Unassociated Document


    CERTIFICATE
      OF DESIGNATIONS,

    PREFERENCES,
      RIGHTS AND LIMITATIONS OF

    SERIES
      A CONVERTIBLE PREFERRED STOCK

    OF

    BLUE
      HOLDINGS, INC.

    


    Pursuant
      to Section 78.195 of the General Corporation Law 

    of
      the
      State of Nevada

     

    Blue
      Holdings, Inc., a Nevada corporation (hereinafter called the “Corporation”),
      hereby certifies that, pursuant to the authority expressly vested in the Board
      of Directors of the Corporation by the Articles of Incorporation, as amended
      (the “Articles
      of Incorporation”),
      and
      in accordance with the provisions of Section 78.195 of the General Corporation
      Law of the State of Nevada, the Board of Directors has duly adopted the
      following resolutions.

     

    RESOLVED,
      that, pursuant to the Articles of Incorporation (which authorizes 5,000,000
      shares of preferred stock, $0.001 par value per share (“Preferred
      Stock”)),
      the
      Board of Directors hereby fixes the powers, designations, preferences and
      relative, participating, optional and other special rights, and the
      qualifications, limitations and restrictions, of the Series A Convertible
      Preferred Stock.

     

    RESOLVED,
      that the Corporation is authorized to issue Series A Convertible Preferred
      Stock
      on the following terms and with the provisions herein set forth:

     

    (1)
       Designation
      and Number of Shares.
      Of the
      5,000,000 shares of Preferred Stock authorized pursuant to the Fourth Article
      of
      the Corporation's Articles of Incorporation, 1,000,000 shares are hereby
      designated as Series A Convertible Preferred Stock (the “Series
      A Preferred Stock”).

     

    (2)
       Stated
      Value.
      Each
      share of Series A Preferred stock will have stated value of $0.001 per share
      (the “Stated
      Value”).
      

     

    (3)
       Dividends.
      

     

    (a)
      Dividend
      Accrual.
      The
      holder of record of each share of Series A Preferred Stock of the Corporation
      (a
“Holder”)
      shall
      be entitled to receive a cumulative share dividend (a “Dividend”)
      equal
      to the Dividend Rate (as defined below), payable only when, as and if declared
      by the Board of Directors. Such dividends will accrue and accumulate annually
      whether or not they have been declared. The “Dividend
      Rate”
shall
      mean six percent (6%) of the Purchase Price. For purposes of this Certificate
      of
      Designations, the “Purchase
      Price”
for
      each share of Series A Preferred Stock shall be $2.556682 per
      share.

     

    (b)
      Further
      Dividends.
      After
      payment of any such Dividends, and subject to the rights of any series of
      Preferred Stock with preference or priority over or on a parity with the Common
      Stock or Series A Preferred Stock with respect to the right to receive any
      dividends, any additional dividends shall be distributed among all holders
      of
      Common Stock pro rata.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (c)
      Dividend
      Payment.

     

    (i) No
      Dividend distribution shall be made with respect to accrued or declared but
      unpaid dividends on any Series A Preferred Stock unless and until such shares
      are (i) converted to Common Stock pursuant to Section
      6,
      or (ii)
      delivered in a Liquidation Event.

     

    (ii) So
      long
      as any shares of Series A Preferred Stock are outstanding, the Corporation
      shall
      not declare, pay or set aside for payment any dividend or other distribution
      in
      respect of its Common Stock until all Dividends declared and unpaid with respect
      to the Series A Preferred Stock have been paid. 

     

    (ii) Notwithstanding
      any provision to the contrary set forth in this Certificate of Designations,
      no
      payment shall be made with respect to declared but unpaid Dividends on any
      Series A Preferred Stock that are converted into Common Stock.

     

    (4)
      Liquidation.
      

     

    (a)
       Liquidation
      Preference.
      In the
      event of any liquidation, dissolution or winding up of the Corporation, either
      voluntary or involuntary (a “Liquidation
      Event”),
      subject to the rights of any other series of Preferred Stock that are in
      existence or may, from time to time, come into existence, the cash and other
      assets of the Corporation available for distribution to shareholders shall
      be
      distributed among the holders of the Series A Preferred Stock, prior to any
      amount being distributed to or among the holders of common stock, $0.001 par
      value per share, of the Corporation (the “Common
      Stock”),
      such
      that for each share of Series A Preferred Stock, a holder of Series A Preferred
      Stock shall be entitled to receive an amount equal to the Purchase Price, as
      adjusted for any stock dividends, combinations or splits with respect to such
      shares, plus all accrued but unpaid Dividends on each such share (pursuant
      to
Section
      3(a))
      (the
“Liquidation
      Preference”).
      The
      cash value of any remaining cash and other distributable property that is
      available for distribution to the holders of equity of the Corporation (after
      payment of the Liquidation Preference to the Series A Preferred Stock and any
      other liquidation preference amount to any other class of equity securities
      of
      the Corporation) shall be distributed among among all holders of Common Stock
      pro rata.

     

    (b)
      Merger;
      Sale.
      The
      following events shall be deemed to constitute a Liquidation Event under this
      Section
      4:
      (i) the
      sale, lease, transfer, exclusive license or other disposition of all or
      substantially all of the assets of the Corporation, or (ii) the acquisition
      of
      the Corporation by another entity by means of merger, consolidation, share
      exchange, reorganization or otherwise pursuant to which shares of capital stock
      of the Corporation are converted into cash, securities or other property of
      the
      acquiring entity or any of its affiliates and which results in the holders
      of
      voting securities (excluding shares of the surviving entity held by holders
      of
      the capital stock of the Corporation acquired by means other than the exchange
      or conversion of the capital stock of the Corporation for shares of the
      surviving entity) of the Corporation immediately prior to such merger,
      consolidation, share exchange, reorganization or sale of assets beneficially
      owning, directly or indirectly, less than a majority of the combined voting
      power of the surviving entity resulting from such merger, consolidation, share
      exchange, reorganization or sale of assets (any of the foregoing transactions,
      a
“Deemed
      Liquidation Event ”).

     

    
      
         

      

      
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    (c)
      Valuation
      of Consideration.
      If the
      consideration received by the Corporation is other than cash in connection
      with
      any of the events set forth above, its value shall be deemed its fair market
      value as determined in good faith by the Board; provided,
      however,
      that if
      the consideration consists of securities, the fair market value of such
      securities shall be valued as follows: 

     

    (i) if
      traded
      on a securities exchange or through the NASDAQ Stock Market, the value shall
      be
      deemed to be the average of the closing prices of the securities on such
      exchange or system over the thirty (30) day period ending three (3) days prior
      to the closing;

     

    (ii) if
      actively traded over-the-counter, the value shall be deemed to be the average
      of
      the closing bid or sale prices (whichever is applicable) over the thirty (30)
      day period ending three (3) days prior to the closing; and

     

    (iii) if
      there
      is no active public market, the value shall be the fair market value thereof,
      as
      determined in good faith by the Board.

     

    (d)
       Alternative
      Amount.
      Notwithstanding Section
      4(a)
      above,
      each holder of Series A Preferred Stock shall have the right to elect the
      conversion benefits of the provisions of Section 6
      or other
      applicable conversion provisions in lieu of receiving the Liquidation Preference
      pursuant to Section
      4(a).

     

    (5)
       Redemption.
      The
      Series A Preferred Stock does not have any redemption rights. 

     

    (6)
       Conversion.
      

     

    (a)
       Right
      to Convert.
      Each
      share of Series A Preferred Stock shall be convertible, at the option of the
      Holder, at any time after the date of issuance of such share, at the office
      of
      the Corporation or any transfer agent for such stock, into such number of fully
      paid and nonassessable shares of Common Stock as is determined by dividing
      (i)
      the Purchase Price plus all accrued but unpaid Dividends on each such share
      (pursuant to Section
      3(a),
      by (ii)
      the Conversion Price, determined as hereafter provided, in effect on the date
      the certificate is surrendered for conversion (such quotient is referred to
      as
      the “Conversion
      Rate”).
      The
      initial “Conversion
      Price”
per
      share for the Series A Preferred Stock shall be $0.7347 and shall be subject
      to
      adjustment as set forth in Section
      6(d).
      For the
      avoidance of doubt, the Conversion Price represents the average closing price
      of
      a share of the Common Stock, as quoted on the NASDAQ
      Capital
      Market, over the twenty (20) trading days immediately preceding November 13,
      2007, the closing date for the transaction pursuant to which each Holder
      acquired their shares of Series A Preferred Stock.

     

    (b)
      Automatic
      Conversion.
      Each
      share of Series A Preferred Stock shall automatically be converted into shares
      of Common Stock at the Conversion Rate at the time in effect immediately upon
      the date specified by written consent or agreement of the holders of a majority
      of the then outstanding Series A Preferred Stock.

     

    
      
         

      

      
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    (c)
      Mechanics
      of Conversion.
      Before
      any Holder of Series A Preferred Stock shall be entitled to convert the same
      into shares of Common Stock, the Holder shall surrender the certificate or
      certificates therefor, duly endorsed, at the office of the Corporation or of
      any
      transfer agent for the Series A Preferred Stock, and shall give written notice
      to the Corporation at its principal corporate office, of the election to convert
      the same and shall state therein the name or names in which the certificate
      or
      certificates for shares of Common Stock are to be issued. The Corporation shall,
      as soon as practicable thereafter, issue and deliver at such office to such
      Holder of Series A Preferred Stock, or to the nominee or nominees of such
      Holder, a certificate or certificates for the number of shares of Common Stock
      to which such Holder shall be entitled as aforesaid. Such conversion shall
      be
      deemed to have been made immediately prior to the close of business on the
      date
      of such surrender of the shares of Series A Preferred Stock to be converted,
      and
      the person or persons entitled to receive the shares of Common Stock issuable
      upon such conversion shall be treated for all purposes as the record holder
      or
      holders of such shares of Common Stock as of such date. If the conversion is
      in
      connection with an underwritten offering of securities, the conversion may,
      at
      the option of any holder tendering shares of Series A Preferred Stock for
      conversion, be conditioned upon the closing with the underwriters of the sale
      of
      securities pursuant to such offering, in which event the persons entitled to
      receive the Common Stock upon conversion of the shares of Series A Preferred
      Stock shall not be deemed to have converted such shares of Series A Preferred
      Stock until immediately prior to the closing of such sale of
      securities.

     

    (d)
       Adjustments
      to Conversion Rate and Reorganization.
      The
      Conversion Rate for the number of shares of Common Stock into which the Series
      A
      Preferred Stock shall be converted on a conversion shall be subject to
      adjustment from time to time as hereinafter set forth:

     

    (i) Stock
      Dividends - Recapitalization, Reclassification, Split-Ups.
      If,
      prior to the date of a conversion, the number of outstanding shares of Common
      Stock is increased by a stock dividend on the Common Stock payable in shares
      of
      Common Stock or by a stock split, recapitalization or reclassification of shares
      of Common Stock or other similar event, then, on the effective date thereof,
      the
      Conversion Rate will be adjusted so that the number of shares of Common Stock
      issuable on the conversion of the Series A Preferred Stock shall be increased
      in
      proportion to such increase in outstanding shares of Common Stock.

     

    (ii) Aggregation
      of Shares.
      If
      prior to the date of conversion, the number of outstanding shares of Common
      Stock is decreased by a consolidation, combination, reverse stock split or
      reclassification of shares of Common Stock or other similar event, then, upon
      the effective date thereof, the number of shares of Common Stock issuable on
      the
      conversion of the Series A Preferred Stock shall be decreased in proportion
      to
      such decrease in outstanding shares of Common Stock.

     

    (iii) Change
      Resulting from Reorganization or Change in Par Value, etc.
      In case
      of any reclassification or reorganization of the outstanding shares of Common
      Stock which solely affects the par value of the shares of Common Stock, or
      in
      the case of any merger or consolidation of the Corporation with or into another
      corporation (other than a consolidation or merger in which the Corporation
      is
      the continuing corporation and which does not result in any reclassification
      or
      reorganization of the outstanding shares of Common Stock), or in the case of
      any
      sale or conveyance to another corporation or entity of the property of the
      Corporation as an entirety or substantially as an entirety in connection with
      which the Corporation is dissolved, the holders of the Series A Preferred Stock
      shall have the right thereafter (unless otherwise converted) to receive upon
      the
      conversion of the Series A Preferred Stock the kind and amount of shares of
      stock or other securities or property (including cash) receivable upon such
      reclassification, reorganization, merger or consolidation, or upon a dissolution
      following any such sale or other transfer, by a holder of the number of shares
      of Common Stock into which the Series A Preferred Stock is convertible
      immediately prior to such event; and if any reclassification also results in
      a
      change in shares of Common Stock, then such adjustment also shall be
      made.

     

    
      
         

      

      
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    (iv) Successive
      Changes.
      The
      provisions of this Section shall similarly apply to successive
      reclassifications, reorganizations, mergers or consolidations, sales or other
      transfers.

     

    (7)
       Voting
      Rights.
      The
      holders of record of shares of Series A Preferred Stock shall be entitled to
      the
      following voting rights: 

     

    (a)
        Those
      voting rights required by applicable law and as provided in Section (12)
      hereof;


     

    (b)
        The
      right
      to vote together with the holders of the Common Stock, as a single class, upon
      all matters submitted to holders of Common Stock for a vote. Each
      share of Series A Preferred Stock will carry a number of votes equal to the
      number of shares of Common Stock issuable in a conversion based on the then
      applicable Conversion Rate; and

     

    (c)
        Whenever
      holders of Series A Preferred Stock are required or permitted to take any action
      by vote, such action may be taken without a meeting on written consent, setting
      forth the action so taken and signed by the holders of the outstanding capital
      stock of the Corporation having not less than the minimum number of votes that
      would be necessary to authorize or take such action at a meeting at which all
      such shares entitled to vote thereon were present and voted. Each share of
      the
      Series A Preferred Stock shall entitle the holder thereof to one vote on all
      matters to be voted on by the holders of the Series A Preferred Stock, as set
      forth in this Section
      7(c).

     

    (8)
       No
      Impairment.
      The
      Corporation will not, by amendment of its Articles of Incorporation or through
      any reorganization, recapitalization, transfer of assets, consolidation, merger,
      dissolution, issue or sale of securities or any other voluntary action, avoid
      or
      seek to avoid the observance or performance of any of the terms to be observed
      or performed hereunder by the Corporation, but will at all times in good faith
      assist in the carrying out of all the provisions of this section and in the
      taking of all such action as may be necessary or appropriate in order to protect
      the conversion rights of the holders of Series A Preferred Stock against
      impairment.

     

    (9)
       No
      Fractional Shares and Certificate as to Adjustments.
      No
      fractional shares shall be issued upon the conversion of any share or shares
      of
      the Series A Preferred Stock, and the number of shares of Common Stock to be
      issued shall be rounded to the nearest whole share. The number of shares
      issuable upon conversion shall be determined on the basis of the total number
      of
      shares of Series A Preferred Stock the holder is at the time converting into
      Common Stock and the number of shares of Common Stock issuable upon such
      aggregate conversion.

     

    
      
         

      

      
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    (10)
       Notices
      of Record Date.
      In the
      event of any taking by the Corporation of a record of the holders of any class
      of securities for the purpose of determining the holders thereof who are
      entitled to receive any dividend (other than a cash dividend) or other
      distribution, any right to subscribe for, purchase or otherwise acquire any
      shares of stock of any class or any other securities or property, or any other
      right, the Corporation shall mail to each holder of Series A Preferred Stock,
      at
      least ten (10) days prior to the date specified therein, a notice specifying
      the
      date on which any such record is to be taken for the purpose of such dividend,
      distribution or right, and the amount and character of such dividend,
      distribution or right.

     

    (11)
       Notices.
      Any
      notice required by the provisions of this Certificate of Designations to be
      given to the holders of shares of Series A Preferred Stock shall be deemed
      given
      if deposited in the United States mail, postage prepaid, and addressed to each
      holder of record at his address appearing on the books of the
      Corporation.

     

    (12)
       Protective
      Provisions.
      So long
      as any shares of Series A Preferred Stock are outstanding, the Corporation
      shall
      not without first obtaining the approval (by vote or written consent, as
      provided by law) of the holders of at least a majority of the then outstanding
      shares of Series A Preferred Stock, voting as a separate class: (i) amend,
      alter or repeal the preferences, privileges, special rights or other powers
      of
      the Series A Preferred Stock, as set forth herein, in a manner adverse to
      the holders thereof;
      (ii) create,
      issue, or obligate itself to issue any new class or series of stock or any
      other
      equity security (including any security convertible into or exercisable for
      any
      equity security) ranking senior to the Series A Preferred Stock as to
      dividend rights, redemption rights, conversion rights or liquidation
      preferences;
      (iii) reclassify
      any existing class or series of outstanding shares into a class or series of
      stock or any other equity security (including any security convertible into
      or
      exercisable for any equity security) ranking senior to, or on a parity with,
      the
      Series A Preferred Stock as to dividend rights, redemption rights, conversion
      rights or liquidation preferences;
      or
      (iv) amend
      its
      Certificate of Incorporation or Bylaws in any manner that adversely affects
      the
      preferences, privileges, restrictions or other rights of the holders of
      Series A Preferred Stock.

     

    (13)
       Return
      of Status as Authorized Shares.
      Upon a
      conversion or any other redemption or extinguishment of the Series A Preferred
      Stock, the shares converted, redeemed or extinguished will be automatically
      returned to the status of authorized and unissued shares of Preferred Stock,
      available for future designation and issuance pursuant to the terms of the
      Articles of Incorporation.

     

    
      
         

      

      
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    FURTHER
      RESOLVED, that the statements contained in the foregoing resolutions creating
      and designating the said Series A Convertible Preferred Stock and fixing the
      number, powers, preferences and relative, optional, participating, and other
      special rights and the qualifications, limitations, restrictions, and other
      distinguishing characteristics thereof shall, upon the effective date of said
      series, be deemed to be included in and be a part of the Articles of
      Incorporation of the Corporation pursuant to the provisions of Sections 104
      and
      151 of the General Corporation Law of the State of Nevada.

    


    IN
      WITNESS WHEREOF,
      the
      undersigned has executed this Certificate of Designation of the Series A
      Convertible Preferred Stock on this 13th day of November, 2007.

     

    
      
        	
                BLUE
                  HOLDINGS, INC.

              
	 	 
	
                By:

              	
                /s/
                  Glenn Palmer

              
	
                Name:

              	
                Glenn
                  Palmer

              
	
                Title:

              	
                Chief
                  Executive
                  Officer

              


      

    

     

    
      
         

      

      
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