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    LIMITED
LIABILITY COMPANY AGREEMENT

    OF

    BLUE
HOLDINGS HEADGEAR JV LLC

    

    A
DELAWARE LIMITED LIABILITY COMPANY

     

    AGREEMENT dated as of October
__, 2008 by and among Blue Holdings Headgear JV LLC, a Delaware limited
liability company (the “Company”), Blue Holdings, Inc., a Nevada corporation
(“BH”) and Headgear, Inc., a Virginia corporation (“HG”).

    

    R E C I T A L S:

    

    Pursuant
to an agreement dated October 10, 2008 the (“JV Agreement”), BH and HG agreed to
form the Company to co-market
designated apparel product lines to selected retailers.

    

    NOW,
THEREFORE, in
consideration of the promises and the mutual covenants herein contained, the
adequacy and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:

    

    ARTICLE
I

    Definitions

    

    The following terms used in this
Limited Liability Company Agreement shall have the following meanings (unless
otherwise expressly provided herein):

    

    (a) “Certificate of Formation” shall
mean the Certificate of Formation of the Company as filed with the Secretary of
State of Delaware as the same may be amended from time to time.

    

    (b) “Capital Account” as of any given
date shall mean the Capital Contribution to the Company by a Member as adjusted
up to the date in question pursuant to Article VII.

    

    (c) “Capital Contribution” shall mean
any contribution to the capital of the Company in cash or property by a Member
whenever made.  “Initial Capital Contribution” shall mean the initial
contribution to the capital of the Company pursuant to this Operating
Agreement.  “Additional Capital Contribution” shall mean an additional
contribution to the capital of the Company pursuant to this Operating
Agreement.

    

              
 (d)  “Delaware LLC Act” shall mean the Delaware Limited
Liability Company Act, as amended from time to time.

    

    (e)
“Economic Interest” shall mean, with respect to each class of Membership
Interests, a Member's share of one or more of the Company's Net Profits, Net
Losses, and distributions of the Company's assets pursuant to this Operating
Agreement and the Delaware Limited Liability Company Act, but shall not include
any right to vote on, consent to, or otherwise participate in any decision of
the Members.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (f) “Entity” shall mean any general
partnership, limited partnership, limited liability company, corporation, joint
venture, trust, business trust, cooperative or association, or any foreign
trust, or foreign business organization.

    

    (g) “Fiscal Year” shall mean the
Company's fiscal year, which shall be the calendar year.

    

    
      (h)
“Interest” or
“Membership Interest” shall mean all of the
rights and obligations of a Member hereunder, including, without limitation,
rights in distributions (liquidating or otherwise) and allocations of profits,
losses, gains, deductions, and credits of the Company as provided herein. The
“Percentage Interest” of each Member shall be as set forth on Schedule 4.01
hereto.

    

    

    
      (i)  “Initial
Members” shall mean BH and HG.

    

    

    
      (j)  “IRC”
shall mean the Internal Revenue Code of 1986, as amended, or corresponding
provision of any future law of the same or similar import of subsequent
superseding federal revenue laws, as same shall be amended from
time-to-time.

    

    

    (k) “Majority Interest” shall have the
meaning set forth in Section 5.09 of this Operating Agreement.

    

    (l) “Majority of Members” shall have
the meaning set forth in Section 5.09 of this Operating Agreement.

    

    (m) “Operations Manager” shall mean the
day to day manger of the Company designated by the Board of Managers from time
to time in accordance with Section 5.03.

    

    (n) “Member” shall mean BH, HG and each
Person who is hereinafter admitted to membership in accordance with the
provisions of this Operating Agreement.  To the extent the Operations
Manager has a Membership Interest in the Company, he will have all the rights of
a Member with respect to such Membership Interest.  Except as
otherwise set forth herein, if a Person is a Member immediately before the
purchase or other acquisition by such Person of a Membership Interest or an
Economic Interest, that Person shall have all the rights of a Member with
respect to the purchased or otherwise acquired Membership Interest or Economic
Interest, as the case may be.  Except as specifically stated or unless
the context requires otherwise, the term "Member" also includes the owner of an
Economic Interest who is not a Member.

    

    (o)  “Net Profits” and “Net
Losses” shall mean the income, gain, loss, deductions, and credits of the
Company in the aggregate or separately stated, as appropriate, determined in
accordance with generally accepted accounting principles employed by the
Company's accountant at the close of each fiscal year, approved by the
Operations Manager, and reflected on the Company's information tax return filed
for federal income tax purposes (“Approved Accounting Method”).

    

    (p) “Offering Party” shall mean any
Member which proposes to sell, assign, pledge, hypothecate or otherwise transfer
all or any portion of his Membership Interest.

    

    (q) “Operating Agreement” shall mean
this Limited Liability Company Agreement as originally executed and as amended
from time to time in accordance with the terms hereof.

    

    (r) “Person” shall mean any individual
or Entity, and the heirs, executors, administrators, legal representatives,
successors, and assigns of the “Person” when the context so
permits.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (s) “Reserves” shall mean, for any
fiscal period, funds set aside or amounts allocated during such period to
reserves that shall be maintained in amounts deemed sufficient by the Manager
for the Company’s capital needs and as working capital and to pay taxes,
insurance, debt service, or other costs or expenses incident to the ownership or
operation of the Company's business.

    

    (t)  “Revaluation
Date” shall mean
the date on which a Revaluation Event occurs.

     

    (u)  “Revaluation
Event” shall mean
(i) the admission of a Member (other than a Substitute Member) in accordance
with Article X, (ii) a contribution of property to the company by a Member in
respect of an Interest (other than a de minimus amount), or  (iii) a
liquidating distribution of property other than cash by the
Company.

     

    (v)  “Substitute
Member” shall mean
a Person who acquired an Interest from a Member and who has been admitted as
Member pursuant to this Agreement.

     

    (w) “Treasury Regulations” shall
include proposed, temporary, and final regulations promulgated under the IRC in
effect as of the date of filing the Certificate of Formation and the
corresponding sections of any regulations subsequently issued that amend or
supersede those regulations.

    

    (x) “Voting Interests” shall mean
voting rights incident to the ownership of Membership Interests.

     

    ARTICLE
II

    Formation
of Company

    

    2.01
Formation. The Company has been formed as a Delaware limited liability company
by the filing of the Certificate of Formation with the Office of the Secretary
of State of Delaware in accordance with and pursuant to the Delaware LLC
Act.

    

    2.02
Name. The name of the Company is Blue Holdings Headgear, LLC.

    

    2.03
Principal Place of Business.  The principal place of business of the
Company shall be located at 3409 Chandler Creek Road, Virginia Beach, Virginia
23453.  The Company may locate its place of business and registered
office at any other place or places, as the Board of Managers may from time to
time deem advisable.

    

    2.04
Term. The term of the Company commenced on the date of filing of the Certificate
of Formation with the Secretary of State of the State of Delaware, and unless
otherwise modified in accordance with the terms hereof, the term of the Company
shall continue until terminated in accordance with Article XII.

     

    ARTICLE
III

    Business
of Company

    

    The
business of the Company shall consist of marketing, selling and
distributing designated apparel
product lines to selected retailers (hereinafter referred to as the
“Company Business”) and such other activities as are necessary and/or advisable
to further the Company Business (collectively, “Company Business
Activities”).

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

       

    

    ARTICLE
IV

    Names and
Addresses of Members

    

    4.01 Members. The Initial Members are
BH and HG. The addresses of the Initial Members are set forth in Schedule 4.01
and, if the Company admits additional Members, the names and addresses of those
Members shall be set forth in additional schedules which shall be appended
hereto by the Operations Manager.

    

    4.02 Percentage Interest of
Members.  Each of the Initial members shall own 50% of the Company’s
Membership Interests.  If the Company admits additional Members, the
Percentage Interests of those Members and the Initial Members shall be set forth
in additional schedules which shall be appended hereto by the
Manager.

    

    

    ARTICLE
V

    Management

    

    5.01 (a)  The
business affairs of the Company shall be managed by a Board of Managers
organized in accordance with this Agreement.  The Board may exercise
all such powers of the Company and do all such lawful acts and things as are not
by statute or this Agreement directed or required to be exercised or done by the
Members.  The Board shall consist of three members, two of whom shall
be appointed by Headgear and one of whom shall be appointed by Blue
Holdings.  Each of Headgear and Blue Holdings shall have the right
from time to time to remove and designate a replacement for any member of the
Board of Managers previously appointed by it.

     

    (b)           Except
as otherwise provided in this Agreement, the Board may delegate any or all of
its powers to committees of the Board established by the Board, and to officers
and agents elected or designated by the Board or a duly constituted committee
thereof.

     

    (c)           Notwithstanding
the foregoing, from and after the date hereof and until the expiration of the
term of this Agreement, without the prior unanimous consent of the Board of
Managers taken by action at a duly held meeting of the Board of Managers or by
unanimous written consent of the Board of Managers, the Company shall not, and
the Board of Managers shall not permit the Company, directly or indirectly, to
consummate a material transaction or series of related material transactions
outside the ordinary course of business including without limitation,
transactions or series of related transactions with respect to:

     

    
      
        	
              	
                (i) 

              	
                the
      entry into any agreement having a term of greater than three years or
      obligating the Company to pay in the aggregate more than $1,000,000,
      except for loans, factoring and similar agreements in the ordinary
      course;

              

      

    

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    
      
        	
              	
                (ii) 

              	
                the
      making of an assignment for the benefit of creditors of the Company, or
      otherwise causing the Company to seek protection under any bankruptcy or
      insolvency law;

              

      

    

     

    
      
        	
              	
                (iii) 

              	
                the
      admission of new members to the Company;
or

              

      

    

     

    
      
        	
              	
                (iv) 

              	
                the
      liquidation or dissolution of the
Company.

              

      

    

     

    The
provisions of this Section 5.1 (c) may only be revised, changed, modified,
revoked or otherwise amended upon the unanimous vote of the Board of
Managers.

     

    5.02  Board
of Managers. The Board of Managers as of the date of this Agreement consists of
Jeff Watson and __________________, each of whom was appointed by Headgear, and
Glenn Palmer who was appointed by Blue Holdings.   Jeff Watson
shall be the Chairman of the Board of Managers.

    

    5.03 Management.  Except as
provided above, the day to day business and affairs of the Company shall be
managed by an Operations Manager appointed by the Board of
Managers.  The initial Operations Manager shall be Jeff
Watson.  Subject to those actions requiring the consent of the Board
of Managers as set forth above, the Operations Manager shall have full and
complete authority, power, and discretion to manage and control the day to day
business, affairs, and properties of the Company, to make all decisions
regarding those matters, and to perform any and all other acts or activities
customary or incidental to the management of the Company’s
business.  The Operations Manager shall direct, manage, and control
the business of the Company to the best of his ability and in a manner that he
deems to be in the best interests of the Company.  The Operations
Manager shall give so much of its attention and time to the conduct and
supervision of the Company’s affairs as he deems necessary or
advisable.

    

    5.04
Tenure and Qualifications.  The Operations Manager shall hold office
until a successor shall have been designated by the Board of
Managers.  An Operations Manager need not be a Member of the
Company.

    

    5.05 Unless other officers are
authorized or appointed by the Operations Manager or the Board of Managers, the
Operations Manager, and only the Operations Manager, shall have the power to
bind the Company and/or execute any document on behalf of the
Company.  Unless authorized to do so in writing by the Operations
Manager or the Board of Managers, no Member, attorney-in-fact, employee, or
other agent of the Company shall have any power or authority to bind the Company
in any way, to pledge its credit or to render it liable monetarily for any
purpose.

    

    5.06 If a third party shall request a
consent to, ratification of or confirmation of the Operations Manager’s
authority to act for the Company from a Member or the Board of Managers, each
Member agrees to execute such documentation as may be reasonably requested by
the Manager to evidence same.

    

    5.07 Liability for Certain
Acts.  Neither the members, the Board of managers or the Operations
Manager, in any way, guarantees the return of the Members' Capital Contributions
or a profit for the Members from the operations of the Company.  The
Operations Manager shall not be personally liable for failure to perform in
accordance with, or to comply with the terms and conditions of, this Operating
Agreement, or for any other reason unless such failure to perform or comply or
such other reason constitutes fraud, gross negligence, willful misconduct, an
intentional violation of law or a bad faith violation of the implied contractual
covenant of good faith and fair dealing.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    5.08 Bank Accounts.  The
Operations Manager may from time to time open bank accounts in the name of the
Company, and the Manager shall be the sole signatory thereon, unless the Manager
determines otherwise.

    

    5.10 Indemnification of
the Operations Manager. The Company will
indemnify the Operations Manager
and any other person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action, suit, or proceeding by reason
of the fact that such person is or was the Operations Manager
or an officer, employee, guarantor, or other agent of the Company ("Agent") or that,
being or having been such an Agent, it is or was serving at the request of the
Company as an Agent of another person or enterprise, to the fullest extent
permitted by applicable law in effect on the date of this Operating Agreement
and to such greater extent as applicable law may hereafter from time to time
permit; provided, however, such Agent: (i) conducted itself in good faith; (ii)
reasonably believed that its conduct was in or at least not opposed to the
interest of the Company; (iii) in the case of any criminal proceeding, had no
reasonable cause to believe its conduct was unlawful; and (iv) is not adjudged
in any proceeding to be liable for gross negligence or misconduct in the
performance of its duty. The Operations Manager
is authorized, on behalf of the Company, to enter into indemnity agreements on
such terms and conditions as the Operations Manager
deems appropriate in its business judgment. The Company is authorized to
purchase and maintain insurance on behalf of any agent described in this
paragraph against any liability asserted against the agent and incurred by the
agent in such capacity, or arising out of the agent's status as an agent,
whether or not the Company would have the power to indemnify the Agent against
such liability under this paragraph or under applicable law.

    

    5.11 Resignation. The Operations
Manager of the Company may resign at any time by giving written notice to the
Members of the Company.  The resignation of the Operations Manager
shall take effect upon receipt of that notice or at such later time as shall be
specified in the notice, and unless otherwise specified in the notice, the
acceptance of the resignation shall not be necessary to make it
effective.  The resignation of an Operations Manager who is also a
Member shall not affect the Operations Manager's rights as a Member and shall
not constitute a withdrawal of a Member.

    

    5.12 Manager
Compensation.  In addition to his salary, the Company will pay, or reimburse the
Operations
Manager, for expenses
incurred by the Manager in managing the business of the Company.

    

    ARTICLE
VI

    Rights
and Obligations of Members

    

    6.01 Limitation of
Liability.  Each Member's liability shall be limited as set forth in
this Operating Agreement, the Delaware LLC Act, and other applicable
laws.

    

    6.02 Company Debt
Liability.  A Member will not be personally liable for any debts or
losses of the Company in excess of his Capital Contributions, except as
otherwise specifically provided by law.

    

    6.03 Action by Consent in Lieu of a
Meeting of Members. Members may act as meetings of the Members or by unanimous
written consents (“Consents”).  If any Consent has been given to an
act which is to be performed (“Authorized Action”) other than simultaneously or
contemporaneously with the execution of such Consent, and ratification or
confirmation of such Authorized Action is required under any statutes, laws,
rules or regulations, or, if not so required, but is deemed advisable by the
Members, all of the signatories of such initial Consent agree to execute such
ratification consent.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    6.04 Rights of Members to
Information.  Each of the Initial Members shall have the right to
review and have its auditors review the Company’s books and records of the
Company, including without limitation its books of original entry, at any time
and from time to time.

    

    6.05 Company Books.  In
accordance with Section 8.08 below, the Manager shall maintain and preserve,
during the term of the Company, and for five (5) years thereafter, all accounts,
books, and other relevant Company documents.

    

    6.06 Priority and Return of
Capital.  Except as may be expressly provided in Article VIII, no
Member or Economic Interest Owner shall have priority over any other Member or
Economic Interest Owner, either for the return of Capital Contributions or for
Net Profits, Net Losses, or distributions; provided that this section shall not
apply to loans (as distinguished from Capital Contributions) which a Member has
made to the Company.

    

    6.07 Resignation or
Withdrawal.

    

    (a)  A Member may not
resign or withdraw (collectively “Withdraw”) from the Company without the
written consent of the Manager (“Permitted Withdrawal”).  Any
voluntary act of a Member that constitutes an attempted Withdrawal from the
Company other than a Permitted Withdrawal shall constitute a material breach of
this Operating Agreement.  Any damages suffered by such breach shall
permit the Company to offset any cash or other property distributable to such
Member by the Company.

    

    6.08 Transfer and
Assignment.  A Member may not transfer, set over or assign, with or
without consideration, his Membership Interest, except in accordance with the
provisions of Article IX of this Operating Agreement, and any attempted
assignment in contravention of the provisions of Article IX shall be void and
shall constitute a material breach of this Agreement.  Any damages
suffered by such breach shall permit the Company to offset any cash or other
property distributable to such Member by the Company.

    

    6.09 New Members.  The
Company shall not admit any person as a new Member unless such admission is
approved by the Initial Members.

    

    6.10 Actions Requiring Approval of the
Initial Members.  The following actions require the approval of the
Initial Members:

    

    
      
        	
              	
                (i) 

              	
                the
      initiation of any lawsuit or compromise or forgive any substantial claim
      of, or obligation owing to, the
Company;

              

      

    

     

    
      
        	
              	
                (ii) 

              	
                the
      entry into any agreement having a term of greater than three years or
      obligating the Company to pay in the aggregate more than $1,000,000,
      except for loans, factoring and similar agreements in the ordinary
      course;

              

      

    

     

    
      
        	
              	
                (iii) 

              	
                the
      making of an assignment for the benefit of creditors of the Company, or
      otherwise causing the Company to seek protection under any bankruptcy or
      insolvency law;

              

      

    

     

    
      
        	
              	
                (iv) 

              	
                the
      admission of new members to the Company;
or

              

      

    

     

    
      
        	
              	
                (v) 

              	
                the
      liquidation or dissolution of the
Company.

              

      

    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    6.11 Prior
to the execution of this Agreement the parties reviewed the accounts of BH and
HG to determine which of their accounts will be serviced by the
Company.  The accounts to be serviced by the Company are set forth on
Schedule 6.11 (to be appended no later than one week from the effective date of
this Agreement) and are referred to herein as the “JV Accounts.”  It
is the parties’ expectation that all of BH’s accounts other than those which are
rejected by the Company’s factor will be serviced by the Company.  The
JV Accounts can be expanded to include such new accounts as the Operations
Manager shall determine, provided that if any prospective account is then being
serviced by Blue Holdings it can only become a JV Account with the consent of
Blue Holdings, which cannot be unreasonably withheld.  Each of HG and
BH will introduce the Company to those of its accounts included in the JV
Accounts.

    

    6.12 The
Company will be the exclusive distributor to the JV Accounts of all Taverniti So
Jeans, Antik, and Yanuk products produced by HG and BH, and of any other brands
developed by the JV or by HG or BH for which the JV acts as the
distributor.

    

    6.13 The
Company will hire its own employees to market its merchandise and service its
customers, together with such accounting and other personal necessary for the
operations of the Company.  No later than two weeks from the formation
of the Company the Company will hire or engage as consultants such of the
current sales and marketing personnel of BH as it desires.  Until such
time as such individuals are engaged by the Company, BH shall continue to employ
such personnel and commencing the date of formation of the Company, the Company
will advance to BH such approved and reasonable costs associated with
maintaining such individuals at such times as are necessary to enable BH to
timely meet its obligations to such individuals.

    

    6.14 The
Company may request that HG or BH perform certain functions to be agreed upon
from time to time on behalf of the Company and HG or BH, as the case may be,
shall be compensated for such services on such terms and conditions as shall be
agreed.  HG shall have the option to provide warehousing for the
Company and BH at rates equal to the rates currently being paid by
BH.

    

    6.15 The
Company will be responsible for the payment of royalties and license fees for
that portion of the sale price in excess of the price paid to BH by the Company
with respect to merchandise it sells under existing license and distribution
agreements listed on Schedule 6.15 (to be appended no later than one week from
the effective date of this Agreement).

    

    6.16 BH
and HG will introduce the other to its production and sourcing
resources.

    

    6.17 The
Company shall be permitted to enter into licenses for the sale in the US of
products under the brands for which it is acting as distributor subject to the
consent of BH which will not be unreasonably withheld.  For the
avoidance doubt, BH shall not be entitled to withhold consent to a prospective
licensee that is a reputable party with experience in the industry, with
sufficient financial ability to fulfill its obligations as licensee and with
channels of distribution comparable to those of the Company’s current products.
 In the case of BH brands, one-half of the license fees for licenses
initiated by the JV will be credited to BH, provided that any such revenue to BH
will reduce the “Sales & Income Targets” as per the LOI.  BH shall
retain all licensing revenues under its current international licenses and under
any future international license it initiates for goods that are not to be
produced or distributed by the JV.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    6.18 BH
will give the Company access to all BH brands for which the Company is acting as
distributor. BH will develop and source denim products and HG will develop and
source non-denim products.  All denim products sourced by BH will be
sold to the Company at a discount of 22.5% from BH’s lowest wholesale
price.   All non-denim products sourced by HG will be sold to the
Company at a discount of 22.5% from HG’s lowest wholesale price.

    

    6.19 BH
will co-develop products with the Company provided that the Company reimburses
BH for all out of pocket expenses and a reasonable portion of all the salaries
and benefits paid to those employees engaged in co-development
activities.  Any such payments will be a credit against the Company’s
purchases of the developed products.  All such products will be
sourced by BH and sold to the Company at a discount of 22.5% from BH’s lowest
wholesale price.

    

    6.20 HG
will design and develop a line of non-denim apparel items and footwear for
distribution by the Company under each of the Taverniti, Antik and Yanuk
brands.

    

    6.21 Each
of the parties will allow their websites to be linked to that of the Company for
co-marketing purposes.

    

    6.22 BH
will continue its program of obtaining celebrity introductions of Taverniti,
Antik and Yanuk brand merchandise.

    

    6.23 Additional Obligations of
Headgear.  In addition to the rights and obligations set forth in
items 6.01 through 6.22, Headgear shall have the following rights and
obligations:

    

    
      
        	
              	
                (i) 

              	
                Headgear
      shall have primary responsibility to develop and manage the marketing
      direction, sales and profit targets of the
  Company;

              

      

    

    
      
        	
              	
                (ii) 

              	
                Exercise
      reasonable efforts to co-develop new products with the
      Company;

              

      

    

    
      
        	
              	
                (iii) 

              	
                Introduce
      the Company to its current accounts set forth on Schedule
      6.11;

              

      

    

    
      
        	
              	
                (iv) 

              	
                Sell
      to the Company at a 22.5% discount to its lowest wholesale price all HG
      products to be sold to the
Company;

              

      

    

    
      
        	
              	
                (v) 

              	
                To
      enable Blue Holdings to fulfill its obligations to the Company advance to
      Blue Holdings $1,250,000 in accordance with Schedule 6.23 (to be appended
      no later than one week from the effective date of this Agreement) (the “BH
      Advance”), to be repaid out of the profits of the Company in accordance
      with Section 8.04.1; and

              

      

    

    
      
        	
              	
                (vi) 

              	
                Obtain
      such funding, at no cost to the Company or Blue Holdings, to enable Blue
      Holdings and the Company to produce and source all merchandise to be
      purchased by the Company.

              

      

    

    

    6.24
Additional Obligations of Blue Holdings.  In addition to the rights
and obligations set forth in items 6.01 through 6.22, Blue Holdings shall have
the following rights and obligations:

    

    
      
        	
              	
                (i) 

              	
                Introduce
      the Company to all of its current accounts selected by HG to be serviced
      by the Company;

              

      

    

    
      
        	
              	
                (ii) 

              	
                Provide
      sales, marketing support and distribution (to warehouses designated by the
      Company) to the Company for those of its current accounts to be serviced
      by the Company;

              

      

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

    

    
      
        	
              	
                (iii) 

              	
                Exercise
      reasonable efforts to co-develop new products with the
      Company;

              

      

    

    
      
        	
              	
                (iv) 

              	
                Sell
      to the Company at a 22.5% discount to their lowest wholesale prices all BH
      products to be sold to the
Company;

              

      

    

    
      
        	
              	
                (v) 

              	
                Exercise
      reasonable efforts to enable the Company to license third parties to
      produce products not currently produced by BH or HG for distribution under
      the BH brands.

              

      

    

    

    6.25  Confidentiality.  During
the term of this Agreement, the Members and Operations Manager will have access to certain
trade secrets and confidential information relating to the operations of the
other Member which is not readily available from independent
sources.  The confidential and proprietary information and, in any
material respect, trade secrets of the respective Members are among their most
valuable assets, including but not limited to, customer, supplier and vendor
lists, databases, competitive strategies, computer programs, software, marketing
programs, sales, financial, marketing, training and technical information,
product development (and proprietary product data) and any other information,
whether communicated orally, electronically, in writing or in other tangible
forms concerning how a Member creates, develops, acquires or maintains products
and marketing plans and targets potential customers (hereinafter collectively
referred to as "Confidential Information"), and any misappropriation or
unauthorized disclosure of Confidential Information in any form would
irreparably harm the Member  The Members and Managers acknowledge that
such Confidential Information constitutes valuable, highly confidential, special
and unique property of the respective Members.  The Members and
Managers shall hold in a fiduciary capacity for the benefit of the respective
Members and the Company all Confidential Information, which shall have been
obtained by the Members and Managers during the term of this Agreement and which
shall not be or become public knowledge (other than by acts by the Members and
Managers in violation of this Agreement).  Except as required by law
or an order of a court or governmental agency with jurisdiction, the Members and
Managers shall not, during the term of this Agreement or at any time thereafter,
disclose any Confidential Information, directly or indirectly, to any person or
entity for any reason or purpose whatsoever, nor shall the Members and Managers
use it in any way, except for the benefit of the Company or to enforce any
rights or defend any claims hereunder or under any other agreement to which the
Member is a party, provided that such disclosure is relevant to the enforcement
of such rights or defense of such claims and is only disclosed in the formal
proceedings related thereto.  The Members and Managers shall take all
reasonable steps to safeguard the Confidential Information of the Members and
Company and to protect it against disclosure, misuse, espionage, loss and
theft.  The Members and Managers understand and agree that they shall
acquire no rights to any such Confidential Information of the other Member or of
the Company.

    

    (b)  All
files, records, documents, drawings, specifications, data, computer programs,
evaluation mechanisms and analytics and similar items relating thereto or to the
business of the Company or the Members, as well as all customer lists, specific
customer information, compilations of product research and marketing techniques
of the Company and respective Members coming into the possession of any Member
or Manager, shall remain the exclusive property of the Company or the Member
from which it was obtained, and shall not be removed from the premises of the
Company, except in furtherance of its business.

    

    (c)  As
requested by the Company or either Member and at the Company's expense, from
time to time and upon the termination of this Agreement for any reason, and upon
a Person ceasing to be a member, the Members and Managers will promptly deliver
to the Company or the Member from which it was originally received, all copies
and embodiments, in whatever form, of all Confidential Information in their
possession or within their control (including, but not limited to, memoranda,
records, notes, plans, photographs, manuals, notebooks, documentation, program
listings, flow charts, magnetic media, disks, diskettes, tapes and all other
materials containing any Confidential Information) irrespective of the location
or form of such material.  If requested by the Company or a Member,
the Members and Managers will provide the Company with written confirmation that
all such materials have been delivered to the Company or such Member as provided
herein.

     

    
      
        
        

      

      
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    6.26    Non-Solicitation
or Hire.  For so long as any Member is a Member and for a period of
twelve (12) months following the termination of such Member's Interest in the
Company for any reason, unless such Member succeeds to the business of the
Company, such Member shall not directly or indirectly employ, solicit or attempt
to solicit or induce, directly or indirectly, (a) any party who is a
customer of the Company or its subsidiaries, or who was a customer of the
Company or its subsidiaries at any time during the twelve (12) month period
immediately prior to the date such Member ceases to be a Member, for the purpose
of marketing, selling or providing to any such party any product directly
competitive with any product previously offered by or available from the
Company, (b) any supplier to the Company or another Member to terminate, reduce
or alter negatively its relationship with the Company or such Member or in any
manner interfere with any agreement or contract between the Company or the other
Member and such supplier or (c) any employee of the Company or the other Member
or any person who was an employee of the Company or the other Member during the
twelve (12) month period immediately prior to the date the Member ceases to be a
Member in order, in either case, to enter into a similar relationship with the
Member, or any other person or any entity.  General advertisements of
products or services not directed to a particular individual or entity shall not
be deemed a solicitation in violation of this provision.

     

    ARTICLE
VII

    Contributions
to the Company and Capital Accounts

    

    7.01 Membership
Interests.   The Company shall initially have only one class of
Membership Interests.

    

    7.02. Members' Capital
Contributions.  BH shall not be obligated to contribute any amounts to
the capital of the Company.   HG shall be obligated to contribute
to the Company such capital as shall be necessary to maintain the operations of
the Company.  Notwithstanding the current or future relative
contributions of the parties, the Interests or Membership Interests of the
Initial Members shall remain 50/50.

    

    7.03.
Maintenance of Capital Accounts. (a)  The
Company shall establish and maintain a separate Capital Account for each
Member.  Separate Capital Accounts shall be maintained with respect to
the various classes and series of Interest.  Each Member's Capital
Account shall initially equal the fair market value (as such fair market value
is determined by the Board at the time of contribution), net of liabilities
assumed by the Company, of the property contributed by such Member to the
capital of the Company for such Member's Interest.

     

    (b)           Each
Member's Capital Account shall be increased by (i) the amount of any additional
money contributed by the Member to the capital of the Company, (ii) the fair
market value of any additional property (other than money) contributed by the
Member to the capital of the Company, as such fair market value is determined by
the Board at the time of contribution, net of liabilities assumed by the Company
or subject to which the Company takes such property within the meaning of
Section 752 of the Code, and (iii) the Member's share of Net Profits as
determined in accordance with Article VIII.

     

    
      
        
        

      

      
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    (c)           Each
Member's Capital Account shall be decreased by (i) the amount of any money
distributed to the Member by the Company, (ii) the fair market value of any
Property distributed to the Member, as such fair market value is determined by
the Board at the time of distribution, net of liabilities of the Company assumed
by the Member or subject to which the Member takes such Property within the
meaning of Section 752 of the Code, and (iii) the Member's share of Net Losses
as determined in accordance with Article VIII.

     

    ARTICLE
VIII

    Allocations,
Income Tax, Distributions, Elections and Reports

    

    8.01
Allocations of Net Profits and Losses. Except as may be required by the IRC and
Article VII, the Company's Net Profits and Losses for each taxable year shall be
allocated to the Capital Accounts of the Members in proportion to their
Percentage Interests.  To the extent practicable and subject to the
other terms and conditions herein, during each year (i) items of income, gain,
loss or deduction on the sale or other disposition of assets during such year
shall be allocated to the Members as of the date such items are realized by the
Company and (ii) all other items of income, gain, loss or deduction generated
during such year shall be allocated pro-rata to the Members (including Members
who transferred Interests during such year) taking into account the number of
days in such year and the number of days each Member and former Member was a
Member during such year.

     

    8.02
Allocation of Profit.  Except as may be required by the IRC and
Article VII, the Company’s Net Profit for each taxable year shall be allocated
to the Capital Accounts of the Members in the following priority:

     

    8.02.1 In
proportion to the Percentage Interest of each Member.

     

    8.03  Allocation
of Net Loss.  Except as may be required by the IRC and Article VII,
the Company’s Net Loss for each taxable year shall be allocated to the Capital
Accounts of the Members in the following priority:

     

    8.03.1  In
proportion to the Percentage Interest of each Member.

     

    8.04.1
Intentionally
Omitted.

    

    8.04.2 At the end of each calendar year
or at such earlier periods as the Board of Managers shall determine, the Board
of Managers shall determine the amount of cash funds, if any, available for
distribution to the Members after making any distributions to be made pursuant
to Section 8.04.1.  The Board of Managers shall, in its sole judgment,
determine the working capital needs of the Company and the amount of cash on
hand in excess of the amounts necessary for the Company's working capital needs
and the Company's need for reserve funds (“Available Proceeds”) and the amount,
if any, to be distributed to the Members.  All amounts to be
distributed to the Members pursuant to this Section shall be distributed to the
Members in accordance with their respective Percentage Interests, except if a
Member is in default hereunder, in which event his distribution share of
available proceeds (“Distribution Share”) shall be withheld until any damage
caused by such default is determined and then the amount thereof shall be
satisfied, if possible, first from such Distribution Share.

    

    8.04.3 Notwithstanding the
foregoing, any distributions that might otherwise be made to BH pursuant to
Section 8.04.2 shall be paid to HG until the amount paid to HG pursuant to this
Section 8.03.3 equals the amount of the BH Advance.

     

    
      
        
        

      

      
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    8.05 Limitation Upon
Distributions.  No distribution shall be made to any Member while such
Member is in default hereof.

    

    8.06 Accounting
Principles.  The profits and losses of the Company shall be determined
in accordance with accounting principles applied on a consistent basis using the
Approved Accounting Method.

    

    8.07 Interest on and Return of Capital
Contributions.  No Member shall be entitled to interest on his Capital
Contribution or to return of his Capital Contribution, except as otherwise
specifically provided for in this Operating Agreement.

    

    8.08 Loans to or Loans from
Company.  Nothing in this Operating Agreement shall prevent any Member
from making secured or unsecured loans to the Company by agreement with the
Company or prevent the Company from making secured or unsecured loans to any
Member, provided any such loan shall be approved by the other member and, in the
absence of the consent of the other member shall not bear interest.

    

    8.09 Accounting Period.  The
Company's accounting period shall be the calendar year.

    

    8.10 Records, Audits and
Reports.  At the expense of the Company, the Manager shall maintain
records and accounts of all operations and expenditures of the
Company.  At a minimum the Company shall keep at its principal place
of business the following records:

    

    8.10.1 A
current list of the full name and last known business, residence, or mailing
address of each Member or other owner of an Interest, and Managers, both past
and present;

    

    8.10.2 A
copy of the Certificate of Formation of the Company and all amendments thereto,
together with executed copies of any powers of attorney pursuant to which any
amendment has been executed;

    

    8.10.3 Copies of the Company's federal,
state, and local income tax returns and reports, if any for the four most recent
years;

    

    8.10.4 Copies of the Company's
currently effective written Operating Agreement, copies of any writings,
permitted or required with respect to a Member's obligation to contribute cash,
property, or services, and copies of any financial statements of the Company for
the three most recent years; and

    

    8.10.5 Copies of each year’s cash flow
statements, balance sheets and financial statements.

    

    8.11 Returns and Other
Elections.  The Manager shall cause the preparation and timely filing
of all tax returns required to be filed and K-1s delivered to each of the
Members no later than March 1 of each year by the Company pursuant to the IRC
and all other tax returns deemed necessary and required in each jurisdiction in
which the Company does business.  Copies of those returns, or
pertinent information from the returns, shall be furnished to the Members within
a reasonable time after the end of the Company's fiscal year.  All
elections permitted to be made by the Company under federal or state laws shall
be made by the Manager in the Manager’s sole discretion.

     

    
      
        
        

      

      
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    8.12 Sales and Earnings
Reports.  Each member
shall be entitled to receive weekly sales figures from the Company and monthly
earnings reports, and all sales and earnings reports shall be subject to review
by a CPA firm of BH’s choosing and at its expense to verify that the Company has
met the targets set forth in Section 12.12.1.

    

    

    ARTICLE
IX

    Restrictions
on Transferability

    

    9.01 Restrictions.  Without
the unanimous consent of the Board of Managers, neither a Member nor owner of an
Economic Interest shall have the right to sell, assign, pledge, hypothecate,
transfer, exchange or otherwise transfer (collectively, “Transfer”) all or any
part of his Interest or Economic Interest, except (i) to an existing Member;
(ii) to a “Permitted Transferee” (as defined below); (iii) in accordance with
provisions of Section 9.02 which grants the Company a right of first refusal
with respect to such transfer; or (iv) as otherwise specifically provided for
herein or unless permitted under the Delaware LLC Act as a matter of legal
right. Notwithstanding the foregoing, prior to January 1, 2011, neither a Member
nor an owner of an Economic Interest shall be permitted to Transfer all or any
part of its Interest or Economic Interest pursuant to Section
9.02.   A "Permitted Transferee" shall mean, (a) another Member,
(b) a spouse, child, or grandchild of a Member, (c) the estate of a Member, or
(d) an inter-vivos or testamentary trust created for the benefit of any
beneficiary set forth in (a), (b), or (c) above, or (e) an entity which is
controlled by a Member and whose equity participants are Members or Permitted
Transferees, and the transfer of interests or change of control provisions in
its governing documentation are approved in writing by the Manager(s), which
approval shall not be unreasonably withheld nor unduly delayed.  A
transfer of a Membership Interest (other than to an existing Member) shall not
vest in the transferee any voting rights of a Member unless consented to by the
Manager and such transferee undertakes in writing to be bound by the terms of
this Operating Agreement, and subject to and as a condition to recognizing the
effective and binding nature of any such transfer and (subject to Section 9.03
below) substitution of a new Member or otherwise, the Manager may require the
Offering Member and the proposed purchaser, donee or successor-in-interest, as
the case may be, to execute, acknowledge, and deliver to the Members such
reasonable instruments of transfer, assignment, and assumption and such other
certificates, representations, and documents, and to perform all the other
reasonable acts that the Members may deem necessary or desirable
to:

    

    (a) Constitute such purchaser or donee
as a Member or owner of an Economic Interest, as the case may be;

    

    (b) Confirm that the person desiring to
acquire an interest or interests in the Company, or to be admitted as a Member,
has accepted, assumed, and agreed to be subject and bound by all of the terms,
obligations and conditions of the Operating Agreement, as the same may have been
further amended (whether such Person is to be admitted as a new Member or will
merely be an owner of an Economic Interest);

    

    (c) Preserve the Company after the
completion of such sale, transfer, assignment, or substitution under the laws of
each jurisdiction in which the Company is qualified, organized, or does
business;

    

    (d) Maintain the status of the Company
as a partnership for federal tax purposes; and

    

    (e) Assure compliance with any
applicable state and federal laws, including securities and tax laws and
regulations.

     

    
      
        
        

      

      
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    If the
transfer of a Membership Interest is not consented to by the Manager, as the
case may be, such transfer shall result in its conversion to, and the transferee
shall be deemed to have acquired and own an Economic Interest.

    

    Any
transfer of a Membership Interest or Economic Interest or admission of a Member
in compliance with this Article IX shall be deemed effective as of the last day
of the calendar month in which the required consent of the Manager or Members to
such transfer was given.  The Offering Member agrees, upon request of
the other Members, to execute such certificates or other documents and perform
such other acts as may be reasonably requested by the other Members from time to
time in connection with such sale, transfer, assignment, or
substitution.  The Offering Member hereby indemnifies the Company and
the other Members against any and all loss, damage, or expense (including,
without limitation, tax liabilities or loss of tax benefits) arising directly or
indirectly from any transfer or purported transfer in violation of this Article
IX.

    

    9.02 Right of First Refusal. Except as
otherwise provided in Section 9.01 above, the sale, gift or other transfer of a
Membership Interest or Economic Interest of any Member shall be subject to the
provisions of this Section 9.02.

    

    (a) In the event that a Member
("Offering Member") receives a bona fide written offer
from a third party who is not a Member ("Offer") to purchase his Interest which
is acceptable to him, he shall give a notice in writing (hereinafter called the
"Notice of Sale") to the Company and to the other Members specifying the
identity of the offeror, the nature and amount of the Interest which the
Offering Member proposes to sell ("Offered Interest"), the proposed sale price
for the Offered Interest ("Offer Price"), manner of payment, and the date of
closing (which shall be not less than 30 days and not more than 90 days from the
date upon which the Notice of Sale was given), all as set forth in the Offer
(all of which are hereinafter called the "Terms of Sale").  A Notice
of Sale shall not be revocable, except with the written consent of the person or
entity then entitled to purchase the Offered Interest as set forth
below.  On the giving of any Notice of Sale, the Offering Member shall
be bound to sell all or a part of the Interest to such person or entity in
accordance with the Terms of Sale (except as otherwise provided herein) if the
Offer in the Notice of Sale is accepted by such person or entity in accordance
with the provisions hereof.

    

    (b) If the Company does not agree to
purchase all, but not less than all of the Offered Interest within 15days after
the receipt of the Notice of Sale, then the offer will be deemed to be declined
by the Company and the Offering Member may sell all, but not less than all, of
the Offered Interest to the proposed purchaser ("Purchaser") who made the offer
in accordance with the Terms of Sale specified in the Notice of Sale; provided
that if the Offering Member does not effect a sale of the Offered Interest
within ninety (90) days of such Notice of Sale, then the foregoing provisions
hereof shall again apply. Until the Purchaser obtains the Required Vesting
Consent, he shall acquire and hold the Offered Interest as an owner of an
Economic Interest only and not a Member of the Company, and subject to the terms
of this Operating Agreement, to be evidenced by (and only effective upon) such
Purchaser executing a form of Assumption Agreement to be prepared by the
Company's counsel, at Purchaser's expense.

    

    (c) The Company may assign to the
Manager the right to acquire Offered Interests granted to the Company by this
Section 9.02.

     

    
      
        
        

      

      
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  (d) In the event that a Member or owner of an Economic Interest
becomes a judgment debtor and his Interest becomes the subject of judicial
execution, his Interest shall then become an Offered Interest under Paragraph
(a) above.  The initial documentation constituting legal process by
which the Company is given written notice of the Judgment Creditor's attempt to
enforce his judgment on a Member's Interest or owner’s
Economic  Interest shall be deemed to be an Offer under Paragraph (a)
above, the debtor shall be conclusively deemed to be an Offering Member, and the
procedures in this Section 9.02 granting the Company the right to purchase the
Offered Interest shall apply; except that if all of the Offered Interest is not
purchased, the Judgment Creditor shall only become an owner of an Economic
Interest of such Interest and not a Member of the Company.

    

    9.03    A transfer
by HG of its Membership Interest or the Economic Interest therein does not
relieve it of the obligations contained herein to provide financing to the
Company or BH for sourcing and production.

     

    ARTICLE
X

    Reciprocal
Indemnification Covenant

    By
Members With Respect to Claims.

    

    Each of
the Members hereby agrees to indemnify and save each of the other Members
harmless from and against any and all claims, liabilities, costs and expenses
which the indemnified Member might otherwise incur as a result of any claims
made against either the Company or the indemnified Member, or both, as a result
of any act or omission by any such Member (“Defaulting Member”) in violation of
his obligations undertaken herein or in violation of obligations otherwise
imposed upon such Member involving the Company by statute or common law. In the
event that (i) a Defaulting Member fails to undertake and diligently provide the
defense of an indemnified Member; (ii) a Defaulting Member fails and/or refuses
to pay or satisfy any judgment against an indemnified Member within thirty (30)
days after the entry of such judgment, or (iii) an indemnified Member is
successful in a judicial proceeding to enforce his rights hereunder (which may
be in the same action in which the indemnified claim is made), the Defaulting
Member agrees to pay to the indemnified Members the damages sustained as a
result thereof, including but not limited to the reasonable attorney's fees and
court costs incurred in any such action and in enforcing the provisions of this
Article.

     

    ARTICLE
XI

    Financial
Adjustments for New Members

    

    No new
Members shall be entitled to any retroactive allocation of losses, income, or
expense deductions incurred by the Company. The existing Members may, at their
option, by Majority Vote at the time a new Member is admitted, close the Company
books (as though the Company's tax year had ended) or make pro-rata allocations
of loss, income, and expense deductions to a new Member for that portion of the
Company's tax year in which a Member was admitted in accordance with the
provisions of IRC §706(d) and the Treasury Regulations promulgated
thereunder.

     

    ARTICLE
XII

    Dissolution
and Termination

    

    12.01 Dissolution. (a) Anything in the
Delaware LLC Law to the contrary notwithstanding, except as otherwise set forth
herein, the Company shall be dissolved only (i) as specifically permitted or
required in this Agreement or (ii) by written determination of the Initial
Members.  The death or dissolution of a Member shall not result in the
dissolution of the Company.

     

    
      
        
        

      

      
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              (b)  As
soon as possible following the occurrence of a demand by either BH or HG that
the Company be dissolved as a result of the occurrence of any of the events
specified in Section 12.02, the Operations Manager shall proceed to wind up the
Company's affairs and the net assets of the Company shall be distributed as set
forth below.

    

    12.02.1   BH
shall have the right to demand that the Company be liquidated and dissolved upon
the occurrence of any of the following events:

    

    
      
        	
              	
                (i) 

              	
                A
      breach by HG of any of its material obligations hereunder which is not
      cured within thirty days of the receipt of notice thereof;
    or

              

      

      
        
          
            	
                  	
                    (ii) 

                  	
                    At
      any time after December 31, 2010, if the Company fails to achieve the
      sales or profit target set forth
below.

                  

          

        

         

      

    

    The sales
and profit targets are as follows:

    

    For the period July 1, 2009
to June 30, 2010 –  Company sales revenues is to be equal to or
greater than 150% of the full
price sales revenue of BH in 2008 for the BH brands to be distributed by
the Company, based upon the audited figures of BH’s 2008 actual retail sales to
customers paying “full price” during 2008.

    

    12.02.2
HG shall have the right to demand that the Company be liquidated and dissolved
upon the occurrence of any of the following events:

    

    
      
        	
              	
                (i) 

              	
                A
      breach by BH of any of its material obligations hereunder which is not
      cured within thirty days of the receipt of notice
  thereof;

              

      

    

    

         12.03
Winding Up, Liquidation, and Distribution of Assets. Upon dissolution, an
accounting shall be made by the Company's independent accountants of the
accounts of the Company and of the Company's assets, liabilities, and
operations, from the date of the last previous accounting until the date of
dissolution. If the Company is dissolved and its affairs are to be wound up, the
Operations Manager shall:

    

    (a) Sell or otherwise liquidate all of
the Company's assets, of every nature and description as promptly as
practicable;

    

    (b) Allocate any profit or loss
resulting from such sales to the Members' Capital Accounts in accordance with
Article VII above;

    

    (c) Discharge all liabilities of the
Company, including liabilities to Members who are creditors, to the extent
otherwise permitted by law, other than liabilities to Members for distributions,
and establish such Reserves as may be reasonably necessary to provide for
contingencies or liabilities of the Company (for purposes of determining the
Capital Accounts of the Members, the amounts of such Reserves shall be deemed to
be an expense of the Company);

    

    (d) Distribute the remaining assets in
the following order:

    

    
      
        	
              	
                (i) 

              	
                To
      HG until HG shall have received an amount equal to any amounts then owed
      to HG by the Company or BH;

              

      

    

     

    
      
        
        

      

      
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                (ii) 

              	
                Next,
      to BH and HG in proportion to their capital accounts until such accounts
      are reduced to -0-; and

              

      

    

    

    
      
        	
              	
                (iii) 

              	
                Thereafter
      to BH and HG in proportion to their Percentage
  Interest.

              

      

    

    

    (iii) If any assets of the Company are
to be distributed in kind, the net fair market value of those assets as of the
date of dissolution shall be determined by independent appraisal or by agreement
of the Members.  Those assets shall be deemed to have been sold as of
the date of dissolution for their fair market value, and the Capital Accounts of
the Members shall be adjusted pursuant to the provisions of Article VII of this
Operating Agreement to reflect such deemed sale.

    

    (e) Notwithstanding anything to the
contrary in this Operating Agreement, upon a liquidation within the meaning of
Treas. Reg. §l.704-l(b)(2)(ii)(g), if any Member has a deficit Capital Account
(after giving effect to all contributions, distributions, allocations, and other
Capital Account adjustments for all taxable years, including the year during
which such liquidation occurs), the Member shall have no obligation to make any
Capital Contribution, and the negative balance of the Member's Capital Account
shall not be considered a debt owed by the Member to the Company or to any other
Person for any purpose whatsoever;

    

    (f) Upon completion of the winding up,
liquidation, and distribution of the assets, the Company shall be deemed
terminated;

    

    (g) The Manager shall comply with any
applicable requirements of applicable law pertaining to the winding up of the
affairs of the Company and the final distribution of its assets;
and

    

    (h)  In
connection with any distributions to the Members upon liquidation of the
Company, if the Company is terminated pursuant to clauses 12.01 (i), (iii) or
(iv), neither the Company nor BH shall have any obligation to repay to HG the BH
Advance and if the .

    

    12.05  Certificate of
Cancellation.  When all debts, liabilities, and obligations have been
paid and discharged or adequate provisions have been made therefore, and all of
the remaining property and assets have been distributed to the Members, and all
applicable provisions of the Delaware LLC Law have been complied with a
Certificate of Cancellation shall be filed in the office of the Secretary of
State of the State of Delaware to effect the cancellation of the Company's
Certificate of Formation.

    

    12.06  Return of Contribution
Non-Recourse to Other Members. Except as provided by law or as expressly
provided in this Operating Agreement, upon dissolution, each Member shall look
solely to the assets of the Company for the return of his Capital Contribution.
If the Company Property remaining after the payment or discharge of the debts
and liabilities of the Company is insufficient to return the cash contribution
of one or more Members, the Members shall have no recourse against any other
Member.

    

    12.07 The
parties recognize that Blue Holdings has granted a first priority security
interest in all of its assets to FTC Commercial Corp., a second priority
security interest in all of its assets to Gemini Master Fund, Ltd., and a
third priority security interest in all of its assets to Paul and Elizabeth
Guez, which they will hold for the benefit of himself, herself and
HG.  Solely to the extent permitted by applicable law, in the event
that Blue Holdings is party to a voluntary or involuntary bankruptcy proceeding
(or similar proceeding), the Company shall have the right to continue to market,
license and otherwise exploit the applicable Blue Holdings brands and other
assets contributed to the Company by Blue Holdings in accordance with that
certain Joint Venture Agreement dated October __, 2008, between Blue Holdings
and Headgear.

     

    
      
        
        

      

      
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    ARTICLE
XIII

    Arbitration

    

    13.01 In the event that any
dispute shall arise between the parties hereto as to any matter or thing covered
hereby or as to the meaning of this Agreement or to any state of facts which may
arise, same shall be settled by the agreement of the parties, or if they are
unable to agree, same shall be settled by arbitration in Norfolk, Virginia, in
accordance with the rules of the American Arbitration Association, and judgment
upon any award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.

    

    13.02  Refusal of one party
to arbitrate shall entitle the remaining party to specifically enforce this
Agreement in a court of competent jurisdiction, and, as a result of said refusal
to arbitrate, the remaining party shall be entitled to receive costs, reasonable
attorneys' fees and his share of the arbitration fee.  Arbitration by
the parties shall take place at a time and place as may be agreed upon, but if
no agreement shall be reached, then at a location designated by the
Arbitrator.

    

    13.03  If the party against
which a judgment is rendered in any arbitration (the “Defaulting Party”) does
not pay to the other party the arbitration award within ten (10) days of written
demand therefor, and the other party shall institute suit in a court of
competent jurisdiction to enforce said decision, the Defaulting Party shall pay
the other party the reasonable attorney's fees and court costs incurred in such
action.

    

    13.04 While any Arbitration proceeding
is pending, no party is excused from the payment of monies due hereunder, but if
it is determined by the Arbitrator that monies paid during the Arbitration
period were not due, the payee shall remit the amount of monies so paid,
together with interest at the Default Rate (as hereinafter defined) from the
date of receipt to the proper party, within ten (10) days of the issuance of the
Arbitration Award.

     

    ARTICLE
XIV

    Miscellaneous
Provisions

    

    14.01 Notices.  Any notice,
demand, or communication required or permitted to be given by any provision of
this Operating Agreement shall be deemed to have been sufficiently given or
served for all purposes if delivered personally to the party or to an executive
officer of the party to whom the same is directed or, if sent by recognized
overnight courier service or registered or certified mail, postage and charges
prepaid, addressed to the Member's, owners of an Economic Interest, and/or
Company's address, as appropriate, which is set forth in this Operating
Agreement. Except as otherwise provided in this Operating Agreement, any such
notice shall be effective upon receipt if delivered by hand or two days after
deposit with the US mails or a recognized courier service if delivered by such
means.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    14.02 Books of Accounts and
Records.  Proper and complete records and books of account shall be
kept or shall be caused to be kept by the Manager in which shall be entered
fully and accurately all transactions and other matters relating to the Company
Business in the detail and completeness customary and usual for businesses of
the type engaged in by the Company.  The books and records shall at
all times be maintained at the principal executive office of the Company and
shall be open to the reasonable inspection and examination of the Members,
owners of an Economic Interest, or their duly authorized representatives during
reasonable business hours.

    

    14.03 Application of Delaware Law. This
Operating Agreement, and the application of interpretation hereof, shall be
governed exclusively by its terms and by the laws of the State of Delaware, and
specifically the Delaware LLC Law.

    

    14.04 Jurisdiction.  Subject
to the provisions of Article XIII above, the parties agree that for any action
commenced hereunder to enforce the provisions of this Agreement, the courts
located in the City of Norfolk, Virginia, state or federal, shall have exclusive
jurisdiction to hear and determine any claim or dispute between them pertaining
directly or indirectly to this Agreement or to any matter arising therefrom, and
each of the parties hereto hereby irrevocably attorns to the jurisdiction of the
federal and state courts located in the City of Norfolk, Virginia.

    

    14.05 Waiver of Action for
Partition.  Each Member and owner of an Economic Interest irrevocably
waives during the Term any right that it may have to maintain any action for
partition with respect to the Company Property.

    

    14.06 Amendments. Except for such
amendments as may be adopted by the Manager to cause this Agreement to comport
with the IRC and Treasury Regulations, this Operating Agreement may be amended
only upon written consent of the Manager followed by written consent of Initial
Members, except that any amendment to reflect a change in membership or the
percentage of membership interests held by the Members may be made by the
Manager(s), upon receipt of the appropriate documentation, without any further
action of the Members.

    

    14.07 Execution of Additional
Instruments. Each Member hereby agrees to execute such other and further
statements of interest and holdings, designations, powers of attorney, and other
instruments necessary to comply with any statutes, laws, rules, or
regulations.

    

    14.08 Construction. Whenever the
singular number is used in this Operating Agreement and when required by the
context, the same shall include the plural and vice versa, and the masculine
gender shall include the feminine and neuter genders and vice
versa.

    

    14.09 Headings. The headings in this
Operating Agreement are for convenience only and are in no way intended to
describe, interpret, define, or limit the scope, extent, or intent of this
Operating Agreement or any of its provisions.

    

    14.10 Waivers. The failure of any party
to seek redress for violation of, or to insist upon the strict performance of,
any covenant or condition of this Operating Agreement shall not prevent a
subsequent act, that would have originally constituted a violation, from having
the effect of an original violation.

    

    14.11 Rights and Remedies
Cumulative.  The rights and remedies provided by this Operating
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive the right to use any or all other remedies. Said
rights and remedies are given in addition to any other rights the parties may
have by law, statute, ordinance, or otherwise.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    14.12 Severability.  If any
provision of this Operating Agreement or its application to any person or
circumstance shall be invalid, illegal, or unenforceable to any extent, the
remainder of this Operating Agreement and its application shall not be affected
and shall be enforceable to the fullest extent permitted by law.

    

    14.13 Heirs, Successors, and
Assigns.  Each and all of the covenants, terms, provisions, and
agreements contained in this Operating Agreement shall be binding upon and inure
to the benefit of the parties hereto and, to the extent permitted by this
Operating Agreement, their respective heirs, legal representatives, successors,
and assigns.

    

    14.14 Creditors. None of the provisions
of this Operating Agreement shall be for the benefit of or enforceable by any
creditors of the Company.

    

    14.15 Counterparts. This Operating
Agreement and any Consent (as herein defined) to be executed in furtherance
hereof may be executed in counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same
instrument.

     

    ARTICLE
XV

    Execution
and Adoption

    

     The
undersigned hereby agree, acknowledge, and certify that the foregoing Operating
Agreement, constitutes the Operating Agreement of Blue Holdings Headgear JV LLC,
adopted by the Initial Members of the Company effective as of the date set forth
above, and each agrees to the terms hereof.

    

    
       

      
        
          
            	BLUE HOLDINGS,
      INC.	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	
                    By:
      

                  	/s/ Glen
      Palmer	 	

                    By:  

                  	/s/
      Paul Guez 
	 	Glen
      Palmer	 	 	Paul
      Guez 
	Title:	Chief
      Executive Officer 	 	Title: 	Founder
      Chairman 
	 	 	 	 	 

          

        

         

        
          
            	HEADGEAR,
      INC.	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	
                    By:
      

                  	/s/ Jeff Watson 	 	 	 
	 	Jeff
      Watson 	 	 	 
	Title:
      	Chief
      Executive Officer	 	 	 
	 	 	 	 	 

          

        

      

       

    

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    Schedule
4.01

    Names and
Addresses of Members

     

         The
names and addresses of the Initial Members are as follows:

     

    
      	Name  	Address	 
	Blue Holdings,
      Inc.  	
              5804 E.
      Slauson Avenue

              Commerce,
      California 90040

            	 
	 	 	 
	Headgear,
      Inc.   	
              3409
      Chandler Creek Road

              Virginia
      Beach, VA 23453-2885

            	 

    

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    Schedule
4.02

    Class B
Members’ Capital Contributions and Equity Percentages

     

    
      	
              Name of
      Member  

            	
              Initial Capital
      Contribution 

            	
              Equity
  Percentage

            
	 	 	 
	 	 	 
	 	_____________  	______ 
	
            	
              $                                

            	
              100.00%

            

                                       

    23f8k110308ex10_gzgt.htm

     

     

    Exhibit
10.1

     

     

    AMENDMENT
AGREEMENT

     

    THIS AMENDMENT AGREEMENT
(the “Agreement”), dated as of October ___,
2008, is entered into by and among Guangzhou Global Telecom, Inc., a Florida
corporation (the “Company”),
and the persons identified as “Holders” on the signature pages hereto (the
“Holders”).  Defined
terms not otherwise defined herein shall have the meanings set forth in the
Purchase Agreement (as defined below).

     

    WHEREAS, pursuant to a Securities Purchase
Agreement, dated July 31, 2007 (the “Purchase
Agreement”), among the Company and the Holders, the Holders purchased
from the Company an aggregate of $[____________ in principal amount of 8% Senior
Secured Convertible Debentures of the Company (the “Debentures”)
and were issued warrants exercisable for shares of Common Stock (the “Warrants”);
and

     

    WHEREAS, the parties desire to
amend certain of the Transaction Documents pursuant to the terms
hereof.

     

    NOW THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, each Holder hereby agrees as follows:

     

    1.           Amended and Restated
Debentures.  The Company hereby agrees to issue each Holder, in
exchange for such purchaser’s Debenture, an amended and restated debenture, in
the form of Exhibit
A attached hereto (the “Amended and Restated
Debenture(s)”) with a principal amount equal to the amounts set forth on
Schedule A
attached hereto.  Other than as amended thereunder, the rights and
obligations of the Holders and of the Company with respect to the Amended and
Restated Debentures shall be identical in all respects to the rights and
obligations of the Holders and of the Company with respect to the Debentures and
the Underlying Shares issued and issuable pursuant to the Purchase
Agreement.  For clarity, the Purchase Agreement and all Transaction
Documents thereunder are hereby amended so that the term “Debentures” includes
the Amended and Restated  Debentures and the term “Underlying Shares”
includes the shares of Common Stock issuable upon conversion and redemption
thereof, and the term “Transaction Documents” shall be amended to include this
Agreement.

    

    2.           Amendment to Certificate of
Incorporation.

     

    
      (a)The
Company hereby agrees to hold a special meeting of shareholders (which may also
be at the annual meeting of shareholders) at the earliest practical date
following the date hereof, and in any event on or before January 15, 2009, for
the purpose of obtaining the “Authorized Share Approval” (as defined below),
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.  In addition, the Company agrees to
use its best efforts to promptly respond to any comments the Commission may have
with respect to any preliminary proxy statement.  If the Company does
not obtain the Authorized Share Approval at the first meeting, the Company shall
call a meeting every 30 days thereafter to seek Authorized Share Approval until
the earlier of the date the Authorized Share Approval is obtained or the
Debentures and Warrants are no longer outstanding.  

       

       

      
        
          
          

        

        
          -1-

          
            

          

        

        
          
          

        

      

       

       

      The
Company agrees to file the amendment to its articles or certificate of
incorporation with the Secretary of State of Florida within one Business Day of
obtaining the Authorized Share Approval.  As used herein, “Authorized
Share Approval” means the vote by the stockholders of the Company to approve an
amendment to the Company’s articles or certificate of incorporation that
increases the number of authorized shares of Common Stock from ___________ to at
least 1,000,000,000, and the filing of such amendment and the acceptance thereof
by the Secretary of State of Florida.

    

     

    (b)           On
or prior to the date hereof, the Company shall deliver each Holder irrevocable
written voting agreements, of all of the officers, directors and stockholders
holding more than 10% of the issued and outstanding shares of Common Stock on
the date hereof to vote all Common Stock over which such Persons have voting
control as of the record date for the meeting of stockholders of the Company in
favor of the Authorized Share Approval, amounting to, in the aggregate, at least
50% of the issued and outstanding Common Stock, which agreements shall be in
form and substance acceptable to each Holder.

     

    3.           The
Company hereby makes to the Holders the following representations and
warranties:

     

    (a)           Authorization;
Enforcement.  The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by this
Agreement and otherwise to carry out its obligations hereunder and
thereunder.  The execution and delivery of this Agreement by the
Company and the consummation by it of the transactions contemplated hereby have
been duly authorized by all necessary action on the part of the Company and no
further action is required by the Company, its board of directors or its
stockholders in connection therewith.  This Agreement has been duly
executed by the Company and, when delivered in accordance with the terms hereof
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

     

    (b)           No
Conflicts.  The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby do not and will not: (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of the Company or any Subsidiary, or give
to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any material agreement,
credit facility, debt or other material instrument 

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

     

    (evidencing
a Company or Subsidiary debt or otherwise) or other material understanding to
which the Company or any Subsidiary is a party or by which any property or asset
of the Company or any Subsidiary is bound or affected, or (iii) conflict with or
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state securities laws
and regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not have or reasonably be expected to result in a Material
Adverse Effect.

     

    (c)           Issuance of the Amended and
Restated Debentures.  The Amended and Restated Debentures are
duly authorized and, upon the execution of this Agreement by the Holders will be
duly and validly issued, fully paid and nonassessable, free and clear of all
Liens imposed by the Company other than restrictions on transfer provided for in
the Transaction Documents.  The Underlying Shares, when issued in
accordance with the terms of the Amended and Restated Debentures, will be
validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company.  The Company has reserved from its duly
authorized capital stock a number of shares of Common Stock for issuance of the
Underlying Shares sufficient for the conversion in full of the Amended and
Restated Debentures.

     

    (d)           Equal
Consideration.  No consideration has been offered or paid to
any person to amend or consent to a waiver, modification, forbearance or
otherwise of any provision of any of the Transaction Documents.

     

    (e)           Survival and Bring
Down.  All of the Company’s warranties and representations
contained in this Agreement shall survive the execution, delivery and acceptance
of this Agreement by the parties hereto.  The  Company
expressly reaffirms that, except as set forth in the disclosure schedules
attached hereto (if any), each of the representations and warranties set forth
in the  Purchase Agreement, continues to be true, accurate and
complete, and the Company hereby remake and incorporate herein by reference each
such representation and warranty as though made on the date of this
Agreement.

     

    (f)           Holding Period for Amended
and Restated Debentures. Pursuant to Rule 144, the holding period of the
Amended and Restated Debentures (and Underlying Shares issuable upon conversion
and redemption thereof) shall tack back to the original issue date of the
Debentures.

     

    (g)           No
Novation.  The Amended and Restated Debentures are being issued
in substitution for and not in satisfaction of the Debentures.  The
Amended and Restated Debentures shall not constitute a novation or satisfaction
and accord of any of the Debentures.  The Company hereby acknowledges
and agrees that the Amended and Restated Debentures shall amend, restate,
modify, extend, renew and continue the terms and provisions contained in the
Debentures and shall not extinguish or release the Company or any of its
Subsidiaries under any Transaction Document (as defined in
the  Purchase Agreement) or otherwise constitute a novation of its
obligations thereunder.

     

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    4.           On
or prior to the date hereof, the Company hereby agrees to cause its legal
counsel to issue a legal opinion to the undersigned Holders and the Company’s
Transfer Agent regarding this Agreement and the transactions contemplated
hereby, in form and substance reasonably acceptable to the Holders, including an
opinion that the holding period of the Amended and Restated Debentures (and
shares issued and issuable upon conversion thereof) shall tack back to the
original issue date of the Debentures.

    

    5.           Amendment to the Exercise
Price.  The Exercise Price (as defined in the Warrants) of all
of the Warrants is hereby amended and reduced to $0.015, subject to further
adjustment therein, and the number of shares underlying the Warrants is hereby
increased in the individual amounts set forth on Schedule B attached
hereto, each subject to further adjustment pursuant to the
Warrants.

    

    6.           Miscellaneous.

    

    (a)           The
foregoing waivers shall not be effective unless and until all Holders
shall  have agreed to the terms and conditions
hereunder.  In addition, the respective obligations, amendments,
agreements and waivers of the Holders hereunder are subject to the following
conditions being met: (a) the accuracy in all material respects of the
representations and warranties of the Company contained herein and (b) the
performance by the Company of all if its obligations, covenants and agreements
required to be performed hereunder. Except as expressly set forth above, all of
the terms and conditions of the Transaction Documents shall continue in full
force and effect after the execution of this Agreement and shall not be in any
way changed, modified or superseded by the terms set forth herein.

    

    (b)           This
Agreement may be executed in two or more counterparts and by facsimile signature
or otherwise, and each of such counterparts shall be deemed an original and all
of such counterparts together shall constitute one and the same
agreement.

    

    
             (c)      
The
Company shall, on or before 8:30 AM (NY time) on the 1st Trading
Day following the date hereof, issue a Current Report on Form 8-K, reasonably
acceptable to the Holders, disclosing the material terms of the transactions
contemplated hereby, and shall attach this Agreement thereto.  The
Company shall consult with the Holders in issuing any other press releases with
respect to the transactions contemplated hereby.

    

    

    
                 (d)       
The Company has agreed to reimburse the Holders $5,000 for its legal fees and
expenses, none of which has been paid prior to the date
hereof.  Except as set forth in the preceding sentence, each party
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this
Agreement.

    

     

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

     

    (e)           The
Company has elected to provide all Holders with the same terms and form of
agreement for the convenience of the Company and not because it was required or
requested to do so by the Holders.  The obligations of each Holder
under this Agreement, and any Transaction Document are several and not joint
with the obligations of any other Holder, and no Holder shall be responsible in
any way for the performance or non-performance of the obligations of any other
Holder under this Agreement or any Transaction Document.  Nothing
contained herein or in any Transaction Document, and no action taken by any
Holder pursuant thereto, shall be deemed to constitute the Holders as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Holders are in any way acting in concert or as a
group with respect to such obligations or the transactions contemplated by this
Agreement or the Transaction Documents.  Each Holder shall be entitled
to independently protect and enforce its rights, including without limitation,
the rights arising out of this Agreement or out of the other Transaction
Documents, and it shall not be necessary for any other Holder to be joined as an
additional party in any proceeding for such purpose.  Each Holder has
been represented by its own separate legal counsel in their review and
negotiation of this Agreement and the Transaction Documents.

     

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    
 

    IN
WITNESS WHEREOF, this Agreement is executed as of the date first set forth
above.

     

    GUANGZHOU
GLOBAL TELECOM, INC.

    

    

    

    By:                                                 
                   

    Name:

    Title:

     

     

     

    
 

    [signature
page(s) of Holders to follow]

     

     

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

     

     

     

     

    COUNTERPART
SIGNATURE PAGE

    OF HOLDER
TO

    AMENDMENT
AGREEMENT

    AMONG
GZGT

    THE
HOLDERS THEREUNDER

    

    

    

    Name of
Holder:___________________________________

    

    By:______________________________________________

    

    Name:____________________________________________

    

    Title:_____________________________________________

    

    New
Principal Amount of Debenture due 7/31/09: 

    $__________

    

    New
Principal Amount of Debenture due 2/21/2010: 

    $__________

     

     

     

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

     

     

    SCHEDULE
A

     

    
 

    
      	
              Maturity
      Date

            	 	
              7/31/2009

            	 	 	
              2/21/2010

            	 
	 
      	 	 	 	 	 	 
	 
      	 	 	 	 	 	 
	
              Enable
      Growth Partners New Principal Amount(s):

            	 	 	$1,828,444.24	 	 	
              $1,262,856.99

            	 
	 
      	 	 	 	 	 	 	 	 
	 
      	 	 	 	 	 	 	 	 
	
              Enable
      Opportunity Partners New Principal Amount(s):

            	 	 	$215,111.09	 	 	
               

            	$148,571.41	 
	 
      	 	 	 	 	 	 	 	 
	 
      	 	 	 	 	 	 	 	 
	
              Pierce
      Diversified Strategy Master Fund LLC, Ena New Principal
      Amount(s):

            	 	 	$107,555.52	 	 	 	$74,285.71	 
	 
      	 	 	 	 	 	 	 	 
	
              Total

            	 	 	$2,151,110.85	 	 	 	$1,485,714.10	 

    

     

    

    SCHEDULE
B

    Warrants held following
adjustment of exercise price to $0.015

     

    
 

    
      	 
      	 	
              Number
      of 

              shares
      

              underlying
      warrants

            	 
	 
      	 	 	 
	 
      	 	 	 
	
              Enable
      Growth Partners

            	 	 	132,682,890	 
	 
      	 	 	 	 
	 
      	 	 	 	 
	
              Enable
      Opportunity Partners

            	 	 	15,609,738	 
	 
      	 	 	 	 
	 
      	 	 	 	 
	
              Pierce
      Diversified Strategy Master Fund LLC, Ena:

            	 	 	7,804,906	 
	 
      	 	 	 	 
	 
      	 	 	 	 

    

    
 

     

    -8-

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