Membership Acquisition Agreement - BLUE HOLDINGS, - 11-14-2006 by BLHI-Agreements

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									EXHIBIT 10.27.2

                             MEMBERSHIP ACQUISITION AGREEMENT

This agreement (this "Agreement") is made as of the 20th day of September, 2006, by and between Life &
Death, LLC (the "Company"), a limited liability company organized under Beverly Killea Act of California,
(California Corporations Code ss.ss.17000 ET SEQ., hereinafter referred to as the "Act"), and consisting of
Philippe Naouri and Alexandre Caugant (the "Existing Members"), located at 2508 North Vermont Avenue, Los
Angeles, CA 90027, and Blue Holdings, Inc. (the "Purchaser"), located at 5804 E. Slauson Avenue, Commerce,
CA 90040.

                                                  RECITALS

A. The Company was duly formed and organized under the Act upon the filing of Articles of Organization with
the Secretary of State of California on May 4, 2006, as amended by the filing of a Certificate of Amendment with
the Secretary of State of California on August 21, 2006.

B. An Operating Agreement has existed since August 21, 2006 among the Existing Members (the "Operating
Agreement"), under which the Company has acquired assets consisting of personal property, and has established
and equipped, and is now operating a business at 5804 E. Slauson Avenue, Commerce, CA 90040, consisting of
the design, development, manufacturing and wholesale distribution of knit apparel bearing the "Life & Death"
trademark (the "Trademark").

C. Purchaser desires to purchase an undivided interest in the Company and all of its assets, and to participate in
the operation of the business with the Existing Members in accordance with the management rights afforded to all
members in the Operating Agreement.

1. SALE OF INTEREST.

The Company agrees to sell and transfer to Purchaser an undivided fifty percent (50%) interest in the Company
and in all its assets, in consideration of the sum of One Hundred Eighty Six One Hundred Forty-Two Dollars and
73/100 ( $186,142.73), payable upon execution and delivery of this Agreement. Company represents and
warrants to Purchaser that all required consents of the Existing Members have been obtained and that upon
completion of the transactions referred to herein the Purchaser shall be deemed to be a member of the Company
with all rights associated therewith as may be provided in the Act and in the Operating Agreement.

2. PURCHASE OF INTEREST.

Purchaser agrees to pay as a purchase price for an undivided fifty percent (50%) interest in the Company the
amount set out in Paragraph 1, on the terms stated in that paragraph.
3. INTERESTS OF MEMBERS.

Upon completion of the transactions described herein, the interests of the Purchaser and the Existing Members in
the profits, losses and capital of the Company will be as follows:

                               Philippe Naouri                                                    25%

                               Alexandre Caugant                                                  25%

                               Blue Holdings, Inc.                                                50%

                    4.         AUDIT OF COMPANY BOOKS.




An audit of the assets and liabilities of the Company will be taken as of the date of this Agreement, and the books
of account of such Company will be closed. The books of account will then be adjusted to show the assignment
to Purchaser of an undivided fifty percent (50%) interest in the Company.

5. APPLICATIONS OF PROCEEDS OF SALE OF INTEREST.

The Company agrees to apply the entire sum paid by the Purchaser for its interest in the Company, toward the
reduction of indebtedness of the Company, to the current expenses of the Company, and as working capital.

6. OPERATING AGREEMENT. A copy of the Amended and Restated Operating Agreement is attached to
this Agreement and incorporated herein by this reference. Upon execution of this Agreement, the Amended and
Restated Operating Agreement will be in full force and effect and all of the members shall be bound by the terms
of such Amended and Restated Operating Agreement.

7. OPERATION OF BUSINESS.

The business of the Company will be operated without interruption, in the manner provided by the attached
Amended and Restated Operating Agreement.

8. INVESTMENT INTENT.

Purchaser represents and warrants t the Company and the Existing Members that the Purchaser is acquiring the
interest in the Company under this Agreement for investment and not with a view to distribution. The Purchaser
further represents and warrants to the Company and the Existing Members that the Purchaser understands that:
(a) the interest in the Company being purchased and sold under this Agreement has not been registered under the
Federal Securities Act of 1933, as amended (the "Securities Act") in reliance upon an exemption from
registration, (b) the interest must be held indefinitely, unless it is later registered under the Securities Act or unless
an exemption from
registration is otherwise available, and (c) the Company has no obligation to register the interest. The Purchaser
agrees that the interest will not be offered, sold, transferred, pledged, or otherwise disposed of without
registration under the Securities Act and applicable state securities laws or an opinion of counsel acceptable to
the manager(s) of the Company that such registration is not required.

9. MISCELLANEOUS PROVISIONS.

9.1 CONSTRUCTION AND INTERPRETATION. This Agreement shall be construed and interpreted in
accordance with the substantive and procedural laws of the State of California, including the Act, without
reference to the principles of conflict of laws of such state.

9.2. DESCRIPTIVE HEADINGS. The descriptive headings of the several articles and sections contained in this
Agreement are included for convenience only and shall not control or affect the meaning or construction of any of
the provisions hereof.

9.3 ENTIRE AGREEMENT. This Agreement, together with the Exhibits and Schedules hereto, the certificates,
documents, instruments and writings that are delivered pursuant hereto, constitutes the entire agreement and
understanding of the parties hereto in respect of its subject matters and supersedes all prior understandings,
agreements, or representations, by or among the parties hereto, written or oral, to the extent they relate in any
way to the subject matter hereof or the transactions contemplated hereby.

9.4 ATTORNEY'S FEES. In the event that any suit or action is instituted to enforce any provision in this
Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and
expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including without
limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation,
all reasonable fees, costs and expenses of appeals.

9.5 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.

9.6 AMENDMENTS AND WAIVERS. This Agreement may not be amended or modified, and no provisions
hereof may be waived, without the written consent of the Company and the parties hereto. No action taken
pursuant to this Agreement, including without limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty,
covenant or agreement contained herein. The waiver by any party hereto of a breach of any provisions of this
Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of
any other or subsequent breach. No failure on the part of any party to exercise, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such
right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies
provided by law.
9.7 SEVERABILITY. The provisions of this Agreement will be deemed severable and the invalidity or
unenforceability of any provision hereof 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
court or governmental body to be unenforceable in accordance with its terms, the parties agree that the court or
governmental body making such determination will have the power to modify the provision in a manner consistent
with its objectives such that the provision is enforceable, and/or to delete specific words or phrases, and then it its
reduced form such provision will be enforceable.

9.8 TITLES AND SUBTITLES. The article and section headings contained in this Agreement and in the Exhibits
and Schedules hereto are inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.

9.9 CONSTRUCTION. The parties hereto have jointly participated 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 hereto and presumption or burden of proof will arise favoring or disfavoring any
party hereto because of the authorship of any provision of this Agreement. Any reference to any federal, state,
local or foreign law will also be deemed to refer to such law as amended and all rules and regulations
promulgated thereunder, unless the context otherwise requires. The word "including" means "including, 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 hereto
intend that each representation, warranty and covenant contained herein will have independent significance. If any
party hereto 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 subject matter (regardless of the
relative levels of specificity) which such party has breached, will not detract from or mitigate the fact that such
party is in breach of the first representation, warranty or covenant.

9.10. EFFECTIVE DATE. For all purposes hereof, this Agreement shall be deemed effective as of the date first
mentioned above.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the parties hereto have executed this Membership Acquisition Agreement as of the
day and year first above written.

            COMPANY:                                      LIFE & DEATH, LLC

                                                          By:   /s/ Philippe Naouri
                                                             -----------------------
                                                          Its:



            EXISTING MEMBERS:                             /s/ Alexandre Caugant
                                                          --------------------------
                                                              Alexandre Caugant

                                                          /s/ Philippe Naouri
                                                          --------------------------
                                                              Philippe Naouri


            PURCHASER:                                    BLUE HOLDINGS, INC.

                                                          By: /s/ Patrick Chow
                                                             --------------------------

                                                          Its:      CFO
                                                                 ------------------------
EXHIBIT 10.27.3

                                  AMENDED AND RESTATED
                                  OPERATING AGREEMENT
                                             OF
                                     LIFE & DEATH, LLC,
                          A CALIFORNIA LIMITED LIABILITY COMPANY

THIS AMENDED AND RESTATED OPERATING AGREEMENT (the "AGREEMENT") is entered into to
be effective as of September 15, 2006 (the "EFFECTIVE DATE"), by and between Blue Holdings, Inc.
("BLHL"), Alexandre Caugant ("CAUGANT") and Philippe Naouri ("NAOURI") (each of BLHL, Naouri and
Caugant are referred to herein individually as a "MEMBER", and collectively as the "MEMBER").

                                                 RECITALS:

A. The Members entered into that certain Joint Venture Agreement Term Sheet dated as of September 15, 2006
(the "TERM SHEET"), and that certain Membership Acquisition Agreement (the "MAQ"), dated to be effective
as of September 15, 2006, which set forth the terms and conditions upon which the BLHL would acquire a
membership interest in the Company and the rights, preferences, privileges and restrictions of the Members of the
Company following such acquisition.

B. In accordance with the MAQ, the Members desire to supersede, terminate and void AB INITIO the MAQ,
and to enter into this Agreement to govern, as of the Effective Date, the rights, preferences, privileges and
restrictions of the Members of the Company.

                                               AGREEMENTS:

In consideration of the mutual promises herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Members hereby agree as follows:

                                         ARTICLE 1
                          FORMATION OF LIMITED LIABILITY COMPANY

1.1 FORMATION. Life & Death, LLC (the "COMPANY") was formed under the provisions of the Beverly-
Killea Act, California Corporations Code ss.ss.17000-17655 (the "ACT") by the filing of Articles of
Organization with the California Secretary of State on May 4, 2006, File Number 200612610025, as amended
by the filing on August 21, 2006 of a Certificate of Amendment, changing the name of the Company to Life &
Death, LLC. Except as herein otherwise expressly provided, the rights and liabilities of the Members shall be as
provided in the Act, as it may be amended from time to time.

1.2 MAINTENANCE OF STATUS. The Members shall take such steps as are necessary to maintain the
Company's status as a limited liability company formed under the laws of the State of California and its
qualification to conduct
business in any jurisdiction where the Company does business and is required to be qualified.

1.3 WAIVER OF RIGHT TO PARTITION. No Member shall, either directly or indirectly, take any action to
require partition of the Company or of any of its assets or properties or cause the sale of any Company property,
and, notwithstanding any provision of law to the contrary, each Member (and his, her or its legal representative,
successor or assign) hereby irrevocably waives any and all right to maintain any action for partition or to compel
any sale with respect to his, her or its Membership Interest, or with respect to any assets or properties of the
Company, except as expressly provided in this Agreement.

                                                  ARTICLE 2
                                                    NAME

The business of the Company shall be conducted under the name Life & Death, LLC or such other name as the
Manager may hereafter designate.

                                                 ARTICLE 3
                                                DEFINITIONS

As used in this Agreement, the following terms shall have the following meanings:

3.1 "ACT" means the Beverly-Killea Limited Liability Company Act (California Corporations Code ss.ss.17000-
17655), as it may be amended from time to time.

3.2 "ADDITIONAL CAPITAL" is defined in Section 7.1(b).

3.3 "ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Member, the deficit balance, if
any, in such Member's Capital Account as of the end of the relevant fiscal year of the Company, after giving
effect to the following adjustments: (i) Credit to such Capital Account any amounts which such Member is
obligated to restore pursuant to any provision of this Agreement or is deemed to be obligated to restore pursuant
to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and (ii) debit to such
Capital Account the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6). This definition
of Adjusted Capital Account Deficit is intended to comply with the provisions of Regulations Section 1.704-1(b)
(2)(ii)(d) and shall be interpreted consistently therewith.

3.4 "AGREEMENT" means this Operating Agreement, as amended, modified or supplemented from time to
time.

3.5 "CAPITAL ACCOUNT" means, with respect to any Member, the amount of money contributed by such
Member to the capital of the Company, the aggregate fair market value (as determined by the Manager) of all
property contributed or deemed contributed by such Member to the capital of the Company (net of liabilities
secured by such contributed property that the Company is considered to assume or take subject to under Section
752 of the Code), the aggregate amount of all Net Profits allocated to such Member, and any and all items of
gross income or gain specially allocated to such Member pursuant to Sections 9.3 and 9.4, and decreased by the
amount of money distributed (or deemed distributed) to such Member by the Company (exclusive of any
guaranteed payment within the meaning of Section 707(c) of the Code paid to such Member), the aggregate fair
market value (as determined by the Manager) of all property distributed (or deemed distributed) to such Member
by the Company (net of

                                                        2
liabilities secured by such distributed property that such Member is considered to assume or take subject to
under Section 752 of the Code), the amount of any Net Losses charged to such Member, and any and all losses
and deductions including, without limitation, any and all partnership and/or partner "nonrecourse deductions"
specially allocated to such Member pursuant to Sections 9.3 and 9.4. The foregoing Capital Account definition
and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to
comply with Treasury Regulation Sections 1.704-1(b) and 1.704-2 and shall be interpreted and applied in a
manner consistent with such Regulations.

3.6 "CASH FLOW" means net profits determined under the Generally Accepted Accounting Principles in the
United States of America.

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

3.8 "COMPANY" means the limited liability company formed pursuant to this Agreement by the parties hereto,
as said company may from time to time be constituted.

3.9 "MAJORITY IN INTEREST" means those Members owning or having voting control over, in the aggregate,
more than fifty percent (50%) of the Percentage Interests, except where otherwise expressly provided in this
Agreement.

3.10 "MANAGER" means the person designated as the manager of the Company, as provided in Article 11.

3.11 "MARK" means the "LIFE & DEATH" trademark, as well as any variations thereof that the Company may
elect to register.

3.12 "MEMBERS" means those persons executing this Agreement on the signature page hereto, as well as those
persons who hereafter are been admitted to the Company as a member in accordance with Article 13.

3.13 "MEMBERSHIP INTEREST" means an ownership interest in the Company, which includes a Member's
share of the profits and losses of the Company, a Member's right to receive distributions of the Company's
assets, a Member's right to vote or participate in the management of the Company as permitted in this
Agreement, and a Member's right to information concerning the business and affairs of the Company, as provided
in this Agreement and under the Act.

3.14 "MEMBER LOAN" is defined in Section 7.1(c).

3.15 "NET PROFITS" and "NET LOSSES". The terms "NET PROFITS" and "NET LOSSES" mean, for each
fiscal year or other period, an amount equal to the Company's taxable income or loss, as the case may be, for
such year or period, determined in accordance with Section 703(a) of the Code (for this purpose, all items of
income, gain, loss and deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall
be included in taxable income or loss); provided, however, for purposes of computing such taxable income or
loss,

                                                       3
(i) such taxable income or loss shall be adjusted by any and all adjustments required to be made in order to
maintain Capital Account balances in compliance with Treasury Regulation Section 1.704-1(b), and (ii) any and
all items of gross income, gain, loss and deduction including, without limitation, all partnership and/or partner
"nonrecourse deductions" specially allocated to any Member pursuant to Sections 9.3 and 9.4 shall not be taken
into account in calculating such taxable income or loss.

3.16 "PERCENTAGE INTERESTS" means the Percentage Interests of the Members set forth opposite their
names on EXHIBIT A attached hereto.

3.17 "REGULATIONS" means the Treasury Regulations promulgated under the Code.

3.18 "TRANSFER" shall mean any transfer, sale, assignment, gift, pledge or other disposition or encumbrance.

                                                ARTICLE 4
                                            NATURE OF BUSINESS

4.1 BUSINESS PURPOSE. The business of the Company is to engage in (i) the design, development,
manufacture and wholesale distribution of apparel bearing the "LIFE & DEATH" trademark, as well as any
variations thereof that the Company may elect to register, and (ii) any other activity for which limited liability
companies may be organized under the laws of the State of California.

4.2 NO ACCOUNTABILITY. The Members and their affiliates may conduct any business or activity
whatsoever without any accountability to the Company or to any Member; provided, however, that nothing
contained in this Article 4 shall alter, modify, reduce or eliminate the requirements and obligations of the
Company and the Members expressly set forth in this Agreement. Each Member understands that the other
Members and their affiliates may be interested, directly or indirectly, in various other such businesses and
undertakings. The creation of the Company and the assumption by each of the Members of his, her or its duties
hereunder shall be without prejudice to the respective rights of the other Members and their affiliates to maintain
such other interests and activities and to receive and enjoy profits or compensation therefrom, and each Member
waives any rights he, she or it might otherwise have to share or participate in such other interests or activities of
the other Members and their affiliates.

                                                    ARTICLE 5
                                                      TERM

The term of the Company shall commence on the date hereof and shall continue in perpetuity, unless earlier
terminated under the provisions of Article 14.

                                               ARTICLE 6
                                      PRINCIPAL PLACE OF BUSINESS

The principal business office of the Company shall be located at such place as may be designated by the
Manager from time to time.

                                                           4
                                             ARTICLE 7
                                    CAPITAL AND CONTRIBUTIONS

7.1 NO REQUIRED CAPITAL.

(a) No Member shall be obligated to contribute any cash or property to the capital of the Company, except as
agreed upon by such Member and the Manager. Notwithstanding the foregoing, as an initial capital contribution,
and in consideration for their respective initial Membership Interests in the Company, the Members have
contributed the cash set forth on EXHIBIT A attached hereto and incorporated herein by reference.

(b) The Members may, but shall not be required to, contribute additional capital in the form of cash, as set forth
on EXHIBIT B, attached hereto and incorporated herein by reference ("ADDITIONAL CAPITAL"). In the
event that the Manager determines that Additional Capital is required, the Manager shall provide written notice to
each of the Members as to the amount that is required, and each Member shall be required to contribute its/his
pro-rata share within thirty (30) days from the date of such notice. In the event that any Member is unable to
contribute Additional Capital, then no Member shall be required to contribute Additional Capital; in which case
the Manager may obtain a loan from BLHL as described in subsection (c) below. Under no circumstances shall
any Member's percentage interest be diluted by its/his refusal or inability to contribute Additional Capital under
this provision.

(c) In the event that additional working capital is needed, but the Members do not wish to contribute Additional
Capital or the Members have already contributed Additional Capital up to the limits set forth on Exhibit B, then
any Member may, at its sole discretion, make a loan to the Company, which such loan shall be evidenced by a
promissory note with interest payable at prime plus 1% and shall contain standard terms and conditions, all of
which must be approved by the Manager (each a "MEMBER LOAN").

7.2 LIMITED LIABILITY. Members shall not be liable to creditors of the Company, and shall not be required
to restore all or any portion of a deficit balance in any such Member's Capital Account with the Company.

7.3 NO INTEREST ON CONTRIBUTION. No Member shall have the right to receive interest on its/his
capital contributions to the Company. 7.4 CAPITAL ACCOUNTS. Capital Accounts shall be maintained for the
Members in accordance with Section 704(b) of the Code and the Regulations promulgated thereunder.

                                                ARTICLE 8
                                              DISTRIBUTIONS

8.1 DISTRIBUTIONS. For any fiscal year of the Company Cash Flow shall be distributed by the Manager as
follows:

                                                        5
(a) First, fifty percent (50%) of the Cash Flow, if any, for each fiscal year shall be retained by the Company for
working capital and reserves (provided that when the Manager reasonably determines that any such working
capital and/or reserves are no longer necessary, then any such amounts shall be distributed in accordance with the
remaining provisions of this Section 8.1);

(b) Second, thirty percent (30%) of the Cash Flow, if any, for each fiscal year shall be used to repay the principal
on any outstanding Member Loan. If there are no outstanding Member Loans, then the Cash Flow under this
provision shall be distributed to each of the Members, pro rata, to the extent of any unreturned Additional Capital
contribution of such Member in excess of its/his initial capital contribution as set forth on EXHIBIT A (provided
that at such time as any such unreturned capital contributions are reduced to zero (0) any Cash Flow that would
otherwise be distributed pursuant to this
Section 8.1(b) shall instead be distributed pursuant to
Section 8.1(c)); and

(c) Thereafter, any remaining Cash Flow shall be distributed to the Members in proportion to their respective
Percentage Interests.

(d) Notwithstanding the foregoing, at any time the Manager believes that sufficient Cash Flow exists to make a
distribution within the guidelines set forth in subsections
(a), (b) and (c) above, then the Manager may cause an interim distribution, it being the intent of this subsection
that the Manager shall not be required to wait until the fiscal year end to make distributions.

8.2 RETURN OF CAPITAL. No Member shall be entitled to a return of his, her or its capital contribution
except in accordance with this Article 8 or Article 14.

8.3 WITHHOLDING. Any withholding tax required by law to be withheld by the Company with respect to a
Member shall be treated as a distribution to such Member.

8.4 LIMITATION ON DISTRIBUTIONS. A Member may not receive a distribution from the Company to the
extent that, after giving effect to the distribution, all liabilities of the Company, other than liability to Members on
account of their capital contributions, would exceed the fair value of the Company's assets.

8.5 IN-KIND DISTRIBUTION. Assets of the Company (other than cash) shall not be distributed in kind to the
Members without the prior written approval of the Manager.

                                           ARTICLE 9
                                ALLOCATIONS OF PROFITS AND LOSSES

9.1 NET LOSSES. Net Losses of the Company for each fiscal year of the Company (or part thereof) shall be
allocated to the Members at the end of such fiscal year (or part thereof) in proportion to their respective
Percentage Interests.

9.2 NET PROFITS. Net Profits of the Company for each fiscal year of the Company (or part thereof) shall be
allocated to the Members at the end of such fiscal year (or part thereof) in proportion to their respective
Percentage Interests.

                                                           6
9.3 SPECIAL ALLOCATIONS. Notwithstanding any other provision of this Agreement, no Net Losses or
items of expense, loss or deduction shall be allocated to any Member to the extent such an allocation would
cause or increase such Member's Adjusted Capital Account Deficit and any such Net Losses and items of
expense, loss and deduction shall instead be allocated to the Members in proportion to their respective "interests"
in the Company as determined in accordance with Treasury Regulation Section 1.704-1(b). In addition, items of
income and gain shall be specially allocated to the Members in accordance with and to the extent required by the
qualified income offset provisions set forth in Treasury Regulation Section 1.704-1(b)(2)(ii)(d). Notwithstanding
any other provision in this Article IX, (i) any and all "partnership nonrecourse deductions" (as defined in Treasury
Regulation Section 1.704-2(b)(1)) of the Company for any fiscal year or other period shall be allocated to the
Members in proportion to their respective Percentage Interests; (ii) any and all "partner nonrecourse
deductions" (as such term is defined in Treasury Regulation Section 1.704-2(i)(2)) attributable to any "partner
nonrecourse debt" (as such term is defined in Treasury Regulation Section 1.704-2(b)(4)) shall be allocated to
the Member that bears the "economic risk of loss" (as determined under Treasury Regulation Section 1.752-2)
for such "partner nonrecourse debt" in accordance with Treasury Regulation Section 1.704-2(i)(l); (iii) each
Member shall be specially allocated items of Company income and gain in accordance with the partnership
minimum gain chargeback requirements set forth in Treasury Regulation Sections 1.704-2(f) and 1.704-2(g); and
(iv) each Member with a share of minimum gain attributable to any "partner nonrecourse debt" shall be specially
allocated items of Company income and gain in accordance with the partner minimum gain chargeback
requirements of Treasury Regulation Sections 1.704-2(i)(4) and 1.704-2(i)(5). The Members' respective shares
of the Company's "excess nonrecourse liabilities" under Treasury Regulation Section 1.752-3(a)(3) shall be
allocated to the Members in proportion to their respective Percentage Interests.

9.4 CURATIVE ALLOCATIONS. The allocations set forth in Section 9.3 (the "REGULATORY
ALLOCATIONS") are intended to comply with certain requirements of the Treasury Regulations. It is the intent
of the Members that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory
Allocations or with special allocations of other items of Company income, gain, loss or deduction pursuant to this
Section 9.4. Therefore, notwithstanding any other provision of this Article 9 (other than the Regulatory
Allocations), the Manager is hereby authorized to make such offsetting special allocations of Company income,
gain, loss or deduction in whatever manner he determines appropriate so that, after such offsetting allocations are
made, each Member's Capital Account balance is, to the extent possible, equal to the Capital Account balance
such Member would have had if the Regulatory Allocations were not part of this Agreement and all Company
items were allocated pursuant to Sections 9.1 and 9.2. In exercising his discretion under this Section 9.4, the
Manager shall take into account future Regulatory Allocations under Section 9.3 but, although not yet made, are
likely to offset other Regulatory Allocations previously made under the provisions of Section 9.3.

9.5 DIFFERING TAX BASIS; TAX ALLOCATION. Depreciation and/or cost recovery deductions and gain
or loss with respect to each item of property treated as contributed to the capital of the Company shall be
allocated among the Members for federal income tax purposes in accordance with the principles of
Section 704(c) of the Code and the Treasury Regulations promulgated thereunder, and for state income tax
purposes in accordance with comparable provisions of the California Revenue & Taxation Code, as amended,
and the regulations

                                                         7
promulgated thereunder, so as to take into account the variation, if any, between the adjusted tax basis of such
property and its book value (as determined for purposes of the maintenance of Capital Accounts in accordance
with this Agreement and Treasury Regulation Section 1.704-1(b)(2)(iv)(g)).

9.6 ELECTION; ALLOCATIONS BETWEEN TRANSFEROR AND TRANSFEREE. Upon the death of a
Member, the transfer of the Membership Interest of any Member or the distribution of any property of the
Company to a Member, the Company may file, in the reasonable discretion of the Manager, an election in
accordance with applicable Treasury Regulations, to cause the basis of the Company property to be adjusted for
federal income tax purposes as provided by Sections 734 and 743 of the Code. Upon the transfer of all or any
part of the Interest of a Member as hereinabove provided, Net Profits and Net Losses shall be allocated
between the transferor and transferee on the basis of the computation method which is determined in the
reasonable discretion of the Manager to be in the best interests of the Company, provided such method is in
conformity with the methods prescribed by Section 706 of the Code and Treasury Regulation Section 1.706-1(c)
(2)(ii).

                                        ARTICLE 10
                          BOOKS AND RECORDS; TAX MATTERS PARTNER

10.1 BOOKS. There shall be maintained and kept at all times during the continuation of the Company proper
and usual books of account which shall accurately reflect the condition of the Company and shall account for all
matters concerning the management thereof, and which books shall be maintained and kept at the principal office
of the Company or at such other place or places as the Manager may from time to time determine. The
Company's books and records shall be maintained on the basis selected by the Manager.

10.2 FISCAL YEAR. The fiscal year of the Company shall end on December 31 of each year.

10.3 TAX MATTERS PARTNER. The "tax matters partner" of the Company within the meaning of Code
section 6231(a)(7) shall be Naouri.

                                             ARTICLE 11
                                      MANAGEMENT; VOTING AND
                                     CONTROL RIGHTS OF MEMBERS

11.1 THE MANAGER. The business of the Company shall be managed by the "Manager". The initial Manager
of the Company shall be Naouri. Each of the initial and subsequent Managers shall serve until he or she resigns, is
removed for cause by a Majority in Interest of the Members, dies or becomes incapacitated, in which case a
Majority in Interest of the Members may, at their election, designate a successor Manager, who shall serve at as
a Manager until he, she or it resigns, dies, becomes incapacitated, dissolves, becomes bankrupt or is removed for
cause by a Majority in Interest of the Members.

11.2 MANAGEMENT POWERS AND DUTIES. The Manager shall have the general supervision, direction,
and control of the business of the Company, and the general powers and duties of management typically vested in
the board of directors and president of a corporation, including, but not limited to, the right to enter into and carry
out contracts of all kinds; to employ employees, agents, consultants and advisors on behalf of the Company; to
lend or borrow money and to issue evidences of indebtedness; to bring and defend actions in law or at equity;
and to buy, own, manage, sell, lease, mortgage, pledge or otherwise acquire or dispose of the Company
property. Without limiting the generality of this Section 11.2, the Manager shall have the power and authority,
subject to the limitations of the Act and any limitations set forth elsewhere herein:

(a) To acquire, sell, transfer, exchange, lease or dispose of property, or any portion thereof, from or to any
person as the Manager may determine, and the fact that a Member or a Manager is directly or indirectly affiliated
or connected with any such person shall not prohibit the Manager from dealing with that person;

(b) To borrow money for the Company from banks, other lending institutions, the Members, the Manager or any
other persons on such terms as the Manager deems appropriate, and in connection therewith, to hypothecate,
encumber and grant security interests in the assets of the Company to secure repayment of the borrowed sums;

(c) To purchase liability and other insurance to protect the property and business of the Company;
(d) To hold and own any Company real and personal properties in the name of the Company;

(e) To invest any funds of the Company temporarily (by way of example but not limitation) in time deposits,
short-term governmental obligations, commercial paper or other investments;

(f) To execute on behalf of the Company all instruments and documents, including, without limitation, checks,
drafts, notes and other negotiable instruments, mortgages or deeds of trust, security agreements, financing
statements, documents providing for the acquisition, mortgage or disposition of property of the Company,
assignments, bills of sale, leases, partnership or limited liability company agreements, and any other instruments or
documents necessary or appropriate, in the opinion of the Manager, to the business of the Company;

(g) To employ accountants, legal counsel, managing agents or other experts to perform services for the Company
and to compensate them from Company funds;

(h) To retain and compensate employees and agents generally, and to define their duties;

(i) To effectuate a merger of the Company with any other limited liability company, a corporation or a general or
limited partnership;

(j) To enter into any and all other agreements on behalf of the Company, with any other person for any purpose
necessary or appropriate to the conduct of the business of the Company;

                                                         8
(k) To adopt and implement annual budgets relating to the operations of the Company;

(l) To pay reimbursement from the Company of all expenses of the Company reasonably incurred on behalf of
the Company; and

(m) To do and perform all other acts as may be necessary or appropriate to the conduct of the business of the
Company.

11.3 MAJORITY VOTE REQUIRED. In the event there is more than one Manager, all actions taken and all
decisions made by the Managers shall be by majority vote.

11.4 RELIANCE ON A MANAGER'S SIGNATURE. Every contract, deed, mortgage, lease and other
instrument executed by the Manager shall be conclusive evidence in favor of every person or entity relying
thereon or claiming thereunder that, at the time of the delivery thereof, (i) the Company was in existence, (ii)
neither this Agreement nor the Articles of Organization had been amended in any manner so as to restrict the
delegation of authority to the Manager as provided herein and (iii) such action was duly approved by the
Manager.

11.5 MANAGER'S RIGHT TO APPOINT OFFICERS. The Manager may appoint a president, secretary,
chief financial officer and such other officers of the Company as appropriate, each of whom shall hold office for
such period, have such authority and perform such duties as the Manager determines.

11.6 BANK ACCOUNTS. The funds of the Company shall be deposited in such bank account or accounts, or
invested in such interest-bearing or non-interest bearing investments, as shall be designated by the Manager.

11.7 RELIANCE UPON ADVISORS. The Manager may consult with legal counsel chosen by them and any
act or omission suffered or taken by them on behalf of the Company or in furtherance of the interests of the
Company in good faith in reliance upon and in accordance with the advice of such counsel shall be full justification
for any such act or omission and the Manager shall be fully protected in so acting or omitting to act, provided
such counsel was chosen with reasonable care.

11.8 DEVOTION OF TIME; NON-EXCLUSIVITY. No Manager or officer shall be obligated to devote all of
his, her or its time or business efforts to the affairs of the Company, but shall devote such time, effort and skill as
he, she or it deems appropriate for the operation of the Company and the performance of his, her or its
obligations.

11.9 COMPENSATION; ADMINISTRATIVE EXPENSES. The Manager shall be entitled to receive
reasonable compensation for services rendered by him or her in the management of the Company's business; and
each officer shall be compensated in such manner as the Manager reasonably determines. The Company shall
provide the Manager with (or, at the Manager's election, reimburse the Manager for) reasonable office space,
personnel, equipment, supplies and other administrative and management support that may be necessary or
appropriate in connection with the operation of the business of the Company.

                                                           9
11.10 LIMITED LIABILITY. No Manager or officer shall be personally liable under any judgment of a court, or
in any other manner, for any debt, obligation or liability of the Company, whether that liability or obligation arises
in contract, tort or otherwise, solely by reason of being a Manager or officer, provided that such person acted in
good faith and in a manner that was believed to be in the best interests of the Company. No Manager or officer
shall be liable to the Company or to any Member for any loss or damage sustained by the Company or any
Member, unless the loss or damage shall have been the result of fraud, deceit, gross negligence, reckless or
intentional misconduct, or a knowing violation of law by the Manager or officer.

11.11 LIMITATION ON MEMBERS' AUTHORITY. No Member shall be an agent of the Company solely by
virtue of being a Member; and no Member shall have authority to act for or on behalf of the Company solely by
virtue of being a Member, except as may be otherwise expressly provided in this Agreement.

                                           ARTICLE 12
                                TRANSFER OF MEMBERSHIP INTEREST

12.1 TRANSFER RESTRICTIONS. Until such time that the Members have each been fully reimbursed for any
working capital contribution contributed above its/his initial capital contribution, and any outstanding Member
Loans have been fully repaid, no Member shall be entitled to Transfer any portion of his Membership Interest.
Any attempted Transfer of any Membership Interest to any person that is made in violation of the foregoing shall
be invalid and shall not be reflected on the Company's books.

12.2 TRANSFERS BY BEQUEST, INCAPACITATION, BANKRUPTCY. In the event that a Member dies,
becomes incapacitated or becomes the subject of a proceeding under the U.S. Bankruptcy Code or similar
proceeding that has not been dismissed within ninety (90) days of its commencement (the "INCAPACITATED
MEMBER"), the other Members shall have the right, pro-rata, to purchase such Incapacitated Member's
Membership Interest in the Company at a price equal to the book value of such Membership Interest.

                                         ARTICLE 13
                                 ADMISSION OF NEW MEMBERS;
                             AMENDMENT TO OPERATING AGREEMENT
                                AND ARTICLES OF ORGANIZATION

13.1 ADMISSION OF MEMBERS. New members may be admitted to the Company only upon the consent of
the Majority in Interest of the Members. Any new members shall be admitted upon such terms and conditions as
may be determined by the Majority in Interset of the Members, consistent with this Agreement, the Company's
Articles of Organization and any applicable provision of law or rule of a governmental agency or self-regulating
organization which has jurisdiction over the business of the Company.

13.2 AMENDMENTS. This Agreement and the Articles of Organization may not be amended in whole or in
part except upon the written consent of the Manager and a Majority in Interest of the Members; provided,
however, that no amendment which has a materially adverse effect on a Member shall be effective hereunder
without the consent of such Member. Notwithstanding anything contained

                                                         10
herein to the contrary, the Manager may amend this Agreement without any vote, consent, approval,
authorization or other action of any Member (provided that notice of such amendment is given to all Members) to
(a) add to the duties or obligations of the Manager or surrender any right or power granted to the Manager in this
Agreement for the benefit of the Members; (b) cure any ambiguity, correct or supplement any provision in this
Agreement that may be inconsistent with any other provision in this Agreement, or make any other provisions
with respect to matters or questions arising under this Agreement that will not be inconsistent with the intent of this
Agreement; (c) reflect the withdrawal, addition or substitution of Members; (d) elect for the Company to be
bound by any successor statute to the Act governing limited liability companies if, in the opinion of the Manager,
the amendment does not have a materially adverse effect on the Members or the Company; (e) conform this
Agreement to changes in the Act or interpretations thereof which the Manager believes, in his or her exclusive
discretion, appropriate, necessary or desirable if, in the Manager's reasonable opinion, such amendment does not
have a materially adverse effect on the Members or the Company; (f) change the name of the Company; (g)
conform the profit and loss allocation provisions to any applicable requirements of Federal or state law which the
Manager, in his or her exclusive discretion, believes appropriate, necessary or desirable if, in the Manager's
reasonable opinion, such amendment does not have a materially adverse effect on the Members or the Company;
and (h) make any change which, in the exclusive discretion of the Manager, is advisable to qualify or to continue
the qualification of the Company as a limited liability company under the laws of the State of California.

                                              ARTICLE 14
                                     DISSOLUTION OF THE COMPANY

14.1 EVENTS OF DISSOLUTION. The Company shall be dissolved on the earlier of the following events:

(a) The agreement of a Majority in Interest of the Members to dissolve;

(b) The sale or liquidation of substantially all the assets of the Company;

(c) The expiration of the term of the Company; or

(d) As otherwise provided by the Act.

14.2 RIGHTS TO MARK. In the event that the Company is dissolved and the Mark is no longer being exploited
by the Company, or in the event that the Members determine to dissolve the Company and distribute its assets,
then each Member shall have the opportunity to purchase the Mark at its then fair market value.

14.3 APPLICATION OF PROCEEDS. The assets of the Company on winding-up shall be applied first to the
expenses of the winding-up, liquidation and dissolution, second, to creditors, in order of priority as provided by
law, third, to establish a reserve for any conditional, contingent or unmatured liabilities of the Company and
thereafter distributed to the Members pro rata in accordance with their respective positive Capital Accounts.

                                                          11
14.4 NEGATIVE CAPITAL ACCOUNTS. If any Member has a deficit balance in his, her or its Capital
Account (after giving effect to all contributions, distributions and allocations for all fiscal years, including the fiscal
year during which such liquidation occurs), such Member shall have no obligation to make any contribution to the
capital of the Company with respect to such deficit, and such deficit shall not be considered a debt owed to the
Company or to any other person for any purpose whatsoever.

14.5 NO LIABILITY. No Member shall be personally liable for any debts, liabilities or obligations of the
Company, whether to the Company, any Member or to the creditors of the Company, beyond the amount
contributed by such Member to the capital of the Company, such Member's share of the accumulated but
undistributed profits of the Company, if any, and the amount of any distribution (including the return of any capital
contribution) made to such Member required to be returned to the Company pursuant to the Act. Each Member
shall look solely to the assets of the Company for all distributions with respect to the Company and for the return
of his, her or its capital contribution and shall have no recourse therefore against any other Member. The
Members shall not have any right to demand or receive property other than cash upon dissolution and termination
of the Company; and, except as provided in this Article 14 upon dissolution and termination of the Company, the
Members shall not have any right to demand, at any time, the return of their capital contributions to the Company.

                                              ARTICLE 15
                                    LIABILITY AND INDEMNIFICATION

15.1 LIMITATION ON LIABILITY. No Member, Manager, officer, employee or agent of the Company, a
Member or a Manager shall be liable to the Company or any other Member or Manager for any expenses,
damages or losses arising out of the performance of his, her or its duties for the Company other than those
expenses, damages or losses directly attributable to such person not acting in good faith and in a manner that he,
she or it reasonably believed to be in or not opposed to the best interests of the Company or attributable to such
person's breach of his, her or its duty of loyalty to the Company.

15.2 INDEMNIFICATION. The Company shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (including, without limitation, an action by or in the right of the Company or by any
Member) by reason of the fact that he, she or it is or was a Member, Manager, employee or agent of the
Company, a Member or a Manager against expenses (including attorneys' fees) judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding to
the fullest extent permitted under California law.

                                                   ARTICLE 16
                                                 MISCELLANEOUS

16.1 DISPUTED RESOLUTION. Any controversy or dispute arising out of or relating to (a) this Agreement
(including the interpretation of any of the provisions hereof), (b) the parties' rights under the Act, whether arising
in contract, tort or any other legal theory, or (c) the action or inaction of any Member, Manager or officer, and
whether based on federal, state or local statute

                                                            12
or common law and regardless of the identities of any other defendants, other than requests for immediate
equitable relief (a "DISPUTE"), then such Dispute shall be settled by agreement, mediation or arbitration in
accordance with EXHIBIT C hereto. No action at law or in equity based upon any claim arising out of or related
to this Agreement shall be instituted in any court by any Member except (i) an action to compel arbitration
pursuant to this Section 16.1 or (ii) an action to enforce an award obtained in an arbitration proceeding in
accordance with this Section 16.1.

16.2 ENTIRE AGREEMENT. Except as herein provided, this Agreement constitutes the entire agreement
between the parties relating to the subject matter hereof. It supersedes any prior agreement or under-standings
between them relating to the subject matter hereof, and it may not be modified or amended in any manner other
than as set forth herein. For purposes of clarity, the Joint Venture Agreement Term Sheet is hereby terminated
and deemed null and void AB INITIO.

16.3 GOVERNING LAW. This Agreement and the rights of the parties hereunder shall be governed by and
interpreted in accordance with the laws of the State of California.

16.4 BINDING AGREEMENT. Except as herein otherwise specifically provided, this Agreement shall be
binding upon and inure to the benefit of the parties and their respective legal representatives, heirs, administrators,
executors, successors and assigns.

16.5 CAPTIONS. Captions contained in this Agreement are inserted only as a matter of convenience and in no
way define, limit or extend the scope or intent of this Agreement or any provision thereof. All pronouns shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person (which term, for
purposes of this Agreement, shall include individuals and entities) may require in the context thereof.

16.6 VALIDITY. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Agreement, or the application of such
provision to any person or circumstances shall be held invalid, the remainder of this Agreement, or the application
of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected
hereby.

16.7 COUNTERPARTS. This Agreement may be executed in multiple counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same instrument.

IN WITNESS WHEREOF, the undersigned Members executed this Agreement to be effective as of the date
first set forth above.

                  Members:                                     BLUE HOLDINGS, INC.



                                                               By:     /s/ Patrick Chow
                                                                     ---------------------------




Its: CFO

                                        /s/ Alexandre Caugant
                                        -------------------------------
                                        Alexandre Caugant



                                        /s/ Philippe Naouri
                                        -------------------------------
                                        Philippe Naouri




                                                          13
                                  EXHIBIT A

                      INITIAL CAPITAL CONTRIBUTIONS

                         Cash/Property     Contribution         Membership/
Name of Member            Contributed    Dollar ($) Value   Percentage Interest

Blue Holdings, Inc.        Cash           $186,142.73             50.00%

Alexandre Caugant          Cash            $93,071.36             25.00%

Philippe Naouri            Cash            $93,071.37             25.00%

TOTAL                                     $372,285.46            100.00%
                                  EXHIBIT B

                    ADDITIONAL CAPITAL CONTRIBUTIONS

                         Cash/Property      Contribution         Membership/
Name of Member           Contributed     Dollar ($) Value   Percentage Interest

Blue Holdings, Inc.        Cash            $63,857.27             50.00%

Alexandre Caugant          Cash            $31,928.64             25.00%

Philippe Naouri            Cash            $31,928.63             25.00%

TOTAL                                     $127,714.54            100.00%
                                                    EXHIBIT C

                                        ARBITRATION PROVISIONS

1. RULES; JURISDICTION. Any Dispute that has not been resolved by agreement of the parties or by
mediation, as provided in Section 16.1 of the Agreement, shall be settled by arbitration that must be conducted in
the County of Los Angeles, California, and, except as herein specifically stated, in accordance with the
commercial arbitration rules of the American Arbitration Association ("AAA Rules") then in effect (but not under
the auspices of the AAA), and subject to the provisions of Title 9 of Part 3 of the California Code of Civil
Procedure or any successor statute ("TITLE 9"). To the extent the AAA Rules conflict with, or are supplemented
by, the provisions of Title 9, the provisions of Title 9 shall govern and be applicable. However, in all events the
arbitration provisions provided herein shall govern over any conflicting rules that may now or hereafter be
contained in either the AAA Rules or Title 9. Any judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction of the subject matter thereof. The arbitrators shall have the authority to
grant any equitable and legal remedies that would be available in any judicial proceeding instituted to resolve a
Dispute. The parties hereby submit to the in personam jurisdiction of the Superior Court of the State of California
for the County of Los Angeles and the United States District Court for the Central District of California for
purposes of confirming or enforcing an arbitral award, including without limitation an award of equitable relief,
and entering judgment thereon. The parties hereto waive any and all objections that they may have as to
jurisdiction or venue in any of the above courts.

2. COMPENSATION OF ARBITRATORS. Any such arbitration shall be conducted before a panel of three
arbitrators who shall be compensated for their services at a rate to be determined by the parties, but based upon
reasonable and customary hourly or daily consulting rates for the neutral arbitrator in the event the parties are not
able to agree upon the arbitrators' rate of compensation.

3. SELECTION OF ARBITRATORS. The AAA Rules for the selection of such an arbitrator shall be followed,
except that the selection shall be a partner or principal of a nationally recognized firm of independent certified
public accountants from the management advisory services department (or comparable department or group) of
such firm.

4. PAYMENT OF COSTS. Each party hereby agrees to pay one half the costs of the compensation of the
arbitrators, the costs of transcripts and all other expenses of the arbitration proceedings; provided, however, that
the prevailing party in any arbitration, which shall be determined by the arbitrators, shall be entitled to an award of
attorneys' fees and costs, and the arbitrators' fees and costs, and all other costs of the arbitration shall be paid by
the losing party.

5. EVIDENCE; DISCOVERY. All testimony of witnesses at any arbitration proceeding held pursuant to these
provisions shall be taken under oath, and under the rules of evidence as set forth under the Evidence Code of
California and judicial interpretations thereunder. The parties shall be entitled to conduct discovery proceedings in
accordance with the provisions of Section 1283.05 of the California Code of Civil Procedure.
6. BURDEN OF PROOF; BASIS OF DECISION. For any claim submitted to arbitration, the burden of proof
shall be as it would be if the claim were litigated in a judicial proceedings except where otherwise specifically
provided in the Agreement to which this is attached, and the decision shall be based on the application of
California law (as determined from statutes, court decisions, and other recognized authorities) to the facts found
by the arbitrators.

7. JUDGMENT. Upon the conclusion of any arbitration proceedings hereunder, the arbitrators shall render
findings of fact and conclusions of law and a written opinion setting forth the basis and reasons for any decision
reached by them and shall deliver such documents to each party to the Agreement along with a signed copy of
the award in accordance with Section 1283.6 of Title 9.

8. TERMS OF ARBITRATION. The arbitrators chosen in accordance with these provisions shall not have the
power to alter, amend or otherwise affect the terms of these arbitration provisions or the provisions of the
Agreement.

9. EXCLUSIVE REMEDY. Except as specifically provided in this EXHIBIT B or in the Agreement to which it
is attached, arbitration shall be the sole and exclusive remedy of the parties for any Dispute.

10. ARBITRATION CONFIDENTIAL. Neither party will disclose the existence of any arbitration proceedings
hereunder, nor the outcome thereof, except: (a) insofar as such disclosure is reasonably necessary to carry out
and make effective the terms of this Agreement, including without limitation, pleadings or other documents filed
seeking entry of judgment upon an award of the arbitrators; (b) insofar as a party hereto is required by law to
respond to any demand for information from any court, governmental entity, or governmental agency, or as may
be required by federal or state securities laws; (c) insofar as disclosure is necessary to be made to a party's
independent accountants for tax or audit purposes; (d) insofar as disclosure is necessary to be made to a party's
attorneys for purposes of rendering advice or services relating to this Agreement; and (e) insofar as the panics
may mutually agree in writing.

11. NOTICE; LANGUAGE. Notice of arbitration sent to the other party by using the following means shall be
deemed good and sufficient notice of service:
Notices shall be in writing, shall be sent by certified or registered air mail with postage prepaid, return receipt
requested, or by hand delivery. Such communications shall be deemed given and received upon delivery, if hand
delivered; or within five (5) days of mailing, if sent by certified or registered mail. Notices to any Member shall be
sent to such Member's last known business address appearing on the books of the Company.
       AMENDED AND RESTATED
       OPERATING AGREEMENT

                  OF

           LIFE & DEATH, LLC
A CALIFORNIA LIMITED LIABILITY COMPANY

   EFFECTIVE AS OF SEPTEMBER 15, 2006
                            TABLE OF CONTENTS

                                                                        PAGE
                                                                        ----


ARTICLE 1      FORMATION OF LIMITED LIABILITY COMPANY.......................2

        1.1    Formation....................................................2
        1.2    Articles of Organization.....................................
        1.3    Maintenance of Status........................................2
        1.4    Waiver of Right to Partition.................................3

ARTICLE 2      NAME.........................................................3


ARTICLE 3      DEFINITIONS..................................................3

        3.1    "Act"........................................................4
        3.2    "Adjusted Capital Account Deficit"...........................4
        3.3    "Agreement"..................................................4
        3.4    "Capital Account"............................................4
        3.5    "Cash Flow" .................................................5
        3.6    "Code".......................................................6
        3.7    "Company"....................................................6
        3.8    "Majority in Interest".......................................6
        3.9    "Manager"....................................................6
        3.10   "Mark".......................................................6
        3.11   "Members"....................................................6
        3.12   "Membership Interest"........................................6
        3.13   Net Profits and Net Losses...................................7
        3.14   "Percentage Interests........................................7
        3.15   "Regulations"................................................8
        3.16   "Transfer"...................................................8

ARTICLE 4      NATURE OF BUSINESS...........................................8

        4.1    Business Purpose.............................................8
        4.2    No Accountability............................................8

ARTICLE 5      TERM.........................................................9


ARTICLE 6      PRINCIPAL PLACE OF BUSINESS..................................9


ARTICLE 7      CAPITAL AND CONTRIBUTIONS....................................9

        7.1    No Required Capital..........................................9
        7.2    Limited Liability...........................................11
        7.3    No Interest on Contribution.................................11
        7.4    Capital Accounts............................................11

ARTICLE 8      DISTRIBUTIONS...............................................11

        8.1    Distributions...............................................11
        8.2    Advance Distribution of Profits.............................
        8.3    Return of Capital...........................................13


                                    i
        8.4     Withholding.................................................13
        8.5     Limitation on Distributions.................................13
        8.6     In-Kind Distribution........................................13

ARTICLE 9       ALLOCATIONS OF PROFITS AND LOSSES...........................13

        9.1     Net Losses..................................................13
        9.2     Net Profits.................................................14
        9.3     Special Allocations.........................................14
        9.4     Curative Allocations........................................15
        9.5     Differing Tax Basis; Tax Allocation.........................16
        9.6     Election; Allocations between Transferor and Transferee.....16

ARTICLE 10      BOOKS AND RECORDS; TAX MATTERS PARTNER......................17

        10.1    Books.......................................................17
        10.2    Fiscal Year.................................................17
        10.3    Tax Matters Partner.........................................18

ARTICLE 11      MANAGEMENT; VOTING AND CONTROL RIGHTS OF MEMBERS............18

        11.1    The Manager.................................................18
        11.2    Management Powers...........................................18
        11.3    Majority Vote Required......................................21
        11.4    Reliance on a Manager's Signature...........................21
        11.5    Manager's Right to Appoint Officers.........................22
        11.6    Manager's Right to Issue Membership Interests...............D.
        11.7    Bank Accounts...............................................22
        11.8    Reliance Upon Advisors......................................22
        11.9    Devotion of Time; Non-exclusivity...........................22
        11.10   Compensation; Administrative Expenses.......................22
        11.11   Limited Liability...........................................23
        11.12   Limitation on Members' Authority............................23

ARTICLE 12      TRANSFER OF MEMBERSHIP INTEREST.............................24

        12.1    Transfer Restrictions.......................................24
        12.2    Transfers by Bequest, Incapacitation, Bankruptcy............24
        12.3    Transfer between Members....................................24

ARTICLE 13      ADMISSION OF NEW MEMBERS; AMENDMENT TO OPERATING AGREEMENT
                AND ARTICLES OF ORGANIZATION................................25

        13.1    Admission of Members........................................25
        13.2    Amendments..................................................25

ARTICLE 14      DISSOLUTION OF THE COMPANY..................................27

        14.1    Events of Dissolution.......................................27
        14.2    Rights to Mark..............................................27


                                    ii
        14.3     Application of Proceeds.....................................27
        14.4     Negative Capital Accounts...................................28
        14.5     No Liability................................................28

ARTICLE 15       LIABILITY AND INDEMNIFICATION...............................29

        15.1     Limitation on Liability.....................................29
        15.2     Indemnification.............................................29

ARTICLE 16       MISCELLANEOUS...............................................30

        16.1     Disputed Resolution.........................................30
        16.2     Entire Agreement............................................30
        16.3     Governing Law...............................................31
        16.4     Binding Agreement...........................................31
        16.5     Captions....................................................31
        16.6     Validity....................................................31
        16.7     Counterparts................................................32


EXHIBIT A.........INITIAL CAPITAL CONTRIBUTIONS
EXHIBIT B.........ARBITRATION PROVISIONS




                                       iii
EXHIBIT 10.28

                              ASSIGNMENT AND ASSUMPTION OF LEASE

This Assignment and Assumption of Lease ("Assignment") is made and is effective as of August 1, 2005, by and
among Blue Concept, LLC, a California limited liability company (the "Assignor,"), Blue Holdings, Inc., a
California corporation, (the "Assignee") and Melrose Edinburgh, LLC, a California limited liability company
("Landlord") and consented to by Paul Guez and Elizabeth Guez, both individually and as trustees of the Paul and
Beth Guez living Trust dated February 13,1998 (collectively "Guarantor").

                                                    RECITALS

Landlord and Assignor, executed a Lease (as amended and restated, hereinafter referred to as the "Lease")
dated as of March 16th, 2005;

By the terms of the Lease, a copy of which is attached to this Assignment as Exhibit A, the property located at
and commonly known as 8011 and 8013 Melrose Avenue as more particularly described in the Lease was
leased to Assignor as Tenant for a term of ten (10) years, commencing on May 16, 2005, and ending on March
15, 2015, subject to earlier termination as provided in the Lease; and

Assignor now desires to assign the Lease to Assignee, and Assignee desires to accept the Lease's assignment
and assume all of the obligations of Assignor, as tenant thereunder;

                                                  AGREEMENT

NOW THEREFORE, for and in consideration of the mutual covenants contained herein and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties hereby agree as follows,
effective as of the Effective Date:

                                                  ASSIGNMENT

Assignor assigns and transfers to Assignee all of Assignor's right, title, and interest in and to the Lease attached to
this Assignment as Exhibit A, and Assignee agrees to and does accept the assignment. Assignee expressly
assumes and agrees to keep, perform, and fulfill all the terms, covenants, conditions, and obligations, required to
be kept, performed, and fulfilled by Assignor as Tenant under the lease, including the making of all payments due
to or payable on behalf of Landlord under the Lease when due and payable. Assignor expressly acknowledges,
understands and agrees that this Assignment does not relieve Assignor of any of its obligations under the Lease
should Assignee fail to timely perform any covenant, condition or obligation thereunder.

                                          CONSENT OF LANDLORD

Landlord hereby consents to the above Assignment and Assumption of Lease to Assignee. Landlord does not
waive any of its rights under the Lease, including, without limitation, the right to pursue any action against
Assignor should Assignee fail to timely perform any covenant, condition or obligation called for under the Lease
or to further approve any subsequent assignment or
sublease under the Lease. This Assignment is conditional on the Assignee's use and conduct of business not
violating existing leasehold uses in place prior to the execution of this Assignment.

                             GUARANTOR'S CONSENT TO ASSIGNMENT

Guarantor hereby consents to the Assignment contained herein and agrees that, notwithstanding said Assignment
and/or any further assignments of the Lease, Guarantor's obligations under the Guaranty of Lease shall continue
to remain in full force and effect for the duration of the term of the Lease and any and all extensions and renewals
thereof.

                                              MISCELLANEOUS

Each provision of this Assignment shall extend, bind and inure to the benefit of Landlord, Assignor and Assignee
and their respective permitted successors and assigns. This Assignment contains the entire agreement between the
parties regarding the subject matter contained herein, and all prior negotiations and agreements are merged into
this Assignment. This Assignment may not be changed, modified or discharged, in whole or in part, except by a
written instrument signed by the party against whom enforcement of the change, modification or discharge is
sought. This Assignment may be executed in any number of counterparts, and via facsimile, each of which upon
execution and delivery shall be considered an original for all purposes and all such counterparts shall, together,
constitute one and the same instrument. The invalidity or unenforceability of any provision of this Assignment shall
not affect the validity or enforceability of any other provision of this Assignment. This Assignment shall be
governed by the laws of the state of California.

                     Executed at Los Angeles, California, on this __ day of July, 2006.

ASSIGNOR:
Blue Concept, LLC

                               By:                 /S/ BETH GUEZ
                                          -----------------------------------
                               Its:                CEO
                                          -----------------------------------




ASSIGNEE:
Blue Holdings, Inc.

                               By:                 /S/ PATRICK CHOW
                                          -----------------------------------
                               Its:                CFO
                                          -----------------------------------




LANDLORD:
Melrose Edinburgh, LLC

                               By:                 /S/ A. JOROUD
                                          -----------------------------------
                               Its:
                                          -----------------------------------




[Signatures continued on next page]

                                                         2
GUARANTOR

                     /S/ PAUL GUEZ
            --------------------------------------------
            Paul Guez, individually and on behalf of the
            Paul and Beth Guez Living Trust dated
            February 13, 1998.




                     /S/ ELIZABETH GUEZ
            --------------------------------------------
            Elizabeth Guez, individually and on behalf
            of the Paul and Beth Guez Living Trust dated
            February 13, 1998.




                                 3
EXHIBIT 10.29

Global Fashion Group Tel: + 33(0)1 55 28 88 98 Fax: + 33(0)1 58 30 88 57

Blue Holdings Monsieur Paul Guez

Paris le 5 octobre 2006

Dear Mr. Paul Guez

By this letter, I herebery confirm that Global fashion Group ("GFG") and Blue Holdings, Inc ("BLHL") were
unable to finalize the license agreement between our companies. As you aware, GFG paid to BLHL as an
advance against the license agreement the sum of 200,000 Euros. ("The Advance").

Therefore Pursuant to paragraph 13 of the irrevocable promise to enter into a license Agreement signed by the
parties on the 30th day of March 2006, GFG agrees that the advance may now be applied to the accounts
receivable balance of GFG on the books of BLHL (for the merchandise that BLHL shipped to GFG) and GFG
will, in turn, apply this same amount to the payable that is on our books in favor of BLHL.

For our records could you please provide us with a statement from your company which confirms the described
operation.

Sincerely,

                                       /s/ Christophe Bosc
                                       ---------------------------
                                       Christophe Bosc
                                       President
EXHIBIT 10.30

                                       BLUE HOLDINGS, INC.
                                       5804 E. SLAUSON AVE.
                                    COMMERCE, CALIFORNIA 90040

October 9, 2006

VIA FACSIMILE AND U.S. MAIL

Long Rap, Inc.
1420 Wisconsin Avenue, NW
Washington, DC 20007
Attention: Charles Rendelman
Telephone No.: 202-337-6610
E-mail: chuck@upagainstthewall.com

                RE: AGREEMENT AND PLAN OF MERGER DATED JUNE 19, 2006,

BY AND AMONG BLUE HOLDINGS, INC., LR ACQUISITION CORPORATION, LONG RAP, INC.,
AND THE STOCKHOLDERS OF LONG RAP, INC.

Dear Chuck:

Blue Holdings, Inc. ("BLUE HOLDINGS") and Long Rap, Inc. ("LONG RAP") are parties to that certain
Agreement and Plan of Merger dated June 19, 2006 (the "MERGER AGREEMENT"), by and among Blue
Holdings, LR Acquisition Corporation, Long Rap and the Stockholders of Long Rap.

For the reasons set forth in Sections 6.1(b) of the Merger Agreement, and pursuant to the terms of Section 6.2
(b) thereof, the purpose of this letter is to confirm that Blue Holdings and Long Rap have mutually agreed to
terminate the Merger Agreement effective as of the date of this letter. This will further confirm that the Boards of
Directors of Blue Holdings and Long Rap have authorized the termination of the Merger Agreement on the terms
specified in this letter.

In accordance with Sections 6.2(b) and 4.16 of the Merger Agreement, Blue Holdings has agreed to pay to
Long Rap, within five (5) business days of the date of this letter, $50,000 and 50% of invoices (fees and
expenses) from Weinberg & Company, P.A., delivered in connection with the audit they conducted of Long Rap.
Alternatively, with respect to payments under Section 4.16 of the Merger Agreement, Blue Holdings may pay the
final invoice directly to Weinberg & Company and remit to Long Rap the difference between the amount of the
final invoice so paid and fifty percent (50%) of the total audit fees and expenses. Blue Holdings will cooperate
with Long Rap (and to the extent necessary, condition payment of final invoices to Weinberg & Company) upon
Weinberg & Company's delivery of the audited financial statements of Long Rap to Long Rap.

I trust that the terms noted above will be acceptable to you, and consistent with the provisions of the Merger
Agreement and our mutual intent.
Charles Rendelman
October 9, 2006

                                                   Page 2

Please sign and return to me an executed copy of this letter to confirm your agreement and acknowledgment of
the foregoing.

Very Truly Yours,

                                         /s/ Patrick Chow
                                         -----------------------
                                         Patrick Chow
                                         Chief Financial Officer




ACKNOWLEDGED AND AGREED:

Long Rap, Inc.

                                       /s/ Charles Rendelman
                                       ---------------------------
                                       Charles Rendelman




cc: Paul Guez
Steven M. Abramson, Esq.
Barry Taff, Esq.
Gregory Akselrud, Esq.
EXHIBIT 31.1

                            CERTIFICATION OF CEO PURSUANT TO
                   SECURITIES EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)
                                 AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Paul Guez, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Blue Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the small business
issuer as of, and for, the periods presented in this report;

4. The small business issuer's other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small
business issuer and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the small business issuer, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;

b. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the small business issuer's internal control over financial reporting that
occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
small business issuer's internal control over financial reporting; and

5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small
business issuer's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process,
summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in
the small business issuer's internal control over financial reporting.

          Date: November 14, 2006

                                                                /s/ Paul Guez
                                                                -------------------------------------
                                                                Paul Guez
                                                                Chief Executive Officer and President
EXHIBIT 31.2

                            CERTIFICATION OF CFO PURSUANT TO
                   SECURITIES EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)
                                 AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Patrick Chow, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Blue Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the small business
issuer as of, and for, the periods presented in this report;

4. The small business issuer's other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small
business issuer and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the small business issuer, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;

b. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the small business issuer's internal control over financial reporting that
occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
small business issuer's internal control over financial reporting; and

5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small
business issuer's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process,
summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in
the small business issuer's internal control over financial reporting.

          Date: November 14, 2006

                                                                /s/ Patrick Chow
                                                                -------------------------------------
                                                                Patrick Chow
                                                                Chief Financial Officer and Secretary
EXHIBIT 32.1

                                      CERTIFICATION PURSUANT TO
                                         18 U.S.C. SECTION 1350,
                                       AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Blue Holdings, Inc. (the "Company") on Form 10-QSB for the period
ended September 30, 2006, as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Paul Guez, Chairman, Chief Executive Officer and President of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best
of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.

                              /s/ Paul Guez
                              -----------------------------------------------
                              Paul Guez
                              Chairman, Chief Executive Officer and President
                              November 14, 2006
EXHIBIT 32.2

                                      CERTIFICATION PURSUANT TO
                                         18 U.S.C. SECTION 1350,
                                       AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Blue Holdings, Inc. (the "Company") on Form 10-QSB for the period
ended September 30, 2006, as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Patrick Chow, Chief Financial Officer and Secretary of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best
of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.

                                    /s/ Patrick Chow
                                    -------------------------------------
                                    Patrick Chow
                                    Chief Financial Officer and Secretary
                                    November 14, 2006

								
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