EXHIBIT 10.2
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT (this "Distribution
Agreement") made as of this [11] day of August, 2000
("Effective Date"), by and between Inmvo Group, Inc., a
Delaware corporation with its principal executive offices at
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Commerce Investment Group, LLC, a limited
liability company having its principal executive offices at
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("Commerce") is being made concurrently with the SUPPLY
AGREEMENT ("Supply Agreement."), having the same effective
date, by and between Commerce and Innovo.
RECITALS:
A. Innovo is in the business of selling merchandise
including t-shirts, canvas and denim bags and
other related products.
B. Commerce and Innovo desire to enter into this
Distribution Agreement concurrently with the Supply
Agreement between Commerce and Innovo, whereby
Commerce will manufacture and supply products for
Innovo under the terms and conditions set forth in
the Supply Agreement and Commerce will distribute
Innovo's products as set forth herein, both
pursuant to an aggregate "Minimum Obligation"
(defined below).
C. Commerce shall be entitled to subcontract its
obligations hereunder to Apparel Distribution
Services, LLC, a California Limited Liability
Company ("ADS"). ADS is in the business of providing
specialized logistic services including warehousing,
forwarding, distribution and related services.
NOW THEREFORE, and in consideration of the mutual
promises, covenants, representations and good and
valuable consideration set forth herein, the adequacy of
which is hereby acknowledged, the parties hereto agree
as follows:
1. INNOVO'S MINIMUM OBLIGATION Innovo agrees to purchase
from Commerce within 90 calendar days of execution of this
Distribution Agreement such amount of "D & O Services"
(as defined below) so that an aggregate total of Three Million
Dollars (US $3,000,000) of goods and services is supplied
under both of the Supply Agreement and the Distribution
Agreement (the "Minimum Obligation").
2. COMMERCE'S OBLIGATIONS
2.1 Distribution Pursuant to the terms of this
Distribution Agreement, Commerce shall distribute the Innovo
products listed in Exhibit A, attached hereto ("Distributed
Products") to those third party businesses identified in
advance to Commerce by Innovo. Commerce will not be
responsible for locating buyers on behalf of Innovo for the
Distributed Products. Commerce will only be responsible for
wholesale distribution. From time to time, Exhibit A may be
revised upon the agreement of the parties.
2.2 Distributed Products not in Commerce's Possession To
the extent the Distributed Products include goods not already
being warehoused by Commerce, Innovo will be solely
responsible for making (and paying for) any and all
arrangements to deliver such goods to
Commerce's warehouse facility (identified below) within a
reasonable time frame for Commerce to distribute such goods.
2.3 Warehouse Facility The handling, storage and
fulfillment services for the Distributed Products will
be rendered by Comrnerce at the following facility
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2.4 Services and Performances In accordance with the
terms of this Distribution Agreement, Commerce will provide
the following services (collectively referred to as "D&O
Services"):
2.4.1 Distribution Services
(a) All warehousing functions
(b) receiving
(c) storage
(d) shipping, including shipping supplies
(e) order processing
(f) maintenance of perpetual inventory
(g) all direct labor and
management services
(h) space
(i) utilities
(j) maintenance and repair
(k) medical insurance
2.4.2 Operations Services
(a) Order Entry
(b) Customer Service
(c) MIS
(d) Order Allocation
(e) Billing
(f) Office Supplies
3. TERRITORY Subject to any legal or governmental
restrictions, including but not limited to customs and/or
embargo restrictions, Commerce shall distribute the Distributed
Products to any
third party throughout the world.
4. TERM AND TERMINATION
4.1 Term The term of this Distribution Agreement
shall continue from the Effective Date for a period of
two (2) years ("Term").
4.2 Termination This Agreement maybe immediately
terminated by either party upon (i) failure of the other party
to comply with laws and regulations which materially affect
such party's contracting rights or reputation and where such
failure is not cured within thirty (30) days of receipt of
written notice thereof; or (ii) any material breach of this
Distribution Agreement by the other party which is not
cured within thirty (30) days of receipt of written notice
thereof.
4.3 Renewal Term This Agreement will automatically
renew for consecutive two (2) year terms under the same terms
and conditions set forth herein ("Renewal Term") unless
terminated by either party upon delivering written notice to
the other party at least ninety (90) days prior to the end of
the then existing term. The Renewal Term shall not be subject
to Section 1 of this Distribution Agreement. The prices for
D&O Services shall be renegotiated in good faith by the
parties hereto, based on increases in labor and overhead
costs, as further defined in Section 5.4 below.
4.4 Duties Upon Expiration or Termination of this
Distribution Agreement To the extent that there are any
remaining Distributed Products being warehoused by Commerce
at the time of expiration or termination of this Distribution
Agreement, Innovo will make arrangements to retrieve such
Distributed Products. In the event Commerce transfers the
Distributed Products to Innovo or a third party identified by
Innovo, Commerce will be compensated for any and all costs
and the fair market value of their services in transferring
the Distributed Products. In the event there are any monies
owed by Innovo to Commerce at the time of such expiration or
termination of this Distribution Agreement, Commerce will
have the right to retain any remaining Distributed Products
until payment of such monies are made to Commerce or sell the
Distributed Products and distribute to Innovo any monies in
excess of the amount due Commerce (minus Commerce's costs and
expenses in selling the Distributed Products).
5. PRICING FOR COMMERCE'S SERVICES As consideration for the
Distribution Services, the Operations Services, and
reimbursement for the packaging and ticketing costs associated
with the Distribution and Operations Services contemplated
herein, Innovo will pay Commerce a fixed rate in accordance
with Exhibit A attached hereto (collectively the "Unit
Rate(s)").
5.1 On an annual basis, the Unit Rate(s) may be increased
based upon economic factors. Any requests for increases in the
Unit Rates that Commerce submits to Innovo shall be accompanied
by supporting documentation. In no event shall the Unit Rates be
increased more than the lesser of five percent (5%) per annum or
the annual increase in the Consumer Price Index (CPI) for the
corresponding year. In the event that the parties, after good
faith negotiation, are unable to agree upon the increase to the
Unit Rates, the matter shall be submitted to arbitration.
Pending the final decision of the arbitrator, this Distribution
Agreement shall stay in full force and effect.
6. FEES, EXPENSES AND PAYMENT CONDITIONS
6.1 Other Costs The costs for all other items associated
with the provision of the Services contemplated herein,
including, but not limited to freight, office supplies, and
postage, shall be invoiced to and paid by Innovo on a monthly
basis based on the actual cost of any such items
purchases for each given month.
6.2 Special Handling Fees Special activities such as
quality control, annual inventory, customized repairs,
customized finishing, labeling, tagging or packaging, and
specialized administrative and management projects shall be
performed by Commerce only after receipt of a written
authorization from Innovo containing mutually agreed upon fixed
hourly rates for such special activities. These activities will
be invoiced to Innovo on a monthly basis, based on the actual
number of hours worked.
6.3 Taxes, Customs and Duties Innovo will be
responsible for paying any and all taxes, customs and duties
and other related charges levied by any jurisdiction
pertaining to importation or exportation of the Distributed
Products.
7. COMPENSATION TO COMMERCE FOR ITS SERVICES
7.1 Invoices
7.1.1 Commerce will invoice Innovo on a monthly
basis for the past month's fees, costs and expenses.
Payments by Innovo will be made directly to Commerce
immediately upon receipt of such invoices.
7.1.2 If Innovo fails to pay any fees or charges
when due, Commerce may charge Innovo a late payment charge
of one and one-half percent (1 1/2%) per month on the past
dues balance and cancel or delay any future shipment of the
products.
7.2 Form of Payment For The Services During The Term
Payment for the Distributed Products and Services set forth
herein shall be paid to Commerce in the form of cash via
check or wire transfer.
8. AUDITING PROCEDURES
8.1 At the end of the second and fourth quarters, an
accounting of the inventory held by Commerce may be taken by
Innovo. Overages and shortages will be balanced to a net result
at the end of each fiscal year.
8.2 If there is a net shortage of units after the
overages and shortages have been balanced to a net result, then
Commerce shall pay to Innovo the cost price per unit.
8.3 If there is a net overage of units after the overages
and shortages have been balanced to a net result, which is
attributable to a previous erroneous inventory count and for
which Commerce has paid Innovo the cost price per unit in
accordance with Section 8.2 above, then Innovo shall reimburse
to Commerce the cost price per unit.
9. INSURANCE
9.1 All Distributed Products shall be insured by Commerce
while in the custody and under the control of Commerce, for
the benefit of both Innovo and Commerce. Commerce represents
that it is insured for professional and third party
liabilities on standard business conditions. Except in cases
of Force Majeure and only in cases of proven negligence or
misconduct, Commerce shall be liable for property damage
and/or loss caused during the performance of Services.
9.2 Commerce shall, upon request of Innovo, furnish
Innovo with copies of all insurance policies concerning its
standard business liability coverage and Commerce shall ensure
that premiums due with respect to such insurance policies are
timely and fully paid and are in full force and effect.
9.3 Waiver of Subrogation Innovo and Commerce shall
each secure an appropriate clause in, or an endorsement upon,
each insurance policy required by this section, pursuant to
which the insurance company waives subrogation or permits the
insured, prior to any loss, to agree with a third party to
waive any claim it might have had against said third party
without invalidating the coverage under the insurance policy.
Each party hereby releases the other and its affiliates with
respect to any claim (including a claim for negligence) which
it might otherwise have against them for injury, loss, damage
or destruction occurring during the term of this Distribution
Agreement to the extent actually covered by policies
maintained by Innovo or Commerce as required pursuant to this
section.
10. SECURITY, SAFETY AND ENVIRONMENTAL MATTERS
10.1 As soon as practicable after the execution of
this Distribution Agreement, Innovo shall provide Commerce
with a listing of its representatives and any other authorized
third parties who may have access to the Distributed Products
and act on behalf of Innovo. Commerce will only allow
employees or agents (i e third party carriers) of Commerce,
Innovo and/or authorized third parties to have access to the
Distributed Products as necessary to administer the terms of
this Distribution Agreement. Innovo authorized personnel shall
have access at all reasonable times after notice, and without
notice in event of emergencies.
10.2 Commerce shall, at its sole cost, provide and
maintain adequate and customary security measures, including,
but not limited to, alarms, gates and locks, relating to the
warehouse facility.
10.3 Commerce shall, at its sole cost, apply for and
maintain during the term of this Distribution Agreement all
licenses and authorizations required for performing the
Services. Commerce shall comply with all federal, state and
local applicable laws and regulations in performing the D & O
Services, including but not limited to those regarding safety,
health and environmental matters.
11. MUTUAL REPRESENTATIONS AND WARRANTIES
11.1 Each party represents and warrants to the other that
it has the right and authority to enter into this Distribution
Agreement and to perform all of its respective obligations and
undertakings herein. Each party further represents and warrants
to the other that (i) the rights and
privileges granted or to be granted hereunder are and will at
all times be free and clear of any liens, claims, charges or
encumbrances; and (ii) neither party has done or omitted to do,
nor will do or omit to do, any act or thing that would or might
impair, encumber, or diminish the other party's full enjoyment
of the rights and privileges granted and to be granted under
this Distribution Agreement.
11.2 Each party represents and warrants that it is duly
organized and existing in good standing under the laws of the
jurisdiction in which it is organized, is duly qualified and
in good standing as a foreign corporation in every state in
which the character of its business requires such
qualifications, and has the power to own its property and to
carry on its business as now being conducted.
12. CONFIDENTIAL INFORMATION
12.1 Each parry acknowledges and agrees that it may have
access to information, including, but not limited to,
intellectual property, trade secrets, business information,
ideas and expressions, which are proprietary to and/or embody
the substantial creative efforts of the other party
("Confidential Information"). The parties agree that
Confidential Information will remain the sole and exclusive
property of the disclosing party ("Disclosing Party"), and the
receiving party ("Receiving Party") agrees to maintain and
preserve the confidentiality of such information, including,
but without limitation, taking such steps to protect and
preserve the confidentiality of the Confidential Information
as it takes to preserve and protect the confidentiality of its
own confidential information. All materials and information
disclosed by either party to the other will be presumed to be
Confidential Information and will be so regarded by the
Receiving Parry unless, the Receiving Party can prove that the
materials or information are not Confidential Information. For
the purposes of this section:
12.2 The parties agree that the Confidential Information
will be disclosed for use by the Receiving Parry only for the
limited and sole purpose of carrying out the terms of this
Distribution Agreement.
12.3 The Receiving Parry agrees not to disclose or
permit any other person or entity access to the Confidential
Information, except that such disclosure will be permitted
to an employee, agent, representative or independent
contractor of the Receiving Party requiring access to the
same.
12.4 The Receiving Party agrees (i) not to alter or
remove any identification of any copyright, trademark or
other proprietary rights notice which indicates the
ownership of any part of the Confidential Information, and
(ii) to notify the Disclosing Party of the circumstances
surrounding any possession, use or knowledge of the
Confidential Information by any person or entity other than
those authorized by this Distribution Agreement.
12.5 Confidential Information will exclude any
information that (i) has been or is obtained by the
Receiving Party from a source independent of the Disclosing
Party and not receiving such information from the Disclosing
Party, (ii) is or becomes generally available to the public
other than as a result of an unauthorized disclosure by the
Disclosing Party or its personnel, or (iii) is independently
developed by the Receiving Parry without reliance in any way
on the Confidential Information provided by the Disclosing
Party, or (iv) the Receiving Party is required to disclose
under judicial order, regulatory requirement, or statutory
requirement, provided that the Receiving Party provides
written notice and an opportunity for the Disclosing Party
to take any available protective action prior to such disclosure.
13. NONSOLICITATION
13.1 Commerce hereby agrees with the Company that during
the term of each of the Supply Agreement and this
Distribution Agreement and for a period of two years
thereafter, it will not influence or attempt to influence,
directly or indirectly, customers of the Company or any of
its subsidiaries who are purchasing products similar in
nature to those being supplied and distributed pursuant to
the Supply Agreement and this Distribution Agreement, to
direct their business from the Company to any individual,
partnership, corporation or other entity.
14. INDEMNIFICATION
14.1 Commerce's Indemnification Commerce hereby agrees
to indemnify, defend, and hold Innovo harmless from any
claims, losses, liabilities, causes of action and costs
(including reasonable attorneys' fees) arising from, or on
account of, or related to any breach by Commerce of its
obligations, representations and warranties hereunder.
14.2 Innovo's Indemnification Innovo hereby agrees to
indemnify, defend, and hold Commerce harmless from any
claims, losses, liabilities, causes of action and costs
(including reasonable attorneys' fees) arising from, or on
account of, or related to any breach by Commerce of its
obligations, representations and warranties hereunder.
15. GENERAL
15.1 Governing Law. This Distribution Agreement shall be
interpreted in accordance with the laws of the State of
California, without regard to the conflicts of laws
principles thereof. The parties agree that jurisdiction over
and venue in any legal proceeding arising out of or relating
to this Distribution Agreement will exclusively be in the
state or federal courts located in California.
15.2 Entire Agreement This Distribution Agreement,
including the Exhibits attached hereto, constitutes the
entire agreement and understanding between the parties and
integrates all prior discussions between them related to its
subject matter. No modification of any of the terms of this
Distribution Agreement will be valid unless in writing and
signed by an authorized representative of each party.
15.3 Assignment This Distribution Agreement may not be
assigned by Innovo to any other person, firm, or entity
without the express written approval of Commerce. With the
exception of assignments to subsidiaries, affiliates and
related parties, Commerce may not assign this Distribution
Agreement to any other person, firm, or entity without the
express written approval of Innovo. Any attempt at assignment
in violation of this section will be null and void.
15.4 Notices All legal notices required or permitted
hereunder will be given in writing addressed to the
respective parties as set forth below and will, either be
(i) personally delivered, (ii) transmitted by postage prepaid
certified mail, return receipt requested, or (iii)
transmitted by nationally recognized private express courier,
and will be deemed to have been given on the date of receipt
if delivered personally, or three (3) days after deposit in
mail or express courier. Either party may change its address
for purposes hereof by written notice to the other in
accordance with the provisions of this Subsection. The
addresses for the parties are as follows:
Commerce Investment Group, LLC: Innovo Group, Inc.:
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Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq. Attn: ▇▇▇ ▇▇▇▇▇▇
15.5 Rights to Injunctive Relief Both parties
acknowledge that remedies at law may be inadequate to provide
fun compensation in the event of a material breach relating to
either party's obligations, representations, and warranties
hereunder, and the non-breaching party will therefore be
entitled to seek injunctive relief in the event of any such
material breach.
15.6 Force Majeure No party will be liable for, or will be
considered to be in breach of or default under this Distribution
Agreement on account of, any delay or failure to perform as
required by this Distribution Agreement as a result of any causes
or conditions that are beyond such party's reasonable control
(such as war, riot, insurrection, rebellion, strike, lockout,
unavoidable casualty, or damage to personnel, material or
equipment, fire, flood, storm, earthquake, tornado, or any act of
God) and that such party is unable to overcome through the
exercise of commercially reasonable diligence. If any force
majeure event occurs, the affected party will give prompt written
notice to the other party and will use commercially reasonable
efforts to minimize the impact of the event. However, if a force
majeure event prevents a pant's performance of a material
covenant set forth herein, the other party can immediately
terminate this Distribution Agreement.
15.7 Waiver The waiver, express or implied, by either
parry of any breach of this Distribution Agreement by the
other party will not waive any subsequent breach by such party
of the same or a different kind.
15.8 Headings The headings to the Sections and Exhibits
of this Distribution Agreement are included merely for
convenience of reference and will not affect the meaning of
the language included therein.
15.9 Independent Contractors The parties acknowledge and
agree that they are dealing with each other hereunder as
independent contractors. Nothing contained in this
Distribution Agreement will be interpreted as constituting
either party the joint venturer, employee or partner of the
other party or as conferring upon either party the power of
authority to bind the other party in any transaction with
third parties.
15.10 Severability In the event any provision of this
Distribution Agreement is held by a court or other tribunal of
competent jurisdiction to be unenforceable, such provision
will be reformed only to the extent necessary to make it
enforceable, and the other provisions of this Distribution
Agreement will remain in full force and effect.
15.11 Counterparts This Distribution Agreement may be
executed in two or more counterparts, each of which will be
deemed an original, but all of which together will constitute
one and the same instrument. For purposes hereof, a facsimile
copy of this Distribution Agreement, including the signature
pages hereto, will be deemed to be an original.
Notwithstanding the foregoing, the parties will deliver
original execution copies of this Distribution Agreement to
one another as soon as practicable following execution
thereof.
15.12 Cooperation in Drafting All parties have
cooperated in the drafting and preparation of this
Distribution Agreement, and it will not be construed more
favorably for or against any party.
15.13 Attorney's Fees Should either party hereto
initiate a legal or administrative action or arbitration
proceeding (an "Action") to enforce any of the terms or
conditions of this Distribution Agreement, the prevailing
party (as determined by the court, arbitrator or other fact-
finder) will be entitled to recover from the losing party
all reasonable costs of the Action including without
limitation attorneys' fees and costs.
IN WITNESS WHERFOF, the parties have executed this
Distribution Agreement as of the Effective Date.
COMMERCE INVESTMENT GROUP, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Exec. V.P. & General
Counsel
INNOVO GROUP, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇.
Title: COO
