FORM 8-K

               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549

                            FORM 8-K

                         CURRENT REPORT

 Pursuant to Section 13 or 15(d) of the Securities and Exchange
                           Act of 1934

 Date of Report (Date of earliest event reported): July 18, 2003

                        INNOVO GROUP INC.
       (Exact name of registrant as specified in charter)

         Delaware                   0-18926               11-2928178
(State or other jurisdiction (Commission File No.)      (IRS Employer
    of incorporation)                                Identification No.)

5900 S. Eastern Ave., Suite 124, Commerce, California       90040
(Address of principal executive offices)                  (Zip Code)

 Registrant's telephone number, including area code:
                   (323) 725-5516

                            No Change
  (Former name or former address, if changed since last filing)

Item 2.  Acquisition or Disposition of Assets

On  July  17,  2003, Innovo Group Inc. (the "Company"  or  "IGI")
through  its  subsidiary  Innovo  Azteca  Apparel,  Inc.  ("IAA")
entered  into  an  asset purchase agreement ("APA")  with  Azteca
Production  International, Inc. ("Azteca"), Hubert  Guez ("Hubert
Guez")and Paul Guez ("Paul Guez"),  whereby IAA acquired the Blue
Concepts  division  (the "Division")  of  Azteca.   The  Division
sells   primarily  denim  jeans  to  American   Eagle Outfitters,
Inc. ("AEO"), a  national retailer. Hubert Guez and Paul Guez are
substantial   stockholders  of  the   Company,  together  have  a
controlling interst in Azteca. As of March 25,  2003, Hubert Guez
and his affiliates  beneficially  own  approximately 35%  of  the
Company's common stock on a fully diluted basis.


Pursuant to the terms of the agreement, the purchase price to  be
paid  by  IAA  for  the  Division is $21.8  million,  subject  to
adjustment,  as  noted below. Additionally, IAA will  employ  the
existing employees of the Division but will not assume any of the
Division's or Azteca's existing liabilities.  The purchase  price
has  been  funded through the issuance of a seven-year promissory
note (the "Note"). The Note bears interest  at a rate  of  6% and
requires payment of interest only during the first 24 months  and
then is fully amortizing over the remaining five-year period. The
terms  of  the  transaction  further  allow   the Company,   upon
shareholder approval,  to  convert  a portion of  the  Note  into
equity  through  the  issuance  of  3,125,000  shares of  Company
common stock  valued  at  the  greater  of  $4  per share or  the
market   value  of   the  Company's  common  stock  at  the  date
shareholder  approval  is obtained.   In  the  event  shareholder
approval is obtained, the Note will  be reduced  to  $9.3 million
and the shares issued pursuant to the  conversion will be subject
to certain lock-up  periods.  In the  event  the  market value of
the Company's  common  stock  is greater  than $4.00 per share on
the date of  shareholder  approval  the  purchase price.

In  the  event  that sales of the Division fall below $70 million
during  the  first  17 month period ("Period  I")  following  the
closing  of  the  acquisition,  or  $65  million  during  the  12
month   period   ("Period II") following  Period I, certain terms
of  the APA  allow for a reduction in the purchase price  through
a  decrease  in  the principal balance of  the  Note  and/or  the
return of certain locked-up shares of the Company's common stock.
In the event the Note is reduced during Period I and the sales of
the Division  in Period  II  are  greater  than $65 million,  the
Note  shall  be increased by half of the amount greater  than $65
million  but in no event shall the Note be increased by an amount
greater  than the decrease in Period I.

In the event the principal amount of the Note needs to be reduced
beyond  the outstanding principal balance of such Note,  then  an
amount  of  the  locked-up shares equal to  the  balance  of  the
required  reduction shall be returned to the Company.  For  these
purposes,  the  locked-up shares shall be  valued  at  $4.00  per
share. Additionally, if during the 12 month period following  the
closing, AEO is no longer a customer of IAA, the locked-up shares
will be returned to the Company, and any amount remaining on  the
balance of the Note will be forgiven.



If  the revenues of the Division decrease to $35 million or  less
during  Period I or Period II, IAA shall have the right  to  sell
the  purchased assets back to Azteca, and Azteca shall  have  the
right  to buy back the purchased assets for the remaining balance
of the Note and any and all locked-up shares shall be returned to
the Company.

As  part  of  the  transaction, IAA entered into a  non-exclusive
supply  agreement ("Supply Agreement") with AZT International  SA
DE  CV, a Mexico corporation  and  a  wholly  owned  affiliate of
Azteca, for products to be sold by the Division. In addition, IAA
will pay to  Sweet  Sportswear,  LLC,  an  entity  owned  50%  by
Huber Guez and 50% by Paul Guez, an amount equal to 2.5% of IAA's
revenues generated as a result of sales to AEO.   While Paul Guez
will not become an employee  or officer of IAA,  he will continue
to serve as a liaison  between IAA and Azteca for  the purpose of
facilitating the transaction of the Division from Azteca  to IAA,
and will continue to maintain a working relationship on  a  going
forward basis  with  Azteca,  its subsidiary AZT,  and IAA as  an
interested party to these entities.


On  July  18, 2003, the Company issued the press release attached
hereto  as  Exhibit  99.1 and incporporated herein  by  reference
announcing  the  acquisition of the Blue Concepts  division  from
Azteca.


Item 5.  Other Events

On July 15, 2003, the Company's Board of Directors (the "Board")
increased it size from seven to nine.  The Board elected Kent A.
Savage and Vincent Sanfilippo as new directors to the fill the
vacancies.  The addition of Savage and Sanfilippo increases the
Board's non-employee directors from three to five.

Savage  has  most recently served as co-founder for  TippingPoint
Technologies, Inc., a publicly traded network securities company.
Prior  to that, he was co-founder, President & CEO of Netpliance,
Inc, a provider of Internet services.  Savage has been affiliated
in  senior  management  positions with Cisco  Systems,  Netspeed,
Inc., Connectware, Nortel and Wang Laboratories. Recognized as an
Ernst  & Young Entrepreneuer-of-the-Year finalist, he received  a
Bachelor's degree in Business from Oklahoma State University  and
an MBA from Southern Methodist University.

Vincent Sanfilippo is Chief Investment Officer and a Principal of
Urdang & Associates Real Estate Advisors, Inc. ("Urdang"), a real
estate  investment management firm whose clients include  Fortune
100  corporate  and public pension funds, foundations  and  other
institutional investors.  Sanfilippo has been with Urdang for the
past  15  years.   Sanfilippo received his B.S. degree  from  the
University of Pennsylvania's Wharton School of Finance.

On  July  23, 2003, the Company issued the press release attached
hereto  as  Exhibit  99.2 and incorporated  herein  by  reference
announcing  the  appointment  of  Kent  A.  Savage  and   Vincent
anfilippo to the Company's Board.

Item  7.   Financial Statements, Pro Forma Financial  Information
and Exhibits

Item  7.   Financial  Statements,  Proforma  Financial
Information and Exhibits

     (a)  Financial statements of businesses  acquired:
It  is  not  practicable to file the  audited  and  un-
audited financial statements at this time. Accordingly,
pursuant  to  Item 7(a)4 of Form 8-K,  Registrant  will
file  such financial statements under cover of Form  8-
K/A  as soon as practicable, but in no event later than
October 1, 2003.

     (b)   Pro forma financial information:  It is  not
practicable  to file this required pro forma  financial
information  at  this time.  Accordingly,  pursuant  to
Item  7(b)2  of  Form 8-K, Registrant  will  file  such
financial statements under cover of Form 8-K/A as  soon
as practicable, but in no event later  than  October 1,
2003.



     (c)Exhibits

Exhibit 2.1    Asset Purchase Agreement dated July 17, 2003
               by and among Innovo Azteca Apparel, Inc.,
               Azteca Production International, Inc., Hubert
               Guez  and Paul Guez

Exhibit  10.1  Supply  Agreement dated July  17, 2003 by and
               between AZT International SA DE CV and Innovo
               Azteca Apparel, Inc.
Exhibit 99.1   Press Release dated July 18, 2003

Exhibit 99.2   Press Release dated July 22, 2003

                           SIGNATURES

 Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.

                                     INNOVO GROUP INC.
                                       (Registrant)

Date:  August 1, 2003
                                By: /s/ Samuel Joseph Furrow, Jr.
                                   ------------------------------
                                   Samuel Joseph Furrow, Jr.
                                   Chief Executive Officer,
                                   and Director





Exhibit Index

Exhibit No.

2.1       Asset Purchase Agreement dated July 17, 2003 by and
          among Innovo Azteca Apparel, Inc., Azteca Production
          International, Inc., Hubert Guez and Paul Guez
10.1      Supply Agreement dated July 17, 2003 by and between AZT
          International SA DE CV and Innovo Azteca Apparel, Inc.
99.1      Innovo Group, Inc. press release dated July 18, 2003
99.2      Innovo Group Inc.  press release dated July 23, 2003



Exhibit 2.1

                    ASSET PURCHASE AGREEMENT

                               by

                               and

                              among


                  INNOVO AZTECA APPAREL, INC.,

             AZTECA PRODUCTION INTERNATIONAL, INC.,

                           HUBERT GUEZ

                               and

                            PAUL GUEZ

                       Dated July 17, 2003


                        TABLE OF CONTENTS

                                                             Page


ARTICLE 1. DEFINITIONS,                                         1

ARTICLE 2. PURCHASE AND SALE OF ASSETS                         10
     2.1  PURCHASE AND SALE OF ASSETS                          10
     2.2  NO ASSUMED LIABILITIES                               10

ARTICLE 3. PURCHASE PRICE                                      10
     3.1  PURCHASE PRICE                                       10
     3.2  ALLOCATION OF PURCHASE PRICE                         10
     3.3  PAYMENT TERMS AND OFFSETS                            10
     3.4  PARTIAL  CONVERSION OF BUYER NOTE;  CONVERTED
          SHARES; LOCK-UPS; SHARE REGISTRATION                 11
     3.5  SALES GUARANTEE; LOSS OF ACCOUNT                     13

ARTICLE 4. CLOSING                                             16
     4.1  THE CLOSING                                          16
     4.2  DELIVERIES AT THE CLOSING                            16
     4.3  OBTAINING FURTHER CONSENTS                           17

ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF BUYER             17
     5.1  ORGANIZATION OF BUYER                                17
     5.2  AUTHORITY OF BUYER; ENFORCEABILITY                   17
     5.3  NO VIOLATION                                         17
     5.4  NO FINDER                                            18
     5.5  BUYER'S FINANCIAL STATEMENTS                         18
     5.6  LITIGATION                                           18
     5.7  SOLVENCY                                             18
     5.8  REPRESENTATIONS COMPLETE                             18

ARTICLE 6. REPRESENTATIONS AND WARRANTIES CONCERNING
SELLER AND THE BUSINESS                                        19
     6.1  ENTITY STATUS                                        19
     6.2  POWER AND AUTHORITY; ENFORCEABILITY                  19
     6.3  NO VIOLATION                                         19
     6.4  BROKERS' FEES                                        20
     6.5  FINANCIAL STATEMENTS                                 20
     6.6  SUBSEQUENT EVENTS                                    20
     6.7  NO UNDISCLOSED LIABILITIES                           20
     6.8  LEGAL COMPLIANCE                                     21
     6.9  TAX MATTERS                                          21
     6.10 TITLE TO PURCHASED ASSETS                            21
     6.11 INTELLECTUAL PROPERTY                                21
     6.12 CONTRACTS                                            23
     6.13 PURCHASE COMMITMENTS                                 23
     6.14 LITIGATION                                           23
     6.15 PRODUCT WARRANTY                                     23
     6.16 EMPLOYEES                                            24
     6.17 EMPLOYEE BENEFITS                                    24
     6.18 ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS            25
     6.19 CUSTOMERS AND SUPPLIERS                              25
     6.20 PERMITS                                              25
     6.21 SOLVENCY                                             26
     6.22 ACCURACY OF INFORMATION FURNISHED                    26
     6.23 REPRESENTATIONS COMPLETE                             26
     6.24 REVIEW OF BUYER AND INNOVO                           27

ARTICLE 7. PRE-CLOSING COVENANTS                               27
     7.1  GENERAL                                              27
     7.2  NOTICES AND CONSENTS                                 27
     7.3  OPERATION OF BUSINESS                                28
     7.4  PRESERVATION OF BUSINESS                             28
     7.5  FULL ACCESS                                          28
     7.6  NOTICE OF DEVELOPMENTS                               29
     7.7  EXCLUSIVITY                                          29
     7.8  CONFIDENTIALITY; PUBLICITY                           29
     7.9  CHARGES AND FEES                                     30

ARTICLE 8. ADDITIONAL COVENANTS                                30
     8.1  GENERAL                                              30
     8.2  LITIGATION SUPPORT                                   30
     8.3  TRANSITION                                           30
     8.4  CONFIDENTIALITY                                      31
     8.5  RESTRICTIVE COVENANTS                                31
     8.6  USE OF NAMES                                         32
     8.7  TAXES                                                32
     8.8  EMPLOYEES AND EMPLOYEE BENEFIT PLANS                 33
     8.9  PAYMENT OF NON-ASSUMED LIABILITIES                   35
     8.10 NO LIABILITY                                         35
     8.11 BUYER EARN OUT                                       36
     8.12 SHAREHOLDER APPOINTMENT RIGHTS                       36

ARTICLE 9. CLOSING CONDITIONS                                  37
     9.1  CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER         37
     9.2  CONDITIONS  PRECEDENT TO OBLIGATIONS  OF  THE
          SELLER PARTIES                                       38

ARTICLE 10. TERMINATION                                        39
     10.1 TERMINATION OF AGREEMENT                             39
     10.2 EFFECT OF TERMINATION                                39

ARTICLE 11. INDEMNIFICATION                                    40
     11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES           40
     11.2 INDEMNIFICATION   PROVISIONS   FOR    BUYER'S
          BENEFIT                                              40
     11.3 INDEMNIFICATION   PROVISIONS    FOR    SELLER
          PARTIES' BENEFIT                                     41
     11.4 INDEMNIFICATION CLAIM PROCEDURES                     41
     11.5 LIMITATIONS ON INDEMNIFICATION LIABILITY             42
     11.6 SET OFF RIGHTS                                       43
     11.7 OPTION  TO  REQUIRE SELLER TO  PAY  IN  BUYER
          COMMON STOCK                                         43
     11.8 NO WAVIER OF RIGHTS OR REMEDIES                      43
     11.9 OTHER INDEMNIFICATION PROVISIONS                     44

ARTICLE 12. MISCELLANEOUS                                      44
     12.1 SCHEDULES                                            44
     12.2 ENTIRE AGREEMENT                                     44
     12.3 SUCCESSORS                                           45
     12.4 ASSIGNMENTS                                          45
     12.5 NOTICES                                              45
     12.6 SPECIFIC PERFORMANCE                                 46
     12.7 SUBMISSION TO JURISDICTION; PROCESS AGENT; NO
          JURY TRIAL                                           47
     12.8 TIME                                                 47
     12.9 COUNTERPARTS                                         47
     12.10                                               HEADINGS     48
     12.11                                          GOVERNING LAW     48
     12.12                                 AMENDMENTS AND WAIVERS     48
     12.13                                           SEVERABILITY     48
     12.14                                               EXPENSES     48
     12.15                                           CONSTRUCTION     48
     12.16                INCORPORATION OF EXHIBITS AND SCHEDULES     49
     12.17                                               REMEDIES     49
     12.18                          JOINT AND SEVERAL OBLIGATIONS     49



                            Exhibits


Exhibit A      Form of Bill of Sale and Assignment of Contract
Rights
Exhibit B      Form of Buyer Note
Exhibit C      Form of Supply Agreement
Exhibit D      Form of Seller's Officers' Certificate
Exhibit E      Form of Seller's Secretary's Certificate
Exhibit F      Form of Buyer's Officers' Certificate
Exhibit G      Form of Buyer's Secretary's Certificate

                            Schedules

Schedule 1.1   Purchased Assets
Schedule 5.3   Buyer Required Consents
Schedule 5.6   Buyer Litigation
Schedule 6.3   Seller Required Consents
Schedule 6.5   Financial Statements
Schedule 6.6   Subsequent Events
Schedule 6.12  Contracts
Schedule 6.14  Seller Litigation
Schedule 6.15  Standard Terms of Sale or Lease
Schedule 6.16(a)    Current Employees and Directors
Schedule 6.16(b)    Terminated Employees
Schedule 6.17  Employee Benefits
Schedule 6.18  Environmental Matters
Schedule 6.19  Suppliers
Schedule 6.20  Permits


                  Asset Purchase Agreement

     This  Asset Purchase Agreement dated July 17, 2003 (the
"Execution  Date"),  is  by  and  among  (i)  INNOVO  AZTECA
APPAREL,  INC.,  a  California corporation  ("Buyer"),  (ii)
AZTECA   PRODUCTION   INTERNATIONAL,  INC.,   a   California
corporation   ("Seller"),  and   (iii)   Hubert   Guez,   an
individual,   and   Paul  Guez,  an  individual   (each,   a
"Shareholder"  and,  collectively with Seller,  the  "Seller
Parties").

                          RECITALS

     A.    Seller  is  engaged  through  its  Blue  Concepts
Division  in  the  business of designing, manufacturing  and
wholesaling  denim  and other related apparel  and  products
(the "Business").

     B.   Seller desires to sell to Buyer, and Buyer desires
to  purchase from Seller, certain assets and properties used
by Seller in the operation of the Business, all on the terms
and subject to the conditions set forth herein.

     C.    Buyer  and  the  Seller Parties  (the  "Parties")
intend  for  the  sale of such assets and properties  to  be
treated as a taxable purchase for tax purposes.

                         AGREEMENT:

     NOW,  THEREFORE, in consideration of the  premises  and
the mutual promises herein made, and in consideration of the
representations, warranties, and covenants contained herein,
the Parties agree as follows:

                         ARTICLE 1.
                        DEFINITIONS,

     "Action"  means  any  action, appeal,  petition,  plea,
charge,   complaint,   claim,  suit,   demand,   litigation,
arbitration,  mediation, hearing, inquiry, investigation  or
similar event, occurrence, or proceeding.

     "Active Employees" is defined in Section 8.8(a)

     "AEO" means American Eagle Outfitters, Inc.

     "Affiliate"  or  "Affiliated"  with  respect   to   any
specified   Person   means  a  Person  that,   directly   or
indirectly, through one or more intermediaries, controls  or
is  controlled  by,  or is under common control  with,  such
specified Person.  For this definition, "control"  (and  its
derivatives)  means the possession, directly or  indirectly,
or  as  trustee or executor, of the power to direct or cause
the  direction of the management and policies of  a  Person,
whether  through  ownership of voting Equity  Interests,  as
trustee  or executor, by Contract or credit arrangements  or
otherwise.

     "Affiliated Group" means an affiliated group under Code
Section   1504(a)  or  any  similar  group   defined   under
provisions of applicable Law.

     "AGR" means Buyer's gross revenues from sales that  are
attributable to the Business.

     "Agreement"   means  this  Asset  Purchase   Agreement,
together with all Exhibits and Schedules hereto, as the same
may be amended, supplemented or otherwise modified from time
to time in accordance with Section 12.12.

     "Allocation Schedule" is defined in Section 3.2.

     "Basis"  means  any  past or current  fact,  situation,
circumstance,  status, condition, activity, practice,  plan,
occurrence,  event,  incident, action, failure  to  act,  or
transaction  about which the relevant Person  has  Knowledge
that  forms  or  could  form the  basis  for  any  specified
consequence.



     "Best Efforts" means the efforts, time, and costs  that
a  prudent Person desirous of achieving a result would  use,
expend,  or  incur in similar circumstances to  ensure  that
such  result  is  achieved  as  expeditiously  as  possible;
provided,  however,  that  no  such  use,  expenditure,   or
incurrence  will  be required if it would  have  a  Material
Adverse  Effect on such Person calculated immediately  prior
to the Closing Date.

     "Bill of Sale" means the Bill of Sale and Assignment of
Contract Rights in the form of Exhibit A.

     "Breach"  means (a) any breach, inaccuracy, failure  to
perform,  failure  to  comply,  conflict  with,  failure  to
notify,  default,  or  violation  or  (b)  any  other   act,
omission,  event, occurrence or condition the  existence  of
which  would  (i)  permit  any  Person  to  accelerate   any
obligation  or  terminate, cancel, or modify  any  right  or
obligation  or  (ii) require the payment of money  or  other
consideration.

     "Business"   is  defined  in  the  Recitals   to   this
Agreement.

     "Buyer" is defined in the preamble to this Agreement.

     "Buyer Financial Statements" is defined in Section 5.5.

     "Buyer  Note"  means the promissory note  of  Buyer  in
substantially the form of Exhibit B.

     "Calculation  Period"  means Calculation  Period  I  or
Calculation Period II, as applicable.

     "Calculation Period I" is defined in Section 3.5(a).

     "Calculation Period II" is defined in Section 3.5(b).

     "Cash"  means  cash  and  cash  equivalents  (including
marketable securities and short term investments) calculated
in  accordance with GAAP applied on a basis consistent  with
the preparation of the Financial Statements.

     "Closing" is defined in Section 4.1.

     "Closing  Date"  has the meaning specified  in  Section
4.1.

     "Code"  means  the Internal Revenue Code  of  1986,  as
amended.

     "Commitment"  means (a) options, warrants,  convertible
securities,  exchangeable securities,  subscription  rights,
conversion rights, exchange rights, or other Contracts  that
could  require a Person to issue any of its Equity Interests
or  to  sell any Equity Interests it owns in another Person;
(b)  any other securities convertible into, exchangeable  or
exercisable for, or representing the right to subscribe  for
any  Equity  Interest of a Person or owned by a Person;  (c)
statutory  pre-emptive rights or pre-emptive rights  granted
under  a  Person's Organizational Documents; and  (d)  stock
appreciation rights, phantom stock, profit participation, or
similar rights with respect to a Person.

     "Confidential   Information"  means   any   information
concerning  the businesses and affairs of either the  Buyer,
on  the  one hand, or the Business and Seller, on the  other
hand.

     "Consent"  means  any consent, approval,  notification,
waiver,  or  other  similar  action  that  is  necessary  or
convenient.

     "Contract"  means any contract, agreement, arrangement,
commitment,  letter of intent, memorandum of  understanding,
heads  of agreement, promise, obligation, right, instrument,
document, or other similar understanding, whether written or
oral.

     "Conversion Price" is defined in Section 3.4(a).

     "Converted Shares" is defined in Section 3.4(a).




     "Copyrights"  means copyrights, whether  registered  or
unregistered, in published works and unpublished works,  and
pending applications to register the same.

     "Disputed Note Adjustment Amount" is defined in Section
3.5(b).

     "Earn Out Amount" is defined in Section 8.11(a).

     "Earn  Out  Disputed  Amount"  is  defined  in  Section
8.11(c).

     "Earn  Out  Proposed  Amount"  is  defined  in  Section
8.11(b).

     "Encumbrance"  means  any  Order,  Security   Interest,
Contract,  easement, covenant, community property  interest,
equitable  interest, right of first refusal, or  restriction
of  any  kind,  including any restriction  on  use,  voting,
transfer,  receipt  of  income, or  exercise  of  any  other
attribute of ownership.

     "Enforceable" - a Contract is "Enforceable"  if  it  is
the  legal,  valid, and binding obligation of the applicable
Person  enforceable against such Person in  accordance  with
its  terms, except as such enforceability may be subject  to
the   effects  of  bankruptcy,  insolvency,  reorganization,
moratorium,  or  other Laws relating  to  or  affecting  the
rights of creditors, and general principles of equity.

     "Environmental, Health, and Safety Requirements"  means
all  Orders, Contracts, Laws, and programs (including  those
promulgated or sponsored by industry associations, insurance
companies,  and  risk  management companies)  concerning  or
relating  to  public  health and safety, worker/occupational
health  and  safety,  and pollution  or  protection  of  the
environment, including those relating to the presence,  use,
manufacturing,  refining, production, generation,  handling,
transportation,  treatment,  recycling,  transfer,  storage,
disposal,   distribution,  importing,   labeling,   testing,
processing, discharge, release, threatened release, control,
or  other action or failure to act involving cleanup of  any
hazardous   materials,  substances   or   wastes,   chemical
substances     or    mixtures,    pesticides,    pollutants,
contaminants,   toxic  chemicals,  petroleum   products   or
byproducts, asbestos, polychlorinated biphenyls,  noise,  or
radiation,  each  as  amended and as  now  or  hereafter  in
effect.

     "Equity   Interest"  means  (a)  with  respect   to   a
corporation,  any and all shares of capital  stock  and  any
Commitments  with  respect thereto, (b) with  respect  to  a
partnership,  limited liability company,  trust  or  similar
Person,   any   and   all   units,   interests,   or   other
partnership/limited liability company interests  ,  and  any
Commitments  with respect thereto, and (c) any other  direct
or indirect equity ownership or participation.

     "ERISA"  means the Employee Retirement Income  Security
Act of 1974.

     "ERISA  Affiliate" means each business or entity  which
is  a  member of a "controlled group of corporations," under
"common  control"  or  an "affiliated  service  group"  with
Seller within the meaning of Sections 414(b), (c), or (m) of
the  Code,  or  required to be aggregated with Seller  under
Section  414(o)  of the Code, or is under  "common  control"
with  Seller  within the meaning of Section  4001(a)(14)  of
ERISA.

     "Execution  Date"  is defined in the preamble  to  this
Agreement.

     "Expiration Date" means August 30, 2003.

     "Financial Statements" is defined in Section 6.5.

     "GAAP"   means   United   States   generally   accepted
accounting principles as in effect from time to time.

     "Governmental  Body"  means  any  legislature,  agency,
bureau,  branch,  department, division,  commission,  court,
tribunal,  magistrate, justice, multi-national organization,
quasi-governmental   body,  or  other   similar   recognized
organization   or  body  of  any  federal,  state,   county,
municipal,  local, or foreign government  or  other  similar
recognized organization or body exercising similar powers or
authority.

     "Hired   Active  Employees"  is  defined   in   Section
8.8(b)(i)



     "Indemnification Claim" is defined in Section 11.4(a).

     "Indemnified  Buyer  Parties"  means  Buyer   and   its
officers,    directors,   managers,    employees,    agents,
representatives,  controlling  Persons,  stockholders,   and
their Affiliates.

     "Indemnified  Parties"  means, individually  and  as  a
group,  the  Indemnified Buyer Parties and  the  Indemnified
Seller.

     "Indemnified  Seller" means Seller  and  its  officers,
directors,  managers,  employees,  agents,  representatives,
controlling   Persons,  and  stockholders   (including   the
Shareholders).

     "Indemnitor"  means any Party having any  Liability  to
any Indemnified Party under this Agreement.

     "Innovo"   means   Innovo  Group   Inc.,   a   Delaware
corporation.

     "Innovo  Shareholder Approval" is  defined  in  Section
3.4(a).

     "Intellectual  Property" means  any  rights,  licenses,
liens,  security interests, charges, encumbrances, equities,
and   other  claims  that  any  Person  may  have  to  claim
ownership, authorship or invention, to use, to object to  or
prevent  the  modification of, to withdraw from circulation,
or  control  the publication or distribution of  any  Marks,
Patents, Copyrights, or Trade Secrets.

     "IRS" means the Internal Revenue Service.

     "Knowledge" means the knowledge of a Person's  officers
and  directors as of the Execution Date and the Closing Date
after  due investigation.  With respect to particular  areas
of  interest, "Knowledge" will include the knowledge of such
Person's  employees  charged  with  responsibility   for   a
particular area of such Person's operations.

     "Law"  means any law (statutory, common, or otherwise),
constitution,   treaty,  convention,  ordinance,   equitable
principle, code, rule, regulation, executive order, or other
similar  authority enacted, adopted, promulgated, or applied
by  any  Governmental  Body, each as  amended  and  now  and
hereinafter in effect.

     "Liability"   or  "Liable"  means  any   liability   or
obligation,   whether   known  or   unknown,   asserted   or
unasserted,  absolute or contingent, matured  or  unmatured,
conditional or unconditional, latent or patent,  accrued  or
unaccrued, liquidated or unliquidated, or due or  to  become
due.

     "Lock-up Date Average" is defined in Section 3.4(c).

     "Lock-up Period" is defined in Section 3.4(b).

     "Locked-up Shares" is defined in Section 3.4(b).

     "Locked-up  Shares  Release  Formula"  means:  (a)  the
difference  between (i) 21,800,000 and (ii) the  product  of
(A)  the  difference between (1) 65,000,000 and (2) the  AGR
for Calculation Period II as of the end of a relevant fiscal
quarter of such Calculation Period, and (B) 50%, divided  by
(b)  4;  and subtracting from such quotient (c) any Released
Locked-up Shares determined pursuant to the Locked-up Shares
Release Formula for any previous fiscal quarter.

     "Marks"  means  all fictitious business names,  trading
names,   corporate   names,  registered   and   unregistered
trademarks, service marks, and applications.

     "Material  Adverse Change (or Effect)" means  a  change
(or  effect)  in  the  condition (financial  or  otherwise),
properties,   assets,   Liabilities,  rights,   obligations,
operations, business, or prospects which change (or effect),
individually  or  in  the  aggregate,  could  reasonably  be
expected   to  be  materially  adverse  to  such  condition,
properties,   assets,   Liabilities,  rights,   obligations,
operations, business, or prospects.



     "Material Consents" is defined in Section 9.1(e).

     "Material Contracts" is defined in Section 6.12.

     "Most Recent Balance Sheet" means the unaudited balance
sheet  of  Seller  prepared as of and for  the  Most  Recent
Balance Sheet Date.

     "Most  Recent Balance Sheet Date" is defined in Section
6.5(a).

     "Most Recent Fiscal Year" is defined in Section 6.5(a).

     "Negative Balance" is defined in Section 3.5(c).

     "Note Adjustment Amount" means the aggregate amount  by
which  the  principal balance of the Buyer Note is  adjusted
pursuant to Sections 3.5(a) and (b).

     "Order"  means  any  order, ruling, decision,  verdict,
decree,   writ,   subpoena,   mandate,   precept,   command,
directive,  consent, approval, award, judgment,  injunction,
or  other  similar determination or finding by,  before,  or
under  the supervision of any Governmental Body, arbitrator,
or mediator.

     "Ordinary Course of Business" means the ordinary course
of   business  consistent  with  past  custom  and  practice
(including  with respect to quantity, quality and frequency)
of  the relevant Person and its Subsidiaries in the industry
in  which  the  relevant  Person and its  Subsidiaries  does
business.

     "Organizational  Documents"  means  the   articles   of
incorporation,   certificate  of   incorporation,   charter,
bylaws,   articles  of  formation,  regulations,   operating
agreement,  certificate of limited partnership,  partnership
agreement,  and all other similar documents, instruments  or
certificates executed, adopted, or filed in connection  with
the  creation,  formation,  or  organization  of  a  Person,
including any amendments thereto.

     "Parties" is defined in the preamble to this Agreement.

     "Patents"   means   all   (a)   patents   and    patent
applications,  and  (b)  business methods,  inventions,  and
discoveries that may be patentable.

     "PBGC" means the Pension Benefit Guaranty Corporation.

     "Permit"   means  any  permit,  license,   certificate,
approval,  consent, notice, waiver, franchise, registration,
filing,   accreditation,  or  other  similar   authorization
required by any Law, Governmental Body, or Contract.

     "Person"  means  any  individual, partnership,  limited
liability  company,  corporation, association,  joint  stock
company,  trust, entity, joint venture, labor  organization,
unincorporated organization, or Governmental Body.

     "Proposed Note Adjustment Amount" is defined in Section
3.5(b).

     "Purchased  Assets" means all of the right,  title  and
interest that Seller possesses and has the right to transfer
in  and to all of the following assets as used in connection
with  the ownership and operation of the Business:  (a)  all
Intellectual   Property,  goodwill   associated   therewith,
licenses  and sublicenses granted and obtained with  respect
thereto,    and   rights   thereunder,   remedies    against
infringements thereof, and rights to protection of interests
therein  under  the  laws  of  all  jurisdictions;  (b)  all
purchase   orders   for  products  designed,   manufactured,
distributed  or  marketed by Seller in connection  with  the
ownership and operation of the Business; (c) all Permits and
similar  rights  obtained  from  Governmental  Bodies;   (d)
goodwill;  (e) claims, causes of action, chooses in  action,
rights  of  recovery,  rights of  set  off,  and  rights  of
recoupment (including any such item relating to the  payment
of  taxes);  (f) books, records, ledgers, files,  documents,
correspondence, lists, plats, architectural plans,  drawings
and  specifications,  manuals, quality control  records  and
procedures,  and  research and development  files;  (g)  all
forms,  designs,  drawings, screens, patterns,  photographs,
film,  art,  artwork libraries, labels, creative  materials,
advertising   and   promotional   materials,   new   product
development  materials, studies, reports, and other  printed
or  written materials; and (h) all assets listed on Schedule
1.1;  provided, however, that the Purchased Assets will  not
include (i) any assets possessed or owned by Seller which do
not  relate  to the ownership or operation of the  Business,
(ii)  any  cash or cash equivalents, checkbooks or cancelled
checks,  bank  accounts or deposits, refunds or prepayments,
(iii)  any  inventory, or (iv) any of the rights  of  Seller
under  this Agreement, the other Transaction Documents,  and
any other agreement between Seller on the one hand and Buyer
on  the  other  hand entered into on or after the  Execution
Date and on or prior to the Closing Date.



     "Purchase Price" is defined in Section 3.1.

     "Qualifying  Offer"  means an offer  of  employment  by
Buyer  to an Active Employee that would provide such  Active
Employee  (i) an annual compensation level that is at  least
one   hundred  percent  (100%)  of  the  applicable   Active
Employee's    current   total   annual   cash   compensation
(consisting  of  base  salary  (wages)  and  bonuses),  (ii)
benefits that are substantially similar to those provided to
similarly   situated   employees   of   Buyer,   and   (iii)
substantially  similar duties and responsibilities  as  such
Active Employee had prior to Closing.

     "Released  Locked-up  Shares"  is  defined  in  Section
3.5(f).

     "S-3   Blackout  Period"  means,  with  respect  to   a
registration,  a  period, commencing on the day  immediately
after  Innovo  notifies  the Seller Parties  that  they  are
required, pursuant to Section 3.4(f), to suspend offers  and
sales of registered Converted Shares and/or Shortage Shares,
during which Innovo, in the good faith judgment of its Board
of Directors, determines (because of the existence of, or in
anticipation  of,  any acquisition, financing  activity,  or
other  transaction  involving Innovo, or the  unavailability
for   reasons  beyond  Innovo'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 Innovo)  that
the  registration  and distribution of the Converted  Shares
and/or  Shortage  Shares to be covered by such  registration
statement, if any, would be seriously detrimental to  Innovo
and  its shareholders, and ending on the earlier of (1)  the
date   upon   which  the  material  non-public   information
commencing  the  S-3  Blackout Period is  disclosed  to  the
public  or ceases to be material and (2) such time as Innovo
notifies the Seller Parties that Innovo will no longer delay
such filing of the registration statement applicable to such
Converted  Shares and/or Shortage Shares, recommence  taking
steps to make such registration statement effective or allow
sales  pursuant  to such registration statement  to  resume;
provided,  however, that Innovo shall limit its use  of  S-3
Blackout  Periods, in the aggregate, to one  hundred  twenty
(120) trading days in any 12-month period.

     "Schedules" mean the Schedules to this Agreement.

     "Security  Interest" means any security interest,  deed
of  trust, mortgage, pledge, lien, charge, claim,  or  other
similar  interest or right, except for (i) liens for  taxes,
assessments, governmental charges, or claims that are  being
contested  in  good  faith by appropriate  Actions  promptly
instituted  and diligently conducted and only to the  extent
that  a reserve or other appropriate provision, if any,  has
been  made  on  the face of the Financial Statements  in  an
amount  equal  to  the  Liability  for  which  the  lien  is
asserted,   (ii)   statutory   liens   of   landlords    and
warehousemen's,    carriers',    mechanics',     suppliers',
materialmen's,  repairmen's, or other like liens  (including
Contractual landlords' liens) arising in the Ordinary Course
of  Business and with respect to amounts not yet  delinquent
and   being   contested   in  good  faith   by   appropriate
proceedings,  only  to the extent that a  reserve  or  other
appropriate provision, if any, has been made on the face  of
the Financial Statements in an amount equal to the Liability
for which the lien is asserted; and (iii) liens incurred  or
deposits  made  in  the  Ordinary  Course  of  Business   in
connection    with   workers'   compensation,   unemployment
insurance and other similar types of social security.

     "Seller" is defined in the preamble to this Agreement.

     "Seller  Parties"  is defined in the preamble  to  this
Agreement.

     "Shareholder"  is  defined  in  the  preamble  to  this
Agreement.

     "Shortage Shares" is defined in Section 3.4(c).

     "Software" means computer software or middleware.



     "Supply  Agreement" means the Supply Agreement  in  the
form of Exhibit C.

     "Subsidiary" means, with respect to any Person: (a) any
corporation of which more than 50% of the total voting power
of  all  classes  of the Equity Interests entitled  (without
regard to the occurrence of any contingency) to vote in  the
election  of  directors is owned by such Person directly  or
through  one or more other Subsidiaries of such  Person  and
(b) any Person other than a corporation of which at least  a
majority   of   the  Equity  Interest  (however  designated)
entitled   (without   regard  to  the  occurrence   of   any
contingency) to vote in the election of the governing  body,
partners,   managers  or  others  that  will   control   the
management  of such entity is owned by such Person  directly
or through one or more other Subsidiaries of such Person.

     "Tax"  means  any  federal, state,  local,  or  foreign
income,   gross  receipts,  license,  payroll,   employment,
excise,  severance,  stamp,  occupation,  premium,  windfall
profits,  environmental (including taxes under Code  Section
59A), customs, ad valorem, duties, capital stock, franchise,
profits,   withholding,   social   security,   unemployment,
disability,  real property, personal property,  sales,  use,
transfer,  registration, value added, alternative or  add-on
minimum,  estimated,  or other tax of any  kind  whatsoever,
including  any  interest,  penalty,  or  addition   thereto,
whether disputed or not.

     "Tax  Return"  means  any return, declaration,  report,
claim   for  refund,  or  information  return  or  statement
relating to Taxes required to be filed with any Governmental
Body,  including  any  schedule or attachment  thereto,  and
including any amendment thereof.

     "Termination  Date" means the earlier to occur  of  (a)
the Expiration Date and (b) the date on which this Agreement
is  terminated pursuant to Section 10.1 (other than  Section
10.1(b)).

     "Threatened" means a demand or statement has been  made
(orally or in writing) or a notice has been given (orally or
in  writing), or any other event has occurred or  any  other
circumstances  exist  that would lead a  prudent  Person  to
conclude that a cause of Action or other matter is likely to
be asserted, commenced, taken, or otherwise initiated.

     "Trade  Secrets"  means  all know-how,  trade  secrets,
confidential  information, customer lists, Software  (source
code  and object code), technical information, data, process
technology, plans, drawings, and blue prints.

     "Transaction Documents" means this Agreement, the Buyer
Note, the Supply Agreement and the Bill of Sale.

     "Transactions"  means: (a) the sale  of  the  Purchased
Assets  by  Seller  to  Buyer and Buyer's  delivery  of  the
Purchase  Price therefor; (b) the execution,  delivery,  and
performance  of  all  of  the  documents,  instruments,  and
agreements  to  be  executed, delivered,  and  performed  in
connection herewith including each Transaction Document; and
(c) the performance by Buyer and the Seller Parties of their
respective covenants and obligations (pre- and post-Closing)
under this Agreement.

     "Treas.  Reg." means the proposed, temporary and  final
regulations promulgated under the Code.

     "WARN Act" is defined in Section 6.16(c).

                         ARTICLE 2.
                 PURCHASE AND SALE OF ASSETS

     2.1  Purchase and Sale of Assets

     On  and  subject  to the terms and conditions  of  this
Agreement, Buyer agrees to purchase from Seller, and  Seller
agrees to sell, transfer, convey, and deliver to Buyer,  all
of  the Purchased Assets for the consideration specified  in
ARTICLE 3 below.


     2.2  No Assumed Liabilities

     Buyer  will not assume or have any responsibility  with
respect to any obligation or Liability of Seller.

                         ARTICLE 3.
                       PURCHASE PRICE

     3.1  Purchase Price

     The  purchase  price  for  the  Purchased  Assets  (the
"Purchase Price") will be equal to twenty-one million  eight
hundred   thousand   dollars   ($21,800,000),   subject   to
adjustment pursuant to ARTICLE 3.

     3.2  Allocation of Purchase Price

     Within  30 days following the Closing Date, Buyer  will
deliver  to  Seller  a schedule (the "Allocation  Schedule")
allocating  the Purchase Price (including, for  purposes  of
this  Section 3.2, any other consideration paid  to  Seller)
among the Purchased Assets.  The Allocation Schedule will be
reasonable  and will be prepared in accordance with  Section
1060  of  the  Code and the regulations thereunder.   Seller
agrees   that   promptly  after  receiving  the   Allocation
Schedule, it will sign the Allocation Schedule and return an
executed copy thereof to Buyer.  Buyer and Seller each agree
to  file  IRS Form 8594, and all federal, state,  local  and
foreign  Tax  Returns,  in accordance  with  the  Allocation
Schedule.  Buyer and Seller each agree to provide the  other
promptly with any other information required to complete IRS
Form 8594.

     3.3  Payment Terms and Offsets

          (a)  Subject to the terms of this Agreement, at the
     Closing, Buyer shall deliver to Seller  a Buyer  Note in
     the amount of twenty-one  million eight hundred thousand
     dollars ($21,800,000).

          (b)  The Buyer Note shall be payable by Buyer to Seller,
     shall have a 7-year term, shall bear interest at the rate of
     six percent (6%) per annum, and shall be payable as follows:

               (i)  for the first two  years of  the  term  of the
          Buyer  Note,  accrued  interest only  shall  be  due and
          payable in equal monthly installments; and

               (ii) for the remaining five years of the term of the
          Buyer Note, the principal amount shall be fully amortized
          over such period, and both principal and accrued interest
          shall be due and payable in equal monthly installments.

          (c)  Subject to Sections 3.3(d) and 11.6, Buyer shall make
     each payment under Section 3.3(b) on the fifteenth (15th) day of
     the calendar month (unless such day is a Saturday, Sunday or any
     other  day  in  which  banks  in  California  are  authorized or
     required to be closed, in which case  such payment shall  be due
     on  the  next  business  day  immediately  following  such  day)
     immediately following the calendar month for which such  payment
     became due and owing.  In the event that Buyer fails to make any
     payment when due, then interest at the rate of  eighteen percent
     (18%) per annum shall accrue and be payable on  the  amount then
     due (from the due date until the date paid).

          (d)  At the election of Seller, at  any  time following the
     expiration of the Lock-up Period (as defined below), the balance
     due on the Buyer Note may be reduced as an offset against monies
     payable by Seller or its Affiliates to Buyer for the exercise of
     issued and outstanding common stock warrants of Innovo  that are
     owned by Seller or its  Affiliates prior  to  the  Closing Date;
     provided, however, that any such offset shall be duly authorized
     and evidenced by resolutions of the board of directors of Seller
     and/or its Affiliate(s), as  the case may be, and  shall  be  in
     accordance with applicable law and generally accepted accounting
     principles.



     3.4  Partial Conversion of Buyer Note; Converted Shares;
Lock-ups; Share Registration



          (a)  As soon as reasonably practicable following the Closing
     Date, Innovo shall, in accordance  with  Nasdaq  Marketplace Rule
     4350(i), hold a shareholder meeting  for  the  purpose of seeking
     shareholder approval ("Innovo Shareholder Approval") of:

               (i) the conversion of a portion of the principal amount
          of the Buyer Note into 3,125,000 shares of the  common stock
          of Innovo (the "Converted Shares")  at  a  conversion  price
          equal to the greater of (x) $4.00 and (y) the  closing price
          on the day immediately  prior  to  such  shareholder meeting
          (the "Conversion Price"); provided, however, that,  if  such
          approval is obtained, then the principal amount of the Buyer
          Note shall be reduced by an amount equal to  the  product of
          (A) the Conversion Price and (B) 3,125,000; further provided,
          that in no event shall  the principal  amount  of  the Buyer
          Note be reduced below $9,300,000; and

               (ii) the  issuance  of  additional  Shortage Shares (as
          defined below), if necessary, pursuant to the  provisions of
          Section 3.4(c).

     In   the  event  Innovo  Shareholder  Approval  is  not
     obtained, the existing terms and balances of the  Buyer
     Note shall remain unaffected.

          (b)  In the event Innovo Shareholder Approval is  obtained,
     the Converted Shares  promptly  shall  be  issued in the name of
     Seller and,  subject  to  Section 3.5(f) below,  shall  be  non-
     transferable (the "Locked-up  Shares") until  the  date  that is
     ninety  (90)  days  following   the  expiration  of  Calculation
     Period  II  (as defined below) (the "Lock-up  Period").   During
     such Lock-up Period, in order to satisfy its  obligation to hold
     the requisite number of Locked-up Shares,  Seller shall have the
     right to substitute for  Locked-up  Shares  other  shares of the
     common stock of Innovo (i) then owned by Seller or (ii) acquired
     by Seller pursuant to warrant agreements to which Seller is then
     a party.

          (c)  Subject to  Innovo Shareholder Approval,  in the event
     that the average trading price of Innovo's common  stock for the
     thirty (30) days  immediately preceding  the expiration  of  the
     Lock-up Period (the "Lock-up Date Average") is  less than $4.00,
     Innovo shall, within ninety (90) days of  the expiration  of the
     Lock-up Period, issue to  Seller  additional  shares  of  common
     stock of Innovo equal to the difference of 12,500,000 divided by
     the Lock-up Date Average minus 3,125,000(the "Shortage Shares"),
     provided, however, that for the purposes of  the  calculation of
     the amount of Shortage Shares, the Lock-up Date  Average used in
     such calculation shall be not less than $3.00, regardless of any
     actual Lock-up Date Average that may be lower than  such amount.
     All adjustments contemplated by Section 3.5 shall  be made prior
     to the calculation of Shortage Shares.

          (d)  In the event the Converted Shares are  issued pursuant
     to  Section  3.4(b),  Innovo  shall,  as  soon   as   reasonably
     practicable  but  in  no  event  later  than twelve  (12) months
     thereafter, use its commercially reasonable efforts (i) to  file
     with the Securities and Exchange Commission a shelf registration
     statement on Form S-3 relating to the resale by Seller of all of
     the  Converted  Shares  and  (ii)  to  cause  such  registration
     statement referred to  in  subclause (i) to  become  and  remain
     effective at least for a period ending  with  the first to occur
     of (A) the  sale  of  all  of  the  Converted  Shares,  (B)  the
     availability of  Rule 144  for  Seller  to  immediately,  freely
     resell without restriction all of  the Converted Shares, and (C)
     one  year  following  the  expiration  of  the  Lock-up  Period;
     provided, that Innovo shall not be obligated to effect  any such
     registration,  qualification  or   compliance,   or   keep  such
     registration  effective, (1) in any  particular  jurisdiction in
     which Innovo would be required to qualify to  do business  as  a
     foreign corporation or  as  a  dealer  in  securities  under the
     securities or blue sky laws of such jurisdiction ot to execute a
     general  consent  to  service  of  process  in  effecting   such
     registration, qualification or compliance, in each case where it
     has not already done so,  (2)  during  any  S-3 Blackout Period,
     (3) or if the Converted Shares  have  been  returned  to  Innovo
     pursuant to Section 3.5(f) or 3.5(g); further, provided, that if
     Innovo is obligated to  register the Converted  Shares  and  the
     Converted  Shares  have  not  been   registered   prior  to  the
     expiration of  Calculation  Period II, then  Buyer  shall pay to
     Seller the amount of one hundred thousand dollars ($100,000) for
     each successive three (3) month  period  thereafter  until  such
     time as Innovo registers the Converted Shares in accordance with
     this Section 3.4(d).


          (e)  In  the  event  that  any  Shortage Shares are issued
     pursuant to Section 3.4(c), Innovo  shall,  no  later  than one
     hundred twenty (120) days  following  such  issuance,  use  its
     commercially   reasonable   efforts  (i)  to  file   with   the
     Securities  and  Exchange  Commission   a   shelf  registration
     statement on Form S-3 relating to the resale by  Seller of  all
     of  the  Shortage Shares and (ii)  to  cause  such registration
     statement referred to in  subclause (i)  to become  and  remain
     effective at least for a period ending with  the first to occur
     of (A) the  sale  of  all  of  the  Shortage  Shares,  (B)  the
     availability of Rule 144  for  Seller  to  immediately,  freely
     resell without restriction all of the Shortage Shares,  and (C)
     one  year  following  the  expiration  of  the  Lock-up Period;
     provided, that Innovo shall not be obligated to effect any such
     registration,  qualification  or  compliance,   or   keep  such
     registration effective, (1) in  any particular  jurisdiction in
     which Innovo would be required to qualify to do business  as  a
     foreign corporation  or as  a  dealer  in securities  under the
     securities or blue sky laws of such jurisdiction  to  execute a
     general  consent  to  service  of  process  in  effecting  such
     registration, qualification or compliance, in  each  case where
     it has not already done  so,  or  (2) during  any  S-3 Blackout
     Period; further,  provided,  that  if  Innovo  is  obligated to
     register the Shortage Shares and and the  Shortage  Shares have
     not been registered prior to the expiration of  the  period set
     forth above, then  Buyer shall  pay  to  Seller  the  amount of
     twenty-five  thousand  dollars  ($25,000) for  each  successive
     three (3) month period thereafter  until  such time  as  Innovo
     registers the Shortage Shares  in  accordance with this Section
     3.4(e).

          (f)  In the event of a registration of Converted Shares or
     shortage Shares pursuant to Section 3.4(d) or (e), respectively,
     Innovo will immediately notify  the Seller Parties  at  any time
     when a prospectus relating to such Converted Shares  or Shortage
     Shares is required to be delivered under  the  Securities Act of
     1933, as amended, of the happening of any event  which  comes to
     Innovo'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  Innovo shall promptly prepare and
     furnish to the Seller Parties a supplement or  amendment to such
     prospectus (or prepare  and file  appropriate reports  under the
     Securities  Exchange  Act  of  1934, as  amended) so  that,   as
     thereafter delivered to the purchasers of  such Converted Shares
     or Shortage Shares, as the case  may be,  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  is  authorized  in the
     event of an S-3 Blackout Period, in which case no  supplement or
     amendment need be furnished (or Securities Exchange Act of 1934,
     as amended,  filing made)  until  the  termination  of  such S-3
     Blackout Period.  The Seller Parties agree that, upon receipt of
     any notice from Innovo of the happening of any event of the kind
     described in this Section 3.4(f) or of  the commencement  of  an
     S-3  Blackout  Period, the  Seller  Parties  shall   discontinue
     disposition of Converted Shares and Shortage Shares  pursuant to
     the registration statement(s) covering such securities until the
     Seller Parties' receipt of  the copies  of  the  supplemented or
     amended prospectus contemplated above or notice of  the  end  of
     the S-3 Blackout Period, and,  if  so  directed  by  Innovo, the
     Seller Parties shall deliver to Innovo (at Innovo's expense) all
     copies (including, without  limitation,  any  and  all  drafts),
     other than permanent file copies, then  in  the  Seller Parties'
     possession, of the prospectus covering  such  securities current
     at the time of receipt of such notice. In the event Innovo shall
     give any such notice, the  period  mentioned in  Sections 3.4(d)
     and (e) hereof shall  be  extended  by  the  greater  of (i) ten
     business days or (ii) the number of days during the  period from
     and including the date of the giving of such notice pursuant  to
     this Section 3.4(f) to and including  the  date when  the Seller
     Parties shall have received the copies  of  the  supplemented or
     amended prospectus contemplated by this Section 3.4(f).

     3.5  Sales Guarantee; Loss of Account

         (a)   In  the  event  the  AGR  does  not  equal  at  least
     $70,000,000 during the period from the Closing Date through and
     including  December  31,  2004  ("Calculation  Period  I"), the
     principal balance of  the  Buyer Note shall  be  reduced by  an
     amount computed as follows: (i) $70,000,000 minus  the AGR  for
     Calculation Period I, multiplied by (ii) 50%.



        (b) In the event the AGR does not equal at least $65,000,000
     during  the  twelve  (12)  month  period  from  January 1, 2005
     through  and  including  December 12, 2005 ("Calculation Period
     II"), the principal balance of the Buyer  Note shall be reduced
     by an amount computed as follows: (i) $65,000,000 minus the AGR
     for Calculation Period II, multiplied  by  (ii) 50%;  provided,
     however, if (x) the principal  balance  of  the  Buyer Note  is
     reduced pursuant to Section 3.5(a), (y) the AGR for Calculation
     Period II is less than the AGR for Calculation Period I and (z)
     the AGR for Calculation  Period II  is  less than  $65,000,000,
     then the resulting principal balance of the Buyer Note shall be
     reduced with  respect  to  Calculation Period II  by an  amount
     computed as follows: (A) the AGR for Calculation Period I minus
     the AGR for Calculation Period II, multiplied by (B) 50%.

        (c)  In the event that the principal balance  of  the  Buyer
     Note is reduced pursuant to  Section  3.5(a)  and  the AGR  for
     Calculation  Period  II  is  greater   than   $65,000,000,  the
     resulting  principal  balance  of  the  Buyer  Note   shall  be
     increased with respect to Calculation  Period II  by an  amount
     computed as follows:(i) the AGR for Calculation Period II minus
     $65,000,000, multipled by (ii) 50%; provided, however, that the
     principal balance of the Buyer Note shall not  be  increased by
     more than the amount of the decrease of  the  principal balance
     of the Buyer Note as calculated pursuant to Section 3.5(a).

          (d)  Within twenty (20) days of the end of each Calculation
     Period Buyer will deliver to  Seller a schedule setting forth in
     reasonable detail Buyer's calculation of the AGR for such period
     and the proposed reduction (or increase, as the case may  be) in
     the  principal  amount  of  the  Buyer Note  (the "Proposed Note
     Adjustment Amount").  The Proposed  Note Adjustment  Amount will
     be subject to Seller's review.  In reviewing  the Proposed  Note
     Adjustment Amount, Seller will  have  the right  to  communicate
     with, and  to  review  the  work  papers,  schedules  and  other
     documents Buyer prepared or reviewed in determining the Proposed
     Note Adjustment Amount for  such period and thereafter will have
     access  to  all  relevant  books and records, all to the  extent
     Seller reasonably  requires to complete  its  review of  Buyer's
     calculation of the Proposed Note Adjustment Amount.   Within ten
     (10)  calendar days after its receipt of  Buyer's calculation of
     the Proposed Note Adjustment Amount,  Seller  will  advise Buyer
     whether, based on such review, it has  any  exceptions  to  such
     calculation.    Unless Seller delivers to Buyer within  such ten
     (10) calendar day period a letter describing  its  exceptions to
     Buyer's calculation of the applicable Proposed  Note  Adjustment
     Amount as set forth in the schedule delivered by Buyer described
     in this Section 3.5(d), the Proposed Note Adjustment Amount  for
     the applicable Calculation Period will be conclusive and binding
     on Buyer and Seller as  the  Note  Adjustment Amount.  If  Buyer
     and Seller are unable to  agree  on  the  Note Adjustment Amount
     (the "Disputed Note Adjustment Amount"), then (A) for  ten  (10)
     days  after  the  date  Buyer  receives  the  letter  describing
     Seller's exceptions to Buyer's calculation of  the Proposed Note
     Adjustment Amount, Seller and Buyer will use their  Best Efforts
     to agree on the calculation of  the  Note Adjustment  Amount and
     (B) lacking such agreement, the matter will  be  referred  to an
     independent  accounting  firm  acceptable to Buyer  and  Seller,
     who will determine  the correct Disputed Note  Adjustment Amount
     within  fifteen  (15)  calendar  days  of  such  referral, which
     determination will be final and binding on Buyer and  Seller for
     all purposes.

          (e)  In the  event  the  Converted  Shares  are  issued  as
     contemplated  in  Section 3. 4(a), if  the  application  of  the
     principal balance  adjustment  formulas  described  in  Sections
     3.5(a), (b) and (c) results  in  a reduction  of  the  principal
     balance of the Buyer Note greater than the principal  balance of
     the Buyer  Note  then  outstanding (such  amount  exceeding  the
     principal balance, the  "Negative Balance"),   Locked-up  Shares
     shall  be returned to  the Buyer  in  an  amount  sufficient  to
     equal the Negative Balance, provided, that for such purpose each
     Locked-up Share shall be valued at $4.00.

         (f)  In the event (i) the  Converted  Shares  are  issued as
     contemplated in  Section 3.4(a), (ii) the  AGR  for  Calculation
     Period I  is  at  least  $70,000,000   and  (iii)  the  AGR  for
     Calculation Period II as of the end of any fiscal quarter during
     Calculation Period II is  at  least  $35,000,000 (as  determined
     pursuant to the unaudited financial statements of Buyer for such
     quarter), then that number  of  Locked-up Shares  determined  in
     accordance with  the  Locked-up  Shares  Release  Formula  (such
     Locked-up  Shares,  the  "Released Locked-up Shares")  shall  no
     longer be subject to  the  restriction  on  transferability  set
     forth in Section 3.4(b).



          (g)  In the event the AGR decreases to $35,000,000 or less
     in either Calculation Period I or Calculation Period II,  Buyer
     shall have the right  to resell  the  Purchased Assets  to  the
     Seller Parties, and the Seller Parties shall have the right  to
     repurchase the Purchased Assets from  Buyer,  exercisable  upon
     written notice to  the  other  party  given within  the  90-day
     period  after  the  end  of  Calculation Period II.   Upon  the
     exercise  of  such  rights  by  either   party,  the  remaining
     principal balance outstanding on the Buyer Note shall be deemed
     forgiven and the Buyer Note cancelled without further action by
     either party and  all  outstanding  Converted  Shares  shall be
     returned to Buyer.

          (h)  If at any time during Calculation Period I AEO ceases
     to be a customer of Buyer,  as  determined  in  the  reasonable
     judgment of the Board  of  Directors  of  Buyer, all  Locked-up
     Shares shall  be  returned  to  the  Buyer  and  the  remaining
     principal  balance  outstanding  on  the  Buyer  Note  shall be
     deemed  forgiven  and   the  Buyer  Note  shall   be  cancelled
     without further action by either party.   Upon such  return  of
     Locked-up Shares and the cancellation of the Buyer Note,  Buyer
     will, at the request of Seller, return  to  Seller  any  or all
     Purchased Assets.

          (i)  Notwithstanding any other provision  of this  Section
     3.5, aggregate  Note  Adjustment  Amounts  shall not be  exceed
     $16,800,000, unless (i) AEO is no longer  a  customer  of Buyer
     as contemplated in Section 3.5(h) or (ii) the Purchased  Assets
     are  resold  to  or repurchased  by  Seller  as contemplated in
     Section 3.5(i).

                         ARTICLE 4.
                           CLOSING

     4.1  The Closing

     The  closing of the purchase and sale of the  Purchased
Assets  (the  "Closing") will take place at the  offices  of
Akin   Gump  Strauss  Hauer  &  Feld  LLP  in  Los  Angeles,
California,  commencing at 10:00 a.m., local  time,  or  any
other  mutually agreed upon location, on the third  business
day  following the satisfaction or waiver of all  conditions
to the obligations of the Parties to consummate the purchase
and sale of the Purchased Assets (other than conditions with
respect to actions the respective Parties will take  at  the
Closing  itself) or such other date as Buyer and the  Seller
Parties may mutually determine (the "Closing Date").

     4.2  Deliveries at the Closing

     At the Closing:

          (a)  The Seller Parties will deliver to Buyer:

               (i)  The Bill of Sale, duly executed by Seller.


               (ii) The Supply Agreement, duly executed by AZT
          International.

              (iii) Such other bills  of  sale,  assignments,  and
          other instruments of transfer or conveyance as Buyer may
          reasonably request or as may be otherwise  necessary  to
          evidence  and  effect  the  sale,  assignment, transfer,
          conveyance, and delivery of the Purchased Assets to Buyer.

               (iv) An Officers' Certificate, substantially  in  the
          form of Exhibit D, duly executed on Seller's behalf, as to
          whether  each  condition  specified  in  Sections  9.1 (a)
          through 9.1(d) has been satisfied in all respects.

               (v)  A    Secretary's    certificate    for   Seller,
          substantially in the form of  Exhibit E, duly executed  on
          behalf of Seller.

          (b)  Buyer will deliver the following to Seller:

               (i) A Buyer Note in the principal amount of twenty-
          one million eight hundred thousand dollars ($21,800,000),
          duly executed by Buyer.

               (ii) The Supply  Agreement, each  duly  executed  by
          Buyer.

               (iii)An Officers' Certificate,  substantially in the
          form of Exhibit F, duly executed on Buyer's behalf, as to
          whether  each  condition  specified  in   Sections 9.2(a)
          through 9.2(c) has been satisfied in all respects.

               (iv) A Secretary's certificate, substantially in the
          form of Exhibit G, duly executed on Buyer's behalf.

     4.3  Obtaining Further Consents

     Anything    in   this   Agreement   to   the   contrary
notwithstanding,  this  Agreement shall  not  constitute  an
agreement to assign any of the Purchased Assets or any claim
or  right  or  any benefit arising thereunder  or  resulting
therefrom  if  an  attempted  assign  thereof,  without  the
consent  of  a third Person, would constitute  a  breach  or
other  contravention thereof or in any way adversely  affect
the rights of Buyer thereunder.  The Seller Parties will use
their  Best Efforts to obtain the consent of any such Person
for  the assignment to Buyer of any such Contract or Permit.
If  such consent is not obtained prior to Closing, or if  an
attempted assignment thereof would be ineffective  or  would
adversely  affect  the rights of Seller thereunder  so  that
Buyer would not in fact receive all such rights, then Buyer,
its   sole  discretion,  may  elect  to  waive  the  closing
condition  and  in such event the Seller Parties  and  Buyer
agree  to  cooperate in devising and implementing a mutually
satisfactory  arrangement  under which  Buyer  would  obtain
substantially all of the benefits from and after the Closing
Date in accordance with this Agreement.

                         ARTICLE 5.
           REPRESENTATIONS AND WARRANTIES OF BUYER

     Buyer  represents  and warrants to the  Seller  Parties
that  the statements contained in this ARTICLE 5 are correct
and  complete as of the Execution Date and will  be  correct
and complete as of the Closing Date (as though made then and
except   as  expressly  provided  in  a  representation   or
warranty,  as  though the Closing Date were substituted  for
the Execution Date throughout this ARTICLE 5), except as set
forth in the Schedules that Buyer has delivered to Seller on
the Execution Date.

     5.1  Organization of Buyer

     Buyer   is   a  corporation  duly  organized,   validly
existing,  and in good standing under the Laws of the  State
of  California.  Buyer has the requisite corporate power and
authority  necessary to own or lease its properties  and  to
carry on its businesses as currently conducted.  There is no
pending  or  Threatened Action (or Basis therefor)  for  the
dissolution,  liquidation, insolvency, or rehabilitation  of
Buyer.

     5.2  Authority of Buyer; Enforceability

     Buyer  has  the relevant corporate power and  authority
necessary  to execute and deliver each Transaction  Document
to  which  it  is a party and to perform and consummate  the
Transactions  contemplated  by this  Agreement.   Buyer  has
taken  all  action necessary to authorize the execution  and
delivery  of each Transaction Document to which Buyer  is  a
party,  the  performance of its obligations thereunder,  and
the  consummation  of  the Transactions.   Each  Transaction
Document to which Buyer is a party has been duly authorized,
executed,  and  delivered  by, and is  enforceable  against,
Buyer.

     5.3  No Violation

     Except as listed on Schedule 5.3, the execution and the
delivery  of the Transaction Documents to which Buyer  is  a
party  by  Buyer and the performance of the Transactions  by
Buyer will not (a) Breach any Law or Order to which Buyer is
subject   or   any   provision  of  Buyer's   Organizational
Documents;  (b)  Breach any Contract, Order,  or  Permit  to
which  Buyer is a party or by which it is bound or to  which
any  of the Purchased Assets are subject; or (c) require any
Consent.

     5.4  No Finder


     Buyer  has no Liability to pay any compensation to  any
broker,  finder,  or agent with respect to the  Transactions
for which any Seller Party could become Liable.



     5.5  Buyer's Financial Statements

     Buyer  has  furnished or made available to Seller  true
and  complete copies of Buyer's audited financial statements
for  the  fiscal year ended November 30, 2002, and unaudited
financial  statements for the three (3) month  period  ended
March   1,   2003   (collectively,  the   "Buyer   Financial
Statements").   The  Buyer Financial  Statements  have  been
prepared  in  accordance  with  GAAP  consistently   applied
(except  as  may  be  indicated in the  notes  thereto)  and
present  fairly Buyer's consolidated financial  position  at
the  dates thereof and of its operations and cash flows  for
the  periods  then ended (subject, in the case of  unaudited
statements, to normal audit adjustments).  Since the date of
the  balance  sheet for the Buyer's most recent fiscal  year
end  included in the Buyer Financial Statements,  Buyer  has
not  effected  any  change in any method  of  accounting  or
accounting  practice,  except for any such  change  required
because of a concurrent change in GAAP.

     5.6  Litigation

     Schedule  5.6 sets forth each instance in  which  Buyer
(a)  is  subject to any outstanding Order or (b) is a party,
the  subject of, or is Threatened to be made a party  to  or
the  subject of any Action.  No Action required  to  be  set
forth  in Schedule 5.6 questions the Enforceability of  this
Agreement  or  the  Transactions, or  could  result  in  any
Material Adverse Change with respect to Buyer, and Buyer has
no  Basis to believe that any such Action may be brought  or
Threatened against Buyer.

     5.7  Solvency

     Buyer  is not now insolvent, nor will Buyer be rendered
insolvent  by  any  of the Transactions.   As  used  herein,
"insolvent" means that the sum of the Liabilities  of  Buyer
exceeds the fair present value of Buyer's assets.

     5.8  Representations Complete

     Except  as  and  to  the  extent  set  forth  in   this
Agreement,  Buyer  makes  no representations  or  warranties
whatsoever  (INCLUDING ANY IMPLIED OR  EXPRESS  WARRANTY  OF
MERCHANTABILITY,  FITNESS  FOR  A  PARTICULAR  PURPOSE,   OR
CONFORMITY TO MODELS OR SAMPLES OF MATERIALS) to the  Seller
Parties    and   hereby   disclaims   all   Liability    and
responsibility for any representation, warranty,  statement,
or   information   not  included  herein  that   was   made,
communicated,  or furnished (orally or in  writing)  to  any
Seller  Party or its representatives (including any opinion,
information, projection, or advice that may have been or may
be  provided to such Seller Party by any director,  officer,
employee, agent, consultant, or representative of  Buyer  or
Affiliate thereof).

                         ARTICLE 6.
  REPRESENTATIONS AND WARRANTIES CONCERNING SELLER AND THE
                          BUSINESS

     The  Seller  Parties, jointly and severally,  represent
and  warrant to Buyer that the statements contained in  this
Article 6 are correct and complete as of the Execution  Date
and  will be correct and complete as of the Closing Date (as
though  made  then and, except as expressly  provided  in  a
representation or warranty, as though the Closing Date  were
substituted  for the Execution Date throughout this  ARTICLE
6),  except  as  set  forth  in  the  Schedules  Seller  has
delivered to Buyer on the Execution Date.

     6.1  Entity Status

     Seller   is  a  corporation  duly  organized,   validly
existing,  and in good standing under the Laws of the  State
of  California.   Seller is duly authorized to  conduct  the
Business  and  is in good standing under the  laws  of  each
jurisdiction  where the nature or operation of the  Business
makes   such  qualification  necessary.   Seller   has   the
requisite  corporate power and authority necessary  to  own,
lease and operate the Business as currently conducted and as
proposed  to  be conducted.  Seller has delivered  to  Buyer
correct  and  complete  copies  of  Seller's  Organizational
Documents, as amended to date.  Seller is not in  Breach  of
any provision of its Organizational Documents.  There is  no
pending  or  Threatened Action (or Basis therefor)  for  the
dissolution,  liquidation, insolvency, or rehabilitation  of
Seller.



     6.2  Power and Authority; Enforceability

     Seller  has the relevant corporate power and authority,
and   each  Shareholder  has  the  capacity  and  authority,
necessary  to execute and deliver each Transaction  Document
to  which  it  is a party and to perform and consummate  the
Transactions.   Each  Seller  Party  has  taken  all  action
necessary  to authorize the execution and delivery  of  each
Transaction Document to which it is a party, the performance
of   its   respective   obligations  thereunder,   and   the
consummation of the Transactions.  Each Transaction Document
to  which  each  Seller  Party is  a  party  has  been  duly
authorized,  executed, and delivered by, and is  enforceable
against such Seller Party.

     6.3  No Violation

     Except as listed on Schedule 6.3, the execution and the
delivery  of  the applicable Transaction Documents  by  each
Seller   Party   and  the  performance  of  its   respective
obligations  hereunder and thereunder, and  consummation  of
the  Transactions by each Seller Party will not  (a)  Breach
any  Law  or Order to which such Seller Party is subject  or
any provision of the Organizational Documents of Seller; (b)
Breach  any Contract, Order, or Permit to which such  Seller
Party is a party or by which it is bound or to which any  of
the   Purchased  Assets  are  subject  (or  result  in   the
imposition  of  any Encumbrance upon the Purchased  Assets);
(c) require any Consent; (d) Breach any other material note,
instrument,  agreement, mortgage, base, license,  franchise,
permit  or  other  authorization,  rights,  restriction   or
obligation to which such Seller Party is a party or  any  of
the  Purchased  Assets is subject or by  which  such  Seller
Party is bound.

     6.4  Brokers' Fees

     No   Seller  Party  has  any  Liability  to   pay   any
compensation to any broker, finder, or agent with respect to
the  Transactions for which Buyer could become  directly  or
indirectly Liable.

     6.5  Financial Statements

     Set  forth  on Schedule 6.5 are the following financial
statements  for  the Business (collectively  the  "Financial
Statements"):

          (a)  Unaudited  statements  of   revenues,   direct
     expenses  and   identified   corporate  expenses  before
     interest and taxes as of  and  for each  of  the  fiscal
     years  ended  January 31, 2001,   January 31, 2002,  and
     January 31, 2003 for  the  Business.   The  fiscal  year
     ended January 31, 2003 is  referred  to  herein  as  the
     "Most Recent Fiscal Year."

          (b)  Unaudited balance sheet as of January 31, 2003
     (the "Most Recent Balance Sheet Date") for the Business.

          (c)  The  Financial  Statements,  which  have  been
     extracted from the books and  records  of  Seller (which
     books and records are the  basis  for  Seller's  audited
     consolidated financial statements), have  been  prepared
     in accordance with GAAP applied  on  a  consistent basis
     throughout the periods  covered thereby,  present fairly
     the financial condition of the Business as of such dates
     and the results of operations of  the  Business for such
     periods, are correct  and complete, and  are  consistent
     with the books and records of Seller.   Since  the  Most
     Recent Balance Sheet Date, Seller has  not  effected any
     change  in  any  method   of  accounting  or  accounting
     practice, except for any such change required because of
     a concurrent change in GAAP.

     6.6  Subsequent Events

     Except  as  set forth in Schedule 6.6, since  the  Most
Recent  Balance Sheet Date, Seller has operated the Business
in  the  Ordinary Course of Business and there have been  no
events,  series of events or the lack of occurrence  thereof
which,  singularly or in the aggregate, could reasonably  be
expected to have a Material Adverse Effect on the Business.




     6.7  No Undisclosed Liabilities

     To  any  Seller Party's Knowledge, the Business has  no
Liability  (and there is no Basis for any present or  future
Action  or  Order against the Business giving  rise  to  any
Liability),  except for (a) Liabilities  quantified  on  the
face  of the Financial Statements (rather than in any  notes
thereto)  and  not  heretofore paid or discharged,  and  (b)
Liabilities which have arisen after the Most Recent  Balance
Sheet  Date  in  the  Ordinary  Course  of  Business  which,
individually or in the aggregate, are not material  and  are
of   the  same  character  and  nature  as  the  Liabilities
quantified  on the face of the Financial Statements  (rather
than  any  notes  thereto) none of  which  results  from  or
relates to any Breach of Contract, Breach of warranty, tort,
infringement, or Breach of Law or arose out of any Action or
Order.

     6.8  Legal Compliance

     Seller  and  its respective predecessors and Affiliates
have   conducted  the  Business  in  compliance   with   all
applicable Laws, and no Action is pending or Threatened (and
there  is  no  Basis  therefor) against  them  alleging  any
failure  to  so  comply.  No material expenditures  are,  or
based  on  applicable Law, will be required  of  any  Seller
Party or Buyer for the Business to remain in compliance with
applicable Law.

     6.9  Tax Matters

     There  are  no  Liabilities for Taxes relating  to  the
Business,  including Taxes relating to prior periods,  other
than  those set forth or adequately reserved against in  the
Most  Recent Balance Sheet or those incurred since the  Most
Recent  Balance  Sheet  Date  in  the  Ordinary  Course   of
Business.  Each Seller Party has duly filed when due all Tax
reports and returns in connection with and in respect of the
Business  and the assets and employees related thereto,  and
has  timely  paid and discharged all amounts  shown  as  due
thereon.   Each  Seller Party has made  available  to  Buyer
accurate  and complete copies of all of its Tax reports  and
Tax Returns relating to the Business for all periods, except
those  periods for which returns are not yet due.  No Seller
Party   has  received  any  notice  of  any  Tax  deficiency
outstanding, proposed or assessed against or allocable to it
in respect of the Business, its assets or employees, and has
not executed any waiver of any statute of limitations on the
assessment  or  collection of any Tax or executed  or  filed
with  any  Governmental  Body any  Contract  now  in  effect
extending  the  period for assessment or collection  of  any
Taxes  against it in respect of the Business, its assets  or
employees.   There are no Encumbrances for  Taxes  upon,  or
pending or Threatened against, any Purchased Asset.   Seller
is  not  subject  to any Tax allocation or sharing  Contract
relating to the Business.  Seller (i) has not been a  member
of  an Affiliated Group filing a consolidated federal income
Tax  Return (other than a group the common parent  of  which
was  Seller) or (ii) has no Liability for the Taxes  of  any
Person under Treas. Reg. Section 1.1502-6 or similar Law, as
a transferee or successor, by Contract, or otherwise.

     6.10 Title to Purchased Assets

     Seller has good, marketable, and indefeasible title  to
all of the Purchased Assets, in each case free and clear  of
all  Encumbrances.   Upon and following the  Closing,  Buyer
will have good, marketable, and indefeasible title to all of
the  Purchased Assets, in each case free and  clear  of  all
Encumbrances.

     6.11 Intellectual Property

         (a)  With respect to each Trade Secret constituting
     Purchased Assets, the  documentation relating  to  such
     Trade Secret is current,  accurate,  and  sufficient in
     detail and content to  identify and explain  it and  to
     allow its full and proper use without  reliance  on any
     individual's knowledge or memory.  Seller has taken all
     reasonable precautions to protect  such  Trade Secret's
     secrecy, confidentiality, and value.    No  such  Trade
     Secret is part of the public knowledge or literature or,
     to  any  Seller  Party's  Knowledge,   has  been  used,
     divulged, or appropriated either for the benefit of any
     third person or the detriment of the Business.  No such
     Trade Secret required is subject to  any  adverse claim
     nor has any adverse claim been threatened  with respect
     to  any  such  Trade  Secret  and  there  is  no  basis
     therefore.




         (b) Seller owns or has the right to use pursuant to
     an  Enforceable   Contract  all  Intellectual  Property
     necessary or  desirable  to   operate   the   Business.
     Each  item  of Intellectual Property used  by Seller in
     the operation of the Business immediately prior  to the
     Closing will be owned or available for  use by Buyer on
     identical terms and  conditions  immediately subsequent
     to the Closing.   Seller has  taken  all necessary  and
     desirable action to maintain and protect  each  item of
     Intellectual Property that it owns or uses.

         (c)  Seller has  delivered  to  Buyer  correct  and
     complete copies of all written documentation evidencing
     ownership and prosecution (if applicable) of  each item
     of  Intellectual   Property   used  by  Seller  in  the
     operation of the Business.  With respect  to  each such
     item of Intellectual Property:

           (i)  Seller  possesses   all  right,  title,  and
     interest in and to  the item, free  and  clear  of  any
     Encumbrance;

           (ii) the item is not subject to  any  outstanding
     Order;

           (iii)no  Action is  pending  or  Threatened  (and
     there  is  no  Basis  therefor)  which  challenges  the
     Enforceability, use, or ownership of the item; and

           (iv) Seller has never  agreed  to  indemnify  any
     person for or against any  interference,  infringement,
     misappropriation, or other conflict with respect to the
     item.

        (d)  In respect of  the  Business,  Seller  has  not
     interfered with,  infringed upon,  misappropriated,  or
     otherwise come into conflict with  any  other  person's
     Intellectual Property, and Seller  has  never  received
     any notice alleging any such interference,infringement,
     misappropriation, violation or conflict (including  any
     claim that Seller must license or  refrain  from  using
     any other  person's  Intellectual Property).  No  third
     Person has any Intellectual Property that interferes or
     would be likely to interfere with Buyer's use of any of
     its  Intellectual  Property.   To  any  Seller  Party's
     Knowledge, Buyer will not interfere with,infringe upon,
     misappropriate, or otherwise  come into conflict  with,
     any Intellectual Property rights of any other Person as
     a result  of the continued operation of the Business as
     currently  conducted and as currently  proposed  to  be
     conducted.  To any Seller Party's  Knowledge, no  other
     Person   has   interfered    with,    infringed   upon,
     misappropriated, or otherwise come  into  conflict with
     the Intellectual Property used in  the operation of the
     Business.

(e)  No former and current employees engaged in the Business
have executed written Contracts with Seller that assign to
Seller all rights to any inventions, improvements,
discoveries, or information relating to the Business.  No
employee engaged in the Business has entered into any
Contract that restricts or limits in any way the scope or
type of work in which the employee may be engaged or
requires the employee to transfer, assign, or disclose
information concerning his work or her work to any person
other than Seller.

     6.12 Contracts

     Each material Contract (as amended to date) related  to
the  Business  is  listed in Schedule  6.12  (the  "Material
Contracts").   Seller has delivered to Buyer a  correct  and
complete copy of each such contract.  With respect  to  each
such Material Contract:

               (i)  the Contract is Enforceable;

(ii) the Contract will continue to be Enforceable on
identical terms following the consummation of the
Transactions;
               (iii)     Seller (and, to any Seller Party's Knowledge, no
          counter-party) is not in Breach of such Contract, and no
          event has occurred that, with notice or lapse of time, would
          constitute a Breach under the Contract; and

               (iv) no party to the Contract has repudiated any provision
          of the Contract.



     6.13 Purchase Commitments

     As of the Execution Date, the aggregate of all accepted
and  unfulfilled orders for the sale of merchandise relating
to   the  Business  entered  into  by  Seller  is  at  least
$4,000,000, all of which orders and commitments were made in
the  Ordinary Course of Business.  As of the Execution Date,
there  are  no  claims against Seller to return  merchandise
relating to the Business by reason of alleged overshipments,
defective merchandise or otherwise, or of merchandise in the
hands   of  customers  under  an  understanding  that   such
merchandise  would be returnable.  No ordinary  purchase  or
outstanding  lease  commitment of  Seller  relating  to  the
Business presently is in excess of the normal, ordinary  and
usual  requirements of the Business or was made at any price
in  excess of the now current market price or contains terms
and  conditions more onerous than those usual and  customary
in the Business.

     6.14 Litigation

     Schedule  6.14 sets forth each instance  in  which  any
Seller Party (a) is subject to any outstanding Order or  (b)
is  a  party, the subject of, or is Threatened to be made  a
party  to  or the subject of any Action.  No Action required
to   be   set   forth   in  Schedule  6.14   questions   the
Enforceability  of  this Agreement or the  Transactions,  or
could result in any Material Adverse Change with respect  to
Seller,  and  no Seller Party has any Basis to believe  that
any  such  Action may be brought or Threatened  against  any
Seller Party.

     6.15 Product Warranty

     Each  product manufactured, sold, leased, or  delivered
by  Seller for the Business has been in conformity with  all
applicable  Law,  Contracts, and  all  express  and  implied
warranties,  and  neither Seller nor the  Business  has  any
Liability  (and there is no Basis for any present or  future
Action  against Seller or the Business giving  rise  to  any
Liability)  for  replacement  or  repair  thereof  or  other
damages  in  connection  therewith.   No  product  designed,
manufactured, sold, leased, or delivered by Seller  for  the
Business  is  subject to any guaranty,  warranty,  or  other
indemnity   or  similar  Liability  beyond  the   applicable
standard  terms  and conditions of sale or lease.   Schedule
6.15 includes copies of the standard terms and conditions of
sale  or  lease  for products and services  offered  by  the
Business.

     6.16 Employees

       (a) Schedule 6.16(a) contains a complete and accurate
     list of the following information  for  each  employee,
     director, independent contractor, consultant and  agent
     of  Seller primarily engaged in the Business, including
     each employee on leave of  absence  or  layoff  status:
     employer; name;job title; date of hiring or engagement;
     date  of  commencement  of  employment  or  engagement;
     current compensation paid  or payable and any change in
     compensation since January 1, 2003; sick  and  vacation
     leave that is accrued but unused; and  service credited
     for purposes of vesting and eligibility to  participate
     under any Employee Benefit Plan, or  any other employee
     or director benefit plan.

       (b) Schedule 6.16(b) states the number  of  employees
     engaged in  the  Business  terminated  by  Seller since
     January 1, 2003, and contains a complete  and  accurate
     list of the  following  information for  each  employee
     engaged in the Business who has been terminated or laid
     off, or whose hours of work have been reduced  by  more
     than fifty percent (50%) in the six (6) months prior to
     the Execution Date: (i) the date  of  such termination,
     layoff or reduction in hours; (ii) the reason for such.
     termination, layoff or reduction in hours; and (iii)the
     location to which the employee was assigned.

       (c) Seller has not violated the Worker Adjustment and
     Retraining  Notification  Act (the "WARN Act")  or  any
     similar state or local Law.

       (d)  To any Seller  Party's Knowledge,  no  employee,
     consultant, or contractor engaged in  the  Business  is
     bound by  any  Contract  that  purports  to  limit  the
     ability of such employee, consultant, or contractor (i)
     to engage  in  or  continue  or  perform  any  conduct,
     activity,  duties  or practice relating to the Business
     or (ii) to assign  to Seller or to any other Person any
     rights to any invention, improvement, or discovery.  No
     former or current employee of the Business is  a  party
     to, or is otherwise bound by, any Contract that in  any
     way adversely affected,  affects,  or  will  affect the
     ability of Buyer to conduct the Business as  heretofore
     carried on by Seller.

       (e) Seller  is  not  a  party  to  or  bound  by  any
     collective bargaining Contract relating to the Business,
     nor has it experienced any strikes, grievances,  claims
     of  unfair   labor   practices,  or  other   collective
     bargaining disputes relating  to  the Business.  Seller
     has  not  committed  any  unfair  labor   practice  (as
     determined under any Law) relating to  the Business. No
     Seller Party has any Knowledge  of  any  organizational
     effort currently being made  or  Threatened  by  or  on
     behalf of any labor union with respect  to  any persons
     employed for the Business.



     6.17 Employee Benefits

     Schedule   6.17   lists  each  non-qualified   deferred
compensation plan, qualified defined contribution retirement
plan,  qualified defined benefit retirement  plan  or  other
material   fringe  benefit  plan  or  program  that   Seller
maintains for the Business or to which Seller contributes in
respect  of  the  Business.  With respect  to  any  employee
benefit  plan, within the meaning of Section 3(3) of  ERISA,
which is subject to ERISA and which is sponsored, maintained
or  contributed  to,  or has been sponsored,  maintained  or
contributed to, within six years prior to the Closing  Date,
by  Seller or any ERISA Affiliate for the Business,  (a)  no
withdrawal Liability, within the meaning of Section 4201  of
ERISA, has been incurred, which withdrawal Liability has not
been  satisfied,  (b)  no Liability to  the  PBGC  has  been
incurred  by Seller or any ERISA Affiliate, which  Liability
has   not   been  satisfied,  (c)  no  accumulated   funding
deficiency,  whether or not waived, within  the  meaning  of
Section  302  of ERISA or Section 412 of the Code  has  been
incurred, and (d) all contributions (including installments)
to  such  plan required by Section 302 of ERISA and  Section
412  of the Code have been timely made.  With respect to any
kind  of  employee benefit plan for the Business, such  plan
has  been funded and maintained in compliance with all  Laws
applicable  thereto  and  the requirements  of  such  plan's
governing documents.

     6.18 Environmental, Health, and Safety Matters

     Except  as  set forth in Schedule 6.18, (a) Seller  has
complied  and  is  in  compliance  with  all  Environmental,
Health,  and Safety Requirements in connection with  owning,
using,  maintaining, or operating the Business or any assets
related  thereto, (b) each location at which Seller operates
or  has  operated  the  Business is in compliance  with  all
Environmental,  Health,  and Safety  Requirements,  and  (c)
there are no pending, or any Threatened, allegations by  any
Person that any of the assets or properties the Business are
not,  or  have  not been, conducted in compliance  with  all
Environmental, Health, and Safety Requirements.

     6.19 Customers and Suppliers

     Schedule  6.19  lists the Business's  two  (2)  largest
suppliers  during the 12 month period ended as of  the  Most
Recent Year End and the three (3) month period ended  as  of
the Most Recent Balance Sheet Date.  Except as set forth  in
Schedule  6.19,  no  Seller Party  has  received  notice  of
termination  or  an intention to terminate the  relationship
with the Business from AEO or any supplier.

     6.20 Permits

     Seller  possesses all Permits required to  be  obtained
for  operation of the Business.  Schedule 6.20 sets forth  a
list  of  all such Permits.  Except as set forth in Schedule
6.20, with respect to each such Permit:

    (a) it is valid, subsisting and in full force and effect;

    (b) there  are  no  violations of such Permit that would
result in a termination of suc Permit;

    (c) no Seller Party has received notice that such Permit
will not be renewed; and

    (d) the  Transactions  will  not  adversely  affect  the
validity of  such Permit  or  cause  a  cancellation  of  or
otherwise adversely affect such Permit.



     6.21 Solvency

          (a)  Seller is not now insolvent, nor will Seller be
     rendered insolvent by any of the Transactions.   As  used
     herein, "insolvent" means that the sum of the Liabilities
     of Seller exceeds the fair present value of its assets.

          (b)  Immediately   after   giving   effect   to  the
     consummation of the Transactions:

               (i)  Seller will be able to pay its Liabilities
          as  they  become  due  in  the  Ordinary  Course  of
          Business of Seller;

               (ii) Seller will  not have  unreasonably  small
          capital  with   which  to  conduct  its  present  or
          proposed business;

              (iii) Seller will have assets (calculated at fair
          market value) that exceed its Liabilities; and

               (iv) Taking   into   account   all  pending  and
          Threatened Actions, final judgments against Seller in
          Actions  for   money   damages   are  not  reasonably
          anticipated to be  rendered at  a  time  when,  or in
          amounts such that, Seller will be unable  to  satisfy
          any such judgments promptly in accordance with  their
          terms  (taking  into   account the  maximum  probable
          amount of such judgments in any such Actions  and the
          earliest  reasonable  time  at  which such  judgments
          might be rendered) as well as  all  other obligations
          of Seller.

     6.22 Accuracy of Information Furnished

     No  representation, statement, or information contained
in  this Agreement (including the Schedules) or any Contract
or  document  executed in connection herewith  or  delivered
pursuant hereto or thereto or made available or furnished to
Buyer  or  its  representatives by Seller contains  or  will
contain any untrue statement of a material fact or omits  or
will   omit  any  material  fact  necessary  to   make   the
information  contained therein not misleading.   Seller  has
provided  Buyer  with  correct and complete  copies  of  all
documents    listed   or   described   in   the   Schedules.
Notwithstanding  the  foregoing,  (a)  except  as  otherwise
provided  in  Section 7.6, Buyer may only rely on  the  most
recent version of any information Seller furnishes to  Buyer
that  supersedes previous information provided to Buyer  and
(b)  subject to the next sentence, Seller will not be Liable
with  respect to financial projections or estimates  of  the
Business's   future   performance.   All   projections   and
estimates  that have been provided to Buyer at the  time  of
creation  were  reasonably  made  in  good  faith  based  on
reasonable assumptions, given the circumstances at the  time
such assumptions were made.

     6.23 Representations Complete

     Except  as  and  to  the  extent  set  forth  in   this
Agreement,  no  Seller  Party makes any  representations  or
warranties  whatsoever  (INCLUDING ANY  IMPLIED  OR  EXPRESS
WARRANTY   OF  MERCHANTABILITY,  FITNESS  FOR  A  PARTICULAR
PURPOSE, OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS) to
Buyer  and  each Seller Party hereby disclaims all Liability
and   responsibility   for  any  representation,   warranty,
statement, or information not included herein that was made,
communicated, or furnished (orally or in writing)  to  Buyer
or  its representatives (including any opinion, information,
projection, or advice that may have been or may be  provided
to   Buyer  by  any  director,  officer,  employee,   agent,
consultant, or representative of any Seller Party).

     6.24 Review of Buyer and Innovo

     Seller:

       (a)  Has such knowledge and  experience in  financial
     and business matters that it is capable  of  evaluating
     the merits and  risks  of  Seller's  investment in  the
     Buyer Note contemplated hereby, and that Seller is able
     to   bear  the   economic  risk   of   such  investment
     indefinitely.




       (b)  Has  (i ) had  the  opportunity  to   meet  with
     representative  officers and  other  representatives of
     Innovo, to discuss its business,  assets,  liabilities,
     financial  condition, cash flow,  and  operations,  and
     (ii)  received  all  materials,  documents  and   other
     information that it  deems necessary  or  advisable  to
     evaluate the Buyer Note and the Transactions.

       (c) Has made   its   own   independent   examination,
     investigation, analysis  and  evaluation  of the  Buyer
     Note, including its own estimate of  the value  of  the
     Buyer Note.

       (d) Has undertaken such due  diligence  as  it  deems
     adequate, including that described above.

     Nothing  in  Section  6.24 will  preclude  Seller  from
relying  on the representations, warranties, covenants,  and
agreements  of  Buyer herein or from pursuing  its  remedies
with respect to a Breach thereof.

                         ARTICLE 7.
                    PRE-CLOSING COVENANTS

     The Parties agree as follows with respect to the period
between  the  Execution Date and the earlier of the  Closing
and the Termination Date:

     7.1  General

     Each  Party  will  use  its Best Efforts  to  take  all
actions and do all things necessary, proper, or advisable to
consummate, make effective, and comply with all of the terms
of  this  Agreement and the Transactions  applicable  to  it
(including  satisfaction, but not  waiver,  of  the  Closing
conditions  for  which  it is responsible  or  otherwise  in
control, as set forth in ARTICLE 9).

     7.2  Notices and Consents

          (a)  The Seller Parties will give any  notices to
     third parties, and  will  use  their  respective  Best
     Efforts  to obtain any third party Consents  listed on
     Schedule 6.3, or that Buyer reasonably  may  otherwise
     request in connection with the matters  referred to in
     Section 6.3.  The Seller Parties will give any notices
     to, make any filings with,  and  use  their respective
     Best Efforts to obtain any  Consents  of  Governmental
     Authorities, if any,  required  or  reasonably  deemed
     advisable  by  Buyer pursuant to any applicable Law in
     connection   with   the   Transactions   including  in
     connection with the matters referred to in Section 6.3.

        (b)  Buyer will give any notices  to  third parties,
     and will use its Best Efforts to obtain any third party
     Consents listed on Schedule 5.3, that Seller reasonably
     may otherwise request in connection  with  the  matters
     referred  to  in  Section 5.3.   Buyer  will  give  any
     notices to, make any  filings with,  and  use its  Best
     Efforts to obtain any Consents of  Governmental Bodies,
     if any, required or reasonably deemed advisable  by the
     Company pursuant to any  applicable Law  in  connection
     with the Transactions including in connection  with the
     matters referred to in Section 5.3.

       (c)  Nothing in this Section 7.2 will require that(i)
     Buyer  or   its  Affiliates  divest,   sell,  or   hold
     separately any of its  assets  or  properties,  or (ii)
     Buyer,  its  Affiliates,  or  any   Seller  Party  (the
     determination with respect to  which  Buyer will  make)
     take any  actions  that  could  affect  the normal  and
     regular operations of Buyer,  its  Affiliates,  or  the
     operation of the Business after the Closing.

     7.3  Operation of Business

     Seller  shall  not  engage in any  practice,  take  any
action,  or enter into any transaction outside the  Ordinary
Course  of  Business  of  the  Business  or  engage  in  any
practice, take any action, or enter into any transaction  of
the  sort  described in Section 6.6.  Subject to  compliance
with  applicable Law, the Seller Parties will  confer  on  a
regular  and frequent basis with one or more representatives
of  Buyer  to report on operational matters and the  general
status  of the Business and its operations and finances  and
will promptly provide to Buyer or its representatives copies
of  all filings made with any Governmental Body during  such
period on behalf of the Business.



     7.4  Preservation of Business

     The  Seller  Parties  will use  their  respective  Best
Efforts   to   keep   the  Business   and   its   properties
substantially  intact,  including  its  present  operations,
working   conditions,   and  relationships   with   lessors,
licensors, suppliers, customers, and employees.

     7.5  Full Access

     The Seller Parties will permit representatives of Buyer
(including financing providers) to have full access  at  all
reasonable  times, and in a manner so as  not  to  interfere
with the normal business operations of the Business, to  all
premises,  properties, personnel, books, records, Contracts,
and  documents pertaining to the Business and  will  furnish
copies  of  all such books, records, Contracts and documents
and  all  financial,  operating and other  data,  and  other
information  as  Buyer  may  reasonably  request;  provided,
however, that no investigation pursuant to this Section  7.5
will affect any representations or warranties made herein or
the conditions to the Parties' obligations to consummate the
Transactions.

     7.6  Notice of Developments

     Seller will give prompt written notice to Buyer of  any
development occurring after the Execution Date which  causes
or  reasonably could be expected to cause a Breach of any of
the representations and warranties in ARTICLE 6.  Buyer will
give  prompt  written notice to Seller  of  any  development
occurring   after  the  Execution  Date  which   causes   or
reasonably could be expected to cause a Breach of any of the
representations and warranties in ARTICLE 5.  Except as  set
forth  in  Section 11.2(a) or Section 11.3(a), no disclosure
by  any Party pursuant to this Section 7.6 or otherwise will
be deemed to amend or supplement the Schedules or to prevent
or   cure   any   misrepresentation   or   Breach   of   any
representation, warranty, or covenant.

     7.7  Exclusivity

     No   Seller  Party  will  (a)  solicit,  initiate,   or
encourage the submission of any proposal or offer  from  any
Person  relating to the acquisition of any Equity  Interests
of  Seller or any portion of the assets used in the Business
(including   any  acquisition  structured   as   a   merger,
consolidation, or share exchange) or (b) participate in  any
discussions   or   negotiations   regarding,   furnish   any
information  with respect to, assist or participate  in,  or
facilitate in any other manner any effort or attempt by  any
Person  to  do  or  seek any of the foregoing.   The  Seller
Parties  will  notify Buyer immediately if any Person  makes
any proposal, offer, inquiry, or contact with respect to any
of  the foregoing and the terms of any such proposal, offer,
inquiry, or contact.

     7.8  Confidentiality; Publicity

     Except as may be required by Law, stock exchange or  as
otherwise expressly contemplated herein, no Party  or  their
respective     Affiliates,    employees,     agents,     and
representatives  will  disclose  to  any  third  party   the
existence  of  this Agreement, the subject matter  or  terms
hereof  or  any  Confidential  Information  concerning   the
business  or  affairs  of  any other  Party  (including,  in
respect  of Seller, the Business) that it may have  acquired
from  such  Party in the course of pursuing the Transactions
without  the prior written consent of Seller (on  behalf  of
the  Seller Parties) or Buyer, as the case may be; provided,
however,  any  Party  may  disclose  any  such  Confidential
Information  as follows: (a) to such Party's Affiliates  and
its  or  its  Affiliates' employees,  lenders,  counsel,  or
accountants, the actions for which the applicable Party will
be  responsible;  (b) to comply with any applicable  Law  or
Order, provided that prior to making any such disclosure the
Party making the disclosure notifies the other Party of  any
Action  of  which it is aware which may result in disclosure
and   uses  its  Best  Efforts  to  limit  or  prevent  such
disclosure;   (c)  to  the  extent  that  the   Confidential
Information is or becomes generally available to the  public
through no fault of the Party or its Affiliates making  such
disclosure;  (d) to the extent that the same information  is
in the possession (on a non-confidential basis) of the Party
making such disclosure prior to receipt of such Confidential
Information; (e) to the extent that the Party that  received
the Confidential Information independently develops the same
information  without in any way relying on any  Confidential
Information; or (f) to the extent that the same  information
becomes available to the Party making such disclosure  on  a
nonconfidential basis from a source other than  a  Party  or
its  Affiliates,  which  source, to the  disclosing  Party's
Knowledge,   is   not   prohibited  from   disclosing   such
information by a legal, Contractual, or fiduciary obligation
to   the   other  Party.   If  the  Transactions   are   not
consummated, each Party will return or destroy  as  much  of
the  Confidential Information concerning the other Party  as
the   Parties  that  have  provided  such  information   may
reasonably request.  Whether or not the Closing takes place,
each Seller Party waives any cause of Action arising out  of
the   access  of  Buyer  or  its  representatives   to   any
Confidential   Information  of  Seller  or   the   Business.
Notwithstanding  the foregoing, Buyer may make  such  public
disclosure of the existence of this Agreement, the principal
economic  terms  thereof, and the  status  with  respect  to
achieving  the Closing as it desires; provided,  that  Buyer
will  consult with Seller prior to releasing any such public
disclosure  so that the Seller may notify its  employees  of
the  Transactions.  No Seller Party will, nor will it permit
any  of its Affiliates to, issue any press release or  other
public  announcement  related  to  this  Agreement  or   the
Transactions without Buyer's prior written approval.



     7.9  Charges and Fees

     The  Seller  Parties will, prior to the  Closing,  take
such  steps as are necessary to ensure that no sums are owed
or  payable  by  Buyer to any Person  in  the  nature  of  a
transfer charge or processing fee with respect to any of the
Purchased Assets.

                         ARTICLE 8.
                    ADDITIONAL COVENANTS

     The Parties agree as follows:

     8.1  General

     In  case  at  any  time after the Closing  any  further
action  is necessary or desirable to carry out the  purposes
of  this Agreement, each Party will take such further action
(including executing and delivering such further instruments
and  documents) as any other Party reasonably  may  request,
all  at the requesting Party's sole cost and expense (unless
the requesting Party is entitled to indemnification therefor
under  ARTICLE  11).   After  the  Closing,  Buyer  will  be
entitled  to  possession of all documents,  books,  records,
agreements, and financial data of any sort relating  to  the
Business.

     8.2  Litigation Support

     So   long  as  any  Party  actively  is  contesting  or
defending  against  any Action in connection  with  (a)  the
Transactions  or  (b)  any  fact,  situation,  circumstance,
status,  condition,  activity, practice,  plan,  occurrence,
event,  incident, action, failure to act, or transaction  on
or  prior  to the Closing Date involving the Business,  each
other  Party will cooperate with such Party and such Party's
counsel  in  the  contest or defense, make  available  their
personnel,  and provide such testimony and access  to  their
books  and  records as will be necessary in connection  with
the  contest or defense, at the sole cost and expense of the
contesting  or  defending Party (unless  the  contesting  or
defending  Party  or one of its Affiliates  is  entitled  to
indemnification therefor under ARTICLE 11).

     8.3  Transition

     No  Seller Party will take any action that is  designed
or  intended to have the effect of discouraging any  lessor,
licensor, customer, supplier, or other business associate of
Seller  from  maintaining  at least  as  favorable  business
relationships with Buyer after the Closing as it  maintained
with  Seller prior to the Closing.  Each Seller Party  will,
and  will  cause  its  Affiliates to,  refer  all  customer,
supplier,  and other inquiries relating to the  Business  to
Buyer or an Affiliate thereof.

     8.4  Confidentiality

     Each  Seller Party will treat and hold as such  all  of
the  Confidential Information, refrain from using any of the
Confidential  Information except  in  connection  with  this
Agreement, and deliver promptly to Buyer or destroy, at  the
request  and option of Buyer, all tangible embodiments  (and
all  copies)  of the Confidential Information which  are  in
such  Seller  Party's possession in each case, forever.   If
any  Seller  Party  is ever requested or required  (by  oral
question  or  request for information or  documents  in  any
Action)  to  disclose  any  Confidential  Information,  such
Seller  Party will notify Buyer promptly of the  request  or
requirement so that Buyer may seek an appropriate protective
Order or waive compliance with this Section 8.4.  If, in the
absence  of  a protective Order or the receipt of  a  waiver
hereunder,  any  Seller  Party, on  the  written  advice  of
counsel,   is   compelled  to  disclose   any   Confidential
Information   to  any  Governmental  Body,  arbitrator,   or
mediator or else stand Liable for contempt, then such Seller
Party  may  disclose  the Confidential  Information  to  the
Governmental   Body,  arbitrator,  or  mediator;   provided,
however;  that  Seller Party will use its  Best  Efforts  to
obtain, at the request of Buyer, an Order or other assurance
that confidential treatment will be accorded to such portion
of  the Confidential Information required to be disclosed as
Buyer may designate.




     8.5  Restrictive Covenants

     To  assure that Buyer will realize the benefits of  the
Transactions,  each Seller Party hereby  agrees  with  Buyer
that  such  Seller  Party shall not, and such  Seller  Party
shall cause its Affiliates to not:

          (a)  From  the  Closing Date until  four (4) years
     after the Closing Date, directly or  indirectly,  alone
     or as a  partner, joint  venturer,  officer,  director,
     member,  employee,   consultant,   agent,   independent
     contractor or Equity Interest holder of, or lender  to,
     any Person or business,  engage  in,  induce,  canvass,
     solicit  or  accept   any   business    or   commercial
     arrangements with AEO or its Affiliates.

          (b)  From the Closing  Date  until  two  (2) years
     after the Closing Date, directly  or  indirectly employ
     or knowingly permit any Affiliate of such Seller  Party
     to employ  or solicit for employment  or other  similar
     relationship with Seller, any employee  or  independent
     contractor of Buyer or any of its  Affiliates  if  such
     Person had been employed by Seller in  connection  with
     the Business  (including  employed  as  an  independent
     contractor) on June 11, 2003, except for  any employees
     or independent contractors of the Business  as  of such
     date that were not hired by Buyer  at  any  time during
     such two (2) year period.

Notwithstanding the foregoing, the beneficial  ownership  of
less than 3% of the Equity Interests of any Person having  a
class  of  Equity  Interest actively traded  on  a  national
securities exchange or over-the-counter market will  not  be
deemed, in and of itself, to Breach the prohibitions of this
Section 8.5.  Each Seller Party agrees and acknowledges that
the restrictions in this Section 8.5 are reasonable in scope
and  duration and are necessary to protect Buyer  after  the
Closing.   If any Seller Party or any Affiliate  thereof  is
found  to  have Breached this Section 8.5, then, in addition
to   all  other  remedies  that  may  be  available  to  the
applicable  Person, an amount of time equal  to  the  period
such  Seller  Party or such Affiliate was  found  to  be  in
Breach of this Section 8.5 will be added to the time periods
contemplated by this Section 8.5.  If any provision of  this
Section 8.5, as applied to any Party or to any circumstance,
is  adjudged by a Governmental Body, arbitrator, or mediator
not to be enforceable in accordance with its terms, the same
will  in  no  way  affect  any  other  circumstance  or  the
enforceability of the remainder of this Agreement.   If  any
such  provision,  or any part thereof, is  held  not  to  be
enforceable  in  accordance with its terms  because  of  the
duration of such provision, the area covered thereby, or the
scope of the activities covered, the Parties agree that  the
Governmental  Body,  arbitrator,  or  mediator  making  such
determination  will have the power to reduce  the  duration,
area,  and/or scope of activities of such provision,  and/or
to  delete  specific words or phrases, and  in  its  reduced
form,  such provision will then be enforceable in accordance
with its terms and will be enforced.  The Parties agree  and
acknowledge that the Breach of this Section 8.5  will  cause
irreparable  damage  to  Buyer and the  Business,  and  upon
Breach  of any provision of this Section 8.5, Buyer will  be
entitled  to  injunctive  relief, specific  performance,  or
other  equitable  relief  without bond  or  other  security;
provided,  however, that the foregoing remedies will  in  no
way limit any other remedies which Buyer may have.

     8.6  Use of Names

     From   and  after  the  Closing  Date  Buyer  and   its
Affiliates will have the royalty-free right to refer to  the
Business as "formerly "the Blue Concepts Division of  Azteca
Products  International"  "and  to  use  such  reference  in
advertising or in the description or name of any service  or
product    from   time   to   time   purchased,   processed,
manufactured,  or  sold  by  Buyer  and  its  Affiliates  in
continuation of the Business.




     8.7  Taxes

          (a)  The Seller Parties will be Liable for and will
     pay all Taxes (whether assessed or unassessed)applicable
     to the Business and the Purchased Assets, in  each  case
     attributable to periods (or portions thereof)  ending on
     or prior to the Closing Date.  Buyer will be  Liable for
     and will pay all Taxes (whether assessed or  unassessed)
     applicable to the Business and the Purchased Assets, in
     each case attributable to periods (or portions  thereof)
     beginning after the Closing  Date.  For purposes of this
     Section 8.7(a), any period beginning before  and  ending
     after the Closing Date will be treated  as  two  partial
     periods, one ending on the Closing  Date and  the  other
     beginning after  the  Closing  Date,  except  that Taxes
     (such as property Taxes) imposed  on  a  periodic  basis
     will be allocated on a daily basis.

          (b)  Notwithstanding Section 8.7(a), any sales Tax,
     use Tax, real property transfer or gains Tax,documentary
     stamp Tax, or similar Tax attributable  to  the sale  or
     transfer of the Purchased  Assets will  be  paid  by the
     Seller Parties.  Buyer agrees to timely sign and deliver
     such certificates  or  forms  as  may  be  necessary  or
     appropriate to establish an exemption from (or otherwise
     reduce), or make a report with respect to, such Taxes.

          (c)  The Seller Parties, on the one hand,and Buyer,
     on the other hand, will provide  reimbursement  for  any
     Tax paid by one Party all or a portion of which  is  the
     responsibility of the other Party in accordance with the
     terms of this Section 8.7.   Within  a  reasonable  time
     prior to the payment of any said Tax,  the Party  paying
     such Tax will give notice to the other Party of  the Tax
     payable and the portion which is the Liability  of  each
     Party, although failure to do  so will  not  relieve the
     other Party from its Liability hereunder.

          (d)  Any payments made pursuant to this Section 8.7
     will be treated by Buyer and Seller as  an adjustment to
     the Purchase Price.

          (e)  The  Seller  Parties  will  promptly  after the
     Closing  prepare  and  file  all  Tax Returns  and  other
     reports required by Law, relating to the operation of the
     Business prior to the Closing Date.

     8.8  Employees and Employee Benefit Plans

          (a)  Information  on  Active  Employees.    For  the
     purpose of this Agreement,  the  term  "Active Employees"
     will mean all employees employed on the  Closing  Date by
     Seller primarily for the operation of  the  Business  and
     listed as "employees" on Schedule 6.16(a).

          (b)  Employment of Active Employees by Buyer.

               (i)  Buyer shall make Qualifying  Offers to all
          Active Employees.  Buyer  will provide Seller with a
          list of Active Employees  to whom Buyer has  made an
          offer of employment that  has  been  accepted to  be
          effective as of the Closing Date (the "Hired  Active
          Employees").  The Seller Parties will  provide Buyer
          with reasonable access  to  the  Seller's facilities
          and   personnel   records   (including   performance
          appraisals,  disciplinary actions,  grievances,  and
          medical  records)  for   the  purpose  of  preparing
          Qualifying Offers to the Active Employees. Effective
          immediately   before   the   Closing,   Seller  will
          terminate  the  employment  of  all  of  its  Active
          Employees.    Seller,  with  respect  to  the Active
          Employees, shall timely give all notices required to
          be given under the WARN ACT or  similar  statutes or
          regulation of any jurisdiction relating to any plant
          closing or mass lay-off or as otherwise required  by
          law.  Notwithstanding any other provision  contained
          herein, the Seller  Parties, jointly  and severally,
          agree to  fully  indemnify  Buyer  for any  and  all
          liability incurred by Buyer under the WARN  Act with
          respect to  Active  Employees  as  a result  of  the
          transaction contemplated by this Agreement.




               (ii) For a period of ninety (90) days following
          the  Closing  Date,  Buyer  may  not  terminate  the
          employment of any Hired Active Employee,  except  in
          the case of any such termination for cause.Following
          such ninety  (90)  day  period,  each  Hired  Active
          Employee shall  be  employed  at  will  by Buyer  as
          employees  of  Buyer  (subject  to  any   applicable
          probation period not  prohibited by law)  to  occupy
          positions designated by Buyer  and  pursuant  to the
          terms and conditions determined by Buyer in its sole
          discretion.

          (c)  Salaries and Benefits.

               (i)  Seller will  be  responsible  for  (A) the
          payment  of  all  wages   and   other   remuneration
          liabilities and obligations due to Active  Employees
          with  respect  to  their  services  as  employees of
          Seller, including pro rata bonus  payments  and  all
          vacation pay earned prior to the  Closing  Date, (B)
          the payment of any termination or severance payments
          and  the  provision  of   health  plan  continuation
          coverage  in  accordance  with  the  requirements of
          Sections 601 through 608 of ERISA,  and (C) any  and
          all payments to employees required under the WARN Act.

               (ii) Seller will be liable for any  claims made.
          or   incurred   by   Active   Employees   and   their
          beneficiaries  through  the  Closing Date  under  the
          Employee  Benefit   Plans.    For   purposes  of  the
          immediately preceding  sentence,  a  charge  will  be
          deemed incurred, in the case of hospital,  medical or
          dental  benefits  when  the  services  that  are  the
          subject of the charge are performed and, in  the case
          of  other  benefits  (such   as  disability  or  life
          insurance), when an  event  has  occurred  or  when a
          condition  has  been  diagnosed   that  entitles  the
          employee to the benefit.

               (iii)Buyer assumes no obligation to  continue or
          assume  any  Employee   Benefit  Plans,  compensation
          arrangements or liabilities of Seller (including, but
          not without being limited to,  any  salary,  bonuses,
          vacation,  sick  leave,  fringe  benefits,  insurance
          plans, or pension or  retirement  benefits  under any
          compensation or retirement plan or policy  maintained
          by Seller) to any Active Employee.

          (d)  Employee  Benefit  Plans.    All   Hired  Active
     Employees  who  are  participants  in   Seller's  Employee
     Benefit Plans will retain  their  accrued  benefits  under
     such plans as of the Closing Date, and Seller  will retain
     sole liability for the payment  of  such  benefits  as and
     when such Hired  Active Employees become eligible therefor
     under such plans.   All Hired Active Employees will become
     fully vested in  their  accrued  benefits  under  Seller's
     Employee Benefit Plans as of the Closing Date, and  Seller
     will so amend such  plans  if  necessary  to  achieve this
     result.   Neither Seller nor any ERISA Affiliate of Seller
     will make any transfer of any Employee Benefit Plan assets
     to Buyer.  Seller also agrees to retain responsibility for
     disability  payments  to  Active  Employees on  medical or
     disability leave at  the Closing  Date until such  time as
     such Active Employee is,  if ever,  offered  employment by
     Buyer, in its sole discretion, or  as  otherwise  required
     under applicable law or regulation. Any Active Employee or
     qualified beneficiary thereof and  who  is covered, or who
     is eligible to elect to continue his  or  her coverage, as
     of  or  following  the Closing  Date, under  any  Employee
     Benefit Plan  that  constitutes  a  "group  health  plan,"
     pursuant to the provision of Part 6 of Title I, Substitute
     B  or  ERISA  or  Section  4980B of  the  Code,  shall  be
     eligible to continue such coverage under the Seller's plan
     for the remainder of the applicable continuation  coverage
     period and Seller shall  not terminate any such plan prior
     to the  end of the applicable coverage period.  The Seller
     Parties, jointly and severally, agree  to  indemnify Buyer
     for all losses incurred by  Buyer or Buyer's group  health
     plan resulting  from  any  claim  for  COBRA  continuation
     coverage made by or on behalf of any Active Employee  or a
     qualified beneficiary of such an employee  under  any plan
     maintained by Buyer or its Affiliates except to the extent
     that  such Active Employee is  a Hired Active Employee and
     has become an active participant in  Buyer's "group health
     plan."



          (e)  General Employee Provisions.

               (i)  Seller will provide Buyer  with  completed
          I-9 forms and attachments with respect to all Active
          Employees,  except  for  such  employees  as  Seller
          certifies in writing to Buyer are  exempt from  such
          requirement.  The  Parties  intend  that  the  Buyer
          qualify as a "successor  employer"  for  purposes of
          receiving credit for the payment of  taxes under the
          Federal  Insurance  Contribution  Act  and   Federal
          Unemployment Tax Act by Seller  with respect to  the
          Hired  Active  Employees  within  the   meaning   of
          Section 3121 and 3306 of the Code.  Accordingly, the
          Parties shall cooperate with each other to effectuate
          the foregoing.

               (ii) Buyer will not have any Liability or obligation,
          whether to Active Employees, former employees, their
          beneficiaries or any other Person, with respect to any
          Employee Benefit Plans, practices, programs or arrangements
          (including the establishment, operation or termination
          thereof and the notification and provision of COBRA coverage
          extension) maintained by Seller.

     8.9  Payment of Non-Assumed Liabilities

     In  addition  to payment of Taxes pursuant  to  Section
8.7, the Seller Parties will pay, or make adequate provision
for  the  payment,  in  full of all  Liabilities  of  Seller
relating  to  the Business as of the Closing Date.   If  any
such  Liabilities  are not so paid or provided  for,  or  if
Buyer  reasonably  determines  that  failure  to  make   any
payments  will  impair  Buyer's  use  or  enjoyment  of  the
Purchased Assets or conduct of the Business, Buyer  may,  at
any  time after the Closing, elect to pay any or all of such
Liabilities directly (but will have no obligation to do  so)
and  treat  such payment as damages under this Agreement  so
that  Buyer  will  be  entitled  to  exercise  the  remedies
available to it under ARTICLE 11 of this Agreement  (without
regard to the limitations in Section 11.5).

     8.10 No Liability

     The   Seller  Parties,  jointly  and  severally,  shall
protect and indemnify Buyer from and Buyer shall not assume,
acquiesce, accede to or otherwise become Liable for or  with
respect  to, any Liabilities or obligations of any  kind  or
nature  of Seller or of the Business which exist as  of  the
Closing  Date or arise from, accrue by reason of, or  relate
in  any  material  way to, any Contract, account,  event  or
occurrence  before the Closing Date.  Without  limiting  the
generality  of the foregoing, Buyer shall have no  Liability
of any kind with respect to returns, warranty claims, charge-
backs product liability claims or other adjustments, charges
or  claims  with  respect  to  goods  or  services  sold  or
delivered by Seller or the Business before the Closing Date.

     8.11 Buyer Earn Out

          (a)  Following the Closing, until the earlier of (i) such
     time as AEO is no longer purchasing apparel products from
     Buyer and (ii) such time as Buyer has resold the Purchased
     Assets to the Seller Parties pursuant to Section 3.5(d),
     Buyer will pay to Sweet Sportswear on a quarterly basis, as
     additional consideration for the Purchased Assets, an amount
     equal to two and one half percent (2.5%) of the AGR derived
     solely from sales to AEO (the "Earn Out Amount").  That
     portion of the Earn Out Amount that is due will be paid in
     cash.

(b)  Within forty-five (45) business days of the end of each
quarter, Buyer will deliver to Seller a schedule setting
forth in reasonable detail Buyer's calculation of the Earn
Out Amount for such period (the "Earn Out Proposed Amount").
The Earn Out Proposed Amount will be subject to Seller's
review.  In reviewing the Earn Out Proposed Amount, Seller
will have the right to communicate with, and to review the
work papers, schedules, memoranda and other documents Buyer
prepared or reviewed in determining the Earn Out Proposed
Amount for such period and thereafter will have access to
all relevant books and records, all to the extent Seller
reasonably requires to complete its review of Buyer's
calculation of the Earn Out Proposed Amount.  Within ten
(10) business days after its receipt of Buyer's calculation
of the Earn Out Proposed Amount, Seller will advise Buyer
whether, based on such review, it has any exceptions to such
calculation.  Unless Seller delivers to Buyer within such
ten (10) business day period a letter describing its
exceptions to Buyer's calculation of the applicable Earn Out
Amount as set forth in the schedule delivered by Buyer
described in this Section 8.11(b), the Earn Out Proposed
Amount for the applicable quarter will be conclusive and
binding on Buyer and Seller as the Earn Out Amount.  If
Seller delivers such letter, the Parties will follow the
procedures for resolution of disputes set forth in Section
8.11(c).
          (c)  If Buyer and Seller are unable to agree on the Earn Out
     Amount (the "Earn Out Disputed Amount"), then (i) for ten
     (10)  days  after  the date Buyer receives  the  letter
     describing Seller's exceptions to Buyer's calculation of the
     Proposed Earn Out Amount, Seller and Buyer will use their
     Best Efforts to agree on the calculation of the Earn Out
     Amount and (ii) lacking such agreement, the matter will be
     referred to an independent accounting firm acceptable to
     Buyer and Seller, who will determine the correct Earn Out
     Disputed Amount within fifteen (15) days of such referral,
     which determination will be final and binding on Buyer and
     Seller for all purposes.



          (d)  Within two (2) business days of the determination of
     the applicable Earn Out Amount under this Section 8.11,
     Buyer will pay to Sweet Sportswear an amount equal to such
     amount.

     8.12 Shareholder Appointment Rights

     During the period following the Closing Date until  the
expiration  of  Calculation Period II,  in  the  event  that
Samuel J. Furrow, Jr., for any reason, shall no longer serve
as  Chief Executive Officer or Chairman of Innovo, or in any
similar executive capacity, the Shareholders shall have  the
right to appoint a general manager for the operation of  the
Business,   which   general  manager  must   be   reasonably
acceptable to Buyer in its sole discretion.

     ARTICLE 9.

                     CLOSING CONDITIONS

     9.1  Conditions Precedent to Obligations of Buyer

     Buyer's  obligation to consummate the purchase  of  the
Purchased Assets and the other transactions contemplated  to
occur  in  connection with the Closing  is  subject  to  the
satisfaction  of  each  condition  precedent  listed  below.
Unless  expressly  waived pursuant  to  this  Agreement,  no
representation,   warranty,  covenant,  right,   or   remedy
available  to  Buyer  in  connection with  the  Transactions
contemplated  hereby will be deemed waived  by  any  of  the
following  actions  or inactions by or on  behalf  of  Buyer
(regardless of whether any Seller Party is given  notice  of
any   such  matter):  (i)  consummation  by  Buyer  of   the
Transactions, (ii) any inspection or investigation, if  any,
of  the Purchased Assets, (iii) the awareness of any fact or
matter  acquired (or capable or reasonably capable of  being
acquired)  with  respect  to the  Purchased  Assets  or  the
Business,  or  (iv) any other action, in each  case  at  any
time, whether before, on, or after the Closing Date.

          (a)  Accuracy of Representations and Warranties.  Each
     representation and warranty set forth in ARTICLE 6 must have
     been accurate and complete in all material respects (except
     with respect to any provisions including the word "material"
     or  words of similar import and except with respect  to
     materiality as reflected under GAAP in the representations
     in Section 6.5 related to the Financial Statements, with
     respect to which, in each such case, such representations
     and warranties must have been accurate and complete) as of
     the Execution Date, and must be accurate and complete in all
     material respects (except with respect to any provisions
     including the word "material" or words of similar import and
     except with respect to materiality as reflected under GAAP
     in  the  representations in Section 6.5 related to  the
     Financial Statements, with respect to which, in each such
     case, such representations and warranties must have been
     accurate and complete) as of the Closing Date, as if made on
     the Closing Date, without giving effect to any supplements
     to the Schedules.

(b)  Compliance with Obligations.  Each Seller Party must
have performed and complied with all of its respective
covenants to be performed or complied with at or prior to
Closing (singularly and in the aggregate).

          (c)  No Material Adverse Change or Destruction of Property.
     Since June 11, 2003, there must have been no event, series
     of  events  or  the lack of occurrence  thereof  which,
     singularly or in the aggregate, could reasonably be expected
     to have a Material Adverse Effect on the Purchased Assets or
     the  Business (including as proposed to be  conducted).
     Without limiting the foregoing, (i) there must have been no
     Material Adverse Change to the Purchased Assets or  the
     Business (including as proposed to be conducted), (ii) there
     must not have been any action or inaction by a Governmental
     Body, arbitrator, or mediator which could reasonably be
     expected to cause a Material Adverse Change to the Purchased
     Assets  or  the Business (including as proposed  to  be
     conducted), and (iii) there must not have been any fire,
     flood, casualty, act of God or the public enemy or other
     cause (regardless of insurance coverage for such damage)
     which event could reasonably be expected to have a Material
     Adverse  Effect on the Purchased Assets or the Business
     (including as proposed to be conducted).




          (d)  No Adverse Litigation.  There must not be pending or
     Threatened any Action by or before any Governmental Body,
     arbitrator, or mediator which seeks to restrain, prohibit,
     invalidate,  or  collect damages  arising  out  of  the
     Transactions, or which, in the judgment of Buyer, makes it
     inadvisable to proceed with the Transactions.

(e)  Consents.  Seller and Buyer must have received Consents
to the Transactions and waivers of rights to terminate or
modify any rights or obligations of Seller from any Person
(i) from whom such Consent is required, including under any
Contract listed or required to be listed in Schedules 6.11,
6.12, and 6.17 or any Law, or (ii) who, as a result of the
Transactions, would have such rights to terminate or modify
such Contracts, either by their terms or as a matter of Law
(the "Material Consents").

          (f)  Release of Encumbrances.  There must have been received
     by Seller and Buyer releases of all Encumbrances on the
     Purchased Assets.

(g)  Buyer Approvals.  Buyer and Innovo must have received
all necessary corporate and shareholder approvals for
Buyer's entering into the Transactions.

     9.2  Conditions Precedent to Obligations of the Seller
Parties

     The  Seller Parties' obligation to consummate the  sale
of   the   Purchase   Assets  and  the  other   transactions
contemplated  to  occur in connection with  the  Closing  is
subject  to  the  satisfaction of each  condition  precedent
listed  below.   Unless expressly waived  pursuant  to  this
Agreement, no representation, warranty, covenant, right,  or
remedy  available to a Seller Party in connection  with  the
Transactions  will be deemed waived by any of the  following
actions  or  inactions by or on behalf of such Seller  Party
(regardless  of whether Buyer is given notice  of  any  such
matter):   (i)  consummation by the Seller  Parties  of  the
Transactions, (ii) any inspection or investigation, if  any,
of Buyer, (iii) the awareness of any fact or matter acquired
(or  capable  or reasonably capable of being acquired)  with
respect to Buyer, or (iv) any other action, in each case  at
any time, whether before, on, or after the Closing Date.

          (a)  Accuracy of Representations and Warranties.  Each
     representation and warranty set forth in ARTICLE 5 must have
     been accurate and complete in all material respects (except
     with respect to any provisions including the word "material"
     or  words of similar import, with respect to which such
     representations and warranties must have been accurate and
     complete) as of the Execution Date, and must be accurate and
     complete in all material respects (except with respect to
     any provisions including the word "material" or words of
     similar import, with respect to which such representations
     and warranties must have been accurate and complete) as of
     the Closing Date, as if made on the Closing Date.

          (b)  Compliance with Obligations.  Buyer must have performed
     and complied with all its covenants and obligations required
     by this Agreement to be performed or complied with at or
     prior to Closing (singularly and in the aggregate).

          (c)  No Order or Injunction.  There must not be issued and
     in  effect  any  Order restraining or  prohibiting  the
     Transactions.

                         ARTICLE 10.
                         TERMINATION

     10.1 Termination of Agreement

     The  Parties  may terminate this Agreement as  provided
below:

          (a)  Buyer and Seller may terminate this Agreement as to all
     Parties by mutual written consent at any time prior to the
     Closing.

(b)  Buyer or Seller may terminate this Agreement upon
delivery of notice if the Closing has not occurred prior to
the Expiration Date, provided that the Party delivering such
notice will not have caused such failure to close (and, if
the Party delivering such notice is Seller, no Shareholder
will have caused such failure to close).

          (c)  Buyer may terminate this Agreement by giving written
     notice to Seller at any time prior to the Closing if any
     Seller Party has Breached any representation, warranty, or
     covenant contained in this Agreement in any material respect
     (except  with respect to materiality for any provisions
     including the word "material" or words of similar import and
     Section 6.5, in which case such termination rights will
     arise upon any Breach).




          (d)  Seller may terminate this Agreement by giving notice to
     Buyer at any time prior to the Closing if Buyer has Breached
     any representation, warranty, or covenant contained in this
     Agreement in any material respect (except with respect to
     materiality for any provisions including the word "material"
     or words of similar import, in which case such termination
     rights will arise upon any Breach).

          (e)  Buyer may terminate this Agreement by giving notice to
     Seller on or before the Expiration Date if Buyer is not
     satisfied in its sole discretion with the results of, and
     its  due diligence investigations with respect to,  the
     operations, affairs, prospects, properties, assets, existing
     and potential Liabilities, obligations, profits or condition
     (financial or otherwise) of the Business and the Purchased
     Assets.

     10.2 Effect of Termination

          (a)  Except for the obligations under Section 7.8, this
     ARTICLE 10 and ARTICLE 12, if this Agreement is terminated
     under Section 10.1, then, except as provided in this Section
     10.2, all further obligations of the Parties under this
     Agreement will terminate.

          (b)  If Buyer or Seller terminate this Agreement pursuant to
     Section 10.1(c) or 10.1(d), as the case may be, then the
     rights  of the non-breaching Party to pursue all  legal
     remedies for damages such Party suffer will survive such
     termination unimpaired and no election of remedies will have
     been deemed to have been made.

                         ARTICLE 11.
                       INDEMNIFICATION

     11.1 Survival of Representations and Warranties

          (a)  Each representation and warranty of the Seller Parties
     contained in ARTICLE 6 and any certificate related to such
     representations and warranties will survive the Closing and
     continue  in full force and effect for three (3)  years
     thereafter, except (i) the representations and warranties
     set forth in Sections 6.4, 6.5, 6.17, and 6.18, which will
     survive the Closing and continue in full force and effect
     until the applicable statute of limitations expires (or for
     three  (3)  years if there is no applicable statute  of
     limitations) and (ii) the representations and warranties set
     forth  in Sections 6.1 and 6.2, which will survive  the
     Closing and will continue in full force and effect forever.

(b)  Each representation and warranty of Buyer contained in
ARTICLE 5 and any certificate related to such
representations and warranties will survive the Closing and
continue in full force and effect for three (3) years
thereafter, except the representations and warranties set
forth in Sections 6.1 and 6.2, which will survive the
Closing and will continue in full force and effect forever.
(c)  Each other provision in this Agreement or any
certificate or document delivered pursuant hereto will
survive for the relevant statute of limitations period,
unless a different period is expressly contemplated herein
or thereby.

     11.2 Indemnification Provisions for Buyer's Benefit

     The   Seller  Parties,  jointly  and  severally,   will
indemnify  and hold Indemnified Buyer Parties harmless  from
and  pay  any  and  all  damages,  directly  or  indirectly,
resulting from, relating to, arising out of, or attributable
to any one of the following:

          (a)  Any Breach of any representation or warranty any Seller
     Party has made in this Agreement as if such representation
     or warranty were made on and as of the Closing Date without
     giving effect to any supplement to the Schedules, other than
     (in the event the Transactions are consummated) any such
     Breach that is disclosed in a supplement to the Schedules
     delivered under Section 7.6 that contains an express written
     admission by such Seller Party that such Breach has caused a
     condition specified in Section 9.1 not to be satisfied.

          (b)  Any Breach by any Seller Party of any covenant or
     obligation of Seller or the Shareholders in this Agreement.

(c)  Any event arising from the operation or ownership of,
or conditions occurring with respect to, the Business or any
of the Purchased Assets prior to 11:59 p.m.  on the Closing
Date.



     11.3 Indemnification Provisions for Seller Parties' Benefit

     Buyer  will  indemnify and hold the Indemnified  Seller
Parties  harmless from and pay any and all damages, directly
or  indirectly, resulting from, relating to, arising out of,
or attributable to any of the following:

          (a)  Any Breach of any representation or warranty Buyer has
     made in this Agreement as if such representation or warranty
     were  made on and as of the Closing Date without giving
     effect to any supplement to the Schedules, other than (in
     the event the Transactions are consummated) any such Breach
     that  is  disclosed in a supplement  to  the  Schedules
     (delivered under Section 7.6) that contains an  express
     written admission by Buyer that such Breach has caused a
     condition specified in Section 9.2 not to be satisfied.

          (b)  Any Breach by Buyer of any covenant or obligation of
     Buyer in this Agreement.

          (c)  Any event arising from the operation and ownership of,
     or conditions first occurring with respect to, the Business
     or  any of the Purchased Assets after 11:59 p.m. on the
     Closing Date.

     11.4 Indemnification Claim Procedures

          (a)  If any Action is commenced in which any Indemnified
     Party  is  a  party that may give rise to a  claim  for
     indemnification against any Indemnitor (an "Indemnification
     Claim") then such Indemnified Party will promptly  give
     notice to the Indemnitor.  Failure to notify the Indemnitor
     will not relieve the Indemnitor of any Liability that it may
     have to the Indemnified Party, except to the extent the
     defense  of  such Action is materially and  irrevocably
     prejudiced by the Indemnified Party's failure to give such
     notice.

          (b)  An Indemnitor will have the right to defend against an
     Indemnification Claim, other than a Indemnification Claim
     related to Taxes, with counsel of its choice reasonably
     satisfactory to the Indemnified Party if (i) within 15 days
     following the receipt of notice of the Indemnification Claim
     the Indemnitor notifies the Indemnified Party in writing
     that the Indemnitor will indemnify the Indemnified Party
     from and against the entirety of any damages the Indemnified
     Party may suffer resulting from, relating to, arising out
     of, or attributable to the Indemnification Claim, (ii) the
     Indemnitor provides the Indemnified Party with evidence
     reasonably acceptable to the Indemnified Party that the
     Indemnitor will have the financial resources to  defend
     against the Indemnification Claim and pay, in cash, all
     damages the Indemnified Party may suffer resulting from,
     relating  to,  arising out of, or attributable  to  the
     Indemnification Claim, (iii) the Indemnification  Claim
     involves only money damages and does not seek an injunction
     or other equitable relief, (iv) settlement of, or an adverse
     judgment with respect to, the Indemnification Claim is not
     in the good faith judgment of the Indemnified Party likely
     to establish a precedential custom or practice materially
     adverse  to  the continuing business interests  of  the
     Indemnified  Party, and (v) the Indemnitor continuously
     conducts the defense of the Indemnification Claim actively
     and diligently.

          (c)  So long as the Indemnitor is conducting the defense of
     the  Indemnification Claim in accordance  with  Section
     11.4(b), (i) the Indemnified Party may retain separate co-
     counsel at its sole cost and expense and participate in the
     defense of the Indemnification Claim, (ii) the Indemnified
     Party  will not consent to the entry of any Order  with
     respect to the Indemnification Claim without the  prior
     written  Consent of the Indemnitor (not to be  withheld
     unreasonably), and (iii) the Indemnitor will not consent to
     the entry of any Order with respect to the Indemnification
     Claim without the prior written Consent of the Indemnified
     Party (not to be withheld unreasonably, provided that it
     will not be deemed to be unreasonable for an Indemnified
     Party  to withhold its Consent (A) with respect to  any
     finding of or admission (1) of any Breach of any Law, Order
     or Permit, (2) of any violation of the rights of any Person,
     or  (3)  which Indemnified Party believes could have  a
     Material Adverse Effect on any other Actions to which the
     Indemnified Party or its Affiliates are party or to which
     Indemnified Party has a good faith belief it may become
     party, or (B) if any portion of such Order would not remain
     sealed).

          (d)  In connection with any Indemnification Claim for Taxes,
     or  if  any condition in Section 11.4(b) is or  becomes
     unsatisfied, (i) the Indemnified Party may defend against,
     and consent to the entry of any Order with respect to an
     Indemnification Claim in any manner it may deem appropriate
     (and the Indemnified Party need not consult with, or obtain
     any Consent from, any Indemnitor in connection therewith),
     (ii) each Indemnitor will jointly and severally be obligated
     to reimburse the Indemnified Party promptly and periodically
     for  the  damages  relating to  defending  against  the
     Indemnification Claim, and (iii) each Indemnitor will remain
     jointly and severally Liable for any damages the Indemnified
     Party may suffer relating to the Indemnification Claim to
     the fullest extent provided in this ARTICLE 11.

          (e)  Each Party hereby consents to the non-exclusive
     jurisdiction  of any Governmental Body, arbitrator,  or
     mediator  in  which  an Action is brought  against  any
     Indemnified Party for purposes of any Indemnification Claim
     that an Indemnified Party may have under this Agreement with
     respect to such Action or the matters alleged therein, and
     agrees that process may be served on such Party with respect
     to such claim anywhere in the world.




     11.5 Limitations on Indemnification Liability

          (a)  With Respect to Claims by the Indemnified Buyer
     Parties.  The Seller Parties' aggregate Liability for money
     damages under this Agreement related to Breaches of the
     representations, warranties, and covenants herein will not
     exceed an amount equal to the Purchase Price as adjusted
     pursuant  to  ARTICLE 3, provided that  the  limitation
     contemplated hereby will not be applicable with respect to
     Breaches of Sections 6.1 and 6.2 or instances of fraud by a
     Seller Party.

(b)  With Respect to Claims by the Indemnified Seller
Parties.  Buyer's aggregate Liability for money damages
under this Agreement related to Breaches of the
representations, warranties, and covenants herein will not
exceed the principal amount of the Buyer Note as adjusted
pursuant to ARTICLE 3, provided that the limitation
contemplated hereby will not be applicable with respect to
Breaches of Sections 5.1 and 5.2 or instances of fraud by
Buyer.

(c)  With Respect to Claims by any Indemnified Party.  Any
claims any Indemnified Party makes under this ARTICLE 11
will be limited as follows:

               (i)  Exclusion of Certain Types of Damages.  All
          indemnification obligations will be limited to actual
          damages and will exclude incidental, consequential, lost
          profits, indirect, punitive, or exemplary damages.

               (ii) Knowledge Qualifiers.  In determining whether a
          representation, warranty, or covenant in this Agreement has
          been breached where such covenant is modified by the concept
          of "Knowledge," such concept will be disregarded in
          determining whether there has been a Breach of such
          representation, warranty, or covenant.



     11.6 Set Off Rights

     Buyer  will have the option of setting off all  or  any
part  of any damages Buyer suffers by notifying Seller  that
Buyer is reducing the principal amount outstanding under the
Buyer  Note by the amount of such damages.  This will affect
the  timing and amount of payments required under Buyer Note
in  the  same  manner  as  if Buyer  had  made  a  permitted
prepayment (without premium or penalty) thereunder.  Buyer's
exercise, if in good faith, of its set off rights  will  not
constitute an event of default under the Buyer Note  or  any
related security documents.

  11.7 Option to Require Seller to Pay in Buyer Common Stock

     If any Seller Party has an obligation to pay damages to
Buyer  under this ARTICLE 11, Buyer may require such  Seller
Party   to  satisfy  the  obligation  by  surrendering   for
redemption that quantity of shares of common stock of  Buyer
or  any  Affiliate of Buyer then held by such  Seller  Party
equal in value to the damages.  For purposes of this Section
11.7, the value of Buyer Common Stock will be the lesser  of
the  closing price of such common stock on the NASDAQ  Stock
Market's  National  Market  as  of  (a)  the  business   day
immediately preceding the Closing Date, and (b) the date the
amount  of damages is finally determined in accordance  with
this Agreement.  If Buyer elects to redeem stock, it will do
so by providing notice to the transfer agent with respect to
such  common  stock and providing a copy of such  notice  to
such Seller Party.  Each Seller Party hereby authorizes such
transfer  agent  to transfer title to such common  stock  on
Buyer's  stock  ledger  and will hold  such  transfer  agent
harmless  from  and indemnify such transfer  agent  for  any
Liabilities  of  the  transfer agent (INCLUDING  LIABILITIES
ARISING FROM ITS OWN NEGLIGENCE) arising as a result of such
transfer.   Any certificates representing such common  stock
issued  in connection herewith will bear a legend reflecting
the obligations contemplated by this Section 11.7.

     11.8 No Wavier of Rights or Remedies

     Each  Indemnified Party's rights and remedies set forth
in  this Agreement will survive the Closing and will not  be
deemed  waived  by such Indemnified Party's consummation  of
the  Transactions  and will be effective regardless  of  any
inspection  or investigation conducted, or the awareness  of
any  matters acquired (or capable or reasonably  capable  of
being  acquired), by or on behalf of such Indemnified  Party
or by its directors, officers, employees, or representatives
or  at  any  time  (regardless of  whether  notice  of  such
knowledge  has been given to Indemnitor), whether before  or
after the Execution Date or the Closing Date with respect to
any   circumstances  constituting  a  condition  under  this
Agreement, unless any waiver specifically so states.

     11.9 Other Indemnification Provisions

          (a)  The foregoing indemnification provisions are in
     addition to, and not in derogation of, any remedy at law or
     in  equity that any Party may have with respect to  the
     Transactions.

          (b)  A claim for any matter not involving a third party may
     be asserted by notice to the Party from whom indemnification
     is sought.

                         ARTICLE 12.
                        MISCELLANEOUS

     12.1 Schedules

          (a)  The disclosures in any Schedule, and those in any
     supplement thereto, relate only to the representations and
     warranties in the Section or paragraph of the Agreement to
     which such Schedule expressly relates and not to any other
     representation or warranty in this Agreement.

          (b)  If there is any inconsistency between the statements in
     the body of this Agreement and those in the Schedules (other
     than an exception expressly set forth as in the Schedules
     with respect to a specifically identified representation or
     warranty), the statements in the body of this Agreement will
     control.

(c)  Nothing in the Schedules will be deemed adequate to
disclose an exception to a representation or warranty made
herein, unless the Schedules identify the exception with
particularity and describes the relevant facts in reasonable
detail.



          (d)  The mere listing (or inclusion of a copy) of a document
     or other item in a Schedule will not be deemed adequate to
     disclose an exception to a representation or warranty made
     in this Agreement (unless the representation or warranty
     pertains to the existence of the document or other item
     itself).

     12.2 Entire Agreement

     This   Agreement,  together  with  the   Exhibits   and
Schedules    hereto   and   the   certificates,   documents,
instruments and writings that are delivered pursuant hereto,
constitutes  the entire agreement and understanding  of  the
Parties in respect of its subject matters and supersedes all
prior  understandings, agreements, or representations by  or
among  the  Parties,  written or oral, to  the  extent  they
relate  in  any  way  to the subject matter  hereof  or  the
Transactions, including the letter of intent, dated June 11,
2003,   between  Seller  and  Buyer.   Except  as  expressly
contemplated  by  ARTICLE  11,  there  are  no  third  party
beneficiaries  having rights under or with respect  to  this
Agreement.

     12.3 Successors

     All    of    the    terms,    agreements,    covenants,
representations,   warranties,  and   conditions   of   this
Agreement are binding upon, and inure to the benefit of  and
are   enforceable  by,  the  Parties  and  their  respective
successors  and,  to the extent of any assignment  permitted
under Section 12.4, the assigns of Buyer.

     12.4 Assignments

     No Party may assign either this Agreement or any of its
rights,  interests,  or  obligations hereunder  without  the
prior  written  approval of Buyer and  the  Seller  Parties;
provided, however, that Buyer may (a) assign any or  all  of
its  rights  and interests hereunder to one or more  of  its
Affiliates  and (b) designate one or more of its  Affiliates
to perform its obligations hereunder (in any or all of which
cases  Buyer  nonetheless will remain  responsible  for  the
performance of all of its obligations hereunder), (c) make a
collateral  assignment  of  its  rights  hereunder  to   its
lender(s) and (d) in connection with any sale or transfer by
Buyer  of all or substantially all of its assets to  another
Person,  (i)  Buyer  may, by written notice  to  the  Seller
Parties, assign any or all of its rights and interests under
this  Agreement to such other Person; and (ii) to the extent
such  other Person expressly assumes by a written instrument
any or all of the obligations of Buyer under this Agreement,
Buyer shall be discharged and released from such obligations
so  assumed.   In the event of an assignment or  designation
pursuant  to clauses (a) or (b) or (d) of the prior sentence
prior to the Closing Date, any documents to be delivered  by
any Seller Party or Buyer pursuant hereto the forms of which
are  attached hereto shall be appropriately modified to give
effect to such assignment or designation.

     12.5 Notices

     All  notices,  requests,  demands,  claims,  and  other
communications  hereunder will be in writing.   Any  notice,
request,  demand,  claim,  or other communication  hereunder
will  be deemed duly given if (and then three business  days
after)  it  is sent by registered or certified mail,  return
receipt  requested, postage prepaid, and  addressed  to  the
intended recipient as set forth below:

          If to Buyer:

          Attn:  Jay Furrow
          c/o Innovo Group, Inc.
          5900 S. Eastern Ave., Suite 104
          Commerce, CA 90040
          Tel: (323)725-5516
          Fax: (865)546-9277

          Copy to (which will not constitute
          notice):

          Akin, Gump, Strauss, Hauer & Feld,
          L.L.P.

          Attn: Paul A. Belvin, Esq.
          1333 New Hampshire Ave., N.W.
          Washington, D.C. 20036
          Tel: (202) 887-4021
          Fax: (202) 887-4288

          If to Seller:

          Attn:
          Hubert Guez
          5804 E. Slauson Ave.
          Commerce, CA 90040
          Fax: (323) 890-9677

          If to the Shareholders:

          Attn:
          Hubert Guez
          5804 E. Slauson Ave.
          Commerce, CA 90040
          Fax: (323) 890-9677




     Any  Party may send any notice, request, demand, claim,
or  other  communication hereunder to the intended recipient
at  the  address  set  forth above  using  any  other  means
(including  personal delivery, expedited courier,  messenger
service,  telecopy,  telex,  ordinary  mail,  or  electronic
mail), but no such notice, request, demand, claim, or  other
communication will be deemed to have been duly given  unless
and until it actually is received by the intended recipient.
Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder  are  to
be  delivered  by  giving the other Parties  notice  in  the
manner herein set forth.

     12.6 Specific Performance

     Each  Party  acknowledges and  agrees  that  the  other
Parties  would  be damaged irreparably if any  provision  of
this  Agreement  is  not performed in  accordance  with  its
specific terms or is otherwise Breached.  Accordingly,  each
Party  agrees that the other Parties will be entitled to  an
injunction  or  injunctions  to  prevent  Breaches  of   the
provisions  of  this  Agreement and to enforce  specifically
this  Agreement and its terms and provisions in  any  Action
instituted  in any court of the United States or  any  state
thereof having jurisdiction over the Parties and the matter,
subject to Sections 12.7 and 12.11, in addition to any other
remedy to which they may be entitled, at law or in equity.

     12.7 Submission to Jurisdiction; Process Agent; No Jury
Trial

        (a)  Submission to Jurisdiction.  Each Party submits
 to the
     jurisdiction of any state or federal court sitting in Los
     Angeles,  California, in any action arising out  of  or
     relating to this Agreement and agrees that all claims in
     respect of the action may be heard and determined in any
     such court.  Nothing in this Section 12.7(a) will affect the
     right of any Party to bring any action arising out of or
     relating to this Agreement in any other court.  Each Party
     agrees that a final judgment in any action so brought will
     be conclusive and may be enforced by action on the judgment
     or in any other manner provided at law or in equity.  Each
     Party  waives any defense of inconvenient forum to  the
     maintenance of any action so brought and waives any bond,
     surety, or other security that might be required of any
     other Party with respect thereto.

          (b)  Waiver of Jury Trial.  THE PARTIES EACH HEREBY AGREE TO
     WAIVE THEIR RESPECTIVE RIGHTS TO JURY TRIAL OF ANY DISPUTE
     BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER
     AGREEMENTS  RELATING HERETO OR ANY DEALINGS AMONG  THEM
     RELATING TO THE TRANSACTIONS.  The scope of this waiver is
     intended to be all encompassing of any and all actions that
     may be filed in any court and that relate to the subject
     matter of the transactions, including, contract claims, tort
     claims, breach of duty claims, and all other common law and
     statutory claims.  The Parties each acknowledges that this
     waiver is a material inducement to enter into a business
     relationship and that they will continue to rely on the
     waiver in their related future dealings.  Each Party further
     represents and warrants that it has reviewed this waiver
     with  its  legal counsel, and that each  knowingly  and
     voluntarily  waives  its  jury trial  rights  following
     consultation with legal counsel.  NOTWITHSTANDING ANYTHING
     TO THE CONTRARY HEREIN, THIS WAIVER IS IRREVOCABLE, MEANING
     THAT IT MAY NOT BE MODIFIED ORALLY OR IN WRITING, AND THE
     WAIVER WILL APPLY TO ANY AMENDMENTS, RENEWALS, SUPPLEMENTS
     OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS
     OR AGREEMENTS RELATING HERETO.  In the event of an action,
     this Agreement may be filed as a written consent to trial by
     a court.




          (c)  Service of Process.  The Parties agree that any Party
     may make service on any other Party by sending or delivering
     a  copy of the process to the Party to be served at the
     address and in the manner provided for the giving of notices
     in  Section 12.5.  Nothing in this Section 12.7(c) will
     affect any Party's right to bring any action arising out of
     or relating to this Agreement in any other court or to serve
     legal process in any other manner permitted at law or in
     equity.

     12.8 Time

     Time  is  of  the  essence in the performance  of  this
Agreement.

     12.9 Counterparts

     This   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.

     12.10     Headings

     The  article  and  section headings contained  in  this
Agreement  are inserted for convenience only  and  will  not
affect  in  any  way the meaning or interpretation  of  this
Agreement.

     12.11     Governing Law

     This  Agreement and the performance of the Transactions
and obligations of the Parties hereunder will be governed by
and  construed in accordance with the laws of the  State  of
California,  without  giving effect to  any  choice  of  Law
principles that may require application of any other Laws.

     12.12     Amendments and Waivers

     No   amendment,   modification,  waiver,   replacement,
termination  or  cancellation  of  any  provision  of   this
Agreement will be valid, unless the same will be in  writing
and signed by Buyer and each Seller Party.  No waiver by any
Party  of  any  default,  misrepresentation,  or  breach  of
warranty or covenant hereunder, whether intentional or  not,
may  be deemed to extend to any prior or subsequent default,
misrepresentation,  or  Breach  of  warranty   or   covenant
hereunder or affect in any way any rights arising because of
any prior or subsequent such occurrence.

     12.13     Severability

     The   provisions  of  this  Agreement  will  be  deemed
severable  and  the  invalidity or unenforceability  of  any
provision will not affect the validity or enforceability  of
the  other provisions hereof; provided that if any provision
of  this  Agreement,  as applied to  any  Party  or  to  any
circumstance,   is   adjudged  by   a   Governmental   Body,
arbitrator, or mediator not to be enforceable in  accordance
with  its  terms,  the Parties agree that  the  Governmental
Body, arbitrator, or mediator making such determination will
have   the  power  to  modify  the  provision  in  a  manner
consistent  with its objectives such that it is enforceable,
and/or  to  delete  specific words or phrases,  and  in  its
reduced  form,  such provision will then be enforceable  and
will be enforced.



     12.14     Expenses

     Except   as  otherwise  expressly  provided   in   this
Agreement,  the  Seller Parties, on the one  hand,  and  the
Buyer,  on the other hand, will each bear its own costs  and
expenses   incurred  in  connection  with  the  preparation,
execution  and  performance  of  this  Agreement   and   the
Transactions  including  all fees and  expenses  of  agents,
representatives,  financial  advisors,  legal  counsel   and
accountants.

     12.15     Construction

     The   Parties   have  participated   jointly   in   the
negotiation and drafting of this Agreement.  If an ambiguity
or   question  of  intent  or  interpretation  arises,  this
Agreement  will  be construed as if drafted jointly  by  the
Parties  and  no presumption or burden of proof  will  arise
favoring  or disfavoring any Party because of the authorship
of  any  provision of this Agreement.  Any reference to  any
federal, state, local, or foreign Law will be deemed also to
refer  to  Law  as  amended and all  rules  and  regulations
promulgated   thereunder,  unless   the   context   requires
otherwise.  The words "include," "includes," and "including"
will  be  deemed  to  be  followed by "without  limitation."
Pronouns in masculine, feminine, and neuter genders will  be
construed  to  include any other gender, and  words  in  the
singular  form will be construed to include the  plural  and
vice  versa,  unless  the context otherwise  requires.   The
words   "this  Agreement,"  "herein,"  "hereof,"   "hereby,"
"hereunder,"  and  words of similar  import  refer  to  this
Agreement  as a whole and not to any particular  subdivision
unless  expressly so limited.  The Parties intend that  each
representation, warranty, covenant, and condition  contained
herein will have independent significance.  If any Party has
breached any representation, warranty, or covenant contained
herein  in  any respect, the fact that there exists  another
representation, warranty or covenant relating to the same or
similar subject matter (regardless of the relative levels of
specificity)  which  the Party has  not  breached  will  not
detract  from  or  mitigate the fact that the  Party  is  in
breach  of  the first representation, warranty, or covenant.
If  any  condition to Closing contained herein has not  been
satisfied in any respect, the fact that there exists another
condition  relating  to the same or similar  subject  matter
(regardless of the relative levels of specificity) which has
been  satisfied shall not detract from or mitigate the  fact
that the first condition has not been satisfied.

     12.16     Incorporation of Exhibits and Schedules

     The   Exhibits,   Schedules,  and   other   attachments
identified  in  this  Agreement are incorporated  herein  by
reference and made a part hereof.

     12.17     Remedies

     Except   as  expressly  provided  herein,  the  rights,
obligations  and  remedies created  by  this  Agreement  are
cumulative and in addition to any other rights, obligations,
or remedies otherwise available at law or in equity.  Except
as   expressly  provided  herein,  nothing  herein  will  be
considered an election of remedies.

     12.18     Joint and Several Obligations

     Notwithstanding  anything  to  the  contrary  in   this
Agreement,  the  covenants  and  obligations  of,  and   the
representations  and warranties made by or attributable  to,
any  Seller Party pursuant to this Agreement will be  deemed
to be made by and attributable to each Seller Party, jointly
and  severally,  and  Buyer will have the  right  to  pursue
remedies against any one or more Seller Parties without  any
obligation  to  give  notice to  or  to  pursue  all  Seller
Parties,  or  to  give  notice to or pursue  any  individual
Seller Party, before pursuing any other Seller Party.

                  [Signature Page Follows]

          IN WITNESS WHEREOF, the parties hereto have caused
this  Agreement  to be executed on the day  and  year  first
above written.

                        INNOVO AZTECA APPAREL, INC.


                        By: /s/ Samuel Joseph Furrow, Jr.
                           ------------------------------
                        Name:  Samuel Joseph Furrow, Jr.
                        Title:  Chief Executive Officer


                        AZTECA PRODUCTION INTERNATIONAL, INC.


                        By:  /s/ Hubert Guez
                           -----------------
                        Name:  Hubert Guez
                        Title:  President


                         /s/ Hubert Guez
                         ---------------
                         Hubert Guez

                         /s/ Paul Guez
                         -------------
                         Paul Guez


ACKNOWLEDGED AND AGREED:

INNOVO GROUP INC.


By /s/ Samuel Joseph Furrow, Jr.
Name:  Samuel Joseph Furrow, Jr.
Title: Chief Executive Officer


*The  following Exhibits and Schedules marked "Intentionally
Left  Blank" have not been provided because the Company does
not  believe  such Exhibits or Schedules contain information
that  would  be  material  to an investment  decision.   The
Company  agrees  to furnish supplementally  a  copy  of  the
omitted  Exhibits  and  Schedules  to  the  Commission  upon
request.


                          EXHIBIT A


   Form of Bill of Sale and Assignment of Contract Rights


       BILL OF SALE AND ASSIGNMENT OF CONTRACT RIGHTS

      For  good and valuable consideration, the receipt  and
adequacy  of which are hereby acknowledged, and pursuant  to
the  Asset  Purchase Agreement dated July 17,  2003  by  and
among  Azteca  Production International, Inc., a  California
corporation  ("Seller"), Hubert Guez,  an  individual,  Paul
Guez,  an  individual, and Innovo Azteca  Apparel,  Inc.,  a
California   corporation  ("Buyer")  (the  "Asset   Purchase
Agreement"),  Seller hereby unconditionally and  irrevocably
grants,  bargains, transfers, sells, assigns,  conveys,  and
delivers  to Buyer, its successors and assigns forever,  all
right,  title, and interest, legal or equitable, in  and  to
the  Purchased  Assets  (as defined in  the  Asset  Purchase
Agreement) (the "Purchased Assets").

     TO HAVE AND TO HOLD the Purchased Assets unto Buyer and
its successors and assigns forever.

Undefined  capitalized  terms  herein  are  defined  in  the
Asset Purchase Agreement.

     Seller, for itself, its successors, and assigns, hereby
covenants  and agrees (i) to and with Buyer, to warrant  and
defend  the  grant,  bargain,  transfer,  sale,  assignment,
conveyance,  and delivery of the Purchased Assets  to  Buyer
and  its successors and assigns against all Persons, to  the
extent  set forth in the Asset Purchase Agreement  and  (ii)
that,  at  any  time and from time to time  after  the  date
hereof, promptly upon the written request of Buyer, it  will
do,  execute, acknowledge, and deliver, or cause to be done,
executed, acknowledged, and delivered, each and all of  such
further  acts,  deeds, assignments, transfers,  conveyances,
powers  of  attorney, and assurances as  may  reasonably  be
required  by Buyer in order to assign, transfer,  set  over,
convey,  assure,  and confirm unto and vest  in  Buyer,  its
successors,  and  assigns  the Purchased  Assets  and  title
thereto and to put Buyer in possession and operating control
of  the  Purchased Assets.  To the extent that  any  of  the
Purchased Assets are not actually delivered and turned  over
by  Seller  to  Buyer at the Closing, such Purchased  Assets
will be held in trust by Seller for Buyer and will be turned
over  and  delivered to Buyer at any time and from  time  to
time upon demand therefor.  Buyer will maintain the sole and
exclusive  title thereto and all right, title, and  interest
therein,  and Seller will have no right, title, or  interest
in or to any such Purchased Assets, nor will Seller have any
retaining possessory or other lien thereon.



     Without   limiting   the   foregoing,   Seller   hereby
constitutes Buyer the true and lawful agent and attorney-in-
fact  of  Seller,  with  full  power  of  substitution   and
resubstitution, in whole or in part, in the name  and  stead
of Seller but on behalf and for the benefit of Buyer and its
successors and assigns, from time to time:

     1.   To demand, receive, and collect any and all of the
          Purchased Assets, and to give receipts and releases for and
          with respect to same, or any part thereof.

     2.   To institute and prosecute, in the name of Seller or
          otherwise, all proceedings, at law, in equity, or otherwise,
          that Buyer or its successors and assigns may deem proper in
          order to collect or enforce any claim or right of any kind
          included in the Purchased Assets.

     3.   To do all things legally permissible or required, or
          reasonably deemed by Buyer to be required, to recover and
          collect the Purchased Assets and to use Seller's name in
          such manner as Buyer may reasonably deem necessary for the
          collection and recovery of same.

Seller hereby declares that the foregoing powers are coupled
with  an  interest and are irrevocable by Seller or  by  its
dissolution  or  in  any  other manner  or  for  any  reason
whatsoever.   Buyer expressly does not, and  should  not  be
deemed  to,  assume under this instrument  any  liabilities,
obligations, or commitments of Seller.

      The  scope, nature and extent of the Purchased  Assets
are  expressly  set  forth in the Asset Purchase  Agreement.
Nothing  herein contained will itself change, amend, extend,
or  alter (nor should it be deemed or construed as changing,
amending, extending, or altering) the terms or conditions of
the Asset Purchase Agreement in any manner whatsoever.  This
instrument does not create or establish rights, liabilities,
or  obligations not otherwise created or existing  under  or
pursuant   to   the   Asset  Purchase   Agreement.    Seller
acknowledges    and   agrees   that   the   representations,
warranties, covenants, agreements, and indemnities contained
in  the  Asset  Purchase Agreement will  not  be  superseded
hereby but will remain in full force and effect to the  full
extent  provided therein.  In the event of any  conflict  or
inconsistency  between  the  terms  of  the  Asset  Purchase
Agreement and the terms of this instrument, the terms of the
Asset Purchase Agreement will govern.

     Nothing  in  this instrument, express  or  implied,  is
intended  or shall be construed to confer upon or  give  to,
any  person,  firm or corporation other than Buyer  and  its
successors  and  assigns any remedy or  claim  under  or  by
reason of this instrument or any term, covenant or condition
hereof,   and  all  of  the  terms,  covenants,  conditions,
promises, and agreements in this instrument shall be for the
sole  and exclusive benefit of Buyer and its successors  and
assigns.

     This  instrument will be binding upon  Seller  and  its
successors and assigns, and inure to the benefit of  and  is
enforceable by Buyer and its successors and assigns.


                  [SIGNATURE PAGE FOLLOWS]




            IN  WITNESS  WHEREOF,  this  Bill  of  Sale  and
Assignment   of  Contract  Rights  is  being  executed   and
delivered by Seller as of the date first above written.



AZTECA  PRODUCTION  INTERNATIONAL, INC.

                         By:  _____________________
                         Name:  ___________________
                         Title:    ___________________





                          EXHIBIT B
                     Form of Buyer Note


                       PROMISSORY NOTE

$21,800,000.00                                    Commerce,
California
                                               July __, 2003

     FOR  VALUE  RECEIVED, Innovo Azteca  Apparel,  Inc.,  a
California  corporation ("Maker") promises  to  pay  to  the
order   of   Azteca  Productions  International,   Inc.,   a
California   corporation  ("Noteholder"),  without   further
demand,  at  such location as Noteholder may designate,  the
sum  of Twenty-One Million Eight Hundred Thousand and no/100
Dollars  ($21,800,000.00) in accordance with  the  following
terms:
       This  Promissory  Note  shall  have  a  7-year  term,
          maturing on July __, 2010;

       The  principal amount shall bear interest at the rate
          of six percent (6%) compounded annually;

       On the  first and second anniversary of the  date  of
          issuance of this Promissory Note, accrued interest
          only  shall  be  due and payable in  equal  annual
          installments  in  accordance  with  the   schedule
          attached hereto as Exhibit A;

       The  principal  amount of this Promissory Note  shall
          be  fully amortized into five equal payments, each
          due  and  payable  on  the third  through  seventh
          anniversary   dates  of  the  issuance   of   this
          Promissory  Note, together with equal payments  of
          accrued  interest, in accordance with the schedule
          attached hereto as Exhibit A; and

       All  sums  due hereon are payable in lawful money  of
          the United States.

     If  any  holder of this Note shall institute any action
for  the enforcement or collection of this Note, there shall
be  due  from  Maker all costs and expenses of such  action,
including,  but not limited to, reasonable attorneys'  fees,
and  said  holder  of this Note may take  judgment  for  the
entire amount due.
     Notwithstanding any other provision of this Note, Maker
shall  have  the right at any time or from time to  time  to
prepay  any or all of the unpaid principal balance  of  this
Note,  any or all of the interest due pursuant to the  terms
of  this Note, or any combination of principal and interest,
without bonus, penalty or payment of unearned interest.
     The  provisions  and covenants contained  herein  shall
inure  to  and  be binding upon the successors, transferees,
heirs and assigns of the parties hereto.
     Notwithstanding  anything  to  the  contrary   provided
above,  this  Promissory Note shall be subject  to  offsets,
partial  conversion, and reductions as provided in  Sections
3.3(c), 3.4 and 3.5 of that certain Asset Purchase Agreement
by   and   among  Maker  and  Noteholder  ("Asset   Purchase
Agreement"), dated July ____, 2003.
     This Note shall be governed by the internal laws of the
State  of  California  and the laws  of  the  United  States
applicable to transactions within said State.

                                INNOVO AZTECA APPAREL, INC.


                                By:
____________________________
                                Name:
__________________________
                                Title:
_________________________




                          EXHIBIT C

                  Form of Supply Agreement

  An executed copy has been attached hereto and referenced
       herein as a part of this filing as Exhibit 10.1

                          EXHIBIT D
           Form of Seller's Officer's Certificate

                  Intentionally Left Blank


                          EXHIBIT E
          Form of Seller's Secretary's Certificate

                  Intentionally Left Blank


                          EXHIBIT F
            Form of Buyer's Officer's Certificate

                  Intentionally Left Blank


                          EXHIBIT G
           Form of Buyer's Secretary's Certificate

                  Intentionally Left Blank


                        SCHEDULE 1.1
                      Purchased Assets

                  Intentionally Left Blank


                        SCHEDULE 5.3
                   Buyer Required Consents

                            None


                        SCHEDULE 5.6
                      Buyer Litigation

                            None


                        SCHEDULE 6.3
                  Seller Required Consents

                            None


                        SCHEDULE 6.5
                    Financial Statements

                  Intentionally Left Blank


                        SCHEDULE 6.6
                      Subsequent Events

                            None


                        SCHEDULE 6.12
                          Contracts

                  Intentionally Left Blank


                        SCHEDULE 6.14
                      Seller Litigation

                            None




                        SCHEDULE 6.15
               Standard Terms of Sale or Lease

                  Intentionally Left Blank


                      SCHEDULE 6.16(a)
               Current Employees and Directors

                  Intentionally Left Blank


                      SCHEDULE 6.16(b)
                    Terminated Employees

                  Intentionally Left Blank


                        SCHEDULE 6.17
                      Employee Benefits

                  Intentionally Left Blank


                        SCHEDULE 6.18
                    Environmental Matters

                            None


                        SCHEDULE 6.19
                          Suppliers

                  Intentionally Left Blank


                        SCHEDULE 6.20
                           Permits

                  Intentionally Left Blank


Exhibit 10.1

                      SUPPLY AGREEMENT
     This SUPPLY AGREEMENT ("Supply Agreement"), dated as of
this  17th day of July, 2003 ("Effective Date"), is made  by
and between AZT International SA DE CV, a Mexico corporation
("AZT")  and  wholly-owned subsidiary of  Azteca  Production
International,  Inc.,  a  California  corporation  with  its
principal  executive  offices at 5804 East  Slauson  Avenue,
Commerce,  California  90040 ("Azteca")  and  Innovo  Azteca
Apparel, Inc., a California corporation having its principal
executive  office  at  5900  S.  Eastern  Avenue,  Commerce,
California 90040 ("Innovo").
                          RECITALS
     A.   AZT  is,  among  other things, a  manufacturer  of
          denim-related products.
     B.   Innovo  is, among other things, a seller of denim-
          related products.
     C.   Azteca  and  Innovo have entered into  a  separate
          Asset  Purchase Agreement dated the same  date  as
          this  Supply  Agreement, pursuant to which  Innovo
          has   acquired  from  Azteca  certain  assets  and
          properties   formerly  used  by  Azteca   in   the
          operation of its Blue Concepts Division.
     D.   Both  parties now desire to enter into  this  non-
          exclusive  Supply  Agreement  whereby   AZT   will
          manufacture and supply certain products for Innovo
          under  the terms and conditions set forth in  this
          Supply Agreement, and Innovo will market and  sell
          such  products  to its customers  and  the  former
          customers of the Blue Concepts Division.



      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:
ARTICLE 13.    PRODUCTS, ORDERS AND PRICING

13.1 AZT shall manufacture and supply to Innovo the Products
described  in  Exhibit A attached hereto  (the  "Products"),
during  the  Term  of this Supply Agreement  ("Manufacturing
Services").   AZT  agrees that the  purchase  price  of  the
Products  purchased  from AZT by Innovo  or  its  affiliates
shall  allow Innovo an initial margin per unit of  not  less
than 15% (i.e., the price paid to AZT shall be at least  15%
less than the purchase price to be received by Innovo or its
affiliates from its customers).

 13.2 All of the Products to be manufactured hereunder shall
be   made  in  accordance  with  all  applicable  laws   and
regulations.

 13.3 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 AZT  clearly
setting  forth  the Products to be purchased by  Innovo  and
requested shipping dates for the ordered Products.

ARTICLE 14.    TERM AND TERMINATION

     14.1 Term  The term of this Supply Agreement shall continue
from  the  Effective  Date for a period  of  two  (2)  years
("Term").

14.2 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.
     14.3 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.

ARTICLE  15.     DELIVERY   INNOVO SHALL  PROVIDE  AZT  WITH
REASONABLE  LEAD  TIME FOR ALL ORDERS FOR PURCHASE  AND  AZT
SHALL TIMELY FULFILL ALL ORDERS FOR PURCHASES RECEIVED  FROM
INNOVO AND SHALL DELIVER THE PRODUCTS WHEREVER SO INSTRUCTED
BY  INNOVO ACCORDING TO A REASONABLE DELIVERY SCHEDULE.  THE
PARTIES  HERETO SHALL IN GOOD FAITH NEGOTIATE SUCH  DELIVERY
SCHEDULE.

ARTICLE 16.    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.

ARTICLE 17.    INVOICING AND FORM OF PAYMENT
     17.1 Invoices

          (a)  AZT shall invoice Innovo upon each shipment of goods
     made against an Innovo purchase order.  Payments by Innovo
     will be made directly to AZT immediately upon receipt of
     such invoices.

          (b)  If Innovo fails to pay any fees or charges when due,
     AZT may charge Innovo a late payment charge of one and one-
     half percent (1 1/2%) per month on the past due balance.

     17.2 Form of Payments  Innovo shall remit payments directly
to AZT in the form of cash via a wire transfer.



ARTICLE 18.    RISK OF LOSS  AZT SHALL BEAR THE RISK OF LOSS
OF, OR DAMAGE TO, THE PRODUCTS, UNTIL DELIVERY IN ACCORDANCE
WITH INSTRUCTIONS FROM INNOVO.

ARTICLE  19.    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,  AZT  SHALL  PROVIDE  REASONABLE
ASSISTANCE  AND  ACCESS TO AZT'S FACILITIES,  PERSONNEL  AND
MATERIALS.    AZT  SHALL  COMPLY  WITH  INNOVO'S  REASONABLE
QUALITY  AND  INSPECTION PROCEDURES  DURING  PRODUCTION  AND
AFTER  SHIPMENT,  PROVIDED,  HOWEVER,  THAT  AMERICAN  EAGLE
OUTFITTERS OR OTHER PURCHASER OF THE PRODUCT(S) FROM  INNOVO
SHALL HAVE THE RIGHT OF FINAL DETERMINATION WITH RESPECT  TO
QUALITY CONTROL ISSUES.

ARTICLE 20.    MUTUAL REPRESENTATIONS AND WARRANTIES

     20.1 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.

     20.2 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.

ARTICLE 21.    CONFIDENTIAL INFORMATION

     21.1 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:

     21.2 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.

21.3 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.
     21.4 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.

     21.5 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.



ARTICLE 22.    INDEMNIFICATION

     22.1 AZT's Indemnification  AZT 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  AZT  of  its  obligations,
representations and warranties hereunder.

     22.2 Innovo's Indemnification  Innovo hereby agrees  to
indemnify,  defend, and hold AZT 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  AZT  of  its  obligations,
representations and warranties hereunder.

ARTICLE 23.    GENERAL

     23.1  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.

     23.2 Entire Agreement  This Supply Agreement, including the
Exhibit(s) 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.

23.3 Assignment  This Supply Agreement may not be assigned
by either party hereto to any other person, firm, or entity
without the express written approval of the other party
hereto and any attempt at assignment in violation of this
section will be null and void.
23.4 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:
          AZT                           Innovo
   AZT   International        Innovo Azteca Apparel, Inc.
 5804  E. Slauson Ave.          c/o Innovo  Group, Inc.
 Commerce, CA, 90040             5900 S.Eastern Avenue
Attn:   Hubert  Guez                    Suite 104
                                     Commerce, CA  90040
                                      Attn: Jay Furrow

     23.5 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.

     23.6 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
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  party's performance of a material covenant  set
forth herein, the other party can immediately terminate this
Supply Agreement.



23.7 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.

23.8 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.

23.9 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.

23.10     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.

23.11     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.

23.12     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.


23.13      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 Supply 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  WHEREOF, the parties have  executed  this
Supply Agreement as of the Effective Date.

                         AZTECA INTERNATIONAL, SA DE CV

                         By:  /s/ Hubert Guez
                            -----------------
                         Name:  Hubert Guez
                         Title:  President


                         INNOVO AZTECA APPAREL, INC.

                         By:  /s/ Samuel Joseph Furrow, Jr.
                            -------------------------------
                         Name:  Samuel Joseph Furrow, Jr.
                         Title:  CEO




               (Exhibit A to Supply Agreement
                  Intentionally Left Blank)


Exhibit 99.1

                    FOR IMMEDIATE RELEASE

Innovo Group Acquires Azteca Productions International's
Blue Concepts Division

LOS ANGELES, July 18, 2003 -- Innovo Group Inc. (NASDAQ:
INNO), a sales and marketing organization designing and
selling branded and private label apparel and accessory
products to the retail and private label markets, announced
today that its wholly owned subsidiary, Innovo Azteca
Apparel, Inc. ("IAA") has completed the acquisition of the
Blue Concepts division ("Blue Concepts") of Azteca
Productions International, Inc. ("Azteca").

Azteca's Blue Concepts division, which sells primarily denim
jeans to American Eagle Outfitters, Inc. ("AEO"), had
revenues of approximately $75 million for the fiscal year
ending January 2003.

Pursuant to the terms of the agreement, IAA has purchased
certain assets of Blue Concepts for $21.8 million.
Additionally, IAA will employ the existing employees of Blue
Concepts but will not assume any of Blue Concept's or
Azteca's existing liabilities.

The purchase price has been funded through the issuance of a
seven-year promissory note (the "Note"). The Note bears an
interest rate of 6% and is an interest only note during the
first 24 months and then is fully amortizing over the
remaining five-year period.

"The addition of Blue Concepts will complement our existing
private label business extremely well and we look forward to
capitalizing on the existing operations and expertise within
Blue Concepts. The acquisition will significantly increase
the revenues of the Company and we believe it will also
greatly increase the overall financial strength of the
Company," said Innovo Group CEO Jay Furrow.

After the transaction is completed, the Company will as soon
as reasonably possible call a shareholder meeting at which
the Company's shareholders shall vote upon the conversion of
a portion of the Note into equity through the issuance of
3,125,000 shares of Company common stock valued at the
greater of $4 per share or the market value of the Company's
common stock at the date shareholder approval is obtained.

In the event shareholder approval is obtained, the Note will
be reduced to $9.3 million and the shares issued pursuant to
the conversion will be non-transferable and "locked up"
during Period I (defined below) and locked up during Period
II (defined below) in such quantities necessary to protect
the Company against any revenue shortfalls by Innovo Blue
Concepts ("IBC") during Period II as discussed in more
detail below (the "Locked Up Shares").

In the event that the sales by the newly formed IBC division
fall below $70 million during the first 17 month period
("Period I") following the closing of the acquisition or $65
million during the 12 month period ("Period II") following
Period I, the Company has negotiated certain provisions
which will allow for a reduction in the purchase price
through a decrease in the principal balance of the Note
and/or the return of Locked Up Shares. In the event the Note
is reduced during Period I and the sales of IBC in Period II
are greater than $65 million, the Note shall be increased by
half of the amount greater that $65 million but in no event
shall the Note be increased by an amount greater than the
decrease in Period I.

In the event the principal amount of the Note needs to be
reduced beyond the outstanding principal balance of such
Note, then an amount of the Locked Up Shares equal to the
balance of the required reduction shall be returned to the
Company. For these purposes, the Locked Up Shares shall be
valued at $4.00 per share. Additionally, if during the 12
month period following the closing, AEO is no longer a
customer of IAA, the Locked Up Shares will be returned to
the Company, and any amount remaining on the balance of the
Note will be forgiven.

If the revenues of IBC decrease to $35 million or less
during Period I or Period II, IAA shall have the right to
sell the purchased assets back to Azteca, and Azteca shall
have the right to buy back the purchased assets for the
remaining balance of the Note and any and all Locked Up
Shares shall be returned to the Company.

As part of the transaction, IAA has entered into a non-
exclusive supply agreement with an affiliate of Azteca for
products to be sold by IBC. In addition, IAA will pay to
Sweet Sportswear, LLC, an Azteca affiliate, an amount equal
to 2.5% of IAA's revenues generated as a result of sales to
AEO.



Exhibit 99.2

Innovo Group's Board of Directors Elects Two New Members

LOS ANGELES, Jul 23, 2003 /PRNewswire-FirstCall via COMTEX/
-- Innovo Group Inc. (Nasdaq: INNO), a sales and marketing
organization designing and selling branded and private label
apparel and accessory products to the retail and private
label markets, announced today that its Board of Directors
has elected two new members to its ranks.

The addition of Kent A. Savage and Vincent Sanfilippo
increases the Board's size to nine members, five of them
outsiders, with the other four members representing the
senior management of Innovo Group.

Kent A. Savage has nearly 20 years of entrepreneurial
experience in the information technology, communications and
networking industry, most recently serving as co-founder for
TippingPoint Technologies, Inc., a publicly traded network
securities company. Prior to that, he was co-founder,
President & CEO of Netpliance, Inc, a pioneering provider of
Internet services. During his tenure, Netpliance, Inc.
achieved a leading market position, raised more than $235
million in capital, and took the company public in an IPO at
a market cap of $1.2 billion.

Earlier, Savage was affiliated in senior management
positions with Cisco Systems, Netspeed, Inc, Connectware,
Nortel and Wang Laboratories. Recognized as an Ernst & Young
Entrepreneuer-of-the-Year finalist, he received his
Bachelors in Business and MBA from Oklahoma State University
and Southern Methodist University, respectively. Savage and
his family reside in Austin, Texas.

Vincent Sanfilippo is Chief Investment Officer and a
Principal of Urdang & Associates Real Estate Advisors, Inc.
Urdang & Associates is a real estate investment management
firm whose clients include Fortune 100 corporate and public
pension funds, foundations and other institutional
investors. The Company's portfolio of real estate
investments is currently valued at approximately $2 billion,
and Sanfilippo has been responsible for originating or
overseeing the acquisition of approximately $3 billion of
real estate assets during his 15 years at the Company.
The recipient of a B.S. degree from the University of
Pennsylvania's Wharton School of Finance, Sanfilippo and his
family reside in the Philadelphia area.

"We are extremely fortunate to have both Kent and Vince join
our Board," said Innovo Group CEO Jay Furrow. "Their
collective experience will lend much guidance to our company
as we seek to move forward aggressively both in growing the
company and maximizing shareholder value."