Exhibit 4.1


FORM OF SECURITIES PURCHASE AGREEMENT


INSTRUCTION
SHEET FOR INVESTOR


(to be read in conjunction with the entire Securities
Purchase Agreement and Investor Questionnaire)


A.            Complete the following
items in the Securities Purchase Agreement and in the Investor Questionnaire:


1.                                       Provide the
information regarding the investor requested on the signature pages (pages 3
and 22). Please submit a separate Securities Purchase Agreement and Investor
Questionnaire for each individual fund/entity that will hold the Securities.
The Securities Purchase Agreement and the Investor Questionnaire must be
executed by an individual authorized to bind the investor.


2.             Return the signed
Securities Purchase Agreement and Investor Questionnaire to:


Innovo Group Inc.

5901 South Eastern Avenue

Commerce, CA 90040

Attn:    Marc B.
Crossman, CEO, President and CFO

Phone: (323) 837-3703

Fax:     (323) 837-3790


An executed
original Securities Purchase Agreement and Investor Questionnaire or a fax
thereof must be received by 2:00 p.m., Pacific time, on a date to be determined
and distributed to the investor at a later date.


B.                                     Instructions
regarding the transfer of funds for the purchase of Securities will be faxed to
the investor by the Company at a later date.


C.                                     Resales
of the Securities after the Registration Statement covering the Securities is
effective shall be made in accordance with the provisions of the Securities
Purchase Agreement.



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SECURITIES
PURCHASE AGREEMENT


Innovo Group Inc.

5901 South Eastern Avenue

Commerce, CA 90040

Ladies & Gentlemen:


The undersigned,                                                           
(the “Investor”), hereby confirms its agreement with you as follows:


1.             This Securities
Purchase Agreement (the “Agreement”) is made as of December     ,
2006 between Innovo Group Inc., a Delaware corporation (the “Company”), and the
Investor.


2.             The Company has
authorized the sale and issuance of (x) up to 6,834,347 shares of common stock
(the “Issued Shares”) of the Company, $0.10 par value per share (the “Common
Stock”), and (y) warrants (the “Warrants”), in the form attached hereto as Annex
II, to purchase up to 2,050,304 shares of Common Stock (the “Warrant Shares”),
to certain investors in a private placement (the “Offering”).


3.             The Company and the
Investor agree that the Investor will purchase from the Company and the Company
will issue and sell to the Investor                       
shares, for a purchase price of $     per share, or an
aggregate purchase price of $                              
pursuant to the Terms and Conditions for Purchase of Securities attached hereto
as Annex I and incorporated herein by reference as if fully set forth herein
(the “Terms and Conditions”) and the Warrant to purchase                       
Warrant Shares attached as Annex II. Unless otherwise requested by the
Investor, certificates representing the Issued Shares and Warrants purchased by
the Investor will be registered in the Investor’s name and address as set forth
below.


4.             The Investor
represents that, except as set forth below, (a) it has had no position, office
or other material relationship within the past three years with the Company or
persons known to it to be affiliates of the Company, (b) neither it, nor any
group of which it is a member or to which it is related, beneficially owns
(including the right to acquire or vote) any securities of the Company and (c)
it has no direct or indirect affiliation or association with any NASD member as
of the date hereof. Exceptions:


(If no exceptions, write “none.” If left blank,
response will be deemed to be “none.”)


Please confirm
that the foregoing correctly sets forth the agreement between us by signing in
the space provided below for that purpose. By executing this Agreement, you
acknowledge that the Company may use the information in paragraph 4 above and
the name and address information below in preparation of the Registration
Statement (as defined in Annex I).



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  AGREED AND ACCEPTED:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Innovo Group
  Inc.

  	
   

  	
  Investor:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Print Name:

  	
   

  
	
  By: Marc
  Crossman

  	
   

  	
   

  	
   

  
	
  Title: CEO,
  President & CFO

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Telephone:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name in which
  shares and warrant should be registered

  
	
   

  	
   

  	
  (if different):

  
	
   

  	
   

  	
   

  
														



 



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ANNEX I


TERMS AND CONDITIONS FOR PURCHASE OF SECURITIES


1.             Authorization and
Sale of the Securities. Subject to these Terms and Conditions, the Company
has authorized the sale of (x) up to 6,834,347 shares of Common Stock (the “Issued
Shares”), and (y) warrants, in the form attached hereto as Annex II (the
“Warrants”), to purchase up to 2,050,304 shares of Common Stock (the “Warrant
Shares”).


2.             Agreement to Sell
and Purchase the Securities; Subscription Date.


2.1             At the Closing (as
defined in Section 3), the Company will sell to the Investor, and the Investor
will purchase from the Company, upon the terms and conditions hereinafter set
forth, (x) the number of Issued Shares set forth in Section 3 of the Securities
Purchase Agreement to which these Terms and Conditions are attached, and (y) a
Warrant to purchase up to the number of Warrant Shares set forth in Section 3
of the Securities Purchase Agreement to which these Terms and Conditions are
attached, at the aggregate purchase price set forth thereon.


2.2             The Company may enter
into the same form of Securities Purchase Agreement, including these Terms and
Conditions, with certain other investors (the “Other Investors”) and expects to
complete sales of Issued Shares and Warrants (collectively, “Securities”) to
them. (The Investor and the Other Investors are hereinafter sometimes
collectively referred to as the “Investors,” and the Securities Purchase
Agreement to which these Terms and Conditions are attached and the Securities
Purchase Agreements (including attached Terms and Conditions) executed by the
Other Investors are hereinafter sometimes collectively referred to as the “Agreements.”)
The Company may accept executed Agreements from Investors for the purchase of
Securities commencing upon the date on which the Company provides the Investors
with the proposed purchase price per share and concluding upon the date (the “Subscription
Date”), on which the Company has executed Agreements with Investors for the
purchase of Securities. The Company may not enter into any Agreements after the
Subscription Date.


3.             Delivery of the
Securities at Closing.  The
completion of the purchase and sale of the Securities (the “Closing”) shall
occur on December 19, 2006, (the “Closing Date”), at the offices of the
Company. At the Closing, the Company shall deliver to the Investor (x) one or
more stock certificates representing the number of Issued Shares set forth in
Section 3 of the Securities Purchase Agreement, each such certificate to be
registered in the name of the Investor or, if so indicated on the signature
page of the Securities Purchase Agreement, in the name of a nominee designated
by the Investor and (y) a Warrant, in the form attached hereto as Annex II,
for the purchase the number of Warrant Shares set forth in Section 3 of the
Securities Purchase Agreement, such Warrant to be registered by the Company in
the name of the Investor or, if so indicated on the signature page of the
Securities Purchase Agreement, in the name of the nominee designated by the
Investor.


The Company’s obligation
to issue the Securities to the Investor shall be subject to the following
conditions, any one or more of which may be waived by the Company: (a) receipt
by the Company of a certified or official bank check or wire transfer of funds
in the full amount of the purchase price for the Securities being purchased
hereunder as set forth in Section 3 of the Securities Purchase Agreement; and
(b) the accuracy of the representations and warranties made by the Investors
and the fulfillment of those undertakings of the Investors to be fulfilled
prior to the Closing.


The Investor’s obligation
to purchase the Securities shall be subject to the following conditions, any
one or more of which may be waived by the Investor: (a) the Company shall have
executed Agreements for the purchase of Securities (including the Warrants),
(b) the representations and warranties of the Company set forth herein shall be
true and correct as of the Closing Date in all material respects (except for
representations and warranties that speak as of a specific date, which
representations and warranties shall be true and correct as of such date) and
(c) the Investor shall have received such documents as such Investor shall
reasonably have requested, including, if requested, a standard opinion of
Company Counsel in form and substance customary for transactions of this type.



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4.             Representations,
Warranties and Covenants of the Company. 
The Company hereby represents and warrants to, and covenants with, the
Investor, as follows:


4.1             Organization.  The Company is duly organized and validly
existing in good standing under the laws of the jurisdiction of its
organization. Each of the Company and its Subsidiaries (as defined in Rule 405
under the Securities Act) has full power and authority to own, operate and
occupy its properties and to conduct its business as presently conducted and as
described in the documents filed by the Company under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), since November 26, 2005 through
the date hereof, including, without limitation, its report on Form 10-K for the
fiscal year ended November 26, 2005, its reports on Form 10-Q for the fiscal
quarters ended February 25, 2006, May 27, 2006 and August 26, 2006 and all
Current Reports on Form 8-K (the “SEC Documents”) and is registered or
qualified to do business and in good standing in each jurisdiction in which the
nature of the business conducted by it or the location of the properties owned
or leased by it requires such qualification and where the failure to be so
qualified would have a material 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 (a “Material
Adverse Effect”), and no proceeding has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification.


4.2             Due Authorization
and Valid Issuance.


(a)             The Company has all
requisite power and authority to execute, deliver and perform its obligations
under the Agreements and the Warrants, and the Agreements and Warrants have
been duly authorized and validly executed and delivered by the Company and
constitute legal, valid and binding agreements of the Company enforceable
against the Company in accordance with their terms, except as rights to
indemnity and contribution may be limited by state or federal securities laws
or the public policy underlying such laws, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ and contracting parties’ rights generally and
except as enforceability may be subject to general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at
law). The Company has all requisite power and authority to (x) issue, sell and
deliver the Issued Shares to be issued, sold and delivered to the Investor at
Closing, (y) sell and deliver the Warrants to be sold and delivered to the
Investor at Closing and (z) issue, sell and deliver the Warrant Shares upon
exercise of the Warrants in accordance with the terms thereof.


(b)             The issuance, sale
and delivery of the Issued Shares at the Closing has been duly authorized by
all necessary corporate action on the part of the Company, and all such Issued
Shares have been duly reserved for issuance. The Issued Shares when so issued
and delivered at the Closing in accordance with the terms of this Agreement
will be duly and validly issued, fully paid and non-assessable, and free and
clear of all liens, encumbrances, security interests, right of first refusals,
and preemptive rights (collectively, “Liens”), other than Liens created by the
Investor. The issuance, sale and delivery of the Warrants at the Closing, and
the issuance and delivery of the Warrant Shares issuable upon exercise of the
Warrants, has been duly authorized by all necessary corporate action on the
part of the Company, and all such Warrant Shares have been duly reserved for
issuance. The Warrants when so issued and delivered at the Closing in
accordance with the terms of this Agreement, and the Warrant Shares issuable
upon exercise of the Warrants when so issued, sold and delivered against
payment therefor in accordance with the provisions of the Warrants, will be
duly and validly issued, fully paid and non-assessable, and free and clear of
all Liens.


4.3             Non-Contravention.  The execution and delivery of the Agreements
and Warrants, the issuance and sale of the Issued Shares and Warrants under the
Agreements, the issuance and sale of the Warrant Shares in accordance with the
terms of the Warrants, the fulfillment of the terms of the Agreements and
Warrants and the consummation of the transactions contemplated hereby and
thereby will not (A) conflict with or constitute a violation of, or default
(with the passage of time or otherwise) under, (i) any bond, debenture, note or
other evidence of indebtedness, lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
the Company or any Subsidiary is a party or by which it or any of its
Subsidiaries or their respective properties are bound, (ii) the charter, bylaws
or other organizational documents of the Company or any Subsidiary, or (iii)
any law, administrative regulation, ordinance or order of any court or
governmental agency, arbitration panel or authority applicable to the Company
or any Subsidiary or their respective properties, except in 



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the case of
clauses (i) and (iii) for any such conflicts, violations or defaults which are
not reasonably likely to have a Material Adverse Effect or (B) result in the
creation or imposition of any Lien whatsoever upon any of the material
properties or assets of the Company or any Subsidiary or an acceleration of
indebtedness pursuant to any obligation, agreement or condition contained in
any material bond, debenture, note or any other evidence of indebtedness or any
material indenture, mortgage, deed of trust or any other agreement or
instrument to which the Company or any Subsidiary is a party or by which any of
them is bound or to which any of the material property or assets of the Company
or any Subsidiary is subject. No consent, approval, authorization or other
order of, or registration, qualification or filing with, any regulatory body,
administrative agency, or other federal, state or local governmental body or
any other person is required for the execution and delivery of the Agreements
and the Warrants, the valid issuance and sale of the Issued Shares and Warrants
to be sold pursuant to the Agreements and the valid issuance and sale of the
Warrant Shares issuable upon exercise of the Warrants, other than such as have
been made or obtained, and except for (i) any post-closing securities filings
required by state securities laws, and (ii) the filing of a Notice of Sale of
Securities on Form D with the SEC as required under Regulation D of the
Securities Act of 1933, as amended (the “Securities Act”).


4.4             Capitalization.  The number and type of all authorized, issued
and outstanding capital stock of the Company, and all shares of Common Stock
reserved for issuance under the Company’s various option and incentive plans or
pursuant to any outstanding warrants or other equity or debt securities of the
Company that are exercisable or convertible into shares of capital stock of the
Company, in each case as of October 5, 2006, is as set forth in Schedule 4.4.
The Company has not issued any capital stock since October 4, 2006 except (i)
certain options to purchase shares of the Company’s common stock since that
date pursuant to the Company’s Stock Incentive Plan as described in the SEC
Documents, or (ii) shares reserved pursuant to a collateral protection
agreement disclosed in the SEC Documents. The outstanding shares of capital
stock of the Company have been duly and validly issued and are fully paid and
nonassessable, have been issued in compliance with all federal and state securities
laws, and were not issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities. Except as set forth in the SEC
Documents, there are no outstanding rights (including, without limitation,
preemptive rights), warrants or options to acquire, or instruments convertible
into or exchangeable for, any unissued shares of capital stock or other equity
interest in the Company or any Subsidiary, or any contract, commitment,
agreement, understanding or arrangement of any kind to which the Company is a
party or of which the Company has knowledge and relating to the issuance or
sale of any capital stock of the Company or any Subsidiary, any such
convertible or exchangeable securities or any such rights, warrants or options.
Without limiting the foregoing or as otherwise set forth in the Agreements, no
preemptive right, co-sale right, right of first refusal, registration right, or
other similar right exists with respect to the Issued Shares, the Warrants or
the Warrant Shares or the issuance and sale thereof. No further approval or
authorization of any stockholder or the Board of Directors of the Company is
required for the issuance and sale of the Issued Shares and Warrants at the
Closing or the issuance of the Warrant Shares upon the exercise of the
Warrants. The Company owns the entire equity interest in each of its
Subsidiaries, free and clear of any Lien, other than as described in the SEC
Documents. Except as disclosed in the SEC Documents, there are no stockholders
agreements, voting agreements or other similar agreements with respect to the
Common Stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company’s stockholders.


4.5             Legal Proceedings.  There is no material legal or governmental
proceeding, claim, action or arbitration (each, an “Action”) pending or, to the
knowledge of the Company, threatened to which the Company or any Subsidiary is
or may be a party or of which the business or property of the Company or any
Subsidiary is subject that is not disclosed in the SEC Documents. There is no
Action pending or, to the knowledge of the Company, threatened to which the
Company or any Subsidiary is or may be a party to or of which the business or
property of the Company or any Subsidiary is subject which could adversely
affect or challenge the legality, validity or enforceability of any of the
Agreements or Warrants. The Company has not received any stop order or other
order suspending the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities Act.


4.6             No Violations.  Neither the Company nor any Subsidiary is (x)
in violation of its charter, bylaws, or other organizational document, or (y)
in violation of any law, administrative regulation, ordinance or order of any
court or governmental agency, arbitration panel or authority applicable to the
Company or any Subsidiary, which, in the case of clause (y) only, violation,
individually or in the aggregate, would be reasonably likely to have a Material
Adverse Effect, or (z) is in default (and there exists no condition which, with
the passage of 



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time or otherwise,
would constitute a default) in any respect in the performance of any bond,
debenture, note or any other evidence of indebtedness in any indenture,
mortgage, deed of trust or any other agreement or instrument to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
is bound or by which the properties of the Company or any Subsidiary are bound,
which would be reasonably likely to have a Material Adverse Effect.


4.7             Governmental
Permits, Etc.  With the exception of
the matters which are dealt with separately in Sections 4.1, 4.12, 4.13, and
4.14, each of the Company and its Subsidiaries has all necessary franchises,
licenses, certificates and other authorizations from any foreign, federal,
state or local government or governmental agency, department, or body that are
currently necessary for the operation of the business of the Company and its
Subsidiaries as currently conducted and as described in the SEC Documents
except where the failure to currently possess could not reasonably be expected
to have a Material Adverse Effect.


4.8             Intellectual
Property.  Except as specifically disclosed
in the SEC Documents (i) each of the Company and its Subsidiaries owns or
possesses sufficient rights to use all patents, patent rights, trademarks,
copyrights, licenses, inventions, manufacturing processes, design process,
logos, trade names, hardware designs, programming processes, software, trade
secrets, trade names and know-how (collectively, “Intellectual Property”)
described or referred to in the SEC Documents as owned or possessed by it or
that are necessary for the conduct of its business as now conducted or as
proposed to be conducted except where the failure to currently own or possess
would not have a Material Adverse Effect, (ii) neither the Company nor any of
its Subsidiaries is infringing or has received any notice of, or has any knowledge
of, any asserted infringement by the Company or any of its Subsidiaries of, any
rights of a third party with respect to any Intellectual Property that,
individually or in the aggregate, would have a Material Adverse Effect and
(iii) neither the Company nor any of its Subsidiaries has received any notice
of, or has any knowledge of, infringement by a third party with respect to any
Intellectual Property rights of the Company or of any Subsidiary that,
individually or in the aggregate, would have a Material Adverse Effect.


4.9             Financial
Statements.  The financial statements
of the Company and the related notes contained in the SEC Documents present
fairly, in accordance with generally accepted accounting principles, the
financial position of the Company and its Subsidiaries as of the dates
indicated, and the results of its operations and cash flows for the periods
therein specified consistent with the books and records of the Company and its
Subsidiaries except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments. Such financial statements
(including the related notes) have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the periods
therein specified, except as may be disclosed in
the notes to such financial statements, or in the case of unaudited statements,
as may be permitted by the Securities and Exchange Commission (the “SEC”) on
Form 10-Q under the Exchange Act and except as disclosed in the SEC Documents.
The other financial information contained in the SEC Documents has been
prepared on a basis consistent with the financial statements of the Company.


4.10           No Material Adverse
Change.  Except as disclosed in the
SEC Documents, Since the date of the latest audited financial statements
included in the Company’s most recent Annual Report on Form 10-K, there has not
been (i) any material adverse change in the financial condition or earnings of
the Company and its Subsidiaries considered as one enterprise, (ii) any
material adverse event affecting the Company or its Subsidiaries, (iii) any
obligation, direct or contingent, that is material to the Company and its
Subsidiaries considered as one enterprise, incurred by the Company, except
obligations incurred in the ordinary course of business, (iv) any dividend or
distribution of any kind declared, paid or made on the capital stock of the
Company or any of its Subsidiaries, (v) any loss or damage (whether or not
insured) to the physical property of the Company or any of its Subsidiaries
which has been sustained which has a Material Adverse Effect, or (vi) any
event, occurrence or development that has had or that could reasonably be
expected to have a Material Adverse Effect.


4.11           Disclosure.  Except with respect to the material terms and
conditions of the transaction contemplated by the Agreements and as may be
covered by a separate confidentiality agreement which may be publicly disclosed
by the Company pursuant to Section 15(b) hereof, the Company confirms that
neither it nor any person acting on its behalf has provided the Investor with
any information that constitutes material, non-public information.



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4.12           Nasdaq Compliance.  Except as otherwise disclosed in the SEC
Documents, the Company’s Common Stock is registered pursuant to Section 12(b)
of the Exchange Act and is listed on The Nasdaq Stock Market, Inc. Capital
Market (the “Nasdaq Capital Market”), and the Company has taken no action
designed to, or likely to have the effect of, terminating the registration of
the Common Stock under the Exchange Act or de-listing the Common Stock from the
Nasdaq Capital Market, nor has the Company received any notification that the
SEC or the National Association of Securities Dealers, Inc. (“NASD”) is
contemplating terminating such registration or listing. Notwithstanding the
foregoing and as disclosed in the SEC Documents, the Company received a letter
from Nasdaq Capital Market indicating that the Company no longer met the
continued listing requirements of the Nasdaq Capital Market and the Company has
until December 27, 2006 to regain compliance or request a hearing.


4.13           Reporting Status.  The Company believes that it has filed with
the SEC in a timely manner all reports and documents that the Company was
required to file under the Exchange Act during the 12 months preceding the date
of this Agreement. The Company believes that it is eligible to use Form S-3 to
register the resale of the Issued Shares and Warrant Shares by the Investors
under the Securities Act in accordance with this Agreement, and if not, the
Company shall file a resale registration statement on Form S-1. As of their
respective dates, the SEC Documents complied as to form in all material
respects with the requirements of the Securities Act and the Exchange Act and
the rules and regulations of the SEC promulgated thereunder, and none of the
SEC Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Company does not have pending before the
SEC any request for confidential treatment of information or documents.


4.14           Listing.  The Company shall comply with all
requirements of the National Association of Securities Dealers, Inc. (or any
other securities exchange, interdealer quotation system or other market on
which the Common Stock is then listed) with respect to the issuance of the
Issued Shares, the Warrants and the Warrant Shares and the listing Issued
Shares and Warrant Shares on the Nasdaq Capital Market (or any other securities
exchange, interdealer quotation system or other market on which the Common
Stock is then listed).


4.15           No Manipulation of
Stock.  The Company has not taken and
will not, in violation of applicable law, take, any action designed to or that
might reasonably be expected to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Issued Shares or Warrant Shares.


4.16           Company not an “Investment
Company”.  The Company has been
advised of the rules and requirements under the Investment Company Act of 1940,
as amended (the “Investment Company Act”). The Company is not, and immediately
after receipt of payment for the Securities will not be, an “investment company”
or an entity “controlled” by an “investment company” within the meaning of the
Investment Company Act and shall conduct its business in a manner so that it
will not become subject to the Investment Company Act.


4.17           Foreign Corrupt
Practices.  Neither the Company, nor
to the knowledge of the Company, any agent or other person acting on behalf of
the Company, has (i) directly or indirectly, used any corrupt funds for
unlawful contributions, gifts, entertainment or other unlawful expenses related
to foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) which is in violation of
law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.


4.18         Accountants.  Ernst &
Young LLP, whom the Company expects will express its opinion with respect to
the financial statements to be included or incorporated by reference from the
Company’s Annual Report on Form 10-K for the year ended November 25, 2006, into
the Registration Statement (as defined below) and the prospectus which forms a
part thereof, are independent accountants as required by the Securities Act and
the rules and regulations promulgated thereunder.



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4.19           Contracts.  The contracts described in the SEC Documents
that are material to the Company are in full force and effect on the date
hereof, and neither the Company nor, to the Company’s knowledge, any other
party to such contracts is in breach of or default under any of such contracts
which would have a Material Adverse Effect.


4.20           Taxes.  The Company and each of its Subsidiaries have
filed all foreign, federal, state and local income, excise or franchise tax
returns, real estate and personal property tax returns, sales and use tax
returns and other tax returns required to be filed by it and has paid all taxes
shown thereon, except taxes which have not yet accrued or otherwise become due.
The provision for taxes of the Company included in the provision for accrued
liabilities in the Company’s financial statements is adequate for taxes due or
accrued as of the dates thereof. All taxes and other assessments and levies
which the Company or any of its Subsidiaries is required to withhold or collect
have been withheld and collected in a timely manner and have been paid over to
the proper governmental authorities to the extent required to be so paid. With
regard to the income tax returns of the Company and its Subsidiaries, neither
the Company nor any of its Subsidiaries has received notice of any audit or of
any proposed deficiencies from any taxing authority, and no controversy with
respect to taxes of the Company or any of its Subsidiaries of any type is
pending or, to the Company’s knowledge, threatened. There are in effect no
waivers of applicable statutes of limitations with respect to any taxes owed by
the Company or any of its Subsidiaries for any year.


4.21         Transfer Taxes.  On the
Closing Date, all stock transfer or other taxes (other than income taxes) which
are required to be paid in connection with the sale and transfer of the
Securities to be sold to the Investor hereunder will be, or will have been,
fully paid or provided for by the Company and all laws imposing such taxes will
be or will have been fully complied with.


4.22           Private Offering.  Assuming the correctness of the
representations and warranties of the Investors set forth in Section 5 hereof,
(i) the offer and sale of Issued Shares and Warrants hereunder is exempt from
registration under the Securities Act and (ii) upon the exercise of the
Warrants in accordance with the terms thereof, the issuance and sale of the
Warrant Shares will be exempt from registration under the Securities Act. The
Company has not distributed and will not distribute prior to the Closing Date
any offering material in connection with this Offering and sale of the
Securities other than the documents of which this Agreement is a part or the
SEC Documents. The Company has not in the past nor will it hereafter take any
action to sell, offer for sale or solicit offers to buy any securities of the
Company which would bring the offer, issuance or sale of the Issued Shares, the
Warrants or the Warrant Shares as contemplated by this Agreement, within the
provisions of Section 5 of the Securities Act, unless such offer, issuance or
sale was or shall be within the exemptions of Section 4 of the Securities Act.


4.23           Use of Proceeds.  The proceeds from the sale of
the Securities hereunder shall be used solely for general working capital
purposes.


4.24.          Title to Assets.  The Company and the Subsidiaries have good
and marketable title in fee simple to all real property owned by them that is
material to their respective businesses and good and marketable title in all
personal property owned by them that is material to their respective
businesses, in each case free and clear of all Liens, except for Liens
disclosed in the SEC Documents and except as do not materially affect the value
of such property and do not materially interfere with the use made and proposed
to be made of such property by the Company and the Subsidiaries. Any real
property and facilities or personal property held under lease by the Company
and the Subsidiaries are held by them under valid, subsisting and enforceable
leases of which the Company and the Subsidiaries are in compliance, except as
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.


4.25           Transactions With
Affiliates.  Except as set forth in
the SEC Documents, none of the officers or directors of the Company or any
Subsidiary is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer or director has a substantial interest or is an officer,
director, trustee 



 9
 






 



or partner, in
each case that would be required to be disclosed now or in the future in an SEC
Document pursuant to the requirements of Item 404 of Regulation S-K.


4.26           Environmental
Compliance.  Except as set forth in
the SEC Documents, to the know of the Company, neither the Company nor any of
its Subsidiaries (a) is presently in noncompliance with, any federal, state,
and local environmental and health and safety laws, rules, regulations,
ordinances, guidelines, codes, orders, approvals and similar items (“Environmental
Laws”) applicable to its business and properties; (b) has generated,
manufactured, used, refined, transported, treated, stored, handled, disposed
of, transferred, produced, or processed any pollutant, toxic substance,
hazardous waste, hazardous substance, hazardous material, oil, or petroleum
product other than ordinary cleaning and other similar products (“Hazardous
Materials”) as defined under any Environmental Law, or any solid waste, other
than such instances and Hazardous Materials as are normally consumed by
businesses engaged in operations substantially similar to those conducted by
the Company, and has any knowledge of the release or threat of release of any
Hazardous Materials from its products, properties or facilities except in
compliance with law; (c) has entered into or been subject to any consent
decree, compliance order, or administrative order with respect to any
environmental or health and safety matter relating to its business or any of
its properties or facilities.


4.27           Brokerage.  Except as set forth on Schedule 4.27, there
are no, and will be no, claims for and no person or entity is entitled to any
brokerage commissions, finder’s fees or similar compensation in connection with
the transactions contemplated by this Agreement from the Company or any of its
Subsidiaries or based on any arrangement or agreement made by or on behalf of
the Company or any of its Subsidiaries. The Investor shall have no direct
obligation with respect to any fees or with respect to any claims made by or on
behalf of other persons or entities for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated by
this Agreement.


4.28           Employee Benefit
Plans.  Except as set forth in the
SEC Documents, neither the Company nor any of its Subsidiaries maintains or
contributes to any employee benefit plans. The Company and each of its
Subsidiaries is in material compliance with the provisions of all laws or rules
or regulations applicable to any employee benefit plan maintained or
contributed to by the Company or any of its Subsidiaries for the benefit of its
employees and, to the Company’s knowledge, there are no claims (other than
routine claims for benefits) pending or threatened with respect to any of such
employee benefit plans. Neither the Company nor any of its Subsidiaries has any
retirement, pension or deferred compensation plans or programs. For purposes of
this Section 4.28, the term “Company” includes all entities that have
controlled, have been under the control of, or have been under common control
with, the Company.


4.29           Employees.  Except as set forth in the SEC Documents, no
officer or key employee of the Company or any of its Subsidiaries (orally or in
writing) has notified the Company that he or she intends to terminate
employment with the Company or any of its Subsidiaries.


4.30           Insurance.  The Company and the Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses in
which the Company and the Subsidiaries are engaged. Neither the Company nor any
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business without a significant increase in cost.


4.31           Registration Rights.  The Company has not granted or agreed to
grant to any person or entity any rights (including “piggyback” registration
rights) to have any securities of the Company registered with the SEC or any
other governmental authority on any registration statement on which the Shares
and Warrant Shares for the Investors and for the finder’s fee will be
registered pursuant to the terms of this Agreement.


5.             Representations,
Warranties and Covenants of the Investor.


5.1             The Investor
represents and warrants to, and covenants with, the Company that: (i) the
Investor is an “accredited investor” as defined in Regulation D under the
Securities Act and the Investor is also knowledgeable, sophisticated and
experienced in making, and is qualified to make decisions with respect to 



 10
 






 



investments in
shares presenting an investment decision like that involved in the purchase of
the Securities, including investments in securities issued by the Company and
investments in comparable companies, and has requested, received, reviewed and
considered all information it deemed relevant in making an informed decision to
purchase the Securities; (ii) the Investor is acquiring the number of
Securities set forth in Section 3 of the Securities Purchase Agreement in the
ordinary course of its business and for its own account for investment only and
with no present intention of distributing any of such Securities or any
arrangement or understanding with any other persons regarding the distribution of
such Securities; (iii) the Investor will not, directly or indirectly, offer,
sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of) any of the Securities except
in compliance with the Securities Act, applicable state securities laws and the
respective rules and regulations promulgated thereunder; (iv) the Investor has
answered all questions on the Investor Questionnaire for use in preparation of
the Registration Statement and the answers thereto are true, correct and
complete as of the date hereof and will be true, correct and complete as of the
Closing Date; (v) the Investor will notify the Company immediately of any
change in any of such information until such time as the Investor has sold all
of its Securities or until the Company is no longer required to keep the
Registration Statement effective; and (vi) the Investor has, in connection with
its decision to purchase the number of Securities set forth in Section 3 of the
Securities Purchase Agreement, relied only upon the SEC Documents and the
representations and warranties of the Company contained herein. The Investor
understands that its acquisition of the Securities has not been registered
under the Securities Act or registered or qualified under any state securities
law in reliance on specific exemptions therefrom, which exemptions may depend
upon, among other things, the bona fide nature of the Investor’s investment
intent as expressed herein. The Investor has completed or caused to be
completed and delivered to the Company the Investor Questionnaire, which
questionnaire is true, correct and complete in all material respects.


5.2             The Investor
acknowledges that there may occasionally be times when the Company determines
that it must suspend the use of the Prospectus forming a part of the
Registration Statement, as set forth in Section 7.2 of this Agreement. The Investor
is aware that, in such event, the Securities will not be subject to ready
liquidation, and that any Securities purchased by the Investor would have to be
held during such suspension. The overall commitment of the undersigned to
investments which are not readily marketable is not excessive in view of the Investor’s
net worth and financial circumstances, and any purchase of the Securities will
not cause such commitment to become excessive. The undersigned is able to bear
the economic risk of an investment in the Securities.


5.3             The Investor has
carefully considered the potential risks relating to the Company and a purchase
of the Securities, and fully understands that the Securities are speculative
investments which involve a high degree of risk of loss of the undersigned’s
entire investment. Among others, the undersigned has carefully considered each
of the risks identified in the SEC Documents.


5.4             The Investor
recognizes that an investment in the Company involves certain risks and it has
taken full cognizance of and understands all of the risk factors relating to
the purchase of Securities. The Investor has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of an investment in the Company and making an informed investment
decision with respect thereto. The Investor is able to bear the substantial
economic risks related to an investment in the Company for an indefinite period
of time, has no need for liquidity in such investment, and, at the present
time, can afford a complete loss of such investment.


5.5             The Investor is not
subscribing for Securities as a result of or subsequent to any advertisement,
article, notice or other communication published in any newspaper, magazine, or
similar media or broadcast over television or radio, or presented at any
investment seminar or meeting open to the public.


5.6             If the Investor is a
partnership, corporation, limited liability company or trust, such partnership,
corporation, limited liability company or trust has not been formed for the
specific purpose of acquiring such Securities, unless each beneficial owner of
such entity is qualified as an accredited investor within the meaning of Rule
501(a) of Regulation D and has submitted information substantiating such
individual qualification.


5.7             The Investor
acknowledges, represents and agrees that no action has been or will be taken in
any jurisdiction outside the United States by the Company that would permit an
offering of the Securities, or possession or distribution of offering materials
in connection with the issue of the Securities, in any jurisdiction 



 11
 






 



outside the United
States where legal action by the Company for that purpose is required. Each
Investor outside the United States will comply with all applicable laws and
regulations in each foreign jurisdiction in which it purchases, offers, sells
or delivers Securities or has in its possession or distributes any offering
material, in all cases at its own expense.


5.8             The Investor further
represents and warrants to, and covenants with, the Company that (i) the
Investor has full right, power, authority and capacity to enter into this
Agreement and to consummate the transactions contemplated hereby and has taken
all necessary action to authorize the execution, delivery and performance of
this Agreement, and (ii) this Agreement constitutes a valid and binding
obligation of the Investor enforceable against the Investor in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors’ and
contracting parties’ rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and except as
the indemnification agreements of the Investors herein may be legally
unenforceable.


5.9             The Investor
understands that nothing in the SEC Documents, this Agreement or any other
materials presented to the Investor in connection with the purchase and sale of
the Securities constitutes legal, tax or investment advice. The Investor has
consulted such legal, tax and investment advisors as it, in its sole
discretion, has deemed necessary or appropriate in connection with its purchase
of Securities.


5.10           The Investor represents
and warrants that Investor (either alone or as part of a “group” within the
meaning of the Securities Act) shall not acquire or shall not have the right to
acquire Securities as a result of the Agreements such that, on a pro forma
basis for the purchase of Securities and Warrant Shares under this Agreement,
the Investor or group would beneficially own 20% or more of the voting power or
total shares outstanding of the Company.


5.11           The Investor
understands that the Securities and Warrant Shares have not been registered
under the Securities Act, that that the certificates evidencing the Securities
and Warrant Shares will be imprinted with a legend that prohibits their
transfer except in accordance therewith and will not sell, offer to sell,
assign, pledge, hypothecate or otherwise transfer any of the Securities or
Warrant Shares unless (i) pursuant to an effective registration statement under
the Securities Act, (ii) the Investor provides the Company with an opinion of
counsel, in a generally acceptable form, to the effect that a sale, assignment
or transfer of the Securities or Warrant Shares may be made without
registration under the Securities Act and the transferee agrees to be bound by
the terms and conditions of this Agreement, (iii) the Investor provides the
Company with reasonable assurances (in the form of seller and broker
representation letters) that the Issued Shares, Warrants or the Warrant Shares,
as the case may be, can be sold pursuant to Rule 144 promulgated under the
Securities Act (“Rule 144”) or (iv) pursuant to Rule 144(k) promulgated under
the Securities Act following the applicable holding period.


6.             Survival of
Representations, Warranties and Agreements. 
Notwithstanding any investigation made by any party to this Agreement,
all covenants, agreements, representations and warranties made by the Company
and the Investor herein shall survive the execution of this Agreement, the
delivery to the Investor of the Securities being purchased and the payment
therefor.


7.             Registration of
the Securities; Compliance with the Securities Act.


7.1             Registration
Procedures and Other Matters.


The Company shall:


(a)         prepare and file with the
SEC, within 60 calendar days after the Closing Date (the “Registration
Statement Filing Date”), a registration statement on Form S-3, or other
appropriate form if the Company is not then eligible to use Form S-3, (the “Registration
Statement”), to enable the resale of the Registrable Securities by the
Investors through the automated quotation system of the Nasdaq Capital Market
(or any other securities exchange, interdealer quotation system or other market
on which the Common Stock is traded) or in privately-negotiated transactions
pursuant to Rule 415 of the Securities Act;



 12
 






 



(b)         use its commercially
reasonable efforts to cause the Registration Statement to become effective within
60 days after the Registration Statement Filing Date (unless the Registration
Statement is reviewed by the SEC, then within 90 days) (such 60 or 90 day
period, as applicable, the “Registration Statement Effectiveness Date”), such
efforts to include, without limiting the generality of the foregoing, preparing
and filing with the SEC prior to the Registration Statement Effectiveness Date,
any financial statements that are required to be filed prior to the
effectiveness of such Registration Statement;


(c)         use its commercially
reasonable efforts to prepare and file with the SEC such amendments and
supplements to the Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep the Registration Statement current,
continuously effective and free from any material misstatement or omission to
state a material fact for a period (the “Effectiveness Period”) not exceeding,
with respect to each Investor’s Registrable Securities, the earlier of (i) the
second anniversary of the Closing Date, (ii) the date on which the Investor may
sell all Registrable Securities then held by the Investor without restriction
by the volume limitations of Rule 144(e) of the Securities Act, or (iii) such
time as all Registrable Securities held by such Investor have been sold
pursuant to a registration statement;


(d)         if at any time during the
Effectiveness Period, less than 95% of the then outstanding Registrable
Securities are then registered pursuant to a Registration Statement filed
pursuant to clause (a) above, then (x) the Company shall file as soon as
reasonably practicable, but in any case within 30 days following the event
resulting in less than 95% of the then outstanding Registrable Securities being
so registered (the “Additional Registration Statement Filing Date”), an
additional Registration Statement conforming with the requirements of this
Section 7.1 covering the resale by the Holders of not less than 100% of the
number of then Registrable Securities, (y) use its best efforts to cause such
additional Registration Statement to become effective within 60 days after the
Additional Registration Statement Filing Date (unless such additional
Registration Statement is reviewed by the SEC, then within 90 days) (such 60 or
90 day period, as applicable, the “Additional Registration Statement
Effectiveness Date”), such efforts to include, without limiting the generality
of the foregoing, preparing and filing with the SEC prior to the Additional
Registration Statement Effectiveness Date, any financial statements that are
required to be filed prior to the effectiveness of such additional Registration
Statement, and (z) use its best efforts to cause such additional Registration
Statement to remain current, continuously effective and free from any material misstatement
or omission to state a material fact during the entire Effectiveness Period;


(e)         furnish to the Investor
with respect to the Registrable Securities registered under the Registration
Statement such number of copies of the Registration Statement, Prospectuses and
Preliminary Prospectuses in conformity with the requirements of the Securities
Act and such other documents as the Investor may reasonably request, in order
to facilitate the public sale or other disposition of all or any of the Registrable
Securities by the Investor; provided, however, that the obligation of the
Company to deliver copies of Prospectuses or Preliminary Prospectuses to the
Investor shall be subject to the receipt by the Company of reasonable
assurances from the Investor that the Investor will comply with the applicable
provisions of the Securities Act and of such other securities or blue sky laws
as may be applicable in connection with any use of such Prospectuses or
Preliminary Prospectuses;


(f)          file documents required
of the Company for normal blue sky clearance in states specified in writing by
the Investor and use its best efforts to maintain such blue sky qualifications
during the period the Company is required to maintain the effectiveness of the
Registration Statement pursuant to Section 7.1(c); provided, however, that the
Company shall not be required to qualify to do business or consent to service
of process in any jurisdiction in which it is not now so qualified or has not
so consented;


(g)         use its commercially reasonable
efforts to comply in all material respects with the provisions of the
Securities Act and the Exchange Act, together with the rules and regulations
promulgated thereunder, with respect to the Registration Statement and the
disposition of all Registrable Securities covered thereby;


(h)         use its commercially
reasonable efforts to avoid the issuance of, or, if issued, obtain the
withdrawal of (i) any stop order or other order suspending the effectiveness of
a Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment;



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(i)          provide a transfer agent
and registrar for all Registrable Securities subject to a Registration
Statement.


(j)          if requested by the
Investors, cooperate with the Investors to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be
delivered to a transferee pursuant to the Registration Statements, which
certificates shall be free of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such names
as any such Investors may request.


(k)         provide a copy of any
Registration Statement and any amendments or supplements thereto and the
Company shall notify the Holders’ Counsel and each seller of Registrable
Securities of any stop order issued or threatened by the SEC;


(l)          obtain one or more
comfort letters, dated the effective date of such Registration Statement (and,
if such registration includes an underwritten offereing, dated the closing date
of the closing under the underwriting agreement), signed by the Company’s
independent public accountants in customary form and covering such matters of
the type customarily covered by comfort letters as the holders of a majority of
the Registrable Securities being sold reasonably request;


(m)        provide a legal opinion of
the Company’s outside counsel, dated the effective date of such Registration
Statement (and, if such registration includes an underwritten offering, dated
the date of the closing under the underwriting agreement), with respect to the
Registration Statement, each amendment and supplement thereto, the prospectus
included therein (including the preliminary prospectus) and such other
documents relating thereto in customary form and covering such matters of the
type customarily covered by legal opinions of such nature;


(n)         bear all expenses in
connection with the procedures in paragraph (a) through (m) of this Section 7.1
and the registration of the Securities pursuant to the Registration Statement;
and


(o)         in the event that (i) the
Company fails to file the Registration Statement pursuant to clause (a) above
on or before the Registration Statement Filing Date, (ii) the Company fails to
file any additional Registration Statement required to be filed pursuant to
clause (d) above on or before its applicable Additional Registration Statement
Filing Date, (iii) the Registration Statement required to be filed pursuant to
clause (a) above is not declared effective on or before the Registration
Statement Effectiveness Date, (iv) any additional Registration Statement
required to be filed pursuant to clause (d) above is not declared effective on
or before the applicable Additional Registration Statement Effectiveness Date,
(v) the Company fails to file with the SEC a request for acceleration within
five business days of the date that the Company is notified by the SEC that any
Registration Statement will not be “reviewed,” or is not subject to further
review, or (vi) after a Registration Statement has been declared effective,
either (x) such Registration Statement ceases to be effective or available for
any reason or (y) the occurrence of any Suspension, other than, in the case of
clause (x) or (y) a suspension by the Company of the use of the Prospectus
forming a part of Registration Statement for not more than 30 days in any
period of 365 consecutive days solely to the extent it is suspended in reliance
on an ability to do so due to the existence of a development that, in the good
faith discretion of the Company’s Board of Directors, makes it appropriate to
so suspend or which renders the Company unable to comply with SEC requirements
(any such failure or event described in the foregoing clauses (i) through (vi),
an “Event”, and the date on which such Event occurs being referred to as an “Event
Date”) then, in addition to any other rights available to the Investors under
this Agreement or applicable law, on each monthly anniversary of each such
Event Date and until such time as all then continuing Events shall have been
cured, the Company shall pay to each Investor in cash in immediately available
funds, as partial liquidated damages and not as a penalty, an amount equal to
1% of the aggregate purchase price of the Registrable Securities purchased by
the Investors pursuant to this Agreement (not to exceed 15% total) (the “Registration
Penalty”) for each month, or pro rata from any portion thereof, following such
Event Date. The Registration Penalty shall accrue on a daily basis and shall be
payable in arrears by the Company within 10 days of the end of each monthly
anniversary of the Event Date until such time as all then continuing Events
shall have been cured. Any Registration Penalty payable under this Section
7.1(o) shall be in addition to any remedies available to the Investors at law
or in equity by reason of any breach of this Agreement by the Company.



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7.2             Transfer of
Securities After Registration; Suspension.


(a)         The Investor agrees that
it will not effect any disposition of the Registrable Securities or its right
to purchase the Issued Shares or Warrants that would constitute a sale within
the meaning of the Securities Act except as contemplated in a Registration Statement
referred to in Section 7.1 and as described below or as otherwise permitted by
law, and that it will promptly notify the Company of any changes in the
information set forth in the Registration Statement regarding the Investor or
its plan of distribution.


(b)         Except in the event that
paragraph (c) or (d) below applies, the Company shall (i) if deemed necessary
by the Company, prepare and file from time to time with the SEC a
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or a supplement or amendment to any document incorporated
therein by reference or file any other required document so that such
Registration Statement will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and so that, as thereafter
delivered to purchasers of the Registrable Securities being sold thereunder,
such Prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; (ii) provide the Investor copies of any documents filed pursuant
to Section 7.2(b)(i); and (iii) inform each Investor that the Company has
complied with its obligations in Section 7.2(b)(i) (or that, if the Company has
filed a post-effective amendment to a Registration Statement which has not yet
been declared effective, the Company will notify the Investor to that effect,
will use its best efforts to secure the effectiveness of such post-effective
amendment as promptly as possible and will promptly notify the Investor
pursuant to Section 7.2(b)(i) hereof when the amendment has become effective).


(c)         In addition to any
suspension rights under paragraph (d) below, upon the happening of any pending
corporate development, public filing with the SEC or similar event, that, in
the judgment of the Board, renders it advisable to suspend use of the
Prospectus or upon the request by an underwriter in connection with an
underwritten public offering of the Company’s securities, the Company may
suspend use of the Prospectus, on written notice to each Purchaser (which
notice will not disclose the content of any material non-public information and
will indicate the date of the beginning and end of the intended period of
suspension, if known), in which case the Investor shall discontinue disposition
of Registrable Shares covered by the Registration Statement or Prospectus until
copies of a supplemented or amended Prospectus are distributed to the Investor
or until the Investor is advised in writing by the Company that sales of
Registrable Securities under the applicable Prospectus may be resumed and have
received copies of any additional or supplemental filings that are incorporated
or deemed incorporated by reference in any such Prospectus. Notwithstanding the
foregoing, in no event shall such suspension be for a period of more than
ninety (90) consecutive days in any twelve month period from the giving of the
suspension notice. The suspension and notice thereof described in this Section
7.2(c) shall be held in strictest confidence and shall not be disclosed by the
Investor.


(d)         Subject to paragraph (e)
below, in the event (i) of any request by the SEC or any other federal or state
governmental authority during the period of effectiveness of the Registration
Statement for amendments or supplements to a Registration Statement or related
Prospectus or for additional information; (ii) of the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending
the effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose; (iii) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; or (iv) of any
event or circumstance which, upon the advice of its counsel, necessitates the
making of any changes in a Registration Statement or Prospectus, or any
document incorporated or deemed to be incorporated therein by reference, so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or any omission to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and that in the case of the Prospectus, it will not contain any
untrue statement of a material fact or any omission to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; then
the Company shall deliver, via Federal Express or other overnight delivery
service, a certificate in writing to the Investor (the “Suspension Notice”) to
the effect of the foregoing and, upon receipt of such Suspension Notice, the Investor
will refrain from selling any Registrable Securities pursuant to the
Registration Statement (a “Suspension”) until the Investor’s receipt of copies 



 15
 






 



of a supplemented
or amended Prospectus prepared and filed by the Company, or until it is advised
in writing by the Company that the current Prospectus may be used, and has
received copies of any additional or supplemental filings that are incorporated
or deemed incorporated by reference in any such Prospectus. In the event of any
Suspension, the Company will use its best efforts to cause the use of the
Prospectus so suspended to be resumed as soon as reasonably practicable within
30 days after the delivery of a Suspension Notice to the Investor. In addition
to and without limiting any other remedies (including, without limitation, at
law or at equity) available to the Investor, the Investor shall be entitled to
specific performance in the event that the Company fails to comply with the
provisions of this Section 7.2(c).


(e)           Notwithstanding the
foregoing Section 7.2(d), the Investor shall not be prohibited from selling
Securities under the Registration Statement as a result of Suspensions for more
than 30 days in any twelve month period (the “Restricted Period”); provided
that the Company may extend such Restricted Period for more than 30 days (but
in no event for more than 60 days) if, in the good faith judgment of the
Company’s Board of Directors, upon the written opinion of counsel, the sale of
Registrable Securities under the Registration Statement in reliance on this
paragraph 7.2(d) would be reasonably likely to cause a violation of the
Securities Act or the Exchange Act and result in liability to the Company, in
which case, the Company shall pay the Investor in cash the Registration Penalty
as set forth in Section 7.1(s). The Investor hereby covenants not to sell any
of the Registrable Securities during any Restricted Period in accordance with
this Section.


(f)          Provided that a
Suspension is not then in effect, the Investor may sell Registrable Securities
under the Registration Statement or in any other manner permitted by law. Upon
receipt of a request therefor, the Company has agreed to provide an adequate
number of current Prospectuses to the Investor and to supply copies to any
other parties requiring such Prospectuses.


7.3             Indemnification.  For the purpose of this Section 7.3:


(i)              the term “Registration
Statement” shall include (a) any Registration Statement referred to in Section
7.1, (b) the Prospectus in the form first filed with the SEC pursuant to Rule
424(b) of the Securities Act or filed as part of a Registration Statement at
the time of effectiveness if no Rule 424(b) filing is required, and (c) any
exhibit, supplement or amendment included in or relating to a Registration
Statement referred to in Section 7.1; and


(ii)             the term “untrue
statement” shall include any untrue statement or alleged untrue statement, or
any omission or alleged omission to state in a Registration Statement a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.


(a)         The Company agrees to
indemnify and hold harmless each Investor, the officers, directors, investment
advisors, partners, members, attorneys, and employees of each of the Investor,
each person or entity who controls any such Investor (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, investment advisors, partners, members, attorneys, and
employees of each such controlling person or entity (collectively, the “Investor
Indemnitees”) from and against any losses, claims, damages or liabilities to
which such Investor Indemnitee may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of, or are based upon (i) any
breach of the representations or warranties of the Company contained herein or
failure to comply with the covenants and agreements of the Company contained
herein, (ii) any untrue statement of a material fact contained in the
Registration Statement as amended at the time of effectiveness or any omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (iii) any failure by the Company to
fulfill any undertaking included in the Registration Statement as amended at
the time of effectiveness, and the Company will reimburse such Investor
Indemnitee for any reasonable legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim, or preparing to defend any such action, proceeding or claim, provided,
however, that the Company shall not be liable in any such case to the
extent that such loss, claim, damage or liability arises out of, or is based
upon, an untrue statement made in such Registration Statement or any omission
of a material fact required to be stated therein or necessary to make the statements
therein not misleading in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the applicable Investor
specifically for use in preparation of the 



 16
 






 



Registration
Statement or the failure of the applicable Investor to comply with its
covenants and agreements contained in Section 7.2 hereof respecting sale of the
Registrable Securities or any statement or omission in any Prospectus that is
corrected in any subsequent Prospectus that was delivered to the Investor at a
reasonable time prior to the pertinent sale or sales by the Investor. The
Company shall reimburse each Investor Indemnitee for the amounts provided for
herein on demand as such expenses are incurred.


(b)         The Investor agrees to
indemnify and hold harmless the Company (and each person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act, each
officer of the Company who signs the Registration Statement and each director
of the Company) from and against any losses, claims, damages or liabilities to
which the Company (or any such officer, director or controlling person) may
become subject (under the Securities Act or otherwise), insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of, or are based upon, (i) any failure by such Investor to comply
with the covenants and agreements contained in Section 7.2 hereof respecting
sale of the Registrable Securities, or (ii) any untrue statement of a material
fact contained in the Registration Statement or any omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading if such untrue statement or omission was made in reliance upon and
in conformity with written information furnished by or on behalf of the
Investor specifically for use in preparation of the Registration Statement, and
the Investor will reimburse the Company (or such officer, director or
controlling person, as the case may be) for any legal or other expenses
reasonably incurred in investigating, defending or preparing to defend any such
action, proceeding or claim; provided that
the Investor’s obligation to indemnify the Company shall be limited to the net
proceeds received by the Investor from the sale of Registrable Securities
giving rise to such liability.


(c)         Promptly after receipt by
any indemnified person of a notice of a claim or the beginning of any action in
respect of which indemnity is to be sought against an indemnifying person
pursuant to this Section 7.3, such indemnified person shall notify the
indemnifying person in writing of such claim or of the commencement of such
action, but the omission to so notify the indemnifying person will not relieve
it from any liability which it may have to any indemnified person under this
Section 7.3 (except to the extent that such omission materially and adversely
affects the indemnifying person’s ability to defend such action) or from any
liability otherwise than under this Section 7.3. Subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person, the indemnifying person shall be entitled to participate
therein, and, to the extent that it shall elect by written notice delivered to
the indemnified person promptly after receiving the aforesaid notice from such
indemnified person, shall be entitled to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified person. After notice from
the indemnifying person to such indemnified person of its election to assume
the defense thereof, such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof, provided, however,
that (x) if there exists or shall exist a conflict of interest that would make
it inappropriate, in the opinion of counsel to the indemnified person, for the
same counsel to represent both the indemnified person and such indemnifying
person or any affiliate or associate thereof or (y) the indemnifying party
shall have failed promptly to assume the defense of such action or to employ
counsel reasonably satisfactory to such indemnified party in any such action,
then, in the case of either clause (x) or (y), the indemnified person shall be
entitled to retain its own counsel at the expense of such indemnifying person;
provided, however, that no indemnifying person shall be responsible for the
fees and expenses of more than one separate counsel (together with appropriate
local counsel) for all indemnified parties. In no event shall any indemnifying
person be liable in respect of any amounts paid in settlement of any action
unless the indemnifying person shall have approved the terms of such
settlement; provided that such consent shall not be unreasonably
withheld. No indemnifying person shall, without the prior written consent of
the indemnified person, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified person is or could have been a
party and indemnification could have been sought hereunder by such indemnified
person, unless such settlement includes an unconditional release of such
indemnified person from all liability on claims that are the subject matter of
such proceeding.


(d)         If the indemnification
provided for in this Section 7.3 is unavailable to or insufficient to hold
harmless an indemnified person under subsection (a) or (b) above in respect of
any losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) referred to therein, then each indemnifying person shall
contribute to the amount paid or payable by such indemnified person as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative fault of the
Company on the one hand and the Investor on the other in connection with the
statements or 



 17
 






 



omissions or other
matters which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, in the case of an untrue statement, whether the untrue statement
relates to information supplied by the Company on the one hand or the Investor
on the other and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement. The Company and
the Investor agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Investor and other selling shareholders were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified person as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to
above in this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified person in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), the Investor shall not be required to
contribute any amount in excess of the amount by which the net proceeds
received by the Investor from the sale of Registrable Securities giving rise to
such liability exceeds the amount of any damages which such Investor has
otherwise been required to pay by reason of such untrue statement. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Investor’s obligations in
this subsection to contribute shall be in proportion to its sale of Registrable
Securities to which such loss relates and shall not be joined with any other
selling shareholders.


(e)         The parties to this
Agreement hereby acknowledge that they are sophisticated business persons who
were represented by counsel during the negotiations regarding the provisions
hereof including, without limitation, the provisions of this Section 7.3, and
are fully informed regarding said provisions. They further acknowledge that the
provisions of this Section 7.3 fairly allocate the risks in light of the
ability of the parties to investigate the Company and its business in order to
assure that adequate disclosure is made in the Registration Statement as
required by the Act and the Exchange Act. The parties are advised that federal
or state public policy as interpreted by the courts in certain jurisdictions
may be contrary to certain of the provisions of this Section 7.3, and the
parties hereto hereby expressly waive and relinquish any right or ability to
assert such public policy as a defense to a claim under this Section 7.3 and
further agree not to attempt to assert any such defense.


7.4             Termination of
Conditions and Obligations.  The
conditions precedent imposed by Section 5 or this Section 7 upon the
transferability of the Securities shall cease and terminate as to any
particular number of the Securities when such Securities shall have been
effectively registered under the Securities Act and sold or otherwise disposed
of in accordance with the intended method of disposition set forth in the
Registration Statement covering such Securities or at such time as an opinion
of counsel reasonably satisfactory to the Company shall have been rendered to
the effect that such conditions are not necessary in order to comply with the
Securities Act.


7.5             Information
Available.  So long as the
Registration Statement is effective covering the resale of Securities owned by
the Investor, the Company will furnish to the Investor upon the reasonable
request of the Investor, an adequate number of copies of the Prospectuses to
supply to any other party requiring such Prospectuses; and upon the reasonable
request of the Investor, the Chief Executive Officer or the Chief Financial
Officer of the Company (or an appropriate designee thereof) will meet with the
Investor or a representative thereof during normal business hours at the
Company’s headquarters to discuss all information relevant for disclosure in
the Registration Statement covering the Securities and will otherwise use its
commercially reasonable best efforts to cooperate with any Investor conducting
an investigation for the purpose of reducing or eliminating such Investor’s
exposure to liability under the Securities Act, including the reasonable
production of information at the Company’s headquarters; provided, that the
Company shall not be required to disclose any confidential information to or
meet at its headquarters with any Investor until and unless the Investor shall
have entered into a confidentiality agreement in form and substance reasonably
satisfactory to the Company with the Company with respect thereto and,
provided, further, that such investigation shall not interfere with the normal
business operations of the Company.


7.6             Registrable
Securities.  As used herein, the term
“Registrable Securities” shall mean (i) the Issued Shares, (ii) the Warrant
Shares, and (iii) any shares of Common Stock issued or issuable directly or
indirectly with respect to the securities referred to in clauses (i) and (ii)
by way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization.



 18
 






 



8.             Notices.  All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed (A) if within the
United States by first-class registered or certified airmail, or nationally
recognized overnight express courier, postage prepaid, or by facsimile, or (B)
if delivered from outside the United States, by International Federal Express
or facsimile, and shall be deemed given (i) if delivered by first-class
registered or certified mail, three business days after so mailed, (ii) if
delivered by nationally recognized overnight carrier, one business day after so
mailed, (iii) if delivered by International Federal Express, two business days
after so mailed, (iv) if delivered by facsimile, upon electronic confirmation
of receipt and shall be delivered as addressed as follows:


(a)             if to the Company,
to:


Innovo Group Inc.

5901 South Eastern Avenue

Commerce, CA 90040

Attn:  Marc. B. Crossman


(b)                                 if
to the Investor, at its address on the signature page hereto, or at such other
address or addresses as may have been furnished to the Company in writing.


9.             Changes.  This Agreement may not be modified or amended
except pursuant to an instrument in writing signed by the Company and the
Investor.


10.           Headings.  The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.


11.           Severability.  In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.


12.           Governing Law.  This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware.


13.           Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties.


14.           Rule 144.  The Company covenants that it will timely
file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder (or,
if the Company is not required to file such reports, it will, upon the request
of any Investor holding Registrable Securities, make publicly available such
information as necessary to permit sales pursuant to Rule 144 under the
Securities Act), and it will take such further action as any such Investor may
reasonably request, all to the extent required from time to time to enable such
Investor to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule 144
under the Securities Act, as such Rule may be amended from time to time, or (b)
any similar rule or regulation hereafter adopted by the SEC. Upon the request
of the Investor, the Company will deliver to such holder a written statement as
to whether it has complied with such information and requirements.


15.           Non-Public
Information.


15.1         The
Investor represents to the Company that, at all times during the Company’s
offering of the Securities, the Investor has maintained in confidence all
non-public information regarding the Company received by the Investor from the
Company or its agents, and covenants that it will continue to maintain in
confidence such information until such information (a) becomes generally
publicly available other than through a violation of this provision by the
Investor or its agents or (b) is required to be disclosed in legal
proceedings (such as by deposition, interrogatory, request for documents,
subpoena, civil investigation demand, filing with any governmental authority or
similar process), provided, however, that before making any use or disclosure
in reliance on this subparagraph (b) the Investor shall give the Company at
least fifteen (15) days prior written notice (or such 



 19
 






 



shorter period as required by law) specifying the
circumstances giving rise thereto and will furnish only that portion of the
non-public information which is legally required and will exercise its best
efforts at the sole expense of the Company to obtain reliable assurance that
confidential treatment will be accorded any non-public information so
furnished.


15.2           The Company shall on
the Closing Date issue a press release (the “Closing Date Press Release”)
disclosing the material terms of the transactions contemplated hereby
(including at least the number of Securities sold and proceeds therefrom). The
Company will use its commercially reasonable efforts to disclose on or before the
Registration Statement Effectiveness Date, any other material, non-public
information disclosed to the Investor pursuant to Section 15.1 above, if
applicable.


16.           Right to Participate
in Future Offerings.


16.1           For a period of
eighteen months after the Closing Date, the Investor shall have the right, but
not the obligation, to purchase a pro rata portion of any future sales of Common
Stock or securities convertible into Common Stock, except for Certain Permitted
Issuances (as defined below) (each, a “Subsequent Financing”), on the same
terms and conditions that are offered to the investor participating in such
Subsequent Financing.  The Investor shall
have the right to purchase up to the number of shares of Common Stock or
securities convertible into Common Stock such that the Investor acquires the
number of shares equivalent to maintain the same percentage ownership in the
Company, excluding Certain Permitted Issuances. 
Notwithstanding the foregoing, the Company shall not be required to
increase the amount of shares of Common Stock or securities convertible into
Common Stock offered in the Subsequent Financing to ensure that the Investor
maintains his percentage ownership.  The
amount of shares of Common Stock or securities convertible into Common Stock to
be sold in such Subsequent Financing shall be reduced by the amount of shares
being purchased by the Investor and any other Investor pursuant to the rights
granted under the Agreements.


16.2           In the event of a
Subsequent Financing, the Company shall promptly inform the Investor in writing
of the terms and conditions of the Subsequent Financing, state the nature of
the rights granted thereunder and directions for exercise (the “Notice”).  The Investor may exercise all or part of such
right and must respond within the time frames set forth in the Notice (which
time frame shall not be less than 14 calendar days) , the failure to respond
shall be deemed to mean the Investor declines his rights hereunder.  Should the Investor decline for any reason or
fail to respond to the Notice, then Company shall have the right to proceed
with the Subsequent Financing with no further obligation to the Investor,
except as provided in Section 17 hereunder.


16.3           For purposes of the
Agreements, the term “Certain Permitted Issuances” shall mean any shares of
Common Stock or securities convertible into Common Stock issued pursuant to (i)
consideration for any acquisition or merger with another company, (ii)
consideration for the purchase of all or substantially all of a company’s
assets, (iii) any employee benefit plans disclosed in the SEC Documents, or
(iv) any outstanding warrants, options or other securities disclosed in the SEC
Documents.


17.           Future Offering
Payment.  In the event that the
Company issues any shares of Common Stock, securities convertible into Common
Stock, options or warrants to other investors in another private placement
offering for a period of eighteen (18) months after the Closing Date where the
exercise price of the securities convertible into Common Stock, options or
warrants or purchase price of the Common Stock is at a price less than the
exercise price of the Warrants, then the Company shall pay to the Investors an
amount equal to the product of the difference between the exercise price of the
Warrants and the exercise price of the securities convertible into Common
Stock, options or warrants or the issue price of the equity, as applicable,
times the maximum number of Warrants issued herein (“Future Offering Payment”).
The Future Offering Payment shall be paid in cash within 10 days of the closing
of the future offering. The Investor shall not be entitled to a Future Offering
Payment in the event of a Certain Permitted Issuance.


18.           Expenses.  The Company shall reimburse the Investors for
up to $30,000 of the Investors’ costs and expenses related to preparation and
execution of the Agreements, including, but not limited to, due diligence
expenses, accounting expenses, other incidental costs and expenses and
reasonable attorney’s fees for one outside counsel selected by the Investors in
their sole discretion.



 20
 






 



INNOVO
GROUP INC


INVESTOR QUESTIONNAIRE


(ALL INFORMATION WILL BE TREATED CONFIDENTIALLY)


To:                              Innovo
Group Inc.

5901 South Eastern Avenue

Commerce, CA 90040


This Investor Questionnaire (“Questionnaire”) must be completed by each
potential investor in connection with the offer and sale of the shares of the
common stock, par value $0.10 per share, of Innovo Group Inc. (the “Common
Stock”) and warrants to purchase shares of Common Stock (the “Warrants” and
together with the Common Stock, the “Securities”). The Securities are being
offered and sold by Innovo Group Inc. (the “Company”) without registration
under the Securities Act of 1933, as amended (the “Act”), and the securities
laws of certain states, in reliance on the exemptions contained in Section 4(2)
of the Act and on Regulation D promulgated thereunder and in reliance on similar
exemptions under applicable state laws. The Company must determine that a
potential investor meets certain suitability requirements before offering or
selling Securities to such investor. The purpose of this Questionnaire is to
assure the Company that each investor will meet the applicable suitability
requirements. The information supplied by you will be used in determining
whether you meet such criteria, and reliance upon the private offering
exemption from registration is based in part on the information herein
supplied.


This Questionnaire does
not constitute an offer to sell or a solicitation of an offer to buy any
security. Your answers will be kept strictly confidential. However, by signing
this Questionnaire you will be authorizing the Company to provide a completed
copy of this Questionnaire to such parties as the Company deems appropriate in
order to ensure that the offer and sale of the Securities will not result in a
violation of the Act or the securities laws of any state and that you otherwise
satisfy the suitability standards applicable to purchasers of the Securities.
All potential investors must answer all applicable questions and complete, date
and sign this Questionnaire. Please print or type your responses and attach
additional sheets of paper if necessary to complete your answers to any item.


A.            BACKGROUND
INFORMATION


	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Business Address:

  	
   

  	
   

  
	
   

  	
  (Number and Street)

  	
   

  
	
   

  	
   

  	
   

  
	
  (City)

  	
  (State)

  	
  (Zip Code)

  
	
   

  	
   

  	
   

  
	
  Telephone Number: (   )

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Residence Address (for individuals):

  	
   

  	
   

  
	
   

  	
  (Number and Street)

  	
   

  
	
   

  	
   

  	
   

  
	
  (City)

  	
  (State)

  	
  (Zip Code)

  
	
   

  	
   

  	
   

  
	
  Telephone Number: (    )

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  If an individual:

  	
   

  	
   

  
	
  Age:

  	
  Citizenship:

  	
  Where registered to
  vote:

  
	
   

  	
   

  	
   

  
	
  If a corporation,
  partnership, limited liability company, trust or other entity:

  
	
   

  
	
  Type of entity:

  	
   

  	
   

  
	
  State of formation:

  	
  Date of formation:

  	
   

  




 21
 






 



Social Security or
Taxpayer Identification No.


Send all
correspondence to (check one):         
Residence Address                    
Business Address


Current ownership
of securities of the Company:          (1)
                  
shares of common stock, par value $0.10 per share; (2) options and/or warrants
to purchase                     
shares of Common Stock


B.            STATUS AS
ACCREDITED INVESTOR


The undersigned is an “accredited
investor” as such term is defined in Regulation D under the Act, as at the time
of the sale of the Securities the undersigned falls within one or more of the
following categories (Please initial one or more, as applicable):(1)


o  (1)     a bank as defined in Section 3(a)(2) of the Act,
or a savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; a
broker or dealer registered pursuant to Section 15 of the Securities Exchange
Act of 1934; an insurance company as defined in Section 2(13) of the Act; an
investment company registered under the Investment Corporation Act of 1940 or a
business development company as defined in Section 2(a)(48) of that Act; a
Small Business Investment Corporation licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act
of 1958; a plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions for the benefit of its employees, if such plan has total assets in
excess of $5,000,000; an employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974 if the investment decision is
made by a plan fiduciary, as defined in Section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000 or, if a self-directed plan, with the investment decisions made
solely by persons that are accredited investors;


o  (2)     a private business
development company as defined in Section 202(a)(22) of the Investment Adviser
Act of 1940;


o  (3)     an organization described in
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended,
corporation, Massachusetts or similar business trust, or partnership, not
formed for the specific purpose of acquiring the Securities offered, with total
assets in excess of $5,000,000;


o  (4)     a natural person whose individual
net worth, or joint net worth with that person’s spouse, at the time of such
person’s purchase of the Securities exceeds $1,000,000;


o  (5)     a natural person who had an
individual income in excess of $200,000 in each of the two most recent years or
joint income with that person’s spouse in excess of $300,000 in each of those
years and has a reasonable expectation of reaching the same income level in the
current year;


o  (6)     a trust, with total assets in
excess of $5,000,000, not formed for the specific purpose of acquiring the
Securities offered, whose purchase is directed by a sophisticated person as
described in Rule 506(b)(2)(ii) of Regulation D; and






(1)           As
used in this Questionnaire, the term “net worth” means the excess of total
assets over total liabilities.  In
computing net worth for the purpose of subsection (4), the principal residence
of the investor must be valued at cost, including cost of improvements, or at
recently appraised value by an institutional lender making a secured loan, net
of encumbrances.  In determining income,
the investor should add to the investor’s adjusted gross income any amounts
attributable to tax exempt income received, losses claimed as a limited partner
in any limited partnership, deductions claimed for depiction, contributions to
an IRA or KEOGH retirement plan, alimony payments, and any amount by which
income from long-term capital gains has been reduced in arriving at adjusted
gross income.



 22
 






 



o  (7)     an entity in which all of the
equity owners are accredited investors (as defined above).  (Note: 
If this item is selected, each equity owner must submit an individual
investor questionnaire.)


IN WITNESS WHEREOF, the
undersigned has executed this Questionnaire this           
day of December 2006, and declares under oath that it is truthful and correct.


	
   

  	
   

  
	
   

  	
  Print Name

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  (required for
  any purchaser that is a

  corporation, partnership, trust or other

  entity)

  
				



 



 23
 






 



[Company
Letterhead]


                   ,
2006


Re:          Innovo Group Inc.;
Registration Statement on Form S-3


Dear Selling
Shareholder:


Enclosed please find five
(5) copies of a prospectus dated                             ,
         (the “Prospectus”) for
your use in reselling your shares of common stock, $0.10 par value (the “Securities”),
of Innovo Group Inc. (the “Company”), under the Company’s Registration
Statement on Form S-3 (or other acceptable Form) (Registration No. 333-XXXXX)
(the “Registration Statement”), which has been declared effective by the
Securities and Exchange Commission.  As a selling shareholder under the Registration Statement, you have an
obligation to deliver a copy of the Prospectus to each purchaser of your
Securities, either directly or through the broker-dealer who executes the sale
of your Securities.


The Company is obligated
to notify you in the event that it suspends trading under the Registration
Statement in accordance with the terms of the Securities Purchase Agreement
between the Company and you.  During the
period that the Registration Statement remains effective and trading thereunder
has not been suspended, you will be permitted to sell you  Securities which are included in the
Prospectus under the Registration Statement. 
Upon a sale of any Securities under the Registration Statement, you or
your broker will be required to deliver to the Transfer Agent, Continental
Stock Transfer and Trust Company (1) your restricted stock certificate(s)
representing the Securities, (2) instructions for transfer of the Securities
sold, and (3) a representation letter from your broker, or from you if you are
selling in a privately negotiated transaction, or from such other appropriate
party, in the form of Exhibit A attached hereto (the “Representation
Letter”).  The Representation Letter confirms
that the Securities have been sold pursuant to the Registration Statement and
in a manner described under the caption “Plan of Distribution” in the
Prospectus and that such sale was made in accordance with all applicable
securities laws, including the prospectus delivery requirements.


Please note that you are
under no obligation to sell your Securities during the registration
period.  However, if you do decide to
sell, you must comply with the requirements described in this letter or
otherwise applicable to such sale.  Your
failure to do so may result in liability under the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended.  Please remember that all sales of your
Securities must be carried out in the manner set forth under the caption “Plan
of Distribution” in the Prospectus if you sell under the Registration
Statement.  The Company may require an
opinion of counsel reasonably satisfactory to the Company if you choose another
method of sale.  You should
consult with your own legal advisor(s) on an ongoing basis to ensure your
compliance with the relevant securities laws and regulations.


In order
to maintain the accuracy of the Prospectus, you must notify the undersigned
upon the sale, gift, or other transfer of any Securities by you, including the
number of Securities being transferred, and in the event of any other change in
the information regarding you which is contained in the Prospectus.  For example, you must notify the undersigned
if you enter into any arrangement with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker-dealer. 
Depending on the circumstances, such transactions may require the filing
of a supplement to the prospectus in order to update the information set forth
under the caption “Plan of Distribution” in the Prospectus.


Should you need any
additional copies of the Prospectus, or if you have any questions concerning
the foregoing, please write to me at Innovo Group Inc., 5901 South Eastern
Avenue, Commerce, CA 90040.  Thank you.


	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  Marc B.
  Crossman,

  
	
   

  	
  CEO, President
  and CFO

  
	
   

  	
  Innovo Group,
  Inc.

  



 



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