JOINT VENTURE AGREEMENT

THIS JOINT VENTURE AGREEMENT (the “JV Agreement“) is made and entered into effective as of October 10, 2008 (the “Effective Date”), by and among Blue Holdings, Inc. , a Nevada corporation (“BH”), Paul Guez , the founder of BH (“Founder”), and Headgear, Inc. , a Virginia corporation (“HG”).  BH, Founder and HG shall be referred to individually as a “Party” and collectively as the “Parties.”

A.           BH manufactures and sells denim apparel, including jeans under the names “Taverniti,” “Antik,” and “Yanuk.”

B.           HG manufactures and sells apparel and footwear.

C.           The Parties and the Founder signed a letter of intent in July 2008, (the “LOI”) regarding the establishment of a joint venture “SPV” to market designated apparel product lines to selected retailers.

D.           HG advanced $500,000 to BH to finance the purchase of an initial order and BH issued to HG its Secured Promissory Note dated July 16, 2008 in the principal amount of $500,000 in respect thereof (the “Secured Note”).

E.           The Parties now desire to set forth the terms under which they will organize a limited liability company under the laws of the State of Delaware (the “Company”) to serve as the SPV through which they will market, distribute and sell the designated apparel product lines.

NOW, THEREFORE, in consideration of the above Recitals, which are incorporated herein by this reference, and the mutual promises, agreements and covenants set forth in this JV Agreement, the Parties agree as follows:

In this JV Agreement, unless otherwise clearly indicated by the context, the following terms, whether used in singular or plural forms, shall have the following meanings:

1.3           “Effective Date” has the meaning ascribed thereto above.

1.4           “Escrow Agreement” means an Escrow Agreement among the Founder, HG and the Escrow Agent named therein with respect to certain securities of BH to be executed and delivered simultaneously with the formation of the Company.

1.5           “Governmental Authority” means the United States of America, any state, commonwealth, territory or possession thereof and any political subdivision or quasi-governmental authority of any of the same, including but not limited to courts, tribunals, departments, commissions, boards, bureaus, agencies, counties, municipalities, and other instrumentalities.

1.6           “Operating Agreement” means the Limited Liability Company Agreement of the Company by and among BH, HG and the Company, in the form attached hereto as  Exhibit 1.5 , to be executed, if at all, not later than fifteen days after the Effective Date.

1.7           “Related Agreements” means the Ancillary Agreement, the Operating Agreement and the Escrow Agreement.

1.8           “Secured Note” means the secured promissory note dated July 16, 2008 issued by BH to HG in the principal amount $500,000.

1.9           “Third Party” means any person or legal entity other than BH, HG, the Founder or the Company.

1.10         “Member,” “Membership Interest,” “Board” and “Manager” shall have the meanings set forth in the Operating Agreement.

1.11         In this JV Agreement, except to the extent that the context otherwise requires (i) whenever the words “include,” “includes” or “including” are used they are deemed to be followed by the words “without limitation,” and (ii) the definitions contained in this JV Agreement are applicable to the singular as well as the plural of such terms.

2.1           Subject to the terms and conditions of this JV Agreement, on or before fifteen days after the Effective Date, the Parties shall organize the Company as a limited liability company under the laws of the State of Delaware by filing the Certificate of Formation with the Delaware Secretary of State’s office.  The date on which such filing is made is referred to as the Filing Date.  On the Filing Date, subject to Section 7.3 hereof, the parties shall enter into the Ancillary Agreement, the Operating Agreement and the Escrow Agreement.

2.2           The name of the Company shall be Blue Holdings Head Gear JV LLC.

2.3           The purpose of the Company will be to (i) market, distribute, and sell designated apparel lines produced by HG or BH to selected retailers, and (ii) engage in all activities necessary, customary, convenient or incident to the activities described herein.

3.1           HG has advanced $500,000 to BH to finance the purchase of an initial order of merchandise and BH issued the Secured Noted to HG to evidence its receipt thereof.

3.2           HG will provide an additional $1,250,000 in operating advances to BH (“BH Advances”) which will be paid to HG out of BH’s portion of the “net profits” of the Company in accordance with the terms of the Operating Agreement.  The BH Advances will be advanced in accordance with Schedule 3.2.

4.1           The Membership Interests of the Company shall be owned fifty percent (50%) by BH and fifty percent (50%) by HG.  The transfer of Membership Interests and the issuance of new Membership Interests shall be governed by the terms of the Operating Agreement.

5.1           The Company will have a Board of Managers consisting of three individuals.  HG shall designate two members of the Board.  BH shall designate one Member of the Board.

5.2           Either party may replace the Members of the Board designated by it at any time and from time to time. The relationship of the Members, the Board of Managers and the Operations Manager shall be governed by the Operating Agreement.

6.1           BH currently distributes denim products under the names “Taverniti So Jeans”, “Antik” and “Yanuk”.

6.2           Prior to the execution of the Operating Agreement the parties will review the accounts of BH and HG to determine which of their accounts will be serviced by the Company.  It is the parties understanding that all of BH’s accounts other than those which are rejected by HG will be serviced by the Company. The accounts to be serviced by the Company are referred to herein as the “JV Accounts.”  Each of HG and BH will introduce the Company to those of its accounts included in the JV Accounts.

6.3           The Company will be the exclusive distributor to the JV Accounts of all Taverniti, 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.  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.  In the case of BH brands, the license fees for licenses initiated by the JV will be split equally between the Company and BH, provided that any such revenue to BH will reduce the “Sales & Income Targets” as per the LOI.  BH shall retain its current international licenses, and shall have the right to enter into new international licenses for goods that are not to be produced or distributed by the JV.

6.4           The Company is to assume the sales representative and marketing functions currently carried on by BH and BH will retain responsibility for the design and sourcing functions for its products and for delivery of it products to the warehouses designated by the Company.  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 months 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 HG 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.

6.5           The Company may request that HG or BH perform certain functions 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, provided that the terms on which HG (or BH) shall render services to the Company must be approved by BH (or HG).  HG shall have the option to provide warehousing for the Company at rates equal to the rates currently being paid by BH

6.6           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 agreements listed on Schedule 5.3.

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

6.8           The Company shall have the right to license BH branded products to Third Parties for merchandise other than that produced by BH and HG, subject to the consent of BH which will not be unreasonably withheld.

6.9           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 to regular price customers as indicated on Schedule 6.9.  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.

6.10         BH will co-develop products with the Company provided that the Company reimburses BH f