Stockholders Agreement

EXECUTION COPY


STOCKHOLDERS AGREEMENT


This Stockholders Agreement (the "Agreement"), made as of the 18th day of February, 2005, by and among Gosling Partners Inc., a Delaware corporation (the "Company") and the persons listed on Schedule I hereto (the "Stockholders" and, individually, a "Stockholder").


WHEREAS, the Stockholders own all of the issued and outstanding stock of the Company in the amount shown opposite their names on Schedule I; and


WHEREAS, the Company and Stockholders desire to agree to certain restrictions and covenants in connection with the ownership of such stock in the Company and the management of the Company.


NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and in consideration of the mutual promises set forth below, the parties hereto, intending to be legally bound, agree as follows:


1. Definitions of Shares. As used in this Agreement, "Shares" shall mean and include all common stock, $0.01 par value per share ("Common Stock") of the Company, together with any shares of Common Stock and other capital stock of the Company acquired as a result of any conversion, stock split, stock dividend, recapitalization or the like.


2. Voluntary Transfers. Each Stockholder hereby agrees that he, she or it will not sell, assign, encumber, transfer pursuant to any pledge, or make any other disposition or transfer (each a "Transfer") of any Shares now or hereafter owned by him, her or it unless all of the provisions of this Agreement that are applicable to such Transfer have been complied with.


3. Prohibited and Permitted Transfers. From and after the date hereof, except as permitted by this Section 3, no Stockholder shall sell, assign, transfer, pledge, hypothecate, mortgage, encumber or dispose of all or any of its Shares except pursuant to Section 4 hereof. Notwithstanding the foregoing, a Stockholder may transfer all or any of his Shares without complying with this Section 3: (i) if the Stockholder is an individual, by way of gift to his spouse or to the siblings or lineal descendants or ancestors of such Stockholder or his spouse, or to any trust for the benefit of any one or more of the foregoing; provided, that any such transferee shall agree in writing, as a condition to such transfer, to be bound by all of the provisions of this Agreement to the same extent as if such transferee were the Stockholder transferring such Shares; (ii) if the Stockholder is an individual, by will or the laws of descent and distribution; provided, that such Shares shall thereafter remain subject to the provisions of this Agreement to the same extent they would be if held by the Stockholder; (iii) pursuant to a merger or consolidation of the Company with any other entity in which all of the Stockholders are participating on a ratable basis (based upon the number of Shares held); (iv) to another Stockholder provided that such Shares as are transferred to a Stockholder shall thereafter remain subject to the provisions of this Agreement; or (v) pursuant to a sale in which Castle Brands Inc. (the "Majority Stockholder") is selling all of its shares; provided that the purchaser of the Shares of the Majority Stockholder shall have executed and delivered an agreement, in a form acceptable to the Company, to be bound by the terms of this Agreement. Notwithstanding the foregoing, borrowings with commercial banks or comparable financial institutions, secured by the Shares, are permitted, as long as the lending institution agrees to be bound by the provisions of this Agreement, should it obtain title to the Shares.


4. Right of First Refusal. If any Stockholder shall at any time receive a bona fide offer from a third party to purchase for cash all of his, her or its Shares that the Stockholder wishes to accept, he or she shall give written notice to the Company stating the price, terms and the potential purchaser of the Shares. The Company shall have the option to purchase all, but not less than all, of the offered Shares at the price and on the other terms stated in the notice. The option to purchase the Shares shall be exercisable by notice given to the applicable Stockholder at any time within 30 days of the receipt of the notice given by such Stockholder. If the Company does not exercise its option within 30 days after receipt of the notice given by any Stockholder, the Stockholder shall give notice to the other Stockholders stating the price, terms and the potential purchaser of the Shares. The Stockholders shall have the option to purchase a number of the offered Shares equal to the same percentage of shares then owned by the Stockholder (excluding the offered Shares) at the price and on the other terms stated in the notice; provided that in order to fully exercise their rights as set forth in this Section 4 the Stockholders must collectively purchase all of the offered shares. If any Stockholder declines to exercise his, her or its rights set forth in this Section 4, the Stockholders exercising such rights shall be entitled to purchase the non-exercising Stockholders' portion of the Shares equal to the same percentage of shares then owned by the Stockholder (excluding the offered Shares and the shares of the non-exercising Stockholder). If neither the Company nor any of the other Stockholders exercises its option within 30 days after receipt of the notice given by the Stockholder, such Stockholder may, at any time within 60 days following the expiration of that 30-day option period, sell for value all, but not less than all, of the offered Shares to the purchaser listed in the notice at a cash price per share not less than the minimum price stated in the notice, provided that (i) prior to any sale, counsel for such Stockholder shall have delivered to the Company its opinion, in form and substance reasonably acceptable to the Company, that the sale will not violate any applicable federal or state securities law and (ii) the purchaser shall have executed and delivered an agreement, in a form acceptable to the Company, to be bound by the terms of this Agreement. If the offered Shares remain unsold at the end of such 60-day period, such Shares may not thereafter be transferred (except as may be permitted under another provision of this Agreement) unless the applicable Stockholder again complies with this Section 4.


5. Preemptive Right. If the Company proposes to issue any shares of Common Stock or securities convertible into or exchangeable or exercisable for shares of Common Stock, other than securities issued as a result of any stock split, stock dividend, reclassification, recapitalization or the like the Company will deliver to each Stockholder a written notice (the "New Issuance Notice") not less than thirty (30) days prior to the date of completion of such issuance (the "New Issuance"). Each Stockholder shall have the right, exercisable within fifteen (15) business days of the date of the New Issuance Notice, to purchase all or any part of such Stockholder's Pro Rata Share (as defined below) of the New Securities at the price and on the terms and conditions on which the Company proposes to make the New Issuance, such price to be paid in full in cash or by check against the issuance and delivery of the New Securities promptly after notice from the Company. For purposes of this Section 5, a Stockholder's "Pro Rata Share" means the product of (x) the number of New Securities and (y) a fraction, the numerator of which is the number of shares of Common Stock outstanding as of the date of (and


-2- immediately prior to) the proposed New Issuance held by such Stockholder and the denominator of which is the total number of shares of Common Stock outstanding as of the date of (and immediately prior to) the proposed New Issuance.


6. Liquidation, Dissolution or Winding Up. In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, Castle shall be entitled to the greater of its pro rata share of ownership in the Company or $5,000,000 of the assets of the Company available for distribution to its stockholders.


7. Certain Covenants. The Company covenants and agrees that it will comply with and observe the following covenants and provisions, unless with respect to a specific transaction, event or action that is subject to the provisions of this Section 7, it shall have been permitted to effect, participate in or proceed with such transaction, event or action pursuant to the approval of the members of the Board of Directors representing in the aggregate at least 80% of the outstand ...