rescinded, thereby restoring all rights,
remedies and claims of the parties as existed prior to entering this Agreement,
whether under the MDA, Dissolution Agreement or otherwise.

(b) In the event of a default by JJI of any of its other material obligations
set forth in this Agreement, which is not cured in accordance with Section 14
hereof, BBI may invoke its rights provided by Section 15 hereof and sue to
enforce such rights under this Agreement.

10. BBI and JJI, and each of them, expressly waives any right and/or benefit
conferred upon them by Section 1542 of the California Civil Code, and expressly
agree that the mutual release operates to release all claims between BBI and
JJI, whether the claims are known or unknown or suspected or unsuspected.
Section 1542 provides:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR.”

11. JJI shall indemnify and hold BBI, and its subsidiaries and affiliates, and
their officers, directors, shareholders, employees, representatives and agents,
harmless from and against any and all settlements, claims, demands, causes of
action, judgments, damages, losses, costs and expenses (including, but not
limited to, attorney’s fees and costs) of any kind whatsoever actually or
allegedly suffered by any person, persons, product, customer or property arising
in any way out of or incidental to, the Products manufactured, sold or
distributed by JJI or suffered or incurred by JJI in connection with any
allegedly unauthorized use of any trademark, patent, process, idea, method, or
device in connection with the Products, and also from any claims, suits losses
and damages arising out of alleged defects in any Products manufactured, sold or
distributed by JJI or resulting from any failure of JJI, or any person, firm, or
entity acting under or through JJI, to comply with any applicable laws
including, without limitation, accidental death, or injury to, persons or damage
to property, and claims of infringement of intellectual property rights,
including copyrights, trademark, trade dress and/or patent claims.

12. BBI shall indemnify and hold JJI, and its subsidiaries and affiliates, and
their officers, directors, shareholders, employees, representatives and agents,
harmless against any and all settlements, claims, demands, causes of action,
judgments, damages, losses, costs and expenses (including but not limited to
attorney’s fees and costs) of any kind whatsoever (excluding any product
liability claims) actually or allegedly suffered by any person, persons,
product, customer or property arising in any way out of or incidental to
distribution of the Products by BBI, or the failure of BBI, or any person, firm,
or entity acting under or through BBI, to comply with any applicable laws
including, claims of infringement of intellectual property rights, including
copyrights, trademark, trade dress and/or patent claims.

13. Any party claiming a right to indemnification under Sections 11 or 12
(“Indemnitee”) shall give prompt written notice to the other party
(“Indemnitor”) of any claims or legal proceeding which may give rise to such
right to indemnification (a “Claim”). The Indemnitor shall have the right to
defend any Claim at its sole cost and expense with counsel of the Indemnitor’s
choice reasonably satisfactory to the Indemnitee. The Indemnitee will at all
times cooperate in all reasonable respects with the Indemnitor and counsel in
the conduct of the defense of any Claim giving rise to indemnification
hereunder. Notwithstanding anything to the contrary herein, BBI will in no event
have the right, to settle any claims or issues relating to the Trademarks or the
rights to ownership or utilization thereof. Without limiting the foregoing, BBI
agrees to give JJI written notice of any product liability Claim made against
BBI with respect to the Products within ten (10) days of BBI’s receipt of the
Claim. Without limiting the foregoing, BBI agrees not to communicate with the
press regarding any product liability Claim, and not to confirm or deny any
information relating to such Claim without JJI’s prior written consent.

14. In the event of a claimed breach of any of the provisions, representation,
warranties or covenants contained in this Agreement, the party claiming breach
shall notify the alleged breaching party (or parties) in writing (in accordance
with the notice provisions hereof) of the claimed breach and the alleged
breaching party (or parties) shall have five (5) business days to cure said
breach, if curable.

15. The Parties recognize and expressly agree that the extent of damages to a
party suffering a breach, in the event of a breach by the other party, of any
covenant excluding Sections 1, 2 and 3 set forth herein would be impossible to
ascertain, that the irreparable harm arising out of any breach shall be
irrebuttably presumed, and that the remedy at law for any breach shall be
inadequate to compensate the party suffering breach. Consequently, the Parties
agree that in the event of a breach of any such covenant, excluding Sections 1,
2 and 3 set forth herein, in addition to any other relief to which may be
entitled, shall be entitled to enforce the covenant by injunctive or other
equitable relief ordered by a court of competent jurisdiction.

16. In the event that an action is required to be brought to enforce this
Agreement or for any breach, the prevailing party in any such action shall be
entitled to recover reasonable attorneys fees and costs.

17. All notices, waivers and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party, by reputable overnight
courier, or by certified mail, return receipt requested. All notices, waivers,
or other communications shall be deemed delivered when actually received if
delivered by hand, one day after mailing if sent by overnight courier and three
days after mailing if sent by certified mail and shall be addressed as follows:

If to JJI:

Joe’s Jeans, Inc.

5901 S. Eastern Avenue

Commerce, CA 90040

Attention: Dustin A. Huffine, Esq.

If to BBI:

Beyond Blue, Inc.

c/o Nunziato Buckley Weber, LLP

11355 W.Olympic Blvd.

Los Angeles, CA 90064

Attention: Tom A. Nunziato, Esq.

18. This Agreement may be signed in counterparts and when executed by the
Parties shall constitute one integrated agreement. A party’s signature delivered
by facsimile transmission shall be deemed an original and is binding on such
party.

19. Each of the signatories hereto represents and warrants to be duly authorized
to fully and completely resolve the disputes described in this Agreement, make
the release contained in this Agreement, and to bind the party on whose behalf
the signatory has agreed to act to the terms and conditions contained in this
Agreement.

20. The Parties hereto represent and warrant that they have not assigned,
transferred, conveyed or released and discharged, voluntarily or involuntarily,
or by operation of law, to any other entity an interest in the disputes which
are the subject of this Agreement.

21. The parties each acknowledge that they have not executed this Agreement in
reliance on any representation, inducement, promise, agreement or warranty which
is not contained or referenced in this Agreement and that they have received
independent legal advice from their respective attorneys with respect to their
rights as well as the consequences of signing this Agreement. The Parties each
further acknowledge that adequate consideration is given to each by the other in
exchange for the releases granted to the BBI Releasees and the JJI Releasees
hereby.

22. This Agreement shall be construed and interpreted in accordance with the
laws of the State of California without regard to any choice of law rules to the
contrary. The Courts in Los Angeles County, California shall have exclusive
jurisdiction over any action relating to the disputes or with respect to any
claims that might arise under or relating to this Agreement.

23. Except as necessary for the purposes of compliance with securities laws, any
legal proceeding brought to enforce the terms of this Agreement or any
governmental investigation, the Parties hereby agree not to disclose the terms
and conditions of this Agreement. The Parties, their representatives, agents,
attorneys, advisors, successors and assigns, shall continue to be strictly bound
by the terms of this confidentiality provision throughout the term of this
Agreement and forever.

24. The BBI Releasors agree not to disparage, criticize or make any negative
comments about the JJI Releasees that a BBI Releasor knows or should reasonably
have known would be published in media outlets; provided, however, that this
undertaking shall not be applicable to any statement made in any legal
proceeding between the Parties or government investigation.

25. The JJI Releasors agree not to disparage, criticize, or make any negative
comments about the BBI Releasees that a JJI Releasor knows or should reasonably
have known would be published in media outlets; provided, however, that this
undertaking shall not be applicable to any statement made in any legal
proceeding between the Parties or government investigation.

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

JOE’S JEANS, INC.

By: /s/ Marc Crossman
Name: Marc Crossman
Title: CFO

BEYOND BLUE, INC.

By: /s/ Harry Haralambus
Name: Harry Haralambus
Title: President

INNOVO GROUP, INC.

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

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