Unassociated Document


    EXECUTIVE
      EMPLOYMENT AGREEMENT

    


    This
      Executive Employment Agreement (the “Agreement”),
      is
      made and is effective as of July 1, 2007 (the “Effective
      Date”),
      by
      and between Blue Holdings, Inc., a Nevada corporation (the “Company”),
      and
      Glenn S. Palmer, a resident of the State of New Jersey (“Executive”).

    


    PRELIMINARY
      STATEMENTS

    


    A. The
      Company desires to employ Executive in the capacity of Chief Executive Officer
      and President, upon the terms and conditions hereinafter set forth;
      and

     

    B. Executive
      is willing to enter into this Agreement with respect to his employment and
      services upon the terms and conditions hereinafter set forth.

     

    Now,
      therefore, for good, valuable and binding consideration, the receipt and
      sufficiency of which are hereby acknowledged, the parties hereto, intending
      to
      be legally bound hereby, now agree as follows:

     

    STATEMENT
      OF AGREEMENT

     

    1. Term
      of Employment.
      The
      term of employment under this Agreement shall commence on the Effective Date
      and
      shall expire on December 31, 2010 (the “Expiration
      Date”),
      unless such employment is terminated or extended prior to the expiration of
      said
      period as hereinafter provided. Subject to the provisions of Section
      8
      of this
      Agreement, this Agreement and the employment of Executive hereunder shall be
      automatically renewed for successive renewal periods of one (1) year each (each,
      a “renewal
      period”),
      upon
      and subject to the terms and conditions hereof, commencing on the Expiration
      Date and on each anniversary of the Expiration Date thereafter, unless either
      party hereto gives the other party hereto notice of such former party’s intent
      to terminate this Agreement and Executive’s employment hereunder at least ninety
      (90) days prior to the Expiration Date or the end of any renewal
      period.

     

    2. Duties
      of Executive.

     

    2.1. During
      the term of this Agreement Executive shall serve as the President and Chief
      Executive Officer of the Company. Executive agrees that during the term of
      this
      Agreement, he will devote his full professional and business-related time,
      skills and efforts to the businesses of the Company. In addition, Executive
      shall devote all necessary time and efforts in the performance of such duties
      for the benefit of the Company and its affiliates as is consistent with
      Executive’s position or related thereto and as may be assigned to him from time
      to time by the Board of Directors of the Company (“Board”).
      Executive shall devote his full professional and business skills to the Company
      as his primary responsibility. Executive may engage in personal, passive
      investment activities provided such activities do not interfere with the
      performance of his duties hereunder or violate the provisions of the Employee
      Proprietary Information and Inventions Agreement attached hereto as Exhibit
      A.

     

    
      
        
        

      

      
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    2.2. Within
      ninety (90) days of the Effective Date the Company shall cause Executive to
      be
      elected to its Board and at each annual meeting of its shareholders during
      the
      term hereof the Company shall nominate Executive for re-election to its
      Board.

     

    3. Compensation.

     

    3.1. Base
      Salary.
      The
      Company shall pay Executive as follows: $87,500 for the third quarter of fiscal
      2007; $87,500 for the fourth quarter of fiscal 2007; and at an annual rate
      of
      Four Hundred Thousand Dollars ($400,000)
      (the “Base
      Salary”)
      for
      the remainder of the term of employment. Executive’s Base Salary shall be
      reviewed by the Board (or a committee thereof) on an annual basis no later
      than
      January 15 of each year commencing 2008 to determine if Executive’s Base Salary
      should be increased. Executive’s Base Salary shall be subject to all appropriate
      federal and state withholding taxes and shall be payable in accordance with
      the
      Company’s standard payroll practices for executive employees.

     

    3.2. Annual
      Bonus.
      (a)
      Executive shall be eligible to receive an annual bonus (the “Bonus”)
      equivalent to 2.5% of the Company’s earnings before interest, taxes,
      depreciation and amortization (EBITDA) for each calendar year during the term
      commencing with 2008, which shall be paid no later than March 31st
      of the
      following year. Executive shall be eligible to receive a bonus for the period
      ended December 31, 2007, if any, as determined by the Compensation Committee
      of
      the Board by January 31, 2008 and paid no later than March 31, 2008. Except
      in
      the case of termination for cause, expiration or termination of Executive’s
      employment shall not relieve the Company of the obligation to pay any Bonus,
      or
      portion thereof, due Executive in respect of the year during which this
      Agreement terminates or expires. 

     

    (b) Notwithstanding
      anything to the contrary contained in this Agreement other than Section 3.2(c),
      in the event that this Agreement or Executive’s employment hereunder shall
      terminate or expire for any reason whatsoever during any particular year, any
      Bonus which might otherwise have been payable to Executive in respect of such
      year shall be pro rated based on the period of Executive’s employment hereunder
      during such year, and such pro rated amount (i.e.,
      in
      respect of the portion of such year during which Executive performed services
      hereunder prior to the expiration or termination hereof) shall be payable in
      accordance with the provisions of Section
      9.4.

     

    (c) Notwithstanding
      anything to the contrary contained in this Agreement, in the event that the
      Company shall terminate this Agreement or the employment of Executive hereunder
      for cause, as defined in Section
      8
      below,
      no Bonus shall be payable to Executive in respect of the year of the Company
      during which such termination occurs.

     

    3.3. Stock
      Options.
      Executive shall be granted an option to purchase 625,000 shares of the Company’s
      Common Stock at an exercise price per share of $1.40 (the “Option”).
      The
      Option will be subject to the terms and conditions set forth in a stock option
      agreement between the Company and Executive. Executive shall vest in 125,000
      shares on the date of grant and 125,000 shares on each six-month anniversary
      of
      the date of grant thereafter until fully vested.

     

    
      
        
        

      

      
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    4. Benefits.
      During
      Executive’s term of employment hereunder, Executive and, to the extent
      applicable, Executive’s spouse, dependents and beneficiaries, shall be allowed
      to enjoy and participate in all benefit plans and programs, including
      improvements or modifications of the same, which are now, or may hereafter
      be,
      available to other executive employees of the Company. Such benefit plans and
      programs shall be similar to and consistent with the Company’s past practice and
      shall include, without limitation, medical insurance, disability insurance,
      vacation and sick leave plan, and such similar benefits, plans and programs
      as
      may be maintained by the Company. The Company shall not, however, be obligated
      to institute, maintain, or refrain from changing, amending, or discontinuing,
      any such benefit plan or program, so long as such changes are similarly
      applicable to executive employees generally.

     

    5. Vacations.
      The
      Executive shall be entitled to four (4) weeks of paid vacation annually;
      provided, however, that Executive shall not be entitled to utilize more than
      two
      consecutive weeks of vacation at any time without board approval; and provided,
      further, that Executive shall not be entitled to use any vacation days for
      the
      six-month period beginning on the Effective Date. The Executive shall also
      be
      entitled to all paid holidays given by the Company to its senior
      executives.

     

    6. Reimbursement
      of Expenses.
      The
      Company recognizes that Executive will incur legitimate business expenses in
      the
      course of rendering services to the Company hereunder. Accordingly, during
      the
      term of this Agreement, Executive shall be entitled to receive reimbursement,
      upon presentation of receipts or other adequate documentation, for all
      appropriate business expenses incurred by him in connection with his duties
      under this Agreement in accordance with the policies of the Company as in effect
      from time to time. In addition, during the term of this Agreement, Executive
      shall be entitled to receive reimbursement in an amount up to and not to exceed
      $2,000 per month for all expenses incurred by him with respect to his personal
      automobile including, without limitation, lease payments, insurance, tolls,
      parking, maintenance, repairs and gas.

     

    7. Housing/Travel.
      The
      Company will provide Executive a furnished apartment or comparable living space
      in Los Angeles, California suitable to his position for the initial twelve
      months of the term of this Agreement. Executive agrees that he will establish
      a
      permanent place of abode within twenty miles of Los Angeles, California no
      later
      than the one year anniversary of the Effective Date. Additionally, the Company
      will pay for no more than two coach or economy class round trip tickets from
      Los
      Angeles to New Jersey for Executive to visit with his family for no more than
      two weekends, per month prior to Executive’s relocation to Los Angeles,
      California.

     

    8. Termination.
      The
      employment relationship between Executive and the Company created hereunder
      shall terminate before the expiration of the stated term of this Agreement
      only
      upon the occurrence of any one of the following events:

     

    8.1. Death
      or Permanent Disability.
      The
      death or Permanent Disability of Executive shall automatically terminate this
      Agreement. For the purpose of this Agreement, the “Permanent
      Disability”
of
      Executive shall mean Executive’s inability, because of his injury, illness, or
      other incapacity (physical, emotional or mental), to perform the essential
      functions of the position contemplated herein, with or without reasonable
      accommodation to Executive with respect to such injury, illness or other
      incapacity, for a continuous period of one hundred and fifty (150) days or
      for one hundred and eighty (180) days out of a continuous period of three
      hundred and sixty (360) days. Such Permanent Disability shall be deemed to
      have occurred on the one hundred and fiftieth (150th)
      consecutive day or on the one hundred eightieth (180th)
      day
      within the specified period, whichever is applicable.

     

    
      
        
        

      

      
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    8.2. Termination
      for Cause.
      The
      following events, which for purposes of this Agreement shall constitute
“Cause”
for
      termination by the Company:

     

    (a) a
      material breach of any provision of this Agreement and the failure by Executive
      to cure such breach within ten 10 days written notice to Executive of the
      particular details thereof other than any breach and failure to cure resulting
      from the death or disability of Executive;

     

    (b) a
      material breach of the Employee Proprietary Information and Inventions Agreement
      executed by Executive;

     

    (c) conviction
      of, or a plea of nolo contendere for, any felony criminal offense or any offense
      involving dishonesty or moral turpitude;

     

    (d) engaging
      in dishonest or fraudulent activities which are injurious to the
      Company;

     

    (e) refusal
      to follow any lawful material directive of the Board and failure to cure the
      same within ten days of written notice thereof other than a failure to perform
      or cure resulting from the death or disability of Executive;

     

    (f) any
      act
      or failure to act constituting gross negligence or willful misconduct which
      is
      injurious to the Company other than any action or failure to act resulting
      from
      the death or disability of Executive; or

     

    (g) breach
      of
      a fiduciary duty to the Company which involves personal profit.

     

    Any
      notice of discharge shall describe with reasonable specificity the cause or
      causes for the termination of Executive’s employment, as well as the effective
      date of the termination (which effective date may be the date of such notice).
      If the Company terminates Executive’s employment for any of the reasons set
      forth above, the Company shall have no further obligations hereunder from and
      after the effective date of termination (other than as set forth below) and
      shall have all other rights and remedies available under this or any other
      agreement and at law or in equity.

     

    8.3. Termination
      by the Company Without Cause.
      The
      provision by the Company of at least thirty (30) days’ prior written notice to
      Executive.

     

    
      
        
        

      

      
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    8.4. Termination
      for Good Reason.
      The
      following events, which for purposes of this Agreement shall constitute
“Good
      Reason”
for
      termination by Executive:

     

    (a) the
      assignment to Executive of any duties materially inconsistent with his
      positions, duties, responsibilities and status with the Company, or a material
      change in his reporting responsibilities, or titles as of the Effective Date,
      or
      any removal of Executive from or any failure to re-elect Executive to any such
      positions, except in connection with the expiration of the term of this
      Agreement or the termination of his employment for Cause, death, Disability,
      or
      retirement, or by Executive other than for Good Reason; or

     

    (b) a
      reduction in Executive’s base salary or any significant reduction in the
      aggregate value of Executive’s benefits (unless such reduction is pursuant to a
      general change in benefits applicable to all similarly situated employees of
      the
      Company and its affiliates);

     

    provided,
      however,
      that
      prior to Executive’s termination of employment under this Section 8.4,
      Executive must give written notice to the Company of any such event and such
      event remains uncorrected for thirty (30) days following such written
      notice.

     

    8.5. Voluntary
      Termination by Executive.
      The
      provision by Executive of at least thirty (30) days’ prior written notice to the
      Company.

     

    9. Compensation
      Upon Termination.

     

    9.1 General.
      Upon
      the termination of Executive’s employment under this Agreement before the
      expiration of the stated term hereof for any reason or upon the expiration
      of
      the stated term, Executive shall be entitled to (a) the unpaid Base Salary
      earned by him before the effective date of termination or expiration, as
      provided in Section 3.1,
      prorated on the basis of the number of full days of service rendered by
      Executive during the year to the effective date of termination, (b) any
      accrued, but unpaid, vacation or sick leave benefits, and (c) any
      authorized but unreimbursed business expenses.

     

    9.2 Termination
      Without Cause or for Good Reason.
      If the
      employment relationship is terminated (a) by the Company for any reason other
      than Executive’s death or Permanent Disability or for Cause, or (b) by
      Executive for Good Reason, then Executive shall be entitled to receive as a
      severance payment an amount equal to 12 months Base Salary plus a pro-rated
      bonus for the year during which such termination occurs. The Company shall
      also
      maintain medical coverage for Executive until the earlier of (i) the end of
      the
      12-month period described above and (ii) Executive obtaining alternate medical
      insurance coverage.

     

    9.3 Termination
      For Cause, Death or Disability; Expiration of Term.
      If the
      employment relationship hereunder (i) is terminated by the Company for Cause
      or
      Executive’s death or Permanent Disability, (ii) is terminated voluntarily by
      Executive, or (iii) expires by its terms on the Expiration Date or the end
      of
      any renewal period pursuant to a party’s provision of written notice of
      non-renewal to the other at least ninety (90) days prior to the Expiration
      Date
      or the end of any renewal period, Executive shall not be entitled to any
      severance compensation, except as provided in Section 9.1.

     

    
      
        
        

      

      
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    9.4 Payment
      of Compensation.
      All
      compensation payable pursuant to termination shall be payable to Executive
      in a
      lump sum payment within thirty (30) days immediately following the effective
      date of Executive’s termination.

     

    10. Property
      of Company.
      Executive acknowledges that from time to time in the course of providing
      services pursuant to this Agreement Executive shall have the opportunity to
      inspect and use certain property, both tangible and intangible, of the Company,
      and Executive hereby agrees that such property shall remain the exclusive
      property of the Company, and Executive shall have no right or proprietary
      interest in such property, whether tangible or intangible, including, without
      limitation, Executive’s customer and supplier lists, contract forms, books of
      account, computer programs and similar property.

     

    11. Equitable
      Relief.
      Executive acknowledges that the services to be rendered by him are of a special,
      unique, unusual, extraordinary, and intellectual character, which gives them
      a
      peculiar value, and the loss of which cannot reasonably or adequately be
      compensated in damages in an action at law, and that a breach by him of any
      of
      the provisions contained in this Agreement will cause Company irreparable injury
      and damage. Executive further acknowledges that he possesses unique skills,
      knowledge and ability and that a breach of the provisions of this Agreement
      or
      the Employee Proprietary Information and Inventions Agreement would be extremely
      detrimental to Company. By reason thereof, Executive agrees that Company shall
      be entitled, in addition to any other remedies it may have under this Agreement
      or otherwise, to seek injunctive and other equitable relief to prevent or
      curtail any breach of this Agreement by him
      all
      without the necessity of proving the amount of any actual damage to the Company
      or any affiliate thereof resulting therefrom; provided,
      however,
      that
      nothing contained in this section shall be deemed or construed in any manner
      whatsoever as a waiver by the Company of any of the rights which the Company
      may
      have against Executive at law, in equity, by statute or otherwise arising out
      of, in connection with or resulting from Executive’s breach of any of his
      covenants, agreements, duties or obligations hereunder.

     

    12. Successors
      Bound.
      This
      Agreement shall be binding upon Company and Executive, their respective heirs,
      executors, administrators or successors in interest.

     

    13. Severability
      and Reformation.
      The
      parties hereto intend all provisions of this Agreement to be enforced to the
      fullest extent permitted by law. If, however, any provision of this Agreement
      is
      held to be illegal, invalid, or unenforceable under present or future law,
      such
      provision shall be fully severable, and this Agreement shall be construed and
      enforced as if such illegal, invalid, or unenforceable provision were never
      a
      part hereof, and the remaining provisions shall remain in full force and effect
      and shall not be affected by the illegal, invalid, or unenforceable provision
      or
      by its severance.

     

    
      
        
        

      

      
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    14. Integrated
      Agreement.
      This
      Agreement constitutes the entire Agreement between the parties hereto with
      regard to the subject matter hereof, and there are no agreements,
      understandings, specific restrictions, warranties or representations relating
      to
      said subject matter between the parties other than those set forth herein or
      herein provided for.

     

    15. Notices.
      Any
      notice required to be given or delivered to the Company or Executive shall
      be in
      writing and addressed to the below addresses, as applicable, or at such other
      addresses as shall be specified by the parties by like notice. All notices
      shall
      be deemed effectively given upon personal delivery, (a) five (5) days after
      deposit in the United States mail by certified or registered mail (return
      receipt requested), (b) two (2) business day after its deposit with any return
      receipt express courier (prepaid), or (c) one (1) business day after
      transmission by facsimile.

    

      
        	 	
                If
                  to the Company:

              	If
                to Executive:
	 	 	
                5804
                  E. Slauson Avenue

              	
                33
                  Great Hall Road

              
	 	 	
                Commerce,
                  CA 90040

              	
                Mahwah,
                  New Jersey 07430

              
	 	 	
                Fax
                  - 323-725-5524

              	 
	 	 	 	 


      

    

    
    

    With,
      in
      the case of Executive, a copy to:

     

    
      
        
          	
                  Vincent
                    J. McGill, Esq.

                
	
                  Eaton
                    & Van Winkle LLP

                
	
                  3
                    Park Avenue

                
	
                  New
                    York, New York 10016

                
	
                  Fax
                    - 212 779 9928

                


        

         

      

    

    16. Further
      Actions.
      Whether
      or not specifically required under the terms of this Agreement, each party
      hereto shall execute and deliver such documents and take such further actions
      as
      shall be necessary in order for such party to perform all of his or its
      obligations specified herein or reasonably implied from the terms
      hereof.

     

    17. Governing
      Law.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of California without giving effect to its conflict of law
      principles.

     

    18. Assignment.
      This
      Agreement is personal to Executive and may not be assigned in any way by
      Executive without the prior written consent of the Company. This Agreement
      shall
      not be assignable or delegable by the Company, other than to an affiliate of
      Company, provided,
      however,
      if
      there is a change of control of the Company, the Company may assign its rights
      and obligations hereunder to the person, corporation, partnership or other
      entity that has gained such control.

     

    19. Counsel.
      Executive acknowledges that Executive has been advised to consult with legal
      counsel prior to signing this Agreement, and that Executive has consulted with
      legal counsel prior to signing this Agreement. The Company agrees to reimburse
      Executive for the reasonable fees and expenses of his counsel in connection
      with
      the negotiation, execution and delivery of this Agreement and the Option
      Agreement in an aggregate amount up to, but not to exceed, Five Thousand Dollars
      ($5,000). The foregoing reimbursement shall be made following presentation
      of
      one or more appropriate invoices therefor.

     

    
      
        
        

      

      
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    20. Counterparts.
      This
      Agreement may be executed in counterparts, each of which will take effect as
      an
      original and all of which shall evidence one and the same
      Agreement.

     

    [Signature
      Page Follows]

     

    
      
        
        

      

      
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    In
      witness whereof, the parties hereto have executed this Agreement as of the
      date
      first above written.

     

      

    
      	Blue Holdings,
              Inc.	 	 	Glenn S. Palmer
	 	 	 	 	 
	 	 	 	 	 
	By:	 	 	 	 
	Name:	
              
Larry
              Jacobs  	 	 	
              
(Signature)
	Title: 	Chief
              Financial
              Officer	 	 	 


    

     

    
      
        
        

      

      
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    EXHIBIT
      A

    


    Employee
      Proprietary Information and Inventions Agreement

     

    
      
        
        

      

      
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