EXHIBIT 10.1
SUPPLY AGREEMENT
'This SUPPLY AGREEMENT ("Supply Agreement") made as of
this [11] day of August, 2000 ("Effective Date") by and
between Commerce Investment Group, LLP, a limited liability
company with its principal executive offices at 0000 Xxxx
Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxx 00000 ("Commerce") and
Innovo Group, Inc., a Delaware corporation having its
principal executive offices at 0000 X. Xxxxxx Xxxxxx,
Xxxxxxxxx, XX 00000 ("Innovo") is concurrently being made
with the related but separate DISTRIBUTION AGREEMENT
("Distribution Agreement"), having the same effective date,
by and between Innovo and Commerce.
RECITALS
A. Innovo is, among other things, a seller of t-
shirts, canvas and denim bags and other related
products.
B. Commerce and Innovo desire to enter into this
Supply Agreement concurrently with the
Distribution Agreement between Commerce and
Innovo, whereby Commerce will manufacture and
supply products for Innovo under the terms and
conditions set forth in this Supply Agreement and
Commerce will distribute Innovo's products as set
forth in the Distribution Agreement,both pursuant
to an aggregate "Minimum Obligation" (as that
term is defined below).
C. Commerce shall be entitled to subcontract its
obligations hereunder to Azteca Production
International, Inc., a California corporation
("Azteca"). Azteca is, among other things, a
manufacturer of t-shirts, canvas and denim bags
and other related products.
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. PRODUCTS, ORDERS AND PRICING
1.1 Commerce shall supply to Innovo the Products
described in Exhibit A attached hereto (the "Products"),
during the Term of this Supply Agreement ("Manufacturing
Services"). The purchase price that Innovo will pay Azteca
for each of the Products is also listed in Exhibit A, From
time to time, Exhibit A may be revised to add Products upon
written agreement of the parties.
1.2 All of the Products to be manufactured hereunder
shall be made in accordance with all applicable laws and
regulations.
1.3 Minimum Obligations Innovo agrees to purchase a
"Minimum Obligation" of One Million Five Hundred Thousand
Dollars (US $1,500,000) worth of Manufacturing Services and
D&O Services (as defined in the Distribution Agreement)
from Commerce at the execution of this Supply Agreement and
One Million Five Hundred Thousand Dollars (US $1,500,000)
worth of Manufacturing Services and D&O Services within 90
calendar days of execution of this Supply Agreement.
1.4 Placing of Subsequent Orders During the Term or
any Renewal Term of this Supply Agreement, on a monthly
basis, Innovo shall submit written purchase orders to
Commerce clearly setting forth the Products to be purchased
by Innovo and requested shipping dates for the ordered
Products.
2. TERM AND TERMINATION
2.1 Term The term of this Supply Agreement shall
continue from the Effective Date for a period of two (2)
years ("Term").
2.2 Termination This Supply Agreement may be
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 Supply Agreement by the
other party which is not cured within thirty (30) days of
receipt of written notice thereof.
2.3 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 1.3 of this Supply
Agreement. The prices for Products shall be renegotiated
in good faith by the parties hereto, based on increases
in costs of raw materials and labor.
3. DELIVERY Innovo shall provide Commerce with reasonable
lead time for all orders for purchase and Commerce shall
timely fulfill all orders for purchases received from
Innovo and shall deliver the Products to Apparel
Distribution Services, LLC ("ADS") or wherever so
instructed by Innovo according to a reasonable delivery
schedule. The parties hereto shall in good faith negotiate
such delivery schedule.
4. QUALITY CONTROL The quality of the Products, including,
among other things, the technical specifications in
manufacturing the products, shall meet the specifications
and standards of both parties, which specifications and
standards shall be reasonably based on the highest in the
industry. The parties hereto shall determine such quality in
good faith.
5. COMPENSATION TO COMMERCE FOR THE PRODUCTS 5.1
5.1 Invoices
5.1.1 Commerce shall invoice Innovo upon each
shipment of goods made against an Innovo purchase order.
Payments by Innovo will be made directly to Commerce
immediately upon receipt of such invoices.
5.1.2 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
due balance and cancel or delay any future shipment of the
products.
5.2 Form of Payment For The Services During The
Term Payment for the Products and Services set forth
herein shall be paid to Commerce in the form of cash via
check or wire transfer.
5.3 SALE OF IRREGULAR AND SECOND QUALITY PRODUCTS Innovo
and Commerce each shall use their marketing resources to sell
Products characterized as irregulars and seconds ("Seconds").
Commerce shall not invoice Innovo for any Seconds. However,
all proceeds from the sales of Seconds made by Innovo shall be
remitted to Commerce.
6. RISK OF LOSS Commerce shall bear the risk of loss of, or
damage to, the Products, until delivery in accordance with
instructions from Innovo.
7. INSPECTION OF THE PRODUCTS Innovo and its representatives
may, from time to time, upon reasonable notice and during regular
business hours, inspect the manufacture of Products and
conduct related quality control. In connection therewith,
Commerce shall provide reasonable assistance and access to
Commerce's facilities, personnel and materials. Commerce shall
comply with Innovo's reasonable quality and inspection procedures
during production and after
shipment.
8. MUTUAL REPRESENTATIONS AND WARRANTIES
8.1 Each party represents and warrants to the other
that it has the right and authority to enter into this
Supply 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 Supply Agreement.
8.2 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.
9. CONFIDENTIAL INFORMATION
9.1 Each party 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 Party unless, the
Receiving Party can prove that the materials or information
are not Confidential Information. For the purposes of this
section:
9.2 The parties agree that the Confidential
Information will be disclosed for use by the Receiving
Party only for the limited and sole purpose of carrying
out the terms of this Supply Agreement.
9.3 The Receiving Party 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.
9.4 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
Supply Agreement.
9.5 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 Party
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.
10. NONSOLICITATION
10.1 Commerce hereby agrees with the Company that
during the term of each of this Supply Agreement and the
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
this Supply Agreement and the Distribution Agreement, to
direct their business from the Company to any individual,
partnership, corporation or other entity.
11. INDEMNIFICATION
11.1 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.
11.2 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.
12. GENERAL
12.1 Governing Law This Supply 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 Supply Agreement will exclusively be in
the state or federal courts located in California.
12.2 Entire Agreement This Supply 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
the agreement will be valid unless in writing and signed
by an authorized representative of each party.
12.3 Assignment This Supply Agreement may not be
assigned by Innovo to any other person, firm, or entity
without the express written approval of Commerce and any
attempt at assignment in violation of this section will
be null and void. With the exception of assignments to
subsidiaries, affiliates and related parties, Commerce may
not assign this Supply Agreement to any other person,firm,
or entity without the express written approval of Innovo.
12.4 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 Innovo Group, Inc.:
Group, LLC:
0000 X. Xxxxxxx Xxx. 0000 X. Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000 Xxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxx, Esq. Attn: Xxx Xxxxxx
12.5 Rights to. Injunctive Relief Both parties
acknowledge that remedies at law may be inadequate to provide
full 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.
12.6 Force Majeure No party will be liable for,
or will be considered to be in breach of or default under
this Supply Agreement on account of, any delay or failure to
perform as required by this Supply 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 parry 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 party's' performance of a material
covenant set forth herein, the other parry can immediately
terminate this Supply Agreement.
12.7 Waiver The waiver, express or implied, by either
party of any breach of this Supply Agreement by the other
party will not waive any subsequent breach by such party of
the same or a different kind.
12.8 Headings The headings to the Sections and Exhibits of
this Supply Agreement are included merely for convenience of
reference and will not affect the meaning of the language
included therein.
12.9 Independent Contractors The parties acknowledge
and agree that they are dealing with each other hereunder as
independent contractors. Nothing contained in this Supply
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.
12.10 Severability In the event any provision of
this Supply 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 Supply Agreement will, remain in
full force and effect,
12.11 Counterparts This Supply 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 Supply 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 Supply Agreement to one another as soon as
practicable following execution thereof,
12.12 Cooperation in Drafting All parties have
cooperated in the drafting and preparation of this Supply
Agreement, and it will not be construed more favorably for
or against any party.
12.13 Attorney's Fees Should wither party hereto
initiate a legal or administrative action or arbitration
proceeding (an "Action") to enforce any of the terms or
conditions of this Supply Agreement, the prevailing partly
(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 WEREOF, the parties have executed this Supply
Agreement as of the Effective Date.
COMMERCE INVESTMENT GROUP, LLC
By: /s/ Xxxxxxx Xxxxxxx
-------------------
Name: Xxxxxxx Xxxxxxx
Title: Exec. V.P. & General Counsel
INNOVO GROUP, INC.
By: /s/ Xxxxxx Xxxxxx Xxxxxx, Xx.
-----------------------------
Name: Xxxxxx Xxxxxx Xxxxxx, Xx.
Title: COO
