BLUE
      HOLDINGS, INC.

     

    PREFERRED
      STOCK RESCISSION AND PURCHASE AGREEMENT

     

    THIS
      PREFERRED STOCK RESCISSION AND PURCHASE AGREEMENT (this “Agreement”),
      is
      made as of November 28, 2007 (the “Effective
      Date”),
      by
      and among Blue Holdings, Inc., a Nevada corporation, (the “Company”),
      and
      Paul Guez (“Investor”).
      

     

    WHEREAS,
      on
      November 13, 2007 (the “Original
      Effective Date”),
      the
      Company agreed to issue and sell to the Investor, pursuant to the terms of
      that
      certain Series A Convertible Preferred Stock Purchase Agreement dated as of
      the
      Original Effective Date (the “Original
      Purchase Agreement”),
      up to
      an aggregate of 1,000,000 shares (the “Preferred
      Shares”)
      of the
      Company’s Series A Convertible Preferred Stock, par value $0.001 per share (the
“Series
      A Preferred Stock”),
      in
      exchange for the cancellation of certain indebtedness due and owing to the
      Investor on the Effective Date; 

     

    WHEREAS,
      on the
      Original Effective Date, the parties concluded the purchase and sale of Series
      A
      Preferred Stock contemplated by the Original Purchase Agreement;

     

    WHEREAS,
      notwithstanding the conclusion of the purchase and sale of Series A Preferred
      Stock contemplated by the Original Purchase Agreement, the Company has not,
      as
      of the Effective Date, issued or delivered the Preferred Shares, or any
      certificates representing such shares;

     

    WHEREAS,
      effective as of the Original Effective Date, the parties desire to rescind
      and
      unwind the purchase and sale of Series A Preferred Stock contemplated by the
      Original Purchase Agreement in such a manner as is necessary to (i) permit
      such
      purchase and sale to be deemed rescinded and unwound, and null and void, on
      and
      as of the Original Effective Date, and (ii) allow the Federal income tax
      doctrine of rescission to be applied to the unwinding of such purchase and
      sale;

     

    WHEREAS,
      on or
      prior to the date hereof, the Company has amended and restated the Certificate
      of Designations, Preferences, Rights and Limitations of Series A Convertible
      Preferred Stock (the “Certificate”),
      which, in the form attached hereto as Exhibit
      B,
      is
      applicable to the New Series A Preferred Stock (as defined below);

     

    WHEREAS,
      on and
      as of the Effective Date, the Company desires to issue and sell to the Investor,
      pursuant to the terms of this Agreement, an aggregate of 1,000,000 shares (the
      “New
      Preferred Shares”)
      of the
      Company’s Series A Convertible Preferred Stock, par value $0.001 per share (the
“New
      Series A Preferred Stock”),
      having the designations, preferences, rights and limitations set forth in the
      Certificate, in exchange for (i) the cancellation of certain indebtedness due
      and owing to the Investor on the Effective Date (and taking into account the
      rescission described above), and (ii) the additional cash investment by Investor
      of $125,000; and

     

    WHEREAS,
      Investor wishes to rescind and unwind the purchase and sale of Series A
      Preferred Stock contemplated by the Original Purchase Agreement, and to purchase
      the New Preferred Shares, on the terms and subject to the conditions set forth
      in this Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    NOW,
      THEREFORE,
      in
      consideration of the premises, representations, warranties and the mutual
      covenants contained in this Agreement, the parties agree as
      follows:

     

    
      	
              1.

            	
              RESCISSION
                OF ORIGINAL PURCHASE

            


    

     

    1.1  Rescission. 

     

    1.1.1 Effective
      as of the Original Effective Date, (i) the parties hereby rescind and unwind
      the
      purchase and sale of Series A Preferred Stock contemplated by the Original
      Purchase Agreement; and (ii) the Original Purchase Agreement, and the purchase
      and sale of Series A Preferred Stock contemplated by the Original Purchase
      Agreement, shall be deemed null and void and of no further force and
      effect.

     

    1.1.2 The
      foregoing rescission shall be effective so as to allow the Federal income tax
      doctrine of rescission to be applied thereto, and, each party acknowledges
      and
      agrees that it has been returned to its situation existing immediately prior
      to
      the consummation of the purchase and sale of Series A Preferred Stock
      contemplated by the Original Purchase Agreement, including, for the avoidance
      of
      doubt, that any and all outstanding amounts due and owing to Investor
      immediately prior to the Original Effective Date shall be deemed due and owning
      on and as of Original Effective Date and as of immediately prior to the
      Effective Date hereof.

     

    1.1.3 Investor
      hereby represents and warrants that it did not receive a certificate from the
      Company representing the Preferred Shares upon the consummation of the purchase
      and sale of Series A Preferred Stock contemplated by the Original Purchase
      Agreement. Investor hereby transfers and assigns to the Company all right,
      title
      and interest in and to the Preferred Shares, to the extent held by Investor,
      and
      relinquishes all claims to ownership of the Preferred Shares and any and all
      rights therein.

     

    
      	
              2.

            	
              
                AUTHORIZATION
                  AND SALE OF NEW PREFERRED
                  SHARES

              

            


    

     

    2.1 Issuance,
      Sale and Delivery of the New Preferred Shares at the
      Closing.
      At the
      Closing (as defined in Section 2.2 hereof), on the terms and subject to the
      conditions of this Agreement, the Company shall issue and sell to Investor,
      and
      Investor shall purchase from the Company, that number of New Preferred Shares
      set forth opposite the name of Investor under the heading “Number of Preferred
      Shares to be Purchased” on Exhibit A hereto, at a price of $2.681682 per share
      for the aggregate purchase price set forth opposite the name of Investor under
      the heading “Aggregate Purchase Price for Preferred Shares” on Exhibit A
      hereto. 

     

    2.2 Closing.
      The
      Closing shall take place at the offices of Stubbs Alderton & Markiles, LLP,
      15260 Ventura Blvd., 20th
      Floor,
      Sherman Oaks, California 91403, at such date and time as may be agreed upon
      between the Company and the Investors (such closing being called the
“Closing” and
      such
      date and time being called the “Closing
      Date”).
      At the
      Closing, the Company shall issue and deliver to Investor a stock certificate
      or
      certificates in definitive form, registered in the name of Investor,
      representing the New Preferred Shares being purchased by it at the Closing.
      As
      payment in full for the New Preferred Shares being purchased by it under this
      Agreement, and against delivery of the stock certificate or certificates
      therefor as aforesaid, on the Closing Date, Investor shall deliver to the
      Company by such method as may be reasonably acceptable to the Company, cash,
      cashier’s check, wire transfer of immediately available funds, or a promissory
      note or other evidence of indebtedness for cancellation, as applicable, in
      the
      amount and as set forth opposite the name of Investor under the heading
“Aggregate Purchase Price for Preferred Shares” on Exhibit A. All amounts shall
      be paid to the account of the Company as shall have been designated in writing
      a
      reasonable time in advance to the Investor by the Company.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    2.3 Issuance,
      Sale and Delivery of the New Preferred Shares at the
      Closing.
      The
      Company has authorized the number of New Preferred Shares of New Series A
      Preferred Stock having the rights, preferences, privileges and restrictions
      set
      forth in the Certificate, which, in the form attached hereto as Exhibit B,
      shall
      be adopted and filed with the Secretary of State of the State of Nevada on
      or
      before the Closing. 

     

    2.4 Conversion
      Shares.
      Shares
      of Common Stock issuable upon conversion of the New Preferred Shares are
      referred to herein as the “Conversion
      Shares.”
Each
      share of New Series A Preferred Stock shall be convertible, at the option of
      the
      Investor, at any time after the date of issuance of such share, into such number
      of shares of Common Stock as is determined by dividing (i) the purchase price
      per share of New Series A Preferred Stock, plus all accrued but unpaid Dividends
      (as defined in the Certificate) on each such share, by (ii) the Conversion
      Price
      in effect on the date the certificate is surrendered for conversion. The initial
      “Conversion
      Price”
per
      share for the New Series A Preferred Stock shall be $0.58 and shall be subject
      to adjustment as set forth in the Certificate. For the avoidance of doubt,
      the
      Conversion Price represents the consolidated closing bid price for a share
      of
      the Common Stock immediately prior to the execution of this
      Agreement.

     

    
      	
              3.

            	
              REPRESENTATIONS
                AND WARRANTIES OF THE
                COMPANY

            


    

     

    The
      Company represents and warrants to Investor that:

     

    3.1 Organization
      and Standing; Qualifications.
      The
      Company is a corporation validly existing and in good standing under the laws
      of
      the State of Nevada. The Company has all requisite power and authority to own
      and operate its properties and assets, and to carry on its business as conducted
      and as proposed to be conducted. The Company is duly qualified to transact
      business and is in good standing in each jurisdiction in which the failure
      to so
      qualify could, singly or in the aggregate, have a material adverse effect on
      the
      business, assets, liabilities, financial condition or results of operations
      of
      the Company as presently conducted or proposed to be conducted.

     

    3.2 Corporate
      Power.
      The
      Company has all requisite power and authority to execute and deliver this
      Agreement, to sell and issue the New Preferred Shares hereunder, to issue the
      Conversion Shares and to carry out and perform its obligations under the terms
      of this Agreement.

     

    3.3 Authorization.

     

    3.3.1 All
      corporate action on the part of the Company, its officers, directors and
      stockholders, necessary for (i) the authorization, execution and delivery of
      the
      Agreement by the Company, (ii) the authorization, sale, issuance and delivery
      of
      the New Preferred Shares and the Conversion Shares, (iii) the filing of the
      Certificate, and (iv) the performance of all of the Company’s obligations under
      the Agreement has been taken. The Agreement has been duly and validly executed
      and delivered by the Company and constitutes the valid and binding obligation
      of
      the Company, enforceable in accordance with its terms, except as limited by
      applicable bankruptcy, insolvency, reorganization, moratorium, and other laws
      of
      general application affecting enforcement of creditors’ rights
      generally.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    3.3.2 The
      New
      Preferred Shares, when sold, issued and delivered in compliance with the
      provisions of this Agreement, will be duly and validly issued, fully paid and
      nonassessable and shall have the rights, preferences, privileges and
      restrictions described in the Certificate, and shall be free of any liens,
      preemptive or similar rights, encumbrances or restrictions on transfer;
      provided, however, that the New Preferred Shares may be subject to restrictions
      on transfer under state and/or federal securities laws. The Conversion Shares
      have been duly and validly reserved for issuance and, upon issuance in
      accordance with the terms of the Certificate, will be duly and validly issued,
      fully paid, and nonassessable and shall be free of any liens, preemptive or
      similar rights, encumbrances or restrictions on transfer; provided, however,
      that the Conversion Shares may be subject to restrictions on transfer under
      state and/or federal securities laws.

     

    
      	
              4.

            	
              REPRESENTATIONS
                AND WARRANTIES OF THE
                INVESTORS

            


    

     

    Investor
      hereby represents and warrants to the Company with respect to the purchase
      of
      the New Preferred Shares to be purchased by it as follows:

     

    4.1 Experience.
      Investor acknowledges that it is able to bear the economic risk of its
      investment, and has such knowledge and experience in financial or business
      matters that it is capable of evaluating the merits and risks of the investment
      in the New Preferred Shares and the Conversion Shares and is able to bear the
      economic risk of its investment in the New Preferred Shares and Conversion
      Shares for an indefinite period of time. 

     

    4.2 Disclosure
      of Information. Investor further represents that it has had an
      opportunity to ask questions of and receive answers from the Company regarding
      the terms and conditions of the offering of the New Preferred Shares and the
      business, prospects, properties and financial condition of the
      Company.

     

    4.3 Investment.
      Investor is acquiring the New Preferred Shares and the Conversion Shares for
      investment for its own account, not as a nominee or agent, and not with the
      view
      to, or for resale in connection with, any distribution thereof. It understands
      that the New Preferred Shares have not been, and the Conversion Shares will
      not
      be, (except for specific registration rights granted to the Investor),
      registered under the Securities Act by reason of a specific exemption from
      the
      registration provisions of the Securities Act, the availability of which depends
      upon, among other things, the bona fide nature of the investment intent and
      the
      accuracy of Investor’s representations as expressed herein.

     

    4.4 Accredited
      Investor. Investor is an “accredited investor” as defined in Rule
      501(a) of Regulation D promulgated under the Securities Act.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    4.5 Legends.
      It is understood that the certificates evidencing the New Preferred Shares
      and
      the Conversion Shares may bear one or all of the following legends:

     

    “THESE
      SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
      AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
      THE
      ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
      UNDER SUCH ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
      THAT SUCH REGISTRATION IS NOT REQUIRED, OR UNLESS SOLD PURSUANT TO RULE 144
      OF
      SUCH ACT.” 

     

    Any
      other
      legend required by the securities laws of the State of California.

     

    4.6 Authorization.
      The
      execution, delivery and performance by Investor of the Agreement has been duly
      authorized by all requisite action of Investor. The Agreement, when executed
      and
      delivered by Investor, shall constitute valid and legally binding obligations
      of
      Investor, enforceable in accordance with its terms except as limited by
      applicable bankruptcy, insolvency, reorganization, moratorium and other laws
      of
      general application affecting enforcement of creditors’ rights
      generally.

     

    
      	
              5.

            	
              INVESTOR’S
                CONDITIONS TO CLOSING

            


    

     

    Investor’s
      obligation to purchase the New Preferred Shares at the Closing is, at the option
      of Investor, subject to the fulfillment of the following conditions on or before
      the Closing:

     

    5.1 Representations
      and Warranties True and Correct. The representations and warranties
      made by the Company in Section 2 hereof shall be true and correct as of the
      Closing, with the same effect as if made as of the Closing.

     

    5.2 Covenants.
      All covenants, agreements and conditions contained in this Agreement to be
      performed by the Company on or prior to the Closing shall have been performed
      or
      complied with.

     

    5.3 Certificate.
      Prior to the Closing, the Company shall have prepared and executed the
      Certificate in the form set forth in Exhibit B. The Certificate shall have
      been
      filed with and accepted by the Secretary of State of the State of Nevada and
      shall have become effective.

     

    
      	
              6.

            	
              COMPANY’S
                CONDITIONS TO EACH
                CLOSING

            


    

     

    The
      Company’s obligation to sell and issue any New Preferred Shares at the Closing
      to Investor is, at the option of the Company, subject to the fulfillment of
      the
      following conditions as of the Closing:

     

    6.1 Representations
      and Warranties True and Correct.
      The
      representations and warranties made by Investor in Section 3 hereof shall be
      true and correct when made, and shall be true and correct at the Closing.


     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    6.2 Covenants.
      All covenants, agreements and conditions contained in this Agreement to be
      performed by Investor on or prior to the Closing shall have been performed
      or
      complied with. 

     

    6.3 Certificate.
      The Secretary of State of the State of Nevada shall have accepted the
      Certificate for filing. 

     

    6.4 Purchase
      Price Paid.
      Investor
      shall have delivered to the Company the purchase price for the New Preferred
      Shares set forth in Exhibit A hereto.

     

    
      	
              7.

            	
              COVENANTS.

            


    

     

    7.1 Reserve
      for Conversion Shares. The Company shall at all times reserve and
      keep available out of its authorized but unissued shares of Common Stock, for
      the purpose of effecting the conversion of the New Preferred Shares and
      otherwise complying with the terms of this Agreement, such number of its duly
      authorized shares of Common Stock as shall be sufficient to effect the
      conversion of the New Preferred Shares from time to time outstanding or
      otherwise to comply with the terms of this Agreement. If at any time the number
      of authorized but unissued shares of Common Stock shall not be sufficient to
      effect the conversion of the New Preferred Shares or otherwise to comply with
      the terms of this Agreement, the Company will forthwith take such corporate
      action as may be necessary to increase its authorized but unissued shares of
      Common Stock to such number of shares as shall be sufficient for such purposes.
      The Company will obtain any authorization, consent, approval or other action
      by
      or make any filing with any court or governmental authority that may be required
      under applicable state securities laws in connection with the issuance of shares
      of Common Stock upon conversion of the New Preferred Shares.

     

    7.2 Further
      Assurances. The Company shall cure promptly any defects in the
      creation and issuance of the New Preferred Shares and the Conversion Shares,
      and
      in the execution and delivery of the Agreements. The Company, at its expense,
      shall execute and deliver promptly to the Investor upon request all such other
      and further documents, agreements and instruments as may be reasonably necessary
      to permit the Company to comply with its covenants and agreements herein, and
      shall make any recordings, file any notices and obtain any consents as may
      be
      necessary or appropriate in connection therewith.

     

    7.3 Regulation
      D Filings. The Company shall file on a timely basis all notices of
      sale required to be filed with the Securities and Exchange Commission pursuant
      to Regulation D under the Securities Act of 1933, as amended (the “Securities
      Act”),
      with
      respect to the transactions contemplated by this Agreement.

     

    7.4
      Piggyback
      Registrations.

     

    7.4.1 Right
      to Include Conversion Shares.
      Each
      time that the Company proposes for any reason to register any of its Common
      Stock under the Securities Act, either for its own account or for the account
      of
      a stockholder or stockholders, other than Registration Statements on Forms
      S-4
      or S-8 (or similar or successor forms) (a “Proposed
      Registration”),
      the
      Company shall promptly give written notice of such Proposed Registration to
      the
      Investor (which notice shall be given in no event less than ten (10) days prior
      to the expected filing date of the Proposed Registration) and shall offer
      Investor the right to request inclusion of Investor’s Conversion Shares in the
      Proposed Registration. The rights to piggyback registration may be exercised
      on
      an unlimited number of occasions.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    7.4.2 Piggyback
      Procedure.
      Investor shall have twenty (20) days from the date of receipt of the Company’s
      notice referred to in Section 6.4.1 above to deliver to the Company a written
      request specifying the number of Conversion Shares Investor intends to sell
      and
      Investor’s intended method of disposition. Investor shall have the right to
      withdraw Investor’s request for inclusion of Investor’s Conversion Shares in any
      Proposed Registration pursuant to this Section 7.4 by giving written notice
      to
      the Company of such withdrawal; provided,
      however,
      that
      the Company may ignore a notice of withdrawal made within less than one full
      business day prior to the date the Proposed Registration is scheduled to become
      effective. Subject to Section 7.4.4 below, the Company shall use its reasonable
      best efforts to include
      in such Proposed Registration all such Conversion Shares so requested to be
      included therein; provided,
      however,
      that
      the Company may at any time withdraw or cease proceeding with any such Proposed
      Registration if it shall at the same time withdraw or cease proceeding with
      the
      registration of all other shares of Common Stock originally proposed to be
      registered.

     

    7.4.3 Selection
      of Underwriters.
      The
      managing underwriter for any Proposed Registration that involves an underwritten
      public offering shall be one or more reputable nationally recognized investment
      banks selected by the Company.

     

    7.4.4 Priority
      for Piggyback Registration.
      

     

    7.4.4.1 Notwithstanding
      any other provision of this Section 7.4, if the managing underwriter of an
      underwritten public offering determines and advises the Company and the Investor
      in writing that the inclusion of all Conversion Shares proposed to be included
      by the Investor in the underwritten public offering would materially and
      adversely interfere with the successful marketing of the Company’s securities in
      the Proposed Registration, then the Investor shall not be permitted to include
      any Conversion Shares in excess of the amount, if any, of Conversion Shares
      which the managing underwriter of such underwritten public offering shall
      reasonably and in good faith agree in writing to include in such public offering
      in addition to the amount of securities to be registered for the Company. No
      party, other than the Company and the Investor, shall be permitted to include
      their shares in any such Proposed Registration unless such shares are also
      limited on a pro rata basis equal to the ratio which such party’s requested
      shares bear to the total number of Conversion Shares requested to be included
      in
      such Proposed Registration by Investor. The securities to be included in a
      Proposed Registration initiated by the Company shall be allocated:
      first,
      to the Company; second, pari
      passu
      to the
      Investor, and third, to any others requesting registration of securities of
      the
      Company.

     

    7.4.4.2 Notwithstanding
      any portion of the foregoing to the contrary, in no event shall the shares
      to be
      sold by the Investor be reduced below twenty percent (20%) of the total amount
      of securities included in the Proposed Registration. No stockholder of the
      Company shall be granted piggyback registration rights which would reduce the
      number of shares to be included by the Investor in such registration without
      the
      consent of the Investor.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    7.4.4.3 If
      as a
      result of the provisions of this Section 7.4, Investor shall not be entitled
      to
      include more than 50% of its Conversion Shares in a registration that Investor
      has requested to be so included, Investor may withdraw Investor’s request to
      include Conversion Shares in such Proposed Registration.

     

    7.4.5 Underwritten
      Offering.
      In the
      event that the Proposed Registration by the Company is, in whole or in part,
      an
      underwritten public offering of securities of the Company, any request under
      this Section 7.4 shall specify that the Conversion Shares be included in the
      underwriting on the same terms and conditions as the shares, if any, otherwise
      being sold through the underwriters under such registration.

     

    7.4.6 Transfer.
      The
      foregoing registration rights may be transferred to any transferee that acquires
      all of the Series A Preferred Stock.

     

    
      	
              8.

            	
              MISCELLANEOUS

            


    

     

    8.1 Closing.
      Investor
      expressly acknowledges and agrees that immediately following the Closing,
      Investor shall have deemed its conditions to closing identified in Section
      5
      hereof to have been satisfied or waived.

     

    8.2 Governing
      Law. This Agreement shall be governed in all respects by the
      internal laws of the State of California, without giving effect to principles
      of
      conflicts of law, as applied to agreements entered into among California State
      residents to be performed entirely within California. Each party hereto
      irrevocably and unconditionally (i) agrees that any action, suit or claim
      brought hereunder must be brought in the courts of the United States in the
      State of California or the state courts of the State of California which shall
      serve as the exclusive jurisdiction and venue for any and all disputes arising
      out of and/or relating to this Agreement; (ii) consents to the jurisdiction
      of
      any such court in any such suit, action or proceeding; and (iii) waives any
      objection which such party may have to the laying of venue of any such suit,
      action or proceeding in any such court.

     

    8.3 Successors
      and Assigns. Except as otherwise provided herein, the provisions of
      this Agreement shall inure to the benefit of, and be binding upon, the
      successors, assigns, heirs, executors and administrators of the parties hereto
      (including to any transferee of any New Preferred Shares or Conversion Shares
      that is an affiliate of the Investor). Nothing in this Agreement, express or
      implied, is intended to confer upon any party other than the parties hereto
      or
      their respective successors and assigns any rights, remedies, obligations or
      liabilities under or by reason of this Agreement, except as expressly provided
      in this Agreement.

     

    8.4 Amendment.
      Any provision of this Agreement may be amended, waived, modified, discharged
      or
      terminated only with the written consent of the Company and the Investor. Any
      amendment or waiver affected in accordance with this Section 8.4 shall be
      binding upon the Company and Investor and future holders of all such securities.
      Investor may waive his rights or the Company’s obligations with respect to its
      New Preferred Shares hereunder without obtaining the consent of any other
      natural person or Person.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    8.5 Notices.
      All notices required or permitted hereunder shall be in writing and shall be
      deemed effectively given (a) upon personal delivery to the party to be notified,
      (b) five (5) days after deposit in the United States mail, by registered or
      certified mail, postage prepaid and properly addressed to the party to be
      notified as set forth in the Company records, or (c) when received if
      transmitted by telecopy (to be followed by U.S. mail), electronic or digital
      transmission method. In each case notice shall be sent to the addresses set
      forth on the Company’s records or at such other address as a party may designate
      by ten (10) days’ advance written notice to the other parties
      hereto.

     

    8.6 Counterparts.
      This Agreement may be executed in any number of counterparts, each of which
      shall be enforceable against the parties actually executing such counterparts,
      and all of which together shall constitute one and the same
      instrument.

     

    8.7 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.

     

    8.8 Titles
      and Subtitles. The titles and subtitles used in this Agreement are
      used for convenience only and are not to be considered in construing or
      interpreting this Agreement.

     

    8.9 Survival
      of Agreement.
      All
      covenants and agreements made in this Agreement shall survive the execution
      and
      delivery hereof and the issuance, sale and delivery of the New Preferred Shares,
      and the issuance and delivery of the Conversion Shares. For the avoidance of
      doubt, the representations and warranties made in this Agreement shall not
      survive the execution and delivery hereof.

     

    8.10 Attorneys'
      Fees.
      If any
      action at law or in equity (including arbitration) is necessary to enforce
      or
      interpret the terms of any of the Agreements, the prevailing party shall be
      entitled to reasonable attorney’s fees, costs and necessary disbursements in
      addition to any other relief to which such party may be entitled.

     

    8.11 Facsimile
      Signatures.
      This
      Agreement may be executed and delivered by facsimile and, upon such delivery,
      the facsimile will be deemed to have the same effect as if the original
      signature had been delivered to the other party. Investor agrees to deliver
      to
      the Company the original signature copy by express overnight delivery. The
      failure to deliver the original signature copy and/or the nonreceipt of the
      original signature copy shall have no effect upon the binding and enforceable
      nature of this Agreement.

     

    8.12 Entire
      Agreement. This Agreement, together with the Exhibits hereto, the
      certificates, documents, instruments and writings that are delivered pursuant
      hereto and each of the other Agreements, 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.

     

    Company
      Signature Page to Preferred Stock Rescission and Purchase
      Agreement

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    


     

    IN
      WITNESS WHEREOF,
      the
      parties have executed this Preferred Stock Rescission and Purchase Agreement
      on
      the day and year first set forth above.

     

    
      	 	 	 
	 	Blue
              Holding, Inc.
	 
 	 
 	 
 
	
            	
            	/s/
              Glenn Palmer
	 	
              

              By: Glenn
                Palmer 

            
	 	
              Title: Chief
                Executive Officer  

            


    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    Investors
      Signature Page to Preferred Stock Rescission and Purchase
      Agreement

     

    
      	 	 	 	
              INVESTOR:

            
	 	 	 	 
	
            	 	 	Paul
              Guez
	
            	 	 	
              

              By:
                Paul Guez

            




    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

     

    Schedule
      of Investors


    


    
      	
              Closing

            
	
              Investor

            	 	
              Number
                of New Preferred Shares

              To
                Be Purchased

            	 	
              Aggregate
                Purchase Price

              For
                New Preferred Shares

            
	
              Paul
                Guez*

            	 	
              1,000,000

            	 	
              $2,681,682**

            
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 


    

    


    * Investor
      may be Paul Guez or any accredited investor designee thereof that executes
      a
      joinder hereto.

     

    ** Represents
      (i) the cancellation of indebtedness due and owing to Investor, in the aggregate
      principal and interest amount of $2,556,682, and (ii) the delivery of $125,000
      by wire transfer of immediately available funds.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      B

    


    AMENDED
      AND RESTATED

    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 the
      Corporation previously filed with the Secretary of State of the State of Nevada
      on November 14, 2007 a Certificate of Designations, Preferences, Rights and
      Limitations of Series A Convertible Preferred Stock of the Corporation (the
      “Original
      Certificate of Designations”);

     

    RESOLVED
      FURTHER, 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 amends and restates the Original Certificate of
      Designations to amend and restate 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; and

     

    RESOLVED
      FURTHER, 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)
       Par
      Value.
      Each
      share of Series A Preferred stock will have a par value of $0.001 per share.
      

     

    (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 $2.681682 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 ”).

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (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 $0.58 and shall be subject
      to
      adjustment as set forth in Section
      6(d).
      For the
      avoidance of doubt, the Conversion Price represents the consolidated closing
      bid
      price for a share of the Common Stock prior to the signing of the definitive
      agreement applicable to the transaction pursuant to which each Holder acquired
      their shares of Series A Preferred Stock.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (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.

     

    (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.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (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.

     

    (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 0
      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.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (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.

     

    (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.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    RESOLVED
      FURTHER, that the statements contained in the foregoing resolutions amending
      and
      restating the terms applicable to 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 28th day of November, 2007.

     

    BLUE
      HOLDINGS, INC.

     

    
      	 	 	 	 
	By: /s/
              Glenn Palmer	 	 	
            
	
              
Name: Glenn
              Palmer  	 	 	
            
	Title:
              Chief
              Executive Officer	 	 	
            




    
      
        
        

      

      
        7