Unassociated Document


    AMENDMENT
      AGREEMENT

    


    This
      Amendment Agreement (this “Agreement”),
      dated
      as of July 30, 2008, is entered into by and among
      BLUE
      HOLDINGS, INC., a Nevada corporation (the “Company”),
      ANTIK
      DENIM, LLC, a California limited liability company and wholly-owned subsidiary
      of the Company (“Antik”),
      TAVERNITI SO JEANS, LLC, a California
      limited liability company and wholly-owned subsidiary of the Company
(together
      with Antik, the “Guarantors”,
      and
      each individually, a “Guarantor”),
      GEMINI STRATEGIES, LLC, a Delaware limited liability company (the “Collateral
      Agent”),
      and
      GEMINI MASTER FUND, LTD., a Cayman Islands corporation (the “Investor”).
      The
      Company and the Guarantors are sometimes referred to herein individually as
      a
“Blue
      Entity”
and
      collectively as the “Blue
      Entities”.

    


    RECITALS:

    


    WHEREAS,
      the Company and the Investor are party to that certain Securities Purchase
      Agreement, dated as of March 5, 2008 (the “Purchase
      Agreement”),
      pursuant to which the Company issued to the Investor (i) an 8% Senior Secured
      Convertible Note in the original principal amount of $2 million (the
“Note”),
      convertible
      into
      shares of common stock of the Company, par
      value
      $0.001 per share (the “Common
      Stock”),
      and
      (ii)
      a Warrant to purchase 875,000 shares of Common Stock (the “Warrant”);

    


    WHEREAS,
      the Guarantors have entered into that certain Subsidiary Guarantee, dated as
      of
      March 5, 2008 (the “Guarantee”),
      pursuant to which each Guarantor has guaranteed the satisfaction of all the
      obligations of the Company under the Existing Transaction Documents (as defined
      below);

    


    WHEREAS,
      Antik has entered into that certain Intellectual Property Security Agreement,
      dated as of March 5, 2008 (the “Antik IP Security
      Agreement”),
      pursuant to which Antik granted a security interest in its intellectual property
      to the Investor and the Collateral Agent to secure the satisfaction of all
      the
      obligations of the Blue Entities under the Existing Transaction
      Documents;

    


    WHEREAS,
      the Company and the Guarantors have entered into that certain Security Agreement
      and that certain Intellectual Property Security Agreement, each dated as of
      March 5, 2008 (collectively, and together with the Antik IP Security Agreement,
      the “Security
      Agreements”),
      pursuant to which the Company and the Guarantors have each granted a security
      interest in its assets and properties to the Investor and the Collateral Agent
      to secure the satisfaction of all the obligations of the Blue Entities under
      the
      Existing Transaction Documents;

    


    WHEREAS,
      the Company is in breach of certain of its obligations under the Existing
      Transaction Documents, and the Company has requested that the Investor waive
      such breaches in accordance with and in consideration for the terms and
      conditions described in this Agreement; and

    


    WHEREAS,
      pursuant to a placement agency engagement agreement with Granite Financial
      Group, LLC (“Granite”),
      the
      Company issued to Granite (i) an 8% Senior Secured Convertible Note in the
      original principal amount of $86,400 (the “Granite Note”),
      convertible
      into
      shares of Common Stock, and
      (ii)
      a Warrant to purchase 150,000 shares of Common Stock (the “Granite Warrant”),
      in
      connection with the closing of the transactions under the Purchase
      Agreement

     

    
      
         

      

      
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    AGREEMENT:

    


    NOW,
      THEREFORE, in consideration of the foregoing and subject to the terms and
      conditions herein contained, and
      for
      other good and valuable consideration, the receipt and sufficiency of which
      are
      hereby acknowledged, the parties hereto agree as follows:

    


    1. DEFINITIONS.

    


    1.1 Certain
      Defined Terms.
      As used
      in this Agreement, the following terms shall have the meanings set forth
      below:

    


    “Existing
      Transaction Documents”
means
      the Purchase Agreement, the Note, the Warrant, the Security Agreements, the
      Guarantee and all other agreements, instruments and other documents executed
      and
      delivered by or on behalf of the Blue Entities or any of their officers in
      connection with any of the foregoing agreements.

    


    “Transaction
      Documents”
means
      the Existing Transaction Documents (as amended by this Agreement), this
      Agreement, the Amended and Restated Note (as
      defined below),
      the
      Amended and Restated Warrant (as
      defined below),
      and all
      other agreements, instruments and other documents executed and delivered by
      or
      on behalf of the Blue Entities or any of their officers in connection with
      this
      Agreement.

    


    1.2 Terms
      Defined in the Purchase Agreement.
      Capitalized
      terms used in this Agreement and not otherwise defined herein have the
      respective meanings ascribed to them in the Purchase Agreement.

    


    2. ACKNOWLEDGEMENT
      AND WAIVER.

    


    2.1 Existing
      Breaches.
      The
      Blue Entities acknowledge, agree and represent that the following breaches
      have
      occurred and are continuing as of the date hereof under the Existing Transaction
      Documents:

    


    	(a)  	
            as
              of March 5, 2008, the Company’s representations to the Investor as to the
              Company’s financial position, the accuracy of the Company’s public filings
              for fiscal 2007, and the Company’s system of internal accounting controls
              and disclosure controls and procedures were incorrect due to accounting
              errors in the Company’s related party accounts, discovered and publicly
              disclosed after March 5, 2008, pertaining to royalties and payables
              that
              were initially recognized and subsequently written off in error, and
              rental expenses that were not recorded;
              and

          


     

    
      
         

      

      
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    	(b)  	
            the
              Company has failed to timely file (or obtain extensions in respect
              thereof
              and file within the applicable grace period) all reports required to
              be
              filed by the Company pursuant
              to the Exchange Act.

          


    


    2.2 Waiver
      of Existing Breaches.
      Upon
      the satisfaction of the conditions specified in Section
      2.3,
      each of
      the Investor and Granite shall be deemed to have waived the breaches specified
      in Section
      2.1 of
      this
      Agreement and the resulting Events of Default under Sections 8(a)(ii), (iii),
      (iv) and (ix) of the Note; provided,
      however,
      that
      nothing herein shall be deemed to be a waiver by the Investor of any breaches
      under the Existing Transaction Documents that are not expressly specified in
      Section
      2.1,
      whether
      now or hereafter existing.

    


    2.3 Specified
      Conditions to Waiver.
      Each of
      the Investor’s and Granite’s waiver under Section
      2.2
      shall
      not be effective unless and until each of the following conditions has been
      satisfied by the Blue Entities:

    


    	(a)  	
            each
              of the Blue Entities shall have executed and delivered this Agreement
              to
              the Investor;

          


    


    	(b)  	
            the
              Company shall have reserved the requisite number of shares of Common
              Stock
              for issuance as required by Section
              4.2 of
              this Agreement;

          


    


    	(c)  	
            the
              Blue Entities shall have delivered to the Investor a copy of an
              irrevocable written consent executed by Paul Guez, as a stockholder
              holding a majority of the outstanding shares of Common Stock, approving
              the transactions contemplated under this Agreement (including without
              limitation the issuance of all of the Underlying Shares in excess of
              19.99% of the issued and outstanding Common Stock on the date of the
              Purchase Agreement) on or prior to the date of this Agreement in
              accordance with the requirements of the applicable
              rules and regulations of the Nasdaq Stock Market (or any successor
              entity)
              (“Shareholder
              Approval”),
              and the Shareholder Approval shall be subject only to the subsequent
              delivery to the Company’s shareholders of an information statement in
              accordance with applicable securities laws, rules and regulations (the
              “New Information
              Statement”);
              and

          


    


    	(d)  	
            each
              Blue Entity shall have delivered to the Investor a Secretary’s Certificate
              certifying true and complete copies of the minutes or resolutions of
              such
              Blue Entity’s board of directors or manager, as applicable, authorizing
              and approving the transactions contemplated by this Agreement and the
              other Transaction Documents to which such Blue Entity is a
              party.

          


    


    2.4 Waiver
      of Anticipated Breach.
      The
      Company anticipates that the Common Stock shall not be eligible for listing
      or
      quotation on a Trading Market subsequent to the date of this Agreement and
      prior
      to the filing of all
      reports required to be filed by it under the Exchange Act,
      and
      shall not be eligible to resume listing or quotation for trading on a Trading
      Market within five Trading Days of such ineligibility. To the extent such
      ineligibility occurs, the Company covenants to use its best efforts to take,
      or
      cause to be taken, all action necessary to resume listing or quotation of the
      Common Stock on a Trading Market as soon as practicable following the filing
      of
      all reports required to be filed by it under the Exchange Act (but in any event
      no later than October 15, 2008), and each of the Investor and Granite hereby
      waive, until October 15, 2008, the ineligibility for listing or quotation of
      the
      Common Stock on a Trading Market and the resulting Events of Default under
      Sections 8(a)(ii), (iii), (iv) and (vii) of the Note (provided such best efforts
      are made before such date).

     

    
      
         

      

      
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    3. AMENDMENT
      AND RESTATEMENT OF NOTES AND WARRANTS.

    


    3.1 The
      Note.
      The
      Note shall be amended and restated in the form attached hereto as Exhibit
      A
      (the
“Amended
      and Restated Note”),
      which
      shall provide, among other things, that (i) the original principal face amount
      of the Note is $2,500,000, and (ii) the Conversion Price (as defined therein)
      in
      effect as of the date hereof is $0.40 (subject to further adjustment as provided
      therein).

    


    3.2 The
      Warrant.
      The
      Warrant shall be amended and restated in the form attached hereto as
Exhibit
      B
      (the
“Amended
      and Restated Warrant”),
      which
      shall provide, among other things, that (i) the aggregate number of shares
      of
      Common Stock for which such warrant is exercisable as of the date hereof is
      2,187,500 shares (subject to further adjustment as provided therein), and (ii)
      the Exercise Price (as defined therein) in effect as of the date hereof is
      $0.40
      (subject to further adjustment as provided therein).

    


    3.3 The
      Granite Note.
      The
      Granite Note shall be amended and restated, consistent with the amendments
      to
      the Note, to provide, among other things, that (i) the original principal face
      amount of the Granite Note is $108,000, and (ii) the Conversion Price (as
      defined therein) in effect as of the date hereof is $0.40 (subject to further
      adjustment as provided therein) (the “Granite Amended
      and Restated Note”).

    


    3.4 The
      Granite Warrant.
      The
      Granite Warrant shall be amended and restated, consistent with the amendments
      to
      the Warrant, to provide, among other things, that (i) the aggregate number
      of
      shares of Common Stock for which such warrant is exercisable as of the date
      hereof is 244,500 shares (subject to further adjustment as provided therein),
      and (ii) the Exercise Price (as defined therein) in effect as of the date hereof
      is $0.40 (subject to further adjustment as provided therein) (the “Granite Amended
      and Restated Warrant”).

    


    3.5 Delivery.
      The
      Company hereby irrevocably commits to deliver the Amended and Restated Note,
      Amended and Restated Warrant, Granite Amended and Restated Note and Granite
      Amended and Restated Warrant to each of the Investor and Granite, as applicable,
      promptly following the fifteenth day after the filing of a Notification Form:
      Listing of Additional Shares with the Nasdaq Stock Market regarding the shares
      underlying the Transaction Documents in exchange for the Note, the Warrant,
      the
      Granite Note and the Granite Warrant, as applicable.

     

    
      
         

      

      
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    4. ADDITONAL
      AMENDMENTS AND OTHER AGREEMENTS.

    


    4.1 Exchange
      Act Reporting Requirements.
      On or
      prior to September 30, 2008, the Company shall have filed with the Commission
      all reports required to be filed by it under the Exchange Act by issuers that
      are subject to the reporting requirements of the Exchange Act (whether or not
      the Company is subject to the reporting requirements of the Exchange Act),
      and
      the Company shall thereafter continue to timely file (or
      obtain extensions in respect thereof and file within the applicable grace
      period) all
      such
      reports with the Commission. Any waiver of compliance with Section 4.3 of the
      Purchase Agreement hereunder, and of resulting Events of Default under Sections
      8(a)(ii), (iii), (iv) and (ix) of the Note (as amended hereby), shall be
      applicable only until such date.

    


    4.2 Reservation
      of Common Stock.
      At all
      times hereafter the Company shall cause to be authorized and reserved for
      issuance to the Investor
      from its
      duly authorized capital stock a number of shares of Common Stock for issuance
      of
      the Underlying Shares at least equal to the Required Minimum (after
      taking into account the amendments contemplated hereby).

    


    4.3 References
      to Notes, Warrants and Transaction Documents.
      All
      references in the Existing Transaction Documents to (i) “Notes” shall be deemed
      to be references to the Amended and Restated Note (together with any future
      Notes issued pursuant to the Purchase Agreement), (ii) “Warrants” shall be
      deemed to be references to the Amended and Restated Warrant (together with
      any
      future Warrants issued pursuant to the Purchase Agreement), and (iii)
“Transaction Documents” shall be deemed to mean
      the
      Existing Transaction Documents (as amended by this Agreement), this Agreement,
      the Amended and Restated Note (together
      with any future Notes issued pursuant to the Purchase Agreement),
      the
      Amended and Restated Warrant (together
      with any future Warrants issued pursuant to the Purchase Agreement),
      and all
      other agreements, instruments and other documents executed and delivered by
      or
      on behalf of the Blue Entities or any of their officers in connection with
      this
      Agreement.

    


    4.4 Indemnification
      of Investor and Collateral Agent.
      Each of
      the Blue Entities will jointly and severally indemnify and hold the Investor
      and
      Collateral Agent and each of their directors, managers, officers, shareholders,
      members, partners, employees and agents (each, an “Investor
      Party”)
      harmless from any and all losses, liabilities, obligations, claims,
      contingencies, damages, costs and expenses, including all judgments, amounts
      paid in settlements, court costs and reasonable attorneys’ fees and costs of
      investigation that any such Investor Party may suffer or incur as a result
      of or
      relating to (a) any breach of any of the representations, warranties, covenants
      or agreements made by a Blue Entity in this Agreement or in the other
      Transaction Documents or (b) any action instituted against the Investor, or
      any
      of its Affiliates, by any shareholder of a Blue Entity who is not an Affiliate
      of the Investor, with respect to any of the transactions contemplated by the
      Transaction Documents (unless such action is based upon a breach of the
      Investor’s representation, warranties or covenants under the Transaction
      Documents or any agreements or understandings the Investor may have with any
      such shareholder or any violations by the Investor of state or federal
      securities laws or any conduct by the Investor which constitutes fraud, gross
      negligence, willful misconduct or malfeasance). If any action shall be brought
      against any Investor Party in respect of which indemnity may be sought pursuant
      to this Agreement, such Investor Party shall promptly notify the Company in
      writing, and the Company shall have the right to assume the defense thereof
      with
      counsel of its own choosing. Any Investor Party shall have the right to employ
      separate counsel in any such action and participate in the defense thereof,
      but
      the fees and expenses of such counsel shall be at the expense of such Investor
      Party except to the extent that (i) the employment thereof has been specifically
      authorized by the Company in writing, (ii) the Company has failed after a
      reasonable period of time following such Investor Party’s written request that
      it do so, to assume such defense and to employ counsel or (iii) in such action
      there is, in the reasonable opinion of such separate counsel, a material
      conflict on any material issue between the position of a Blue Entity and the
      position of such Investor Party. None of the Blue Entities will be liable to
      any
      Investor Party under this Agreement (i) for any settlement by an Investor Party
      effected without the Company’s prior written consent, which shall not be
      unreasonably withheld or delayed; or (ii) to the extent, but only to the extent
      that a loss, claim, damage or liability is attributable to such Investor Party’s
      wrongful actions or omissions, or gross negligence or to such Investor Party’s
      breach of any of the representations, warranties, covenants or agreements made
      by such Investor in this Agreement or in the other Transaction
      Documents.

     

    
      
         

      

      
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    4.5 Rule
      144.
      The
      Company acknowledges and agrees that, for purposes of Rule 144 promulgated
      under
      the Securities Act, the holding period for the Underlying Shares issuable upon
      conversion or exercise of, or otherwise pursuant to, the Amended and Restated
      Note and/or the Amended and Restated Warrant (and the Granite Amended and
      Restated Note and Granite Amended and Restated Warrant) shall have commenced
      on
      March 5, 2008 (the date of original issuance of the Note and the Warrant).
      Without limiting the foregoing, if at any time it is determined that such
      holding period does not relate back to such date, the Company will promptly,
      but
      no later than 30 days thereafter, cause the registration of all such Underlying
      Shares under the Securities Act (without regard to any beneficial ownership
      or
      issuance limitations contained in the Amended and Restated Note and/or the
      Amended and Restated Warrant). In connection with any registration of Underlying
      Shares pursuant to this Section, the Company and the Investor shall enter into
      a
      registration rights agreement containing customary and reasonable provisions
      regarding the registration of securities under the Securities Act.

    


    4.6 Disclosure.
      The
      Company shall, by 8:30 a.m. (New York City time) on the third Trading Day
      following the date on which this Agreement is executed by all parties hereto,
      issue a Current Report on Form 8-K disclosing the material terms of the
      transactions contemplated hereby and attaching this Agreement as an exhibit
      thereto. The Company and the Investors shall consult with each other in issuing
      any other press releases with respect to the transactions contemplated
      hereby.

     

    4.7 Security
      Continued.
      The
      Blue Entities’ obligations under all the Transaction Documents, including
      without limitation this Agreement, the Amended
      and Restated Note and the Amended and Restated Warrant,
      shall be
      secured by all the assets of the Blue Entities pursuant to the Security
      Agreements as if this Agreement, the Amended
      and Restated Note and the Amended and Restated Warrant were each in effect
      at
      the time of execution of such Security Agreements and referenced
      therein.
      The
      Company shall execute such other agreements, documents and financing statements
      reasonably requested by Investor, which will be filed at the Company’s expense
      with the applicable jurisdictions and authorities.

    


    4.8 New
      Information Statement.
      The
      Blue Entities shall cause the New Information Statement to be delivered to
      all
      the shareholders of the Company in accordance with all applicable securities
      laws, rules and regulations such that the Shareholder Approval becomes effective
      within 60 days following the date of this Agreement and cause the Shareholder
      Approval to become effective within such time period. If for any reason such
      Shareholder Approval does not become effective within such 60-day period,
      without limiting any of the Investor’s rights or remedies under the Transaction
      Documents the Company shall hold a special meeting of shareholders (which may
      also be at the annual meeting of shareholders) no later than October 31, 2008
      for the purpose of obtaining Shareholder Approval, with the recommendation
      of
      the Company’s Board of Directors that such proposal be approved, and the Company
      shall solicit proxies from its shareholders in connection therewith in the
      same
      manner as all other management proposals in such proxy statement and all
      management-appointed proxyholders shall vote their proxies in favor of such
      proposal. If the Company does not obtain Shareholder Approval at the first
      such
      meeting, the Company shall call a meeting every four months thereafter to seek
      Shareholder Approval until the earlier of the date Shareholder Approval is
      obtained or the Amended and Restated Notes are no longer
      outstanding.

     

    
      
         

      

      
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    5. REPRESENTATIONS
      AND WARRANTIES OF THE BLUE ENTITIES.
      

    


    Each
      of
      the Blue Entities hereby jointly and severally represents and warrants to the
      Investor as of the date hereof:

    


    5.1 Organization.
      Such
      Blue Entity is duly organized, validly existing and in good standing under
      the
      laws of its organization.

    


    5.2 Authorization.
      Such
      Blue Entity has the requisite corporate power and authority to execute, deliver
      and perform this Agreement and the other Transaction Documents to which it
      is a
      party. All
      corporate action on the part of such Blue
      Entity
      and by
      its officers, directors and shareholders necessary for the authorization,
      execution and delivery of, and the performance by such Blue
      Entity
      of its
      obligations under this Agreement and the other Transaction Documents to which
      it
      is a party has been taken, and no further consent or authorization of any other
      party is required. 

    


    5.3 Enforceability.
      This
      Agreement and the other Transaction Documents to which such Blue Entity is
      a
      party constitute such Blue Entity’s valid and legally binding obligation,
      enforceable in accordance with its terms, subject to (i) applicable bankruptcy,
      insolvency, fraudulent transfer, reorganization, moratorium or other similar
      laws of general application relating to or affecting the enforcement of
      creditors’ rights generally and (ii) general principles of equity.

    


    5.4 No
      Conflicts.
      The
      execution, delivery and performance of this Agreement and the other Transaction
      Documents to which such Blue Entity is a party, and the consummation of the
      transactions contemplated hereby and thereby, will not result in any violation
      of any provisions of any of such Blue
      Entity’s
      organizational documents or in a default under any provision of any instrument
      or contract to which such Blue
      Entity
      is a
      party or by which any of its assets are bound, or in violation of any provision
      of any governmental requirement applicable to such Blue
      Entity
      or be in
      conflict with or constitute, with or without the passage of time and giving
      of
      notice, either a default under any such provision, instrument or contract or
      the
      triggering of any preemptive or anti-dilution rights (including
      without limitation pursuant to any “reset” or similar provisions) or
      rights
      of first refusal or first offer.

     

    
      
         

      

      
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    5.5 Valid
      Issuance.
      The
      Amended and Restated Note and the Amended and Restated Warrant (and the Granite
      Amended and Restated Note and Granite Amended and Restated Warrant) have been
      duly authorized and, when issued and delivered in accordance with the terms
      of
      this Agreement, will be duly and validly issued, free and clear of any Liens
      imposed by or through any of the Blue
      Entities.

    


    5.6 Reservation
      of Common Stock.
      The
      Company has authorized and reserved for issuance to the Investor
      from its
      duly authorized capital stock a number of shares of Common Stock for issuance
      of
      the Underlying Shares at least equal to the Required Minimum on the date
      hereof,
      after
      taking into account the amendments contemplated hereby.

    


    6. REPRESENTATIONS
      AND WARRANTIES OF THE INVESTOR.

    


    The
      Investor represents and warrants to the Company as of the date
      hereof:

    


    6.1 Organization.
      The
      Investor is duly organized, validly existing and in good standing under the
      laws
      of its organization.

    


    6.2 Authorization.
      The
      Investor has the requisite corporate power and authority to execute, deliver
      and
      perform this Agreement and the other Transaction Documents to which it is a
      party. All
      corporate action on the part of the Investor
      and by
      its officers, directors and shareholders necessary for the authorization,
      execution and delivery of, and the performance by the Investor
      of its
      obligations under this Agreement and the other Transaction Documents to which
      it
      is a party has been taken, and no further consent or authorization of any other
      party is required.

    


    6.3 Enforceability.
      This
      Agreement and the other Transaction Documents to which the Investor is a party
      constitute the Investor’s valid and legally binding obligation, enforceable in
      accordance with its terms, subject to (i) applicable bankruptcy, insolvency,
      fraudulent transfer, reorganization, moratorium or other similar laws of general
      application relating to or affecting the enforcement of creditors’ rights
      generally and (ii) general principles of equity.

    


    6.4 No
      Conflicts.
      The
      execution, delivery and performance of this Agreement and the other Transaction
      Documents to which the Investor is a party, and the consummation of the
      transactions contemplated hereby and thereby, will not result in any violation
      of any provisions of any of the Investor’s
      organizational documents or in a default under any provision of any instrument
      or contract to which the Investor
      is a
      party or by which any of its assets are bound, or in violation of any provision
      of any governmental requirement applicable to the Investor
      or be in
      conflict with or constitute, with or without the passage of time and giving
      of
      notice, a default under any such provision, instrument or contract.

    


    6.5 Investment
      Representations.
      The
      representations made by the Investor in Sections 3.2(b) through (f) of the
      Purchase Agreement are true and accurate as of the date of this Agreement as
      if
      set forth in their entirety in this Agreement.

     

    
      
         

      

      
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    7. MISCELLANEOUS.

    


    7.1 Severability.
      In the
      event that any provision of this Agreement becomes or is declared by a court
      of
      competent jurisdiction to be illegal, unenforceable or void, this Agreement
      shall continue in full force and effect without said provision; provided
      that in
      such case the parties shall negotiate in good faith to replace such provision
      with a new provision which is not illegal, unenforceable or void, as long as
      such new provision does not materially change the economic benefits of this
      Agreement to the parties.

    


    7.2 Successors
      and Assigns.
      The
      terms and conditions of this Agreement shall inure to the benefit of and be
      binding upon the respective successors and permitted assigns of the parties.
      Nothing in this Agreement, express or implied, is intended to confer upon any
      party other than the parties hereto or their respective successors and permitted
      assigns any rights, remedies, obligations or liabilities under or by reason
      of
      this Agreement, except as expressly provided in this Agreement. The Investor
      may
      assign its rights and obligations hereunder, as long as, as a condition
      precedent to such transfer, the transferee executes an acknowledgment agreeing
      to be bound by the applicable provisions of this Agreement, in which case the
      term “Investor” shall be deemed to refer to such transferee as though such
      transferee were an original signatory hereto. None of the Blue
      Entities
      may
      assign its rights or obligations under this Agreement.

    


    7.3 No
      Reliance.
      Each
      party acknowledges that (i) it has such knowledge in business and financial
      matters as to be fully capable of evaluating this Agreement and the transactions
      contemplated hereby and thereby, (ii) it is not relying on any advice or
      representation of any other party in connection with entering into this
      Agreement or such transactions (other than the representations made in this
      Agreement), (iii) it has not received from any other party any assurance or
      guarantee as to the merits (whether legal, regulatory, tax, financial or
      otherwise) of entering into this Agreement or the performance of its obligations
      hereunder and thereunder, and (iv) it has consulted with its own legal,
      regulatory, tax, business, investment, financial and accounting advisors to
      the
      extent that it has deemed necessary, and has entered into this Agreement based
      on its own independent judgment and, if applicable, on the advice of such
      advisors, and not on any view (whether written or oral) expressed by any other
      party.

    


    7.4 Injunctive
      Relief.
      Each of
      the Blue
      Entities
      acknowledges and agrees that a breach by it of its obligations hereunder will
      cause irreparable harm to the Investor and that the remedy or remedies at law
      for any such breach will be inadequate and agrees, in the event of any such
      breach, in addition to all other available remedies, the Investor shall be
      entitled to an injunction restraining any breach and requiring immediate and
      specific performance of such obligations without the necessity of showing
      economic loss or the posting of any bond.

    


    7.5 Governing
      Law; Jurisdiction; Waiver of Jury Trial.
      (a)
      This Agreement shall be governed by and construed under the laws of the State
      of
      New York applicable to contracts made and to be performed entirely within the
      State of New York. Each party hereby irrevocably submits to the exclusive
      jurisdiction of the state and federal courts sitting in the City and County
      of
      New York for the adjudication of any dispute hereunder or any other Transaction
      Document or in connection herewith or therewith or with any transaction
      contemplated hereby or thereby, and hereby irrevocably waives, and agrees not
      to
      assert in any suit, action or proceeding, any claim that it is not personally
      subject to the jurisdiction of any such court, that such suit, action or
      proceeding is brought in an inconvenient forum or that the venue of such suit,
      action or proceeding is improper. Each party hereby irrevocably waives personal
      service of process and consents to process being served in any such suit, action
      or proceeding by mailing a copy thereof to such party at the address in effect
      for notices to it under this Agreement and agrees that such service shall
      constitute good and sufficient service of process and notice thereof. Nothing
      contained herein shall be deemed to limit in any way any right to serve process
      in any manner permitted by law.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    (b)
      EACH
      PARTY TO THIS AGREEMENT ACKNOWLEDGES AND AGREES THAT ANY DISPUTE OR CONTROVERSY
      THAT MAY ARISE UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS LIKELY
      TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH PARTY HEREBY
      IRREVOCABLY
      AND
      UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
      RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
      TO
      THIS AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT OR
      THE
      OTHER TRANSACTION DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
      THEREBY.

    


    7.6 Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed an original, and all of which together shall constitute one and the
      same
      instrument. This Agreement may be executed and delivered by facsimile
      transmission or by email of a digital image format file.

    


    7.7 Headings.
      The
      headings used in this Agreement are used for convenience only and are not to
      be
      considered in construing or interpreting this Agreement.

    


    7.8 Notices.
      Any
      notice, demand or request required or permitted to be given by a Blue Entity
      or
      the Investor pursuant to the terms of this Agreement shall be in writing and
      shall be deemed delivered (i) when delivered personally or by verifiable
      facsimile transmission, unless such delivery is made on a day that is not a
      Business Day, in which case such delivery will be deemed to be made on the
      next
      succeeding Business Day, (ii) on the next Business Day after timely delivery
      to
      an overnight courier and (iii) on the Business Day actually received if
      deposited in the U.S. mail (certified or registered mail, return receipt
      requested, postage prepaid), addressed in accordance with the notice provisions
      contained in the Purchase Agreement.

    


    7.9 Entire
      Agreement; Amendments.
      This
      Agreement and the other Transaction Documents constitute the entire agreement
      between the parties with regard to the subject matter hereof and thereof,
      superseding all prior agreements or understandings, whether written or oral,
      between or among the parties.

    


    7.10 Fees
      and Expenses.
      The
      Blue Entities and the Investor shall pay all costs and expenses that it incurs
      in connection with the negotiation, execution, delivery and performance of
      this
      Agreement and the other Transaction Documents, provided,
      however,
      that
      the Company shall, concurrently with the execution of this Agreement, pay the
      Investor the
      non-accountable sum of $10,000 in
      immediately available funds for
      its
      expenses (including
      without limitation legal fees and expenses) incurred or to be incurred by it
      in
      connection with the Company’s defaults described herein and with the negotiation
      and preparation of this Agreement and the other Transaction Documents to be
      delivered in connection herewith.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    7.11 Full
      Force and Effect.
      Except
      as specifically waived and amended hereby and for the purposes described herein,
      the Existing Transaction Documents shall remain in full force and effect in
      accordance with their respective terms. Except for the waiver and amendment
      contained herein, this Agreement shall not in any way waive or prejudice any
      of
      the rights of the Investor or obligations of the Company under the Transaction
      Documents, or under any law, in equity or otherwise, and such waiver and
      amendment shall not constitute a waiver or amendment of any other provision
      of
      the Transaction Documents nor a waiver or amendment of any subsequent default
      or
      breach of any obligation of the Company or of any subsequent right of the
      Investor.

     

    [Signature
      Page to Follow]

    


    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

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


     

     

    
      	BLUE HOLDINGS,
              INC. 	 	GEMINI
              MASTER FUND, LTD.
	 	 	By:	GEMINI STRATEGIES, LLC, as investment
              manager
	 	 	 	 
	By:	/s/
              Glenn S.
              Palmer	 	By:	/s/ Steven Winters
	
              Name:

            	
              
Glenn
              S. Palmer	 	Name:	
              
Steven
              Winters
	Title:	CEO	 	Title: 	President


    

    
       

       

      
        	ANTIK DENIM,
                LLC. 	 	GEMINI
                STRATEGIES, LLC 
	 	 	 	 
	By:	/s/
                Glenn S.
                Palmer	 	By:	/s/
                Steven
                Winters
	Name:	
                
Glenn
                S. Palmer	 	Name:	
                
Steven
                Winters
	Title:	CEO	 	Title:	President


      

      
         

         

        
          	TAVERNITI
                  SO JEANS, LLC	 	 	 
	 	 	 	 
	By:	/s/
                  Glenn S.
                  Palmer	 	 	 
	Name:	
                  
Glenn
                  S. Palmer	 	 	
                
	Title:	CEO	 	 	 


        

        
           

           

           
AGREED
          AND ACKNOWLEDGED:
           

          
            	GRANITE
                    FINANCIAL GROUP, LLC	 	 	 
	 	 	 	 
	By:	/s/
                    Daniel J. Schreiber	 	 	
                  
	Name: 	
                    
Daniel
                    J. Schreiber	 	 	
                  
	
                    Title:
                      

                  	President