Document:

Unassociated Document

    Exhibit
      10.1

    EMPLOYMENT
      AGREEMENT

    

    

    THIS
      EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of the
      27th
      day of November, 2007 and shall be deemed to be effective on the 15th day of
      December, 2007 (the "Effective Date") by and between Christy Young Shue, an
      individual residing at 20 Ramblewood Road, Shoreham, New York 11786 (the
      "Executive"), and Harbin Electric Inc., a Nevada corporation (the
      "Company").

    

    RECITALS

    

    The
      Company desires to employ the Executive and the Executive agrees to serve in
      the
      employ of the Company, all on the terms and conditions hereinafter
      provided.

    

    NOW,
      THEREFORE, in consideration of the premises and the mutual covenants herein
      contained, and other good and valuable consideration, the receipt and
      sufficiency of which the parties hereby acknowledge the parties hereby agree
      as
      follows:

    

    ARTICLE
      I

    EMPLOYMENT

    

    1.1
      Employment. The Company hereby employs the Executive and the Executive hereby
      accepts employment by the Company upon the terms and conditions contained in
      this Agreement.

    

    1.2
      Office and Duties. The Executive shall serve the Company as Executive Vice
      President of Finance and Investor Relations ("EVP") of the Company. Subject
      to
      the direction of the Board of Directors (or equivalent body) of the Company
      (the
      "Board"), the Executive, in her capacity as EVP, shall oversee global investor
      relations outside of mainland PRC, capital formation and market integration,
      and
      other general corporate development activities. She shall perform all functions
      necessary to conduct investor relations and other activities necessary in the
      U.S.

    

    1.3
      Commitment. Throughout the term of this Agreement, the Executive shall
      diligently and faithfully devote her full-time efforts to the performance of
      her
      duties hereunder in a manner that will further the business and interests of
      the
      Company. For so long as the Executive remains employed by the Company hereunder,
      the Executive may not engage in any other business for her own account or accept
      employment from or serve on the boards of directors of, or hold any other
      offices or positions in, other companies or organizations without the prior
      written approval of the Board; provided, however, that the Executive may make
      passive equity investments in other companies or organizations subject to the
      terms of Section 2.1 and the Executive may engage in charitable, civic or
      community activities that do not interfere with her duties to the
      Company.

    
      
         

      

      
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    1.4
      Term.
      The term of this Agreement shall commence on the Effective Date and shall
      continue for a period of 48 months until 15th day of December, 2011 (the
      "Initial Term Date"), unless earlier terminated in accordance with Section
      1.6.
      Thereafter, the term of this Agreement shall automatically extend for additional
      48 month periods (each, a "Subsequent Term") unless (i) terminated in accordance
      with Section 1.6, or (ii) the Company notifies the Executive in writing of
      non-renewal at least 60 days prior to the end of such Term (as defined below).
      In the event that the Company continues to employ the Executive after the
      Initial Term Date, the Executive shall continue to be employed upon the same
      terms and conditions as are contained in this Agreement, except that any such
      employment shall be terminable by either party "at will." The period of time
      between the commencement and termination of this Agreement is referred to herein
      as the "Term."

    

    1.5
      Compensation.

    

    (a)
      Salary. The Company shall pay the Executive as compensation a base salary of
      not
      less than $100,000 per year during the Term (the "Base Salary"), or such greater
      (but not lesser) amount as shall be approved from time to time by the Board
      (the
      "Salary"). The Salary for each year shall be paid by the Company in accordance
      with the regular payroll practices of the Company, but not less frequently
      than
      monthly.

    

    (b)
      Restricted Stock Grant and Option Grant. Upon commencement of employment
      hereunder, the Executive shall be granted options (the "Options") to purchase
      260,000 shares of the Company's common stock (the "Common Stock") at an exercise
      price $15.60, the closing price on November 26, 2007, the date that this
      agreement is signed. One-fifth (1/5) of the Options (52,000 shares) shall vest
      immediately. The remaining Options shall vest over a 3-year period, with 13.33%
      shares vesting on the 180th day of the Effective Date and the balance vesting
      thereafter on a semi-annual basis, proportionately over the course of the
      following three (3) years.

    

    (c)
      Other
      Benefits and Perquisites. Effective as of the date hereof, and for the remainder
      of the Term, the Executive and her dependent family members shall be entitled
      to
      participate in any major medical health plan (including dental family coverage)
      (the "Health Plan") that the Company offers at the Company's expense and the
      Executive shall be entitled to participate in and receive such additional
      benefits, if any, under any plan or arrangement made available from time to
      time
      by the Company to other senior management executives at an equivalent or higher
      position to that of the Executive on a basis consistent with the terms,
      conditions and overall administration of any such plan or arrangement. The
      Company and the Executive have further agreed that, until the Company has
      enrolled the Executive and her dependent family members in the Health Plan,
      the
      Company will reimburse the Executive $800.00 per month, in addition to the
      amounts payable to the Executive under Sections 1.5(a) and 1.5(b) hereof, to
      offset the cost of the Executive purchasing her own Health Plan. During the
      Term, the Company, in addition to the amounts payable to the Executive under
      Sections 1.5(a) and 1.5(b) hereof, shall provide the Executive with personal
      disability insurance policy and D&O insurance coverage.

    
      
         

      

      
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    (d)
      Vacations and Sick Leave. Effective as of the date hereof, and for the remainder
      of the Term, the Executive shall be entitled to the maximum number of paid
      absence and leave days ("PAL Days") permitted under the Company's PAL policy
      in
      effect from time to time (but not less than four weeks vacation). Such PAL
      Days
      shall be administered pursuant to the regular policies of the Company. PAL
      Days
      that are not used by the Executive in any calendar year will not be carried
      forward except as expressly provided by the PAL Day policy of the Company.
      The
      Executive shall not be entitled to any payment or other compensation for any
      unused PAL Days as of the end of any calendar year or at the end of the
      Term.

    

    (e)
      Payment and Reimbursement of Expenses. Effective as of the date hereof, and
      for
      the remainder of the Term, the Company shall pay or reimburse the Executive
      for
      all reasonable travel, entertainment and other out-of-pocket expenses incurred
      by the Executive in performing her obligations under this Agreement, consistent
      with past practices; provided, that, the Executive properly accounts therefore
      in accordance with the Company's expenses reimbursement policies.

    

    1.6
      Termination.

    

    (a)
      Death. If the Executive dies during the Term of this Agreement, the Executive's
      employment hereunder shall terminate upon her death and all obligations of
      the
      Company hereunder shall terminate on such date, except that the Executive's
      estate or her designated beneficiary shall be entitled to payment of any unpaid
      accrued Base Salary through the date of her death.

    

    (b)
      Disability. If the Company delivers to the Executive a notice of the termination
      of this Agreement due to the disability (as hereinafter defined) of the
      Executive, all obligations of the Company hereunder shall terminate, except
      that
      Executive shall be entitled to payment of any unpaid accrued Base Salary through
      the date of termination. For purposes of this section, Executive shall be deemed
      "disabled" if she shall be unable to perform a significant and substantial
      part
      of her duties and responsibilities in connection with the conduct of the
      business and affairs of the Company and such inability lasts for (i) a period
      of
      at least one hundred twenty (120) consecutive days, or (ii)periods aggregating
      at least one hundred eighty (180) days during any three hundred sixty five
      (365)
      consecutive days, by reason of her physical or mental disability, whether by
      reason of injury, illness or similar cause.

    

    (c)
      Termination for Cause. The Company may at any time during the Term, terminate
      this Agreement and discharge the Executive for Cause, whereupon the Company's
      obligation to pay compensation or other amounts payable hereunder to or for
      the
      benefit of the Executive shall terminate on the date of such discharge. Such
      termination may be made by the Company without prior notice, except for
      terminations made pursuant to clauses (i), (ii) and (v) below, in which
      instances the Executive shall be given a reasonable opportunity to cure the
      breach. As used herein the term "Cause" shall mean: (i) a willful and material
      breach by Executive of the terms of this Agreement, (ii) willful violation
      of
      specific and lawful written direction from the Board of Directors of the
      Company; provided such direction is not inconsistent with the Executive's duties
      and responsibilities the Executive is holding at the time of the directive;
      (iii) fraud, embezzlement or other material dishonesty by the Executive with
      respect to the Company or any of its Affiliates; (iv) conviction of the
      Executive of a felony by a federal or state court of competent jurisdiction;
      and
      (v) the Executive's willful failure to perform (other than by reason of
      disability), or gross negligence in the performance of her duties. The
      obligations of the Executive under the restrictive covenants set forth in
      Sections 2.1 through 2.5 shall continue notwithstanding termination of the
      Executive's employment pursuant to this Section 1.6(c).

    
      
         

      

      
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    (d)
      Termination Without Cause. If the Company terminates this Agreement without
      Cause by providing written notice to the Executive, the Company shall pay the
      Executive, upon termination, the amount required pursuant to Section 1.7. The
      obligations of the Executive under the restrictive covenants set forth in
      Sections 2.1 through 2.5 shall continue notwithstanding termination of the
      Executive's employment pursuant to this Section 1.6(d).

    

    1.7
      Severance. In the event that Executive's employment hereunder shall be
      terminated by the Company without Cause (as defined in Section 1.6(c) hereof)
      at
      any time, the Executive shall be entitled to receive from the Company, in
      addition to any Base Salary earned to the date of termination, and a severance
      amount equal three (3) times the Executive's current Base Salary in effect
      on
      the date of termination and the immediate vesting of any unvested Options
      (together, the "Severance"). The Severance shall be paid in monthly increments
      during the year following such termination. In the event of such termination,
      the amounts due hereunder shall be payable without offset or defense or any
      obligation of the Executive to mitigate damages.

    

     

    ARTICLE
      II

    RESTRICTIVE
      COVENANTS

    

    2.1
      Non-Competition. The Executive agrees that at all times while she is employed
      by
      the Company and, regardless of the reason for termination of her employment
      or
      this Agreement, for a period of two (2) years thereafter (the "Restrictive
      Period"), unless the Executive is not paid all amounts due to her under this
      Agreement, she will not, as a principal, agent, employee, employer, consultant,
      stockholder, investor, director or co-partner of any person, firm, corporation
      or business entity other than the Company, or in any individual or
      representative capacity whatsoever, directly or indirectly, without the express
      prior written consent of the Company:

    

    (a)
      engage or participate in any business which competes with the Company, which
      business is the manufacturing, marketing, and sale of motor
      equipments;

    
      
         

      

      
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    (b)
      aid
      or counsel any other person, firm, corporation or business entity to do any
      of
      the above;

    

    (c)
      become employed by a firm, corporation, partnership or joint venture which
      competes with the business of the Company; or

    

    (d)
      approach, solicit business from, or otherwise do business or deal with any
      customer of the Company in connection with any product or service competitive
      to
      any provided by the Company.

    

    2.2
      Non-solicitation of Employees. During the Term, the Restriction Period, the
      Executive shall not in any manner, directly or indirectly, as an individual
      on
      her own account or as an independent contractor, consultant, partner or joint
      venturer, or as an employee, representative or agent of another Person, or
      as an
      officer, director, owner or shareholder of such other Person, or otherwise
      (a)solicit, induce or encourage or attempt to solicit, induce or encourage,
      any
      employee of the Company to leave the Company, (b) hire any employee of the
      Company or (c) otherwise interfere with the Company's employment relationship
      with any employee. The word "employee" in this Section 2.2 means any person
      who
      is or was employed by the Company or any of its affiliates at the time of,
      or
      within 180 days prior to, such solicitation, inducement, encouragement, hiring
      or interference.

    

    2.3
      Non-interference with Contract. During the Term and, unless the Company
      terminates the Executive without Cause, the Restriction Period, other than
      in
      connection with, for the benefit of, or in furtherance of the Company's
      business, the Executive shall not in any manner, directly or indirectly, as
      an
      individual on her own account or as an independent contractor, consultant,
      partner or joint venturer, or as an employee, representative or agent of another
      Person, or as an officer, director, owner or shareholder of such other Person,
      or otherwise, solicit, encourage or induce, or attempt to solicit, encourage
      or
      induce, any vendor, supplier or other third party with whom the Company is
      doing
      business or has a contract as of the Date of Termination, to terminate such
      vendor's, supplier's or other third party's business relationship or contract
      with the Company.

    

    2.4
      Confidentiality. The Executive recognizes that, by virtue of the Executive's
      employment with the Company, the Executive will have access to Confidential
      Information (as defined below) relating to the Company's business. The Executive
      agrees that such Confidential Information is a valuable asset, and if it were
      to
      be known or used by others engaged in a similar business, it would be harmful
      and detrimental to the Company's interests. Accordingly, except as may be
      required or appropriate for the performance of the Executive's duties in the
      normal course of business, or unless specifically authorized in writing by
      the
      Board, the Executive shall not use or disclose, either during or after the
      Term,
      any Confidential Information, except for any Confidential Information required
      to be disclosed by law or to comply with a request by a court or governmental
      authority (pursuant to a subpoena or otherwise), but only if the Executive
      promptly notifies the Company of the required or requested disclosure so the
      Company may seek a protective order to prevent disclosure of such Confidential
      Information.

    
      
         

      

      
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    For
      purposes of this Agreement, "Confidential Information" shall mean any and all
      information relating to the business, finances, customers, clients and
      operations of the Company, whether obtained by or furnished to the Executive
      before or after the date hereof, and regardless of the manner in which it is
      obtained or furnished. Confidential Information does not include, however,
      information which: (a) is or becomes generally available to the public other
      than as a result of an impermissible disclosure by the Executive; (b) was known
      by or made available on a non-confidential basis to the Executive prior to
      her
      employment with the Company, or (c) becomes available to the Executive on a
      non-confidential basis from a Person other than the Executive who is not known
      by the Executive to be bound by a confidentiality agreement with or other
      obligation of secrecy to the Company.

    

    2.5
      Breach of Restrictive Covenants. The period of time during which the Executive
      is prohibited from engaging in business practices pursuant to the restrictive
      covenants set forth in Sections 2.1 through 2.3 shall be extended by the length
      of time during which the Executive is in breach of any such
      covenant.

    

    2.6
      Condition Precedent. So long as the Company is in compliance with its
      obligations under Section 1.7, the restrictive covenants set forth in Sections
      2.1 through 2.5 are essential elements of this Agreement and enforceable by
      the
      Company, and, but for the Executive's agreement to comply with such covenants,
      the Company would not have entered into this Agreement. Such covenants are
      for
      the benefit of the Company and may be enforced by the Company and by any Person
      succeeding to the business of the Company pursuant to a merger or purchase
      of
      all or substantially all the assets or outstanding voting stock of the Company.
      Except as otherwise provided in the first sentence of this Section 2.6, such
      covenants by the Executive shall be construed as agreements independent of
      any
      other provision contained in this Agreement, and the existence of any claim
      or
      cause of action of the Executive against the Company, whether predicated on
      this
      Agreement or otherwise, shall not constitute a defense to the enforcement by
      the
      Company of such covenants.

    

    2.7
      Injunctive Relief. The Executive acknowledges that the services to be rendered
      by Employee under this Agreement are extraordinary and unique and are vital
      to
      the success of the Company, and that damages at law shall be an insufficient
      remedy in the event that the Executive violates or threatens to violate any
      of
      the terms of Sections 2.1 through 2.5, and the Company shall be entitled, upon
      application to a court of competent jurisdiction, to seek injunctive relief
      (including temporary restraining orders) to enforce any or all of the provisions
      of said sections, without being required to show any actual damage or to post
      an
      injunction bond or other security. The foregoing injunctive relief shall be
      in
      addition to any other rights and remedies available under applicable
      laws.

    

    
      
         

      

      
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    ARTICLE
      III

    MISCELLANEOUS

    

    3.1
      Notices. All notices, requests, demands and other communications required or
      permitted under this Agreement and the transactions contemplated herein shall
      be
      in writing or electronically and shall be deemed to have been duly sent, given,
      made and received when personally delivered, or when sent by confirmed telecopy
      or other electronic means or one business day after deposit with a nationally
      recognized overnight courier, specifying next day delivery, with written
      verification of receipt, addressed as set forth below:

    

    If
      to the
      Executive:

    Christy
      Y. Shue

    20
      Ramblewood Road

    Shoreham,
      NY 11786

    

    Fax: 631-849-5224

    Phone:
       
      914-912-4135

    Email:
      shuechristy@yahoo.com

    

    

    If
      to the
      Company:

    

    Tian
      Fu
      Yang

    c/o
      Harbin Electric, Inc.

    

    Fax: 
      86-451-86116769

    Phone: 86-451-86116757

    Email:
       
      manager@tech-full.com

    

    

    With
      a
      copy to:

    Mitchell
      S. Nussbaum 

    LOEB
      & LOEB LLP

    345
      Park
      Avenue

    New
      York,
      NY  10154 

    

    Fax: 212.504.3013

    Phone:
       
      212.407.4159

    Email:
       
      mnussbaum@loeb.com

    

    Any
      party
      may alter the address to which communications or copies are to be sent by giving
      notice of such change of address in conformity with the provisions of this
      section for the giving of notice, which shall be effective only upon
      receipt.

    
      
         

      

      
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    3.2
      Severability. The provisions of this Agreement are independent of and severable
      from each other, and no provision shall be affected or rendered invalid or
      unenforceable by virtue of the fact that for any reason any other or others
      of
      them may be invalid or unenforceable in whole or in part. If any provision
      of
      this Agreement is held to be unenforceable for any reason, it shall be adjusted
      rather than voided, if possible, in order to achieve the intent of the parties
      to the extent possible.

    

    3.3
      Entire Agreement; Amendment. This Agreement contains the entire understanding
      between the parties hereto with respect to the subject matter hereof and
      supersedes all prior and contemporaneous agreements and understandings,
      inducements or conditions, express or implied, oral or written, except as herein
      contained. This Agreement may not be modified or amended other than by an
      agreement in writing executed by the parties hereto.

    

    3.4
      Waiver. Neither the failure nor any delay on the part of either party to
      exercise any right, remedy, power or privilege under this Agreement shall
      operate as a waiver thereof, nor shall any single or partial exercise of any
      right, remedy, power or privilege preclude any other or further exercise of
      the
      same or of any other right, remedy power or privilege, nor shall any waiver
      of
      any right, remedy, power or privilege with respect to any occurrence be
      construed as a waiver of such right, remedy, power or privilege with respect
      to
      any other occurrence.

    

    3.5
      Interpretation. The parties hereto acknowledge and agree that (i) each party
      and
      each party's counsel have reviewed and negotiated the terms and provisions
      of
      this Agreement and have contributed to its revision, (ii) the rule of
      construction to the effect that any ambiguities are resolved against the
      drafting party shall not be employed in the interpretation of this Agreement,
      and (iii) the terms and provisions of this Agreement shall be construed fairly
      as to all parties hereto and not in favor of or against any party regardless
      of
      which party was generally responsible for the preparation of this
      Agreement.

    

    3.6
      Headings. The headings of paragraphs herein are included solely for convenience
      of reference and shall not control the meaning or interpretation of any of
      the
      provisions of this Agreement.

    

    3.7
      Governing Law. This Agreement shall be governed by and construed in accordance
      with the laws of the State of New York, without giving effect to its principles
      of conflict of laws.

    

    3.8
      Survival. The covenants and agreements of the parties set forth in Sections
      1.6
      and 1.7 and, Article II are of a continuing nature and shall survive the
      expiration, termination or cancellation of this Agreement, regardless of the
      reason therefore and in a manner consistent with the applicable
      section.

    

    3.9
      Binding Effect. This Agreement shall be binding upon and inure to the benefit
      of
      and be enforceable by the parties hereto and their respective heirs, personal
      representatives, successors and assigns, including any direct or indirect
      successor by purchase, merger, consolidation or otherwise to all or
      substantially all of the activities or assets of the Company. The Company shall
      require and cause any successor (whether direct or indirect by purchase, merger,
      consolidation or otherwise) to all or substantially all, of the business or
      assets of the Company, by written agreement in form and substance satisfactory
      to the Executive, expressly to assume and agree to perform this Agreement in
      the
      same manner and to the same extent that the Company would be required to perform
      if no such succession had taken place; provided, however, that any such
      succession or assignment shall not relieve the Company from its continuing
      responsibility and liability for the complete payment and performance of all
      obligations owed to the Executive under this Agreement.

    
      
         

      

      
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    3.10
      Forum Selection. Any litigation based hereon or arising out of, under or in
      connection with this Agreement, may be brought and maintained non-exclusively
      in
      the courts of the State of New York or in the United States District Court
      for
      the District of New York.

    

    3.11
      Counterparts. This Agreement may be executed in counterparts and multiple
      originals, each of which shall be deemed to be an original but all of which
      together will constitute one and the same instrument.

    

    

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    IN
      WITNESS WHEREOF, the Company has caused this AGREEMENT to be executed by its
      duly authorized representative, and the Executive has signed this Agreement,
      all
      as of the day and year first above written.

    

    

    
      	 	
              HARBIN
                ELECTRIC INC.

            
	 	 
	 	
              By:
                /s/ Tianfu Yang

            
	 	
              ----------------------

            
	 	
              Title:
                CEO & Chairman

            
	 	 
	 	 
	 	 
	 	
              EXECUTIVE

            
	 	 
	 	 
	 	
              /s/
                Christy Y. Shue

            
	 	
              ----------------------

            
	 	
              Christy
                Y. Shue

            

    

    

    

    

    
      
         

      

      
        10AMENDED
      AND RESTATED

    CERTIFICATE
      OF DESIGNATIONS,

    PREFERENCES,
      RIGHTS AND LIMITATIONS OF

    SERIES
      A CONVERTIBLE PREFERRED STOCK

    OF

    BLUE
      HOLDINGS, INC.

    

    Pursuant
      to Section 78.195 of the General Corporation Law 

    of
      the
      State of Nevada

     

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

     

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

     

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

     

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

     

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

     

    (2)
       Par
      Value.
      Each
      share of Series A Preferred stock will have a par value of $0.001 per share.
      

     

    (3)
       Dividends.
      

     

    (a)
      Dividend
      Accrual.
      The
      holder of record of each share of Series A Preferred Stock of the Corporation
      (a
“Holder”)
      shall
      be entitled to receive a cumulative share dividend (a “Dividend”)
      equal
      to the Dividend Rate (as defined below), payable only when, as and if declared
      by the Board of Directors. Such dividends will accrue and accumulate annually
      whether or not they have been declared. The “Dividend
      Rate”
shall
      mean six percent (6%) of the Purchase Price. For purposes of this Certificate
      of
      Designations, the “Purchase
      Price”
for
      each share of Series A Preferred Stock shall be $2.681682 per
      share.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

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

     

    (c)
      Dividend
      Payment.

     

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

     

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

     

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

     

    (4)
      Liquidation.
      

     

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

     

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

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

    (6)
       Conversion.
      

     

    (a)
       Right
      to Convert.
      Each
      share of Series A Preferred Stock shall be convertible, at the option of the
      Holder, at any time after the date of issuance of such share, at the office
      of
      the Corporation or any transfer agent for such stock, into such number of fully
      paid and nonassessable shares of Common Stock as is determined by dividing
      (i)
      the Purchase Price plus all accrued but unpaid Dividends on each such share
      (pursuant to Section
      3(a),
      by (ii)
      the Conversion Price, determined as hereafter provided, in effect on the date
      the certificate is surrendered for conversion (such quotient is referred to
      as
      the “Conversion
      Rate”).
      The
      initial “Conversion
      Price”
per
      share for the Series A Preferred Stock shall be $0.58 and shall be subject
      to
      adjustment as set forth in Section
      6(d).
      For the
      avoidance of doubt, the Conversion Price represents the consolidated closing
      bid
      price for a share of the Common Stock prior to the signing of the definitive
      agreement applicable to the transaction pursuant to which each Holder acquired
      their shares of Series A Preferred Stock.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

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

    

    IN
      WITNESS WHEREOF,
      the
      undersigned has executed this Certificate of Designation of the Series A
      Convertible Preferred Stock on this 28th day of November, 2007.

    
       

      BLUE
        HOLDINGS, INC.

    

    
      	 	 	 	 
	By: 
              /s/ Glenn Palmer	 	 	
            
	
              
                

              
Name: Glenn
              Palmer	 	 	
            
	Title:
Chief
              Executive Officer	 	 	 

    

     

    
      
         

      

      
        7

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