U.S. POLO ASSOCIATION, LTD
SHAREHOLDERS' AGREEMENT
AGREEMENT, effective the day of October, 1998, by and among Iron Will
Group Ltd., a British Virgin Island Corporation, with an address c/o Jordache
Enterprises, Inc., 0000 Xxxxxxxx, Xxx Xxxx, XX ( "Iron Will" ), and American
Resources and Development Company, a Utah corporation, with an address at 0000
X. 000 Xxxx, Xxxxx X, Xxxx Xxxx Xxxx, XX 00000 ("Ardco1l) (each a Shareholder,
and collectively, the "Shareholders1l) and U.S. Polo Association, Ltd., a
British Virgin Island Corporation (the "Corporation"). WHEREAS, each Shareholder
is the record and beneficial owner of fifty percent (50%) of the Corporation's
issued and outstanding stock (each an "Ownership Interest1l)i and WHEREAS, the
Shareholders consider it to be in their best interest to discourage each other
from engaging in a Transfer Event, as hereinafter defined, and to ensure
continuity of management.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows.
1. Transfer of an Ownership Interest.
(a) Limitation of Transfer.
No Shareholder may, directly or indirectly, sell, assign,
mortgage, hypothecate, transfer, pledge, create a security interest in or lien
upon, encumber, gift, place in trust, or otherwise voluntarily or involuntarily
dispose of its Ownership Interest (collectively, a "Transfer Event1l) in the
Corporation except in accordance with the terms of this Agreement, and as
required by the terms of the loan being extended by Jordache Enterprises, Inc.
to Ardco as of this date.
(b) Effect of Certain Transfers.
No actual or purported transfer or encumbrance of any Ownership
Interest or interest therein, whether voluntary or involuntary, not in
accordance with the provisions of this Agreement, shall be valid or effective to
grant to the transferee of, or claimant with respect to, such interest any right
(including, without limitation, any right to cause the registration of such
interest in his name or on his behalf on the books of the Corporation, to
receive any distributions or to vote), title or interest in or to such Ownership
Interest (all such right, title and interest being hereinafter referred to as
"Ownership Rights"). Any purported transferor of any Ownership Interest shall
not be entitled to, and I specifically waives, its Ownership Rights from the
date of such purported transfer or encumbrance until such transaction shall be
rescinded.
(c) Issuance of Shares.
The Corporation shall not issue any Shares or any options, warrants
or rights to purchase or acquire any Shares or other securities convertible or
exchangeable for any Shares, without the prior written consent of all of the
directors and Shareholders.
(d) Corporate Transactions.
The Corporation shall not redeem, purchase, reclassify, recapitalize or
otherwise acquire for any consideration any Shares other than pursuant to
Section 2, without the written consent of all Shareholders.
2. Shareholder Transactions. If either Shareholder (the "Selling
Shareholder") shall wish to sell all, but not less than all, of the Ownership
Interest in the Corporation owned by it then, in such event, the Selling
Shareholder may do so only after strictly complying with the following
provisions: (a) The Selling Shareholder shall offer (the "Offer") to sell to
the Corporation and to the other Shareholder (the "Non-selling Shareholder")
all (but not less than all) of the Ownership Interest (i) at a purchase price
(the "Purchase Price") determined pursuant to section (b) immediately below.
The payment II terms shall be twenty (20%) percent in cash at Closing with the
balance payable pursuant to the promissory note terms described in Section 3
hereof (collectively, the "Buyout Terms")
(b) The value of the Corporation shall be determined pursuant to
the following formula:
Ownership percentage in the
Corporation
[(i) Book value plus (ii)5 times
(three times net pre-tax income for
the fiscal year preceding the year
of the Offer plus two times the net
pre-tax income for the second
fiscal year preceding the year of
the Offer plus the net pre-tax
income for the third fiscal year
preceding the year of the Offer,
with the total divided by six), but
the aggregate of (i) and (ii) shall
not be less than book value]. If
the Corporation shall be in
existence less than three fiscal
years prior to the year in which
the Offer is made, the formula
shall be adjusted to adapt to such
fact.
Book value and net pre-tax income shall conclusively be those amounts reported
on the Corporation's Financial Statements for the specific fiscal year involved.
(c) The Corporation and the Non-selling Shareholder shall thereupon
have the right and option for a period of 60 days after the receipt of the Offer
(the "Aceeptance Period"), either (i) to accept the offer to purchase all (but
not less than all) of the Ownership Interest on the Buyout Terms by delivering a
written notice ("Notice of Acceptance") to the Selling Shareholder within the
Acceptance Period or (ii) to reject the Offer. The Corporation shall have the
first option to exercise the rights to purchase. If the Corporation elects to
purchase less than all of the Subject Ownership Interest or declines to purchase
any of the Subject Ownership Interest, the Non-selling Shareholder shall have
the option to purchase the shares of the Selling Shareholder not acquired by the
Corporation.
(d) If effective acceptance shall have been given, closing shall
take place, within 30 days after the delivery of the Notice of Acceptance, at
the offices of Jordache Enterprises, Inc., 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx, or
such other place mutually agreed upon by the parties (the "Closing1l).
(e) If effective acceptance shall not have been given by the
Corporation and/or the Non-selling Shareholder by the delivery of a Notice of
Acceptance within the Acceptance Period, as aforesaid, then the Selling
Shareholder may sell the Ownership Interest at a price not less than the
Purchase Price, and on terms not materially more favorable to the purchaser than
the Buyout Terms, at any time within sixty (60) days (the "Option Period") after
the expiration of the Acceptance Period.
(f) If the Selling Shareholder shall fail to sell the Ownership
Interest as contemplated above within the Option Period, then the Ownership
Interest may not be sold and the provisions of this Agreement shall continue to
apply as if no Offer had been given.
(g) Any transferee of any Ownership Interest shall hold such
Ownership Interest subject to the terms of this Agreement, and thereafter shall
be referred to as one of the Shareholders as that term is used in this
Agreement. Such transferee shall not have any rights, by virtue of his or her
ownership of a Ownership Interest to be employed by the Corporation or to
receive any compensation or benefits from the Corporation of any kind or nature
whatsoever other than to share proportionately in distributions made by the
Corporation, if any.
3. Promissory Note Terms.
Any promissory note issued by a Shareholder or the Corporation
pursuant to Section 2 hereof is hereinafter referred to as a "Promissory Note"
and the person making such Promissory Note is hereinafter referred to as the
"Maker". Each Promissory Note shall be payable in: (i) 120 equal monthly
installments ( such installments being herein referred to as "Installments") of
principal, plus (ii) interest in an amount sufficient to pay all interest at the
prime rate as declared from time to time by Citibank, N .A. ( the "Prime Rate" )
in effect when the Installment is due. Each Installment shall be applied first
to the payment of interest and then to the reduction of principal. Any unpaid
interest will be added to the outstanding principal balance of the Promissory
Note and interest shall accrue thereon at the rate provided for in the
Promissory Note. Such Promissory Note shall provide for the acceleration of
payments thereunder upon a default in the payment of principal or interest
thereon, the voluntary or involuntary bankruptcy of the Maker or a default under
any other material indebtedness of the Maker. Each Promissory Note may be
prepaid by, and at the election of, the Maker at any time without premium or
penalty, but with interest through the date of such prepayment. The Promissory
Note shall be secured by the Ownership Interest, the acquisition of which
generated production of the Promissory Note.
4. Management.
Each Shareholder agrees to vote his or her shares: (a) to cause the
By-laws of the Corporation to provide for four (4) directors (b) to cause Xxxxx
Xxxxxx ("Xxxxx") and Xxxxxx Xxxxxx ("Xxx") to be elected at all times as
directors of the Corporation and to cause Xxxxxx Xxxxx ("Xxxxxx") and Will
Xxxxxxxxx ("Will"), to be elected at all times as directors of the Corporation
and (c) to cause Xxx at all times to be elected as Chairman of the Board, Xxxxx
to be elected at all times as secretary, Xxxxxx Xxxxx to be elected at all times
as president, and Will Pappenfuss to be elected at all times as vice president
of the Corporation.
Within 120 days after the execution of this Agreement, each of Iron
Will and Ardco shall file in writing with the Corporation the name and address
of the person(s) that it has selected to be its designee(s) in the event of the
death, resignation or removal as officer and/or director of Xxx or Xxxxx as to
Iron Will or Xxxxxx and Will as to Ardco. Each designating party shall have the
right to change its designee at any time.
5. Eguitable Relief.
The parties hereto agree and acknowledge that a breach of the
provisions of this Agreement could not be adequately compensated by money
damages. Accordingly, each party hereto shall be entitled, in addition to any
other right or remedy available to it, to an injunction restraining such breach
or any threatened breach to a specific performance of any such provision of this
Agreement, and in either case, no bond or other security shall be required in
connection therewith, and the parties hereto hereby consent to such injunction
and the ordering of specific performance.
6. Term.
This Agreement shall be effective for and have a term of twenty
(20) years from the date written at the head of this Agreement.
7. Arbitration.
(a) Forum. Any dispute arising out of or relating to this Agreement
or the breach, termination or invalidity thereof, shall be finally settled
by arbitration conducted in New York City in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. Judgment upon
the award rendered may be entered in any court having jurisdiction thereof.
(b) Costs and Exl2enses. The successful party (as determined by the
arbitral tribunal) shall be entitled to recover interest from the date of
any breach and reimbursement of costs and expenses of the arbitration,
including reasonable attorneys' fees incurred in connection therewith.
8. Miscellaneous.
(a) Notices: Any and all notices, designations, consents, offers,
acceptances, or any other communication provided for herein shall be made
by hand-delivery, first-class mail (registered or certified, return receipt
requested), telex, telecopies, or overnight air courier guaranteeing next
day delivery to the intended recipient:
To Iron Will Group Ltd. c/o Jordache Enterprises, Inc.
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
With a copy to: Xxxxxx X. Xxxxxxxx, Esq.
Xxxxxxxx, Xxxxxx & Golieb, P.C.
000 Xxxxx Xxxxxx - Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
To American Resources and Development Company:
0000 X. 000 Xxxx, Xxxxx X
Xxxx Xxxx Xxxx, XX 00000
with a copy to:
Except as otherwise provided in this Agreement, each such notice shall
be deemed given at the time delivered by hand, if personally delivered five (5)
business days after being deposited in the mail, postage prepaid, if mailed
when answered back, if telexed when receipt acknowledged, if telecopied and
the next business day after timely deliver to the courier, if sent by overnight
air courier guaranteeing next day delivery.
(b) Entire Agreement; Amendment. This Agreement constitutes the
entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior negotiations, representations and
agreements. No change or modification of this Agreement shall be valid,
binding or enforceable as against any Shareholder unless the same shall be
in writing and signed by all of the directors and by shareholders owning at
least two thirds (2/3) of the Corporation's issued and outstanding shares.
(c) Waiver. No failure or delay on the part of any Shareholder in
exercising any right, power or privilege hereunder, and no course of
dealing between an Entity and the Shareholders or either of them shall
operate as a waiver thereof nor shall any single or partial exercise of any
right, power or privilege hereunder preclude the simultaneous or later
exercise of any other right, power or privilege. The rights and remedies
herein expressly provided are cumulative and not exclusive of any rights
and remedies that the Shareholders or either of them would otherwise have.
No notice to or demand on any Entity in any case shall entitle such Entity
to any other further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the Shareholders or any of them to
take any other of further action in any circumstances without notice or
demand. (d) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
