Document:

SCHEDULE 6.2(c)

EMPLOYMENT
AGREEMENT

THIS EMPLOYMENT AGREEMENT
(this “Agreement”) is entered into as of the 6th day
of February, 2007, by and among Joseph M.
Dahan (“Employee”) and Innovo
Group Inc., a Delaware corporation (the “Company”).

W I T N E S S E T H:

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

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

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

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

I.                   EMPLOYMENT.

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

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

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

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

II.              POSITION, DUTIES AND RESPONSIBILITIES.

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

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

C.              Employee
recognizes the duties and responsibilities set forth hereinabove are essential
and material services being provided to the Company, and as a result thereof
Employee shall devote 

 1
 

substantially all of his
business time, attention and efforts in the faithful performance of his duties
hereunder in a manner that shall faithfully and diligently further the business
and interests of the Company. Notwithstanding the foregoing, Employee shall be
entitled to spend certain business time and attention on charitable or personal
causes, provided that such time and attention does not materially interfere
with his duties and responsibilities under this Agreement.

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

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

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

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

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

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

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

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

v)                For
the purposes of this Section II.G., “material” shall mean an amount,
action, inaction, item of significance or importance which if spent, obligated,
performed or not performed or altered may result in an adverse effect upon the
condition (financial or 

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otherwise), earnings,
business or business prospects, properties or operations of the Company and its
subsidiaries, considered as one enterprise.

III.         COMPENSATION AND BENEFITS.

A.             So
long as this Agreement is in full force and effect and except as otherwise set
forth herein, the Company shall pay Employee an annual base salary in
accordance with the following Gross Profit (defined hereinbelow) calculations
(the “Salary”); provided, however, in no event shall Employee’s Salary be less
than Nine Hundred Fifty Thousand ($950,000) Dollars (“Minimum Salary Amount”)
which shall be creditable on an annual basis against the following Salary
calculation amounts:

i)                  7%
of Gross Profit up to $22,500,000; plus

ii)              an
additional 3% of Gross Profit of any dollar amount within the next $9,000,000
of Gross Profit above $22,500,000 in Gross Profit; plus

iii)          an
additional 2% of Gross Profit of any dollar amount within the next $9,000,000
of Gross Profit above $31,500,000 in Gross Profit; plus

iv)            an
additional 1% of Gross Profit of any dollar amount of Gross Profit above
$40,500,000 of Gross Profit.

If 7% of Gross Profit for any fiscal year is less than
the Minimum Salary for that fiscal year period, such shortfall shall not be
taken into account for the calculations under this Section III.A for any
subsequent fiscal year.

By way of example, in the event the Company achieves
Gross Profit of Ten Million ($10,000,000) Dollars during its fiscal year, then
Employee shall be entitled to receive the Minimum Salary for that fiscal year
period, notwithstanding the fact that the formula calculated out as set forth
in Section III.A(i) above would only equal $700,000.

Further by way of example, in the event the Company
achieves Gross Profit of Twenty-Five Million ($25,000,000) Dollars during its
fiscal year, then Employee shall be entitled to receive total cash compensation
of $1,650,000 for that fiscal year, calculated as follows:

	
  $22,500,000 x 7%
  =

  	
   

  	
  $1,575,000 (includes Minimum Salary)

  
	
  [$25,000,000 -
  $22,500,000] x 3% =

  	
   

  	
  $75,000

  	
   

  
	
  Total Compensation:

  	
   

  	
  $1,650,000

  	
   

  
						

 

Finally by way of example, in the event the Company
achieves Gross Profit of Forty-Five Million ($45,000,000) Dollars during its
fiscal year, then Employee shall be entitled to receive total cash compensation
of $2,070,000 for that fiscal year, calculated as follows:

	
  $22,500,000 x 7%
  =

  	
   

  	
  $1,575,000 (includes Minimum Salary)

  
	
  [$31,500,000 -
  $22,500,000] x 3% =

  	
   

  	
  $270,000

  
	
  [$40,500,000 -
  $31,500,000] x 2% =

  	
   

  	
  $180,000

  
	
  [$45,000,000 -
  $40,500,000] x 1% =

  	
   

  	
  $45,000

  	
   

  
	
  Total Compensation:

  	
   

  	
  $2,070,000

  	
   

  

 

For purposes of this Agreement, the phrase “Gross
Profit” shall be defined as Net Sales of the Brand less Cost of Goods Sold for
the Brand as such is reported in the Company’s periodic filings with the
Securities and Exchange Commission (“SEC”) and fiscal year shall mean the
fiscal year as reported therein.

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The Minimum Salary Amount shall be made to Employee
pursuant to this Section III.A shall be made in accordance with the
Company’s regular payroll policy and subject to withholding for taxes as
required by law. Any additional Salary amounts shall be paid in advance on a
monthly basis within ten (10) business days after the end of the preceding
month. On a quarterly and annual basis, after the Company reports its Gross
Profit in its SEC filings, the Company and Employee shall reconcile the
additional Salary payments made in advance to the Employee pursuant to this
Agreement. To the extent the advance additional Salary payments made to the
Employee do not equal the amount of additional Salary actually earned by
Employee for any quarter or fiscal year, as determined on the basis of the
Company’s SEC filings for such fiscal period, (i) the Company shall
recover any overpayment from Employee as an offset against future payments of
additional Salary; and (ii) the Company shall promptly pay any
underpayment to Employee. In the event that this Agreement is terminated
pursuant to Section V.F., then Employee shall receive his pro rata Minimum
Salary Amount and additional Salary otherwise due as of the date of termination.
Additional Salary amounts shall be calculated as soon as practicable after the
date of termination.

B.              Employee
shall also be entitled to receive those benefits outlined in the Company’s
Employee Handbook in effect during the Term of this Agreement and any
additional benefits received by other named executive officers of Company, if
any.

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

IV.           TERM. Employee’s employment shall
commence on the Effective Date, and shall terminate ten years from the
Effective Date, unless terminated sooner as provided in this Agreement (the “Term”).

V.                TERMINATION.

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

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

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advice
or other evidence is required to enable such determination, Employee shall
submit to such examination by such medical doctor and shall consent to the
transfer and disclosure to the Company of such information. If Employee
withdraws or refuses to provide such consent, then solely for the purposes of
this Agreement, there shall be a presumption upon which the Company may rely
that Employee is Disabled.

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

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

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

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

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

 5

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

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

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

E.              If
a Change in Control (as hereinafter defined) occurs during the Term of this
Agreement and at any time within 18 months following such Change in Control
either the Company terminates the Employee’s employment without Cause, or the
Employee terminates employment with the Company for Good Reason, then the
Employee shall be entitled to an amount equal to the Termination Severance, as
defined in Section V.C hereinabove. The Company shall pay Employee the
Termination Severance within 60 days of the date of termination; provided, 

 6
 

however, that to the
extent required to avoid taxation under Section 409A(a) of the Code,
the Company shall pay the Termination Severance on the date that is six months
plus one day after the date of termination. Any such payments made pursuant to
this Section V.E will be subject to all standard and regular withholdings.
For purposes of this Agreement, “Change in Control” shall be deemed to have
occurred upon the closing of a transaction which: (i) the Company sells or
otherwise disposes of all or substantially all of its assets; (ii) there
is a merger or consolidation of Company with any other corporation or
corporations, provided that the shareholders of Company, as a group, do not
hold, immediately after such event, at least fifty percent (50%) of the voting
power of the surviving or successor corporation; (iii) any person or
entity, including any “person” as such term is used in Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), becomes the “beneficial owner” (as defined in Rule 13(d-3)
under the Exchange Act) of Common Stock of Company representing fifty percent
(50%) or more of the combined voting power of the voting securities of Company
(exclusive of persons who are now officers or directors of Company); or (iv) the
approval by the shareholders of a liquidation or dissolution of the Company.

F.               Employee
may terminate this Agreement at any time for any reason upon ten business days’
notice. In the event of termination under this Section V.F., then Employee
shall receive his pro rata Minimum Salary Amount and additional Salary
otherwise due as of the date of termination. Any additional Salary amounts
shall be calculated as soon as practicable after the date of termination.

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

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

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

 7
 

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

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

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

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

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

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

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

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

 8
 

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

	
  If to Employee:

  	
  Joseph
  M. Dahan

  
	
   

  	
  1810
  Rising Glen Road

  
	
   

  	
  Los Angeles, CA 
  90069

  
	
  With a copy to:

  	
  David P. Markman

  
	
   

  	
  Greenberg Traurig

  
	
   

  	
  2450 Colorado Avenue

  
	
   

  	
  Suite 400E

  
	
   

  	
  Santa Monica, CA 
  90404

  
	
  If to the Company:

  	
  Marc Crossman or Chief Executive Officer

  
	
   

  	
  Innovo Group Inc.

  
	
   

  	
  5901 S. Eastern Avenue

  
	
   

  	
  Commerce, CA 
  90040

  
	
  With a copy to:

  	
  Dustin Huffine or General Counsel

  
	
   

  	
  Innovo Group Inc.

  
	
   

  	
  5901 S. Eastern Avenue

  
	
   

  	
  Commerce, CA 
  90040

  

 

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

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

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

XVII.               SURVIVAL.  The
provisions of Sections VI through XVII shall survive the termination of the
employment period or termination of this Agreement.

XVIII.               DISPUTE RESOLUTION PROCEDURES.

A.              Arbitration.

i)                  Agreement to Arbitrate Disputes.  The Company and Employee hereby agree that any dispute with
any party (including the Company’s affiliates, successors, predecessors,
contractors, employees and agents) that may arise from Employee’s employment
with the Company or the termination of Employee’s employment with the Company
and that cannot be resolved after negotiation and mediation, if applicable,
must be submitted for resolution by mandatory, binding arbitration. The
arbitration requirement applies to all 

 9
 

statutory, contractual
and/or common law claims arising from employment with the Company including but
not limited to claims arising under Title VII of the Civil Rights Act of 1964,
the Age Discrimination in Employment Act, the Equal Pay Act of 1963, the
California Fair Employment and Housing Act, the California Labor Code Sections
200, et seq., 970 and 1050 et seq., the Fair Labor Standards Act and claims of
defamation under California Civil Code Section 44, et seq.
or common law. Both the Company and the Employee shall be precluded from
bringing or raising in court or another forum any dispute that was or could
have been submitted to binding arbitration. This arbitration requirement does not apply to claims for workers’
compensation benefits, claims arising under ERISA (29 U.S.C. § 1001 et seq.) or provisional remedies under California Code of
Civil Procedure Section 1281.8.

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

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

XIX.                    DIRECTOR AND OFFICER INSURANCE. Company
shall maintain during the Term of this Agreement and for no less than 6 years
thereafter, adequate director and officer insurance to 

 10
 

cover any real or
threatened claims, proceedings or lawsuits arising out of or related to Employee’s
employment by Company and performance of his duties and responsibilities under
this Agreement.

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

[Signature Page to
Follow]

 11
 

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

	
  

  	
  EMPLOYEE

  
	
   

  	
  /s/ JOSEPH M. DAHAN

  	
   

  
	
   

  	
  Joseph M. Dahan

  
	
   

  	
  INNOVO GROUP INC.

  
	
   

  	
  By:

  	
  /s/ MARC CROSSMAN

  	
   

  
	
   

  	
  Name:

  	
  Marc Crossman

  
	
   

  	
  Title:

  	
  President and CEO

  
						

 

 12SCHEDULE 6.3(c)

INVESTOR RIGHTS
AGREEMENT

This Investor Rights Agreement dated as of              ,
2007 (this “Agreement”) is entered into by and among
Innovo Group Inc., a Delaware corporation (the “Company”),
and Joseph M. Dahan, a California resident (the “Investor”).

WHEREAS, the Company and the Investor have entered
into an Agreement and Plan of Merger dated as of February 6, 2007 (the “Merger Agreement”) pursuant to which the Investor shall
receive a number of shares of the common stock, par value $0.10 per share, of
the Company (the “Common Stock”), as set forth
therein;

WHEREAS, in order to induce the Investor to enter into
the Merger Agreement, the Company has agreed to grant certain registration
rights to the Investor with respect to such shares and certain Board
designation rights, in each case, subject to the terms and conditions set forth
herein;

NOW, THEREFORE, in consideration of the foregoing and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

Section 1.   Definitions.   As used
herein, the following terms have the indicated meanings, unless the context
otherwise requires:

“Agreement”
has the meaning given to such term in the preamble hereto.

“Beneficially Own,”
“Beneficially Owned,” “Beneficial Ownership” and “Beneficial Owner” with respect to any
securities means the Investor having such ownership, control or power to direct
the voting with respect to, or which otherwise enables the Investor to legally
act with respect to, such securities as contemplated hereby, including without
limitation pursuant to any agreement, arrangement or understanding, regardless
of whether in writing. Securities “Beneficially
Owned” shall include securities Beneficially Owned by all other
persons with whom the Investor would constitute a “group” as within the meaning
of Section 13(d) of the Exchange Act.

“Blackout Period”
means, with respect to a Registration Statement, a period in each case
commencing on the day immediately after the Company notifies the Investor that
he is required, pursuant to Section 3(c)(vi), to suspend offers and sales
of Registrable Securities during which the Company, in the good faith judgment
of the Board, determines (because of the existence of, or in anticipation of,
any acquisition, financing activity, or other transaction involving the
Company, or the unavailability for reasons beyond the Company’s control of any
required financial statements, disclosure of information which is in its best
interest not to publicly disclose, or any other event or condition of similar
significance to the Company) that the registration and distribution of (and/or
the registration of the offer and sale of) the Registrable Securities covered
or to be covered by such Registration Statement would be seriously detrimental
to the Company and its stockholders and ending on the earlier of (a) the
date upon which the material non-public information commencing the Blackout
Period is disclosed to the public or ceases to be material and (b) such
time as the Company notifies the Investor that the Company will no longer delay
such filing of such Registration Statement, recommence taking steps to make
such Registration Statement effective, or allow sales pursuant to such
Registration Statement to resume; provided that
no Blackout Period may last for more than 60 consecutive days; provided, further, that during any period of 365 consecutive
days, Blackout Periods may not, in the aggregate, last for more than the
greater of (a) zero days and (b) the result of 90 days minus the number of days that the Investor is required
pursuant to Section 3(d) to discontinue and suspend disposition of
Registrable Securities because of the happening of any event described in Section 3(c)(vi).

“Board”
means the board of directors of the Company.

 1
 

“Business Day”
means any day of the year, other than a Saturday, Sunday, or other day on which
the SEC is required or authorized to close.

“Closing Date”
has the meaning given to such term in the Merger Agreement.

“Common Stock”
has the meaning given to such term in the recitals hereto.

“Company”
has the meaning given to such term in the preamble hereto.

“Effectiveness
Period” has the meaning given to such term in Section 3(c)(i).

“Equity Securities Offering”
means any underwritten registered offering of Relevant Securities, and any
offering or placement of any Relevant Securities pursuant to Rule 144A
under the Securities Act.

“Exchange Act”
means the Securities Exchange Act of 1934, as amended, and the rules and regulations
of the SEC promulgated thereunder.

“Family Member” means (a) with
respect to any individual, such individual’s spouse, any descendants (whether
natural or adopted), any trust all of the beneficial interests of which are
owned by any of such individuals or by any of such individuals together with
any organization described in Section 501(c)(3) of the Internal Revenue
Code of 1986, as amended, the estate of any such individual, and any
corporation, association, partnership, limited liability company or other
entity all of the equity interests of which are owned by those above described
individuals, trusts or organizations and (b) with respect to any trust,
the owners of the beneficial interests of such trust.

“Form S-1”
means such form under the Securities Act as in effect on the date of this
Agreement or any successor registration form thereto under the Securities Act
subsequently adopted by the SEC.

“Form S-3”
means such form under the Securities Act as in effect on the date of this
Agreement or any successor registration form thereto under the Securities Act
subsequently adopted by the SEC.

“Form S-4”
means such form under the Securities Act as in effect on the date of this
Agreement or any successor registration form thereto under the Securities Act
subsequently adopted by the SEC.

“Form S-8”
means such form under the Securities Act as in effect on the date of this
Agreement or any successor registration form thereto under the Securities Act
subsequently adopted by the SEC.

“Inspector”
means any attorney, accountant or other agent retained by the Investor for the
purposes provided in Section 3(c)(ix).

“Investor”
has the meaning given to such term in the preamble hereto.

“Investor Director”
means any member of the Board that was nominated for election to the Board by
the Investor pursuant to and in accordance with Section 2(a).

“Merger Agreement”
has the meaning given to such term in the recitals hereto.

“NASD”
means the National Association of Securities Dealers.

“Piggyback Registration”
has the meaning given to such term in Section 3(b)(i).

“Piggyback Registration
Statement” has the meaning given to such term in Section 3(b)(i).

“register,”
“registered,” and “registration” refer to a registration
effected by preparing and filing a registration statement in compliance with
the Securities Act, and the declaration or ordering of the effectiveness of
such registration statement.

“Registrable
Securities” means the Unlocked Shares, excluding any such Unlocked
Shares (a) that have been publicly sold or may be sold immediately without
registration or the requirement to make filings with the SEC under the
Securities Act either pursuant to Rule 144 of the Securities Act or
otherwise, (b) sold 

 2
 

by a person in a
transaction pursuant to a registration statement filed under the Securities Act
or (c) that are at the time subject to an effective registration statement
under the Securities Act (other than the Registration Statements contemplated
hereby).

“Registration
Expenses” has the meaning given to such term in Section 3(e).

“Registration Statement”
means either any of the Piggyback Registration Statements or the Shelf
Registration Statement; and “Registration Statements”
means, collectively, the Piggyback Registration Statements and the Shelf
Registration Statement.

“Relevant Security”
means the Shares, any other equity security of the Company or any of its
subsidiaries and any security convertible into, or exercisable or exchangeable
for, any Shares or other such equity security.

“SEC”
means the Securities and Exchange Commission or any other federal agency at the
time administering the Securities Act.

“SEC Effective Date”
means, with respect to a Registration Statement, the date as of which such
Registration Statement is originally declared effective by the SEC.

“Securities Act”
means the Securities Act of 1933, as amended, or any similar federal statute
promulgated in replacement thereof, and the rules and regulations of the
SEC thereunder, all as the same shall be in effect from time to time.

“Selling Expenses”
has the meaning given to such term in Section 3(e).

“Shares”
means the shares of Common Stock issued to the Investor pursuant to the Merger
Agreement and (a) any and all shares of capital stock or other equity
securities of the Company which are added to or exchanged or substituted for
such shares of Common Stock by reason of the declaration of any stock dividend
or stock split, the issuance of any distribution or the reclassification,
readjustment, recapitalization or other such modification of the capital structure
of the Company; and (b) any and all shares of capital stock or other
equity securities of any other corporation (now or hereafter organized under
the laws of any state or other governmental authority) with which the Company
is merged, which results from any consolidation or reorganization to which the
Company is a party, or to which is sold all or substantially all of the shares
or assets of the Company, for which such shares of Common Stock are exchanged
or substituted in connection with such merger, consolidation, reorganization or
sale, if immediately after such merger, consolidation, reorganization or sale,
the Company or the stockholders of the Company own equity securities having in
the aggregate more than 50% of the total voting power of such other
corporation.

“Shelf Registration Statement” has the
meaning given to such term in Section 3(a).

“Transfer” has
the meaning given to such term in Section 3(a).

“Unlocked Shares” means on the
six month anniversary of the Closing Date 1/6 of the Shares and thereafter at
the end of every additional six month period, an additional 1/6 of the Shares
until the Shares are released in full on the third year anniversary of the
Closing Date.

Section 2.   Board Designation Rights.

(a)   Designation.   Upon
execution of this Agreement, the Investor shall have the right to designate
himself for election to the Board.

(b)   Company Support.   The
Company shall support the nomination of the Investor pursuant to Section 2(a),
and the Company shall use its best efforts to cause the Board (and the Company’s
nominating committee, if any) to recommend the inclusion of such person in the
slate of nominees recommended to stockholders for election as directors at the
next annual meeting of stockholders of the Company.

 3
 

Section 3.   Registration Rights.

(a)   Shelf Registration Statement.   On
the written request of the Investor beginning on or after six months from the
Closing Date of the Shares , the Company shall (i) file with the SEC a
shelf registration statement on Form S-1 (or, if the Company is
eligible to use such form, Form S-3) relating to the registration of
the offer and resale by the Investor of the number of Registrable Securities
specified in such written request (the “Shelf Registration Statement”) and (ii) use
its commercially reasonable efforts to cause the Shelf Registration Statement
to be declared effective by the SEC no later than 60 days after the filing of
the Shelf Registration Statement in response to such written request; provided, however,
that the Company shall not be obligated to effect any such registration
pursuant to this Section 3(a), or keep such registration or the Shelf
Registration Statement effective pursuant to Section 3(c)(i), during any
Blackout Period and provided further that the Company shall not be obligated to
file any such registration statement pursuant to this Section 3(a) within
90 days after the date of the filing of the most recent registration statement
pursuant to this Section 3(a).

(b)   Piggyback Registration Rights.

(i)   Piggyback Registration.   If
after the date that is six (6) months after the Closing Date, the Company
shall determine to register the offer and sale for cash of any of its Common
Stock for its own account, other than (i) a registration relating solely
to employee benefit plans or securities issued or issuable to employees,
consultants (to the extent the securities owned or to be owned by such
consultants could be registered on Form S-8) or any of their Family
Members (including a registration on Form S-8), (ii) a
registration on Form S-4 in connection with a merger, acquisition,
divestiture, reorganization, exchange offer or similar event, or (iii) a
registration in which the only Common Stock being registered is Common Stock
issuable upon conversion of debt securities that are also being registered,
then (subject to Section 3(b)(ii)) the Company shall promptly give to the
Investor written notice thereof, and in no event shall such notice be given
less than 20 calendar days prior to the filing of the registration statement (a
“Piggyback Registration Statement”) with
respect to such registration (a “Piggyback Registration”),
and shall, subject to Section 3(b)(ii), include in the Piggyback
Registration, all of the Registrable Securities specified in a written request,
made within 10 calendar days after receipt of such written notice from the
Company, by the Investor. However, the Company may, without the consent of the
Investor, withdraw the Piggyback Registration Statement prior to its becoming
effective if the Company has elected to abandon the proposal to register the
securities proposed to be registered thereby.

(ii)   Underwriting.   If
a Piggyback Registration is for a registered public offering involving an
underwriting, the Company shall so advise the Investor in writing or as a part
of the written notice given pursuant to Section 3(b)(i). In such event the
right of the Investor to registration pursuant to Section 3(b)(i) shall
be conditioned upon the Investor’s participation in such underwriting and the
inclusion of the Investor’s Registrable Securities in the underwriting to the
extent provided herein. The Investor proposing to distribute his securities
through such underwriting shall (together with the Company) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of this Section 3(b)(ii), if the underwriter or the Company
determines that marketing factors require a limitation of the number of shares
to be underwritten, the underwriter may exclude some or all Registrable
Securities from such registration and underwriting. The Company shall so advise
the Investor and the number of shares that may be included in the registration
and underwriting shall be allocated:

(A)  first to the
Company; and

 4
 

(B)   then,
subject to written obligations and commitments existing as of the date hereof,
to all selling stockholders, including the Investor, who have requested to sell
in the registration on a pro rata basis according to the number of shares
requested to be included.

No Registrable Securities excluded from the underwriting
by reason of the underwriter’s marketing limitation shall be included in such
registration. If the Investor disapproves of the terms of any such
underwriting, the Investor may elect to withdraw therefrom by written notice to
the Company and the underwriter. The Registrable Securities and/or other
securities so withdrawn from such underwriting shall also be withdrawn from
such registration.

(c)   Registration
Procedures.   In the case of each registration, qualification,
or compliance effected by the Company pursuant to Section 3(a) and Section 3(b),
the Company will keep the Investor reasonably advised in writing (which may
include e-mail) as to the initiation of each registration, qualification, and
compliance and as to the completion thereof. In addition, the Company hereby
agrees as follows with respect to each Registration Statement:

(i)    The
Company will use its commercially reasonable efforts to cause such Registration
Statement to become and remain effective at least for a period ending with the
first to occur of (A) the sale by the Investor of all Registrable
Securities covered by such Registration Statement, (B) the availability
under Rule 144 for the Investor to immediately, freely resell without
restriction under United States federal securities laws all Registrable
Securities covered by such Registration Statement, or (C) the date that is
two years after the SEC Effective Date of such Registration Statement (provided, however,
that if the Company files a Registration Statement on Form S-1 and
subsequently becomes eligible to use Form S-3, it may file a
post-effective amendment to such Form S-1 on Form S-3
prior to the end of such period and use its commercially reasonable efforts to
cause such Registration Statement as amended to become effective until the end
of such period, and provided further, that if the Company has filed a
Registration Statement and thereafter receives another written request in
accordance with this Agreement to include additional Registrable Securities in
such Registration Statement, the Company may file a post-effective amendment to
such Registration Statement prior to the end of such period and use its
commercially reasonable efforts to cause such Registration Statement as amended
to become effective until the end of such period) (in any such case, the “Effectiveness Period”).

(ii)   If any
Registration Statement becomes subject to review by the SEC, the Company will
promptly respond to all comments and diligently pursue resolution of any
comments to the satisfaction of the SEC.

(iii)  The
Company will prepare and file with the SEC such amendments and supplements to
each Registration Statement and any prospectus used in connection therewith as
may be reasonably necessary to keep such Registration Statement effective
during the applicable Effectiveness Period, and will comply with the provisions
of the Securities Act with respect to the disposition of all securities covered
by such Registration Statement during such period in accordance with the
intended method(s) of disposition by the sellers thereof set forth in such
Registration Statement.

(iv)  The Company
will furnish, without charge, to the Investor (A) a reasonable number of
copies of each Registration Statement (including any exhibits thereto other
than exhibits incorporated by reference), each amendment and supplement thereto
as the Investor may request, (B) such number of copies of the prospectus
included in such Registration Statement (including each preliminary prospectus
and any other prospectus filed under Rule 424 under the Securities Act) as
the Investor may request, in conformity with the requirements of the Securities
Act, and (C) such other documents as the Investor may reasonably request
in order to facilitate the disposition of the Registrable Securities owned by
the Investor, but only during the applicable Effectiveness Period.

 5
 

(v)    The
Company will use its commercially reasonable efforts to register or qualify the
Registrable Securities under such other applicable securities or blue sky laws
of such jurisdictions as the Investor reasonably requests as may be necessary
for the marketability of the Registrable Securities (such request to be made by
the time the relevant Registration Statement is deemed effective by the SEC)
and do any and all other acts and things which may be reasonably necessary or
advisable to enable the Investor to consummate the disposition in such
jurisdictions of the Registrable Securities owned by the Investor; provided, however,
that the Company shall not be required to (A) qualify generally to do
business in any jurisdiction where it would not otherwise be required to
qualify but for this paragraph (v), (B) subject itself to taxation in any
such jurisdiction, or (C) consent to general service of process in any
such jurisdiction.

(vi)  As promptly
as practicable after becoming aware of such event, the Company will notify the
Investor of Registrable Securities being offered or sold pursuant to each
Registration Statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
which comes to the Company’s attention if as a result of such event the
prospectus included in such Registration Statement contains an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and the
Company shall promptly prepare and furnish to the Investor a supplement or
amendment to such prospectus (or prepare and file appropriate reports under the
Exchange Act) so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not contain an untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, unless
suspension of the use of such prospectus otherwise is authorized herein or in
the event of a Blackout Period, in which case no supplement or amendment need
be furnished (or Exchange Act filing made) until the termination of such
suspension or Blackout Period.

(vii) The Company
will comply, and continue to comply during the period that each Registration
Statement is effective under the Securities Act, in all material respects with
the Securities Act and the Exchange Act and with all applicable rules and
regulations of the SEC with respect to the disposition of all securities
covered by such Registration Statement.

(viii)     As
promptly as practicable after becoming aware of such event, the Company will
notify the Investor of the issuance by the SEC of any stop order or other
suspension of effectiveness of such Registration Statement.

(ix)  The Company
will make available for inspection by the Investor and any Inspector retained
by the Investor, at the Investor’s sole expense, all records as shall be
reasonably necessary to enable the Investor to exercise his due diligence
responsibility, and cause the Company’s officers, directors, and employees to
supply all information which the Investor or any Inspector may reasonably
request for purposes of such due diligence; provided,
however, that the Investor shall
hold in confidence and shall not make any disclosure of any record or other
information which the Company determines in good faith to be confidential, and
of which determination the Investor is so notified at the time the Investor
receives such information, unless (w) the Investor has, or obtained,
knowledge of such information without violation of or protection under any
agreements with the Company or, to his knowledge any third party, (x) the
disclosure of such record is reasonably necessary to avoid or correct a
misstatement or omission in each Registration Statement and a reasonable time
prior to such disclosure the Investor shall have informed the Company of the
need to so correct such misstatement or omission and the Company shall have
failed to correct such misstatement of omission, (y) the release of such
record is ordered pursuant to a subpoena or other order from a court or
governmental body of competent jurisdiction or (z) the information in such
record has been made generally available to the public other than by disclosure
in violation of this Agreement or any other agreement. The Company shall not be
required to disclose any confidential information in such records to any 

 6
 

Inspector until and unless
such Inspector shall have entered into a confidentiality agreement with the
Company with respect thereto, containing terms substantially similar to those
set forth in this Section 3(c)(ix), which agreement shall permit such
Inspector to disclose records to the Investor. The Investor agrees that he
shall, upon learning that disclosure of such records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at the Company’s expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the records deemed confidential. The Company shall hold
in confidence and shall not make any disclosure of information concerning the
Investor provided to the Company pursuant to this Agreement unless (A) disclosure
of such information is reasonably necessary to comply with federal or state
securities laws, (B) disclosure of such information to the SEC’s Staff of
the Division of Corporation Finance is reasonably necessary to respond to
comments raised by such staff in its review of such Registration Statement, (C) disclosure
of such information is reasonably necessary to avoid or correct a misstatement
or omission in such Registration Statement, (D) release of such
information is ordered pursuant to a subpoena or other order from a court or
governmental body of competent jurisdiction, or (E) such information has
been made generally available to the public other than by disclosure in
violation of this or any other agreement. The Company agrees that it shall,
upon learning that disclosure of such information concerning the Investor is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Investor and allow the Investor,
at the Investor’s expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.

(x)    The
Company will use its commercially reasonable efforts to cause all the
Registrable Securities covered by each Registration Statement to be listed or
quoted on a principal securities market.

(xi)  The Company
will provide a transfer agent and registrar, which may be a single entity, for
the Registrable Securities at all times.

(xii) The Company
will cooperate with the Investor to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends) representing
Registrable Securities to be offered pursuant to such Registration Statement
and enable such certificates to be in such denominations or amounts as the
Investor may reasonably request.

(xiii)     The
Company will take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor pursuant to each Registration Statement,
including without limitation making its chief executive officer, president,
chief financial officer and other appropriate officers and personnel available
to participate in marketing efforts with respect to any registered underwritten
public offering.

 7

(d)   Suspension of Offers and Sales.   The
Investor agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(c)(vi) or
of the commencement of a Blackout Period, the Investor shall discontinue and
suspend disposition of Registrable Securities pursuant to any Registration
Statement until the Investor’s receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(c)(vi) or notice of the
end of the Blackout Period, and, if so directed by the Company, the Investor
shall deliver to the Company (at the Company’s expense) all copies (including,
without limitation, any and all drafts), other than permanent file copies, then
in the Investor’s possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.

(e)   Registration Expenses.   All
expenses incident to the Company’s performance of or compliance with this
Agreement, including without limitation all registration and filing fees,
messenger and delivery expenses, printing expenses, internal expenses
(including without limitation all salaries and expenses of its officers and
employees performing legal or accounting duties), all fees and expenses
associated with filings required to be made with the NASD, as may be required
by the rules and regulations of the NASD, fees and expenses of compliance
with securities or blue sky laws (including reasonable fees and disbursements
of counsel in connection with blue sky qualifications of the Registrable
Securities), rating agency fees, the fees and expenses incurred in connection
with the listing of the securities to be registered on all securities exchanges
on which similar securities issued by the Company are then quoted or listed,
fees and disbursements of counsel for the Company and its independent certified
public accountants, and the fees and expenses of any other persons retained by
the Company, in connection with the registration hereunder (collectively, the “Registration Expenses”) will be borne by
the Company, but not including any roadshow expenses, fees and expenses of
counsel for the Investor and any underwriting, broker or dealer discounts or
commissions attributable to the sale of Registrable Securities (which are
hereinafter referred to as “Selling Expenses”).
All Selling Expenses shall be borne solely by the Investor.

(f)   Information by the Investor.   The
Investor shall furnish to the Company such information required under
Regulation S-K under the Securities Act regarding the Investor and the
distribution proposed by the Investor as the Company may request in writing. The
Investor will not be entitled to have such Registrable Securities included in a
Registration Statement if the Investor does not furnish such information
requested by the Company.

(g)   Indemnification.

(i)    In the
event of the offer and sale of Registrable Securities under the Securities Act,
the Company shall, and hereby does, indemnify and hold harmless, to the fullest
extent permitted by law, the Investor, each other person who participates as an
underwriter in the offering or sale of such securities, and each other person,
if any, who controls or is under common control with the Investor or any such
underwriter within the meaning of Section 15 of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, and
expenses to which the Investor or any underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in (A) any
Registration Statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or (B) in
any materials or information provided to investors by, or with the written
approval of, the Company in connection with the marketing of the offering of
the Shares (“Marketing Materials”), including
any road show or investor presentations made to investors by the Company
(whether in person or electronically), or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein in light of the circumstances in which they were
made not misleading, and the Company shall reimburse the Investor, and each
underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection 

 8
 

with investigating,
defending or settling any such loss, claim, damage, liability, action or
proceeding; provided that the foregoing shall not
apply, and the Company shall not be liable, in any such case (A) to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue statement
or alleged untrue statement in or omission or alleged omission from such
Registration Statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by or on behalf of the Investor specifically stating that it is for
use in the preparation thereof, or (B) to the extent that the Investor
failed to comply with the terms of the plan of distribution mechanics described
in the applicable prospectus. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Investor, or
any such underwriter or controlling person and shall survive the transfer of
such shares by the Investor.

(ii)   As a
condition to including any Registrable Securities to be offered by the Investor
in any Registration Statement, the Investor agrees to be bound by the terms of
this Section 3(g) and to indemnify and hold harmless, to the fullest
extent permitted by law, the Company, its directors and officers, and each
other person, if any, who controls the Company within the meaning of Section 15
of the Securities Act, legal counsel and accountants for the Company, any
underwriter and any controlling person within the meaning of the Securities Act
of any such underwriter, against any losses, claims, damages or liabilities,
joint or several, to which the Company or any such director or officer or
controlling person may become subject under the Securities Act or otherwise, (A) insofar
as such losses, claims, damages or liabilities (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon an untrue statement or omission from such Registration Statement, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company through an instrument duly executed by or on behalf of the
Investor specifically stating that it is for use in the preparation thereof, or
(B) to the extent that the Investor failed to comply with the terms of the
plan of distribution mechanics described in the applicable prospectus. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Company, or any such director, officer, partner,
underwriter or controlling person and shall survive the transfer of such shares
by the Investor, and the Investor shall reimburse the Company, and each such
director, officer, legal counsel and accountants, underwriter, other
stockholder, and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating, defending, or settling and
such loss, claim, damage, liability, action, or proceeding; provided, however,
that such indemnity agreement found in this Section 3(g)(ii) shall in no
event exceed the gross proceeds from the offering received by the Investor.

(iii)  Promptly
after receipt by an indemnified party of notice of the commencement of any
action or proceeding involving a claim referred to in Section 3(g)(i) or Section 3(g)(ii)
(including any governmental action), such indemnified party shall, if a claim
in respect thereof is to be made against an indemnifying party, give written
notice to the indemnifying party of the commencement of such action; provided, however,
that the failure of any indemnified party to give notice as provided herein
shall not relieve the indemnifying party of its obligations under Section 3(g)(i)
or Section 3(g)(ii), except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless in the reasonable judgment of
counsel to such indemnified party a conflict of interest between such
indemnified and indemnifying parties may exist or the indemnified party may
have defenses not available to the indemnifying party in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party
and, after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the 

 9
 

indemnifying party shall
not be liable to such indemnified party for any legal or other expenses
subsequently incurred by the latter in connection with the defense thereof,
unless in such indemnified party’s reasonable judgment a conflict of interest
between such indemnified and indemnifying parties arises in respect of such
claim after the assumption of the defenses thereof or the indemnifying party
fails to defend such claim in a diligent manner, other than reasonable costs of
investigation. Neither an indemnified nor an indemnifying party shall be liable
for any settlement of any action or proceeding effected without its consent. No
indemnifying party shall, without the consent of the indemnified party, consent
to entry of any judgment or enter into any settlement, which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to
such indemnified party of a release from all liability in respect of such claim
or litigation. Notwithstanding anything to the contrary set forth herein, and
without limiting any of the rights set forth above, in any event any party
shall have the right to retain, at its own expense, counsel with respect to the
defense of a claim.

(iv)  In the
event that an indemnifying party does or is not permitted to assume the defense
of an action pursuant to Section 3(g)(iii) or in the case of the expense
reimbursement obligation set forth in Section 3(g)(i) and Section 3(g)(ii),
the indemnification required by Section 3(g)(i) and Section 3(g)(ii) shall
be made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills received or expenses, losses,
damages, or liabilities are incurred.

(v)    If the
indemnification provided for in this Section 3(g) is held by a court
of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage or expense referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall (A) contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense
as is appropriate to reflect the proportionate relative fault of the
indemnifying party on the one hand and the indemnified party on the other
(determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission relates to information supplied
by the indemnifying party or the indemnified party and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission), or (B) if the allocation provided by
clause (A) above is not permitted by applicable law or provides a lesser
sum to the indemnified party than the amount hereinafter calculated, not only
the proportionate relative fault of the indemnifying party and the indemnified
party, but also the relative benefits received by the indemnifying party on the
one hand and the indemnified party on the other, as well as any other relevant
equitable considerations. No indemnified party guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any indemnifying party who was not
guilty of such fraudulent misrepresentation.

(vi)  Indemnification
similar to that specified in the preceding subsections of this Section 3(g)
(with appropriate modifications) shall be given by the Company and the Investor
with respect to any required registration or other qualification of securities
under any federal or state law or regulation or governmental authority other
than the Securities Act.

Section 4.   Miscellaneous.

(a)   Assignment of Rights; Successors and
Permitted Assignees.   The Investor may not assign his rights
under this Agreement to any party without the prior written consent of the
Company which shall not be unreasonably withheld. Except as otherwise provided
herein, the provisions of this Agreement shall inure to the benefit of, and be
binding upon, the successors, permitted assignees, heirs, legatees, executors
and administrators of the parties hereto.

(b)   Notices.   All notices
or other communications which are required or permitted under this Agreement
shall be in writing and sufficient if delivered by hand, by facsimile
transmission, by registered or 

 10
 

certified mail, postage
pre-paid, by electronic mail, or by courier or overnight carrier, to the
persons at the addresses set forth below (or at such other address as may be
provided hereunder), and shall be deemed to have been delivered as of the date
so delivered:

	
  If to the Company:

  	
   

  	
  Innovo Group Inc.

  Attn: Dustin A. Huffine

  5901 Eastern Avenue

  Commerce, CA 90040

  Facsimile: (323) 837-3791

  
	
  with a copy
  (which shall not constitute notice) to:

  	
   

  	
  

  Phelps Dunbar LLP

  Attn: Christopher R. Maddux

  111 East Capitol Street, Suite 600

  Jackson, MS 39201

  Facsimile: (601) 352-2300

  
	
  If to the
  Investor:

  	
   

  	
  Joseph M. Dahan

  1810 Rising Glen Road

  Los Angeles, CA 90069

  Facsimile: (   ) 

  
	
  with a copy
  (which shall not constitute notice) to:

  	
   

  	
  

  Greenberg Traurig, LLP

  Attn: David P. Markman

  2450 Colorado Avenue

  Suite 400E

  Santa Monica, CA 90404

  Facsimile: (310) 586-7800

  

 

or at such other address as any party shall have
furnished to the other party in writing.

(c)   Specific Performance.   Each
party to this Agreement agrees that any breach by it of any provision of this
Agreement would irreparably injure the other party and that money damages would
be an inadequate remedy therefor. Accordingly, each party agrees that the other
party shall be entitled to one or more injunctions enjoining any such breach
and requiring specific performance of this Agreement and consents to the entry
thereof, in addition to any other remedy to which such other party is entitled
at law or in equity.

(d)   Counterparts.   This
Agreement may be executed in any number of counterparts, each of which shall be
enforceable against the parties actually executing such counterparts, and all
of which together shall constitute one instrument.

(e)   Amendments.   The
provisions of this Agreement may be amended at any time and from time to time,
and particular provisions of this Agreement may be waived, with and only with
an agreement or consent in writing signed by the Company and by the Investor.

(f)   Headings and Cross References.   The
headings of the several sections and subsections of this Agreement are inserted
for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement. Unless the context requires
otherwise, all cross references in this Agreement refer to sections and
subsections of this Agreement.

 11
 

(g)   Severability.   In the
case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.

(h)   Entire Agreement.   This
Agreement constitutes the full and entire understanding and agreement between
the parties with regard to the subject matter of this Agreement.

(i)   Governing Law.   This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware.

IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed as of the date
first above written.

	
  

  	
   

  	
  THE COMPANY:

  
	
   

  	
   

  	
  INNOVO GROUP INC.

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
  INVESTOR:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Joseph M. Dahan

  

 

 12

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