Stallion Syndication Agreement
Fractional Interest No. ________ of ________.
Syndicate Agreement made on the ___________________ (date) , by and
between ______________________ (Name of Initial Owner One) of ______________
________________________________________________________ (street address,
city, state, zip code) , referred to herein as Owner One , ______________________
(Name of Initial Owner Two) , of ___________________________________________
______________________________ (street address, city, state, zip code) , referred
to herein as Owner Two , (Owner One and Owner Two being jointly referred to herein as
the Initial Owners ), and ____________________ (Name of Syndicate Manager) , of
______________________________________________________________________
(street address, city, state, zip code) , referred to herein as Syndicate Manager . All
subsequent purchasers of fractional interests in the stallion are hereinafter called the
Purchasers and shall be bound by and subject to all the terms and conditions of this
Agreement. All persons who, at any time, own a fractional interest in the stallion,
whether such persons are Purchasers or the Initial Owners, shall hereinafter be referred
to collectively as the Members or Co-Owners .
Whereas, the Initial Owners are the present owners of the entire interest in and
to a thoroughbred stallion named _________________________ (name) , hereinafter
called the Horse ; and
Whereas, the Syndicate Manager desires to act as Syndicate Manager of Horse
and perform all the duties connected with such position; and
Whereas, the Initial Owners desire to divide the ownership interests in Horse
into _____ (number) equal undivided fractional interests (hereinafter the Fractional
Interests ), to form a syndicate of owners of Fractional Interests (hereinafter called the
Syndicate ) and to enter into this Agreement to:
provide for the respective rights and obligations of the Co-Owners (including their
respective right to sell or otherwise dispose of their respective Fractional
Interests),
to govern the maintenance and standing of Horse for breeding purposes and
to provide for the management of the Syndicate so created, by designating
_______________________ (Name of Syndicate Manager) to act as the
Syndicate Manager thereof.
Now, therefore, for and in consideration of the mutual covenants contained in this
agreement, and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties agree as follows:
1. Syndication of Horse
Upon the execution of this Agreement, ownership of Horse shall be divided into
the _____ (number) equal undivided Fractional Interests described above, which shall
be evidenced by copies of this Agreement serially numbered _______ through ______,
inclusive, and which are held by the Members as tenants in common. Each Fractional
Interest shall represent an undivided __________ (fraction or percentage) interest in
and to Horse, shall be indivisible, shall be entitled to equal rights and privileges and
shall be subject to equal duties and obligations, and shall be subject to all of the terms
and conditions of this Agreement. If any Fractional Interest shall be owned jointly by two
or more parties, the Members and the Syndicate Manager shall be entitled to deal with
and accept and rely upon and act upon any information, instructions or facts
represented by any one of such persons. If a Fractional Interest is held by a corporation,
partnership or similar entity, the Members and the Syndicate Manager shall be entitled
to deal with and accept and rely upon and act upon any information, instructions or facts
represented by any officer of the corporation or general partner of a partnership. Only a
full Fractional Interest shall have any rights hereunder. Upon execution of this
Agreement, the Syndicate Manager shall issue and deliver Fractional Interests _______
through ______, inclusive, to the Initial Owners as follows: Fractional Interests _______
through _______, inclusive, to Owner One and Fractional Interests ______ through
________, inclusive, to Owner Two, all to evidence the respective ownership
established by this Agreement.
2. Effective Date
The syndication of the ownership of Horse and the terms and conditions of this
Agreement shall be effective and binding immediately upon the execution of this
Agreement and by the parties hereto.
3. Retirement and Location of Horse
Horse has been retired from active training and racing and will be located at
____________________ (Name of Farm) in __________________ (name of county)
County, _______________ (name of state) , and shall, from and after the date of this
Agreement, stand at stud at _______________________ (Name of Farm) in
_________________ (name of county) County, ___________________ (name of
state) , under the supervision and management of the Syndicate Manager pursuant to,
and subject to, all of the terms and conditions of this Agreement.
4. Members of the Syndicate
A. Transferability of Fractional Interest .
Each Fractional Interest shall be transferable by the Initial Owners or
Purchaser thereof subject to all of the provisions of this Agreement. Any of the
_______ (number) Fractional Interests retained by the Initial Owners shall be
subject to all of the provisions of this Agreement, except as specifically set out
herein.
B. Membership in Syndicate .
Each person or entity which acquires a Fractional Interest shall become a
member of the Horse Syndicate. The use of the term Syndicate to refer to the
aggregate of persons owning Horse as tenants in common pursuant to this
Agreement is solely for convenience, and is not intended, and shall not be
deemed to imply that such Syndicate constitutes a partnership, association, or
legal person.
C. Rights and Obligations of the Co-Owners .
The specific rights and obligations of the Members shall be as set
forth in this Agreement, including the following:
1. Each Member, in each breeding season, commencing with Horse
first breeding season, shall be entitled to one (1) free nomination (as
hereinafter defined) to Horse for each Fractional interest owned by
him, subject to the provisions of Section 8 hereof. There shall be no
accumulation of nominations from breeding season to breeding season,
and no return in a subsequent breeding season to Horse for a mare bred
to Horse that fails to produce a live foal, or for any other reason. Any such
nomination not used or availed of in any one breeding season shall not be
carried over into any subsequent breeding season, but shall be lost. A
nomination derived from a Fractional Interest for the current breeding
season and the breeding season immediately following the current
breeding season may be sold, transferred or otherwise disposed of by the
holders thereof and their heirs, successors and assigns, and shall not be
subject to the right of first refusal set forth in Section 12 hereof. However,
any nomination derived from such Fractional Interest for any breeding
season other than the current breeding season or the breeding season
immediately following the current breeding season shall be subject to such
right of first refusal. A nomination for purposes of this Agreement is for the
right to breed one (1) thoroughbred mare to Horse in a breeding season
(whether such right arises by virtue of ownership of a Fractional Interest or
any other breeding right provided for herein); provided, however, that
without the consent of the Syndicate Manager, no more shall be covered
by Horse more than five (5) breeding cycles in any one breeding season
under any individual nomination. Once a mare has been covered by Horse
in any one breeding season, the nomination shall be deemed used for that
season, and no other mare may be substituted for breeding to Horse on
such nomination during that breeding season, except that, with the
approval of the Syndicate Manager, such substitution may be permitted in
event of the death of, or breeding unsoundness of, such mare or the
breeding unsoundness of Horse at the time such mare is presented for a
subsequent breeding, provided such mare has not been examined and
found to be in foal, each such substitution to be granted upon and subject
to such terms and conditions as the Syndicate Manager may impose in
granting approval of such substitution. The decision of the Syndicate
Manager with respect to covers and substitution shall be final and
conclusive. As used in connection with the transfer of a nomination,
whether derived from a Fractional Interest or from a Breeding Right
granted pursuant to Section 10 , the term current breeding season shall
mean the breeding season occurring in the calendar year in which the
transfer occurs, unless the nomination attributable to such Fractional
Interest or Breeding Right granted pursuant to Section 10 for that season
has been lost or used, in which event the current breeding season shall be
the breeding season occurring in the immediately following calendar year.
2. Each Member shall be responsible for securing a veterinary
examination for pregnancy of each mare bred on a nomination attributable
to the ownership of a Fractional Interest, and obtaining from such
examining veterinarian and furnishing to the Syndicate Manager, prior to
September 1 of the year bred, a certificate certifying whether the mare is
believed to be pregnant or barren to the cover(s) of Horse.
D. Relationship of the Members Among Themselves and to the
Syndicate Manager .
The relationship of the Members among themselves shall be that of
tenants in common of a chattel Horse, the right to possession of which
shall be vested in the Syndicate Manager, subject only to the right of the
Members to remove the Syndicate Manager as set forth herein. The relationship
of the Members to the Syndicate Manager shall be that of principals and agent as
limited by the terms and conditions of this Agreement, which the agency of the
Syndicate Manager being one that is coupled with an interest in the subject
matter of the agency during any period in which Horse shall stand and be
maintained under the care of the Syndicate Manager. The Syndicate Manager
shall be expressly permitted to conduct any other business activities and to
accept any other engagements, including, without limitation, the management of
other stallions, the purchase, sale, racing and breeding of the thoroughbreds, or
any one or more of them.
5. Purchase and Sale of Fractional Interests
A. Generally
Fractional Interests in Horse shall be transferred only in accordance with
the terms of this Agreement, and, in particular, subject to the provisions of
Section 12 hereof.
B. Transfer of Ownership
Each Agreement shall be executed in triplicate and the original shall
always remain in the files of the Syndicate Manager. Each Member shall receive
and keep a duplicate for so long as he owns the Fractional Interest. The third
copy of this Agreement shall be retained by the Initial Owners for their files. Each
Agreement shall be attached to a certificate executed by the Syndicate Manager,
in the form attached hereto as Exhibit A .
C. Form of Transfers .
For any subsequent transfer of a Fractional Interest, the selling Member
and his transferee shall execute three (3) Horse Assignment of Fractional
Interest forms (the assignments ), in the form attached hereto as Exhibit A .
Provided by the Syndicate Manager. The selling Member shall forward all three
(3) assignments along with his copy of this Agreement to the Syndicate Manager.
All three (3) assignments must be signed by the selling Member and the
transferee before delivery to the Syndicate Manager. Upon receipt of the duly
executed assignment, the Syndicate Manager will sign all three (3) assignments,
and it will then forward one (1) copy of the executed assignment along with the
selling Member’s copy of this Agreement to the transferee. He will retain the
other copy of the executed assignment in his Syndicate files, and will mail a copy
of the executed assignment to the selling Member to evidence that the transfer
has been completed. No transfer of a Fractional Interest shall be effective as
against the Members and the Syndicate Manager until the Syndicate Manager
has executed the assignments and been provided with a copy of an instrument
setting forth the price, terms and conditions of the sale between the selling
Member and his transferee.
6. Syndicate Manager and Standing Horse
____________________ (Name of Syndicate Manager) shall act as the
Syndicate Manager and Horse shall stand for breeding purposes and shall be kept and
maintained at ____________________ (Name of Farm) in ________________ (name
of county) County, _________________ (name of state) (the Farm ) for Horse first and
subsequent breeding seasons. The Syndicate Manager may resign at any time, upon
ninety (90) days’ written notice to all Members, provided that such resignation shall not
become effective during the period commencing on __________________ (date) and
ending on _________________ (date) of any year, in which event the Members shall
determine by a majority vote of the Fractional Interests the person or entity to act as
Syndicate Manager and the location at which Horse shall stand. The Syndicate
Manager may be removed and Horse may be moved to stand elsewhere than at the
Farm, only if the owners of more than ______% of the Fractional Interests consent in
writing or vote to do so.
7. Duties, Rights, and Authority of Syndicate Manager
The Syndicate Manager shall have the following duties, rights and authority in
addition to those provided elsewhere in this Agreement:
A. General
The Syndicate Manager shall have all reasonable authority and discretion
with respect to the keeping, maintenance, care, management, breeding,
advertising, promotion and handling of Horse, the disbursement of funds
which may be necessary to, or in furtherance of, the objectives contemplated by
this Agreement and all bookkeeping, accounting and legal matters pertaining to
the operation of the Syndicate, including, without limitation, (i) the selection of a
veterinarian to attend Horse, (ii) determining, subject to the provisions of Section
8 hereof, when, on a fair and equitable basis, the mares to be serviced by Horse
shall be so serviced and whether the mares and Horse are in suitable condition
for breeding, and (iii) the keeping of books and records for the Syndicate, and the
filing of reports of operation for the Syndicate, as required by this Agreement.
The Syndicate Manager shall be entitled to determine the dates for the
commencement and ending of each breeding season. In the event of an
emergency brought on by injury or illness the Syndicate Manager shall have total
discretion in determining, with the advice of qualified veterinarians, whether
Horse should be destroyed or otherwise rendered incapable for future breeding,
on account of injury or illness, and the Syndicate Manager shall not be liable to
any Member or any other person for the good faith exercise of such discretion,
regardless of whether or not the Member has obtained insurance. Provisions of
certain insurance policies purchased by the Members may provide that the
insurance carriers shall have the right to exercise sole and absolute discretion
concerning the control of Horse (including control of the treatment, location, use,
retention and/or disposal of Horse ) in the event of sickness of, or accident to,
Horse. The Syndicate Manager shall not be bound by, and shall have no
obligation or liability from failing to abide by, any such provisions. The Syndicate
Manager may, however, in its sole and absolute discretion, nevertheless allow
the insurance carriers to exercise such policy provisions relating to control and
shall be no liability for or obligation with respect to any action taken by such
carriers or their representatives. Nothing in this paragraph shall be construed to
divest any Member of his Fractional Interest.
B. Standard of Care
The Syndicate Manager shall employ the degree of care customarily
employed in _______________ (name of state) by persons who keep and breed
Thoroughbred stallions. The Syndicate Manager shall not be liable for loss of,
theft of, or injury to Horse to anyone other than a Member who establishes by
clear and convincing evidence that such degree of care has not been employed.
Any liability of Syndicate Manager for any Member shall be offset by any
insurance proceeds available to such Member, and the insurance carried by any
Member shall contain waivers of subrogation with respect to the Syndicate
Manager. The Syndicate Manager shall not be responsible for any injury, disease
or death of any mare resulting from breeding or attempting to breed to Horse.
The Syndicate Manager shall be entitled to rely upon the person presenting any
mare for breeding as to the identity of such mare.
C. Public Liability Insurance . The Syndicate Manager shall keep and
maintain in full force, as an expense of the Syndicate, a policy of public liability
insurance in a reasonable amount, providing the same can be obtained, insuring
the Members, the Syndicate Manager and the Farm against loss or liability by
reason of the negligence of the Syndicate Manager, or the Farm, their agents,
servants, and employees, in the keep, maintenance, and standing of Horse.
D. Books and Records .
Separate books and accounts shall be kept and maintained by the
Syndicate Manager at the Farm which shall accurately reflect the mares to which
Horse has been bred, the number of covers per mare and the dates thereof, the
results of the breedings, and all disbursements in connection with maintaining
and breeding Horse and the operation of the Syndicate, and such books and
records shall be open to inspection business hours. The Syndicate Manager shall
furnish each Member, as soon after each calendar quarter as is reasonably
practicable, an invoice showing (i) all the costs and expenses incurred during that
calendar quarter in connection with the breeding, maintenance and care of
Horse, (ii) the prevailing rate in _______________ (name of state) for stallion
keep, and (iii) the nomination fees and other expenses incident with the operation
of the Syndicate as provided therein. The Members to whom an invoice is
furnished shall pay the amount shown to be due thereon within thirty (30) days
after the date of such invoice. A service charge of ______% per month may be
made by the Syndicate Manager on all past due accounts. On or before
_______________ (date) of each year the Syndicate Manager shall furnish each
Member with a statement showing the results of the preceding breeding season
and such other information as the Syndicate Manager may deem pertinent.
E. No Duty to Sell Nominations
The Syndicate Manager shall not be obligated or expected to sell
nominations for the account of the Members.
F. Stallion Service Certificates
The Syndicate Manager shall cause to be issued, in a form acceptable to
the Jockey Club, stallion service certificates required for the registration of foals
out of mares bred to Horse, subject to the provisions of Subparagraph G
immediately below.
G. Security . The Syndicate Manager shall be entitled to and shall have a lien
under §§___________ of the _________________ (name of state) Revised
Statutes upon and is granted a security interest under the Uniform Commercial
Code of _________________ (name of state) in any Fractional Interest in Horse
as to which any portion of the charges, costs and expenses due and owing to the
Farm or the Syndicate Manager by the Member owning such Fractional Interest
have not been paid. The Syndicate Manager shall be entitled to commence legal
action upon ______ (number) day’s prior written notice to a Member, the date of
such notice being the date upon which the cause of action for nonpayment shall
be deemed to occur. In the event the default shall continue for a period of _____
(number) months, commencing on the last day of the first quarter for which the
Member shall be in arrears, the Syndicate Manager shall be entitled to sell the
Fractional Interest, as agent and attorney-in-fact, for the Member who is in
default. In addition, the Syndicate Manager may withhold stallion service
certificates and may refuse to permit a mare to be bred on any season
attributable to a Fractional Interest or breeding right, the owner or transferee of
which is:
1. In arrears on amounts payable by such person pursuant to this
Agreement;
2. Is in arrears on any other amounts payable to the Syndicate
Manager, including amounts payable in connection with a stallion other
than Horse; or
3. Who fails to furnish evidence, acceptable to the Syndicate
Manager, either (a) that the uses of any Nomination or breeding right by
the holder thereof is not subject to any sales and use taxes or other taxes
imposed by the Commonwealth of _______________ (name of state) or
other jurisdiction, or (b) that all such taxes have been paid.
H. Powers of Attorney . In accordance with, and subject to the terms and
limitations hereof, each Member authorizes and empowers the Syndicate
Manager, and constitutes and appoints the Syndicate Manager as his agent and
attorney-in-fact, (i) to execute and deliver stallion service agreements, and
generally to do and file on behalf of such Member such things as the Syndicate
Manager shall deem necessary or appropriate with the Jockey Club, and (ii) to
execute such elections as may be required by the taxing authorities of the United
States and as may be provided herein.
I. Allocation of Monies
The Syndicate Manager shall allocate to the account of each Member
such Member’s proportionate share of (i) any receipts from the sale by the
Syndicate Manager of excess nominations on behalf of the Syndicate in an
excess book and (ii) any stallion awards attributable to Horse received by the
Syndicate Manager from Breeders’ Cup Limited, and any other stallion program
to which Horse may be nominated. In the event of a transfer of a Fractional
Interest, such allocation shall be made to the Member of record of the Fractional
Interest, in the case of receipts in an excess book, to the Member of record as of
_________ (time) on _________________ (date) of the applicable breeding
season unless otherwise provided for in the terms of sale for such Fractional
Interest, and in the case of receipt of stallion awards, to the Member of record on
the last day of the calendar quarter in which such receipt shall occur
J. No Liability to Third Parties
The Syndicate Manager shall have no duty to note or record third party
claims of ownership or other rights, including without limitation, security interests,
in and to Fractional Interests, breeding rights or any other interest or right created
pursuant to this Agreement. The Syndicate Manager shall be entitled to rely upon
directions given by the record owner of any such rights, as determined by the
records of the Syndicate Manager, notwithstanding actual or constructive notice
of purported third party rights in and to such interests.
8. Breeding Horse
Horse shall serve mares during the customary breeding season, subject,
however, to the following terms, conditions and limitations:
A. Normal Book of Mares and Nominations
The normal book of mares to which Horse will be bred during
all breeding seasons (hereinafter the normal book ) shall be _______ (number)
mares and shall consist of
1. One (1) thoroughbred mare nominated by each Member,
2. Four (4) thoroughbred mares nominated by the Syndicate Manager
pursuant to Section 9 hereof,
3. Two (2) thoroughbred mares nominated pursuant to Section 10
hereof, and
4. One (1) thoroughbred mare nominated by an entity or individual
acquiring the Breeder’s Cup Nomination from the Syndicate. Nominations
for the current breeding season and the breeding season immediately
following the current breeding season may be sold, exchanged, traded or
otherwise transferred or assigned if written notice of such transfer is given
to the Syndicate Manager within ______ (number) days prior to the
breeding of the mare.
B. Reduced Book of Mares
Should the Syndicate Manager in its sole discretion after consulting the
veterinarian attending Horse, determine that Horse may not be bred to the
normal book of mores during any breeding season, the Syndicate Manager shall
determine the number of mares to which Horse may be bred, and Horse shall be
bred only to such reduced number of mares (hereinafter the reduced book ). The
determination of the Syndicate Manager respecting same shall be conclusive.
The Syndicate Manager’s nominations as defined in Section 9 below and the
Breeders’ Cup nomination as defined in Section 11-E below shall be exempt
from jeopardy by reason of a reduced book. If such determination is made prior
to commencement of the breeding season, those entitled to participate in a
reduced book, and the extent of their participation therein, shall be determined by
lot, with each Fractional Interest and holder of a Breeding Right granted pursuant
to Section 10 being entitled to one draw. Notice of the fact that there will be a
reduced book, the number to which the book is to be reduced, and the time and
place of the drawing shall be sent by the Syndicate Manager to each Member
and holder at least ______ (number) days prior to the drawing. Each Fractional
Interest or holder of a Breeding Right granted pursuant to Section 10 that has
been excluded from participating in a reduced book shall not be subjected to the
risk of a drawing in any subsequent breeding season for which there is a reduced
book until all Fractional Interests and holders of Breeding Rights granted
pursuant to Section 10 shall have been excluded from participating in reduced
books. If such determination is made after commencement of a breeding season,
the Syndicate Manager may make such allocation of nominations and proceeds
from the sale thereof by the Syndicate Manager as the Syndicate Manager in its
sole discretion shall determine to be fair and equitable under the circumstances
so that the benefit of all available nominations and such proceeds shall be
allocated and paid among the Members, holders of breeding Rights granted
pursuant to Section 10 and the Syndicate Manager as nearly as practicable in
accordance with their respective interests in a normal book.
C. Condition of Horse and Mares
The Syndicate Manager may refuse to breed Horse when in the sole
discretion of Syndicate Manager to do so would be injurious to its health, fertility
or future breeding capacity. Each mare nominated or offered for breeding to
Horse shall be in sound breeding condition and free from infection and disease.
D. Excess Book of Mares
Should the Syndicate Manager determine that Horse may be bred safely
to mares in excess of the normal book during any breeding season, the
Syndicate Manager shall determine the number of mares Horse may be bred to
in addition to its normal book of mares. In the event there has been a reduced
book in any prior breeding season, the excess book shall first be allocated to the
Fractional Interest(s) of any member and to the Syndicate Manager who did not
participate in the normal book during such reduced book season, to the extent of
such reduced participation. Thereafter, the Members shall be entitled to a pro
rata share of the proceeds from the sale by the Syndicate Manager of the excess
book. The plan of the Syndicate Manager for the use or disposition of
nominations in an excess book shall be conclusive. The Syndicate Manager may
at any time cancel or defer any position of an excess book for any year in which
the Syndicate Manager shall determine such action to be in the best interests of
Horse.
E. Southern Hemisphere Breeding Season
Should the Syndicate Manager determine that Horse may be bred
to additional mares during any Second Semester or Southern Hemisphere
breeding season, the Syndicate Manager shall determine the number of mares
Horse may breed during such breeding season. The Syndicate Manager shall
then recommend to the Members that Horse be so bred to additional mares and
shall specify to the Members the expected number of such mares. The Members
shall be entitled to a pro rata share of the proceeds from the sale by the
Syndicate Manager of additional nominations during the Southern Hemisphere
breeding season. Horse may only be bred during the Southern Hemisphere
breeding season with the consent of more than _____% of the Members.
9. Compensation of Syndicate Manager and Farm; Restriction on Annual
Breeding Rights
The Members shall pay the Farm, or such other farm where Horse is maintained,
for stallion keep, as provided herein, as compensation for maintaining Horse and, as
additional compensation for its services in each breeding season Horse stands at stud
under its supervision and management, the Syndicate Manager shall receive ______
(number) Free nominations to Horse (the Syndicate Manager’s Nominations ) which
shall be non-cumulative from one breeding season to another and shall not be
irrevocably sold, transferred, assigned or otherwise disposed of over the breeding life of
Horse, or for any shorter period of time, except that in any one breeding season the
Syndicate Manager may use, exchange or otherwise dispose of any or all of the free
nominations to which it may become entitled for services rendered during such breeding
season.
10. Breeding Rights Granted to Interested Persons
The Initial Owners hereby convey ______ (number) free, non-assessable annual
breeding rights for the breeding life of Horse to _____________________ (name) , of
(street address, city, state, zip code) , his/her heirs and assigns. These breeding rights
(the Breeding Rights granted pursuant to Section 10 ) shall be subject to all the terms
and conditions of this Agreement, including the following:
A. Each Breeding Right granted pursuant to Section 10 shall be the right to
breed one (1) thoroughbred mare to Horse in each breeding season for the
breeding life of Horse, which right (or free nomination) shall be noncumulative
from one breeding season to another and any such nomination which is not used
or availed of in any one breeding season shall not be carried over into any
subsequent breeding season, but shall be lost.
B. Each of such Breeding Rights granted pursuant to Section 10 shall be
separate and severable from the other, and nominations derived from such rights may
in each breeding season that they become available be sold, transferred or
otherwise disposed of by the holders thereof and their heirs, successors and assigns,
and shall not be subject to the right of first refusal as set out in Section 12. However,
any attempted transfer of (i) an entire Breeding Right granted pursuant to Section 10,
or (ii) a nomination derived from such Breeding Right granted pursuant to Section 10
for any breeding season other than the current breeding season together with a
nomination for the breeding season immediately following the current breeding season,
shall be subject to the provisions of Section 12 hereof. The holder of a Breeding Right
granted pursuant to Section 10 shall not have a right to vote in connection with any
decision to be made by the Members, shall not be required to pay any of the expenses
of the Syndicate, and shall not be entitled to any of the earnings, if any, of the
nominations granted pursuant to Section 8-D.
11. Rights and Obligations of the Members
The specific rights and obligations pertaining to the Fractional Interests and the
Members shall be as specified in this Agreement, including the following:
A. Each Member shall be entitled to one nomination for each breeding
season for each Fractional Interest owned by him, subject to the terms,
conditions and limitations in Section 8 hereof. Such nominations are non-
cumulative. In the event that any Member has arranged for the breeding of a
mare during any breeding season, and the Fractional Interest to which said
nomination pertains shall be sold, traded or otherwise transferred prior to the end
of the breeding season concerned, the sale, transfer, or trade of the nomination
shall be unaffected, but the buyer or transferee of such Fractional Interest shall
acquire no nomination for that breeding season.
B. Each Member shall pay such proportion of all charges, costs and
expenses incurred in connection with the keeping, maintenance, care, breeding,
advertising, promotion and handling of Horse, as well as all other expenses
incidental to the operation of the Syndicate, including nomination of Horse to
sires or stakes programs such as the Breeders’ Cup Series, as the number of
Fractional Interest owned by him bears to the total of (number) Fractional
Interests.
C. Syndicate Manager or the owners of (number) of the Fractional Interests
may call a meeting of the Members to consider and aft upon any matter which
properly may be the subject of consideration and action by the Members by
giving notice of such meeting to all Members and the Syndicate Manager at least
(number) days prior to the date of such meeting. Such notice shall specify with
particularity the subject matter or matters to be considered and acted upon by the
Members. Only such matters as have been specified in the notice shall be
considered and acted upon at the meeting.
D. At all meetings of the Members, the Members shall be entitled to one vote
for each Fractional Interest owned, and the Fractional Interests may be voted in
person or by agent or proxy duly authorized in writing. Any action which may
be taken at a meeting may be taken without a meeting of Members if the required
number of Fractional Interests vote to take such actions by written instrument.
E. Members agree that it will be beneficial to all Members, their respective
transferees and assigns, if any, to annually nominate Horse progeny to the
Breeders’ Cup Series and that they direct the Syndicate Manager to annually sell
for an amount equal to or in excess of the stated or advertised stud fee for Horse,
payable in accordance with the prevailing market for nominations to Horse as
determined by the Syndicate Manager, one (1) nomination (the Breeders’ Cup
Nomination ) to Horse, the proceeds of such sale to be utilized exclusively by the
Syndicate Manager to nominate Horse progeny to the breeders’ Cup Series and
pay expenses, if any, related thereto. Because the eligibility fee must be paid
prior to receipt of the nomination fee from the purchaser of the Breeders’ Cup
Nomination, the Syndicate Manager may invoice each Member in advance for his
proportionate share of said eligibility fee as an expense of the Syndicate. Should
no mare be bred on the Breeders’ Cup Nomination or should any mare so bred
be barren or fail to produce a live foal such that no stud fee is due and payable to
the Syndicate, then the Syndicate Manager shall pay the cost of nominating
Horse progeny to the Breeders’ cup Series and shall invoice each Member for his
proportionate share as an expense of the Syndicate.
F. Each Member shall be responsible for all sales, use and other taxes
payable in connection with his own use, sale or transfer of its nominations. Each
Member shall either deposit with the Syndicate Manager the amount of all such
taxes for remittance to the appropriate taxing authority or furnish to the Syndicate
Manager such evidence of payment of, or exemption from, all such taxes as the
Syndicate Manager shall reasonably request.
12. Transferability of Fractional Interests and Certain Breeding Rights
The following provisions shall govern the circumstances under which, and the
manner in which, Fractional Interests and the breeding Rights granted pursuant to
Section 10 may be sold, transferred, assigned, or otherwise alienated or
disposed of.
A. Auction or Public Sale
Until the conclusion of the (name) breeding season of Horse, no Fractional
Interests, Syndicate Manager’s Nominations or Breeding Rights granted pursuant
to Section 10, or nominations derived from any of the foregoing, may be offered
for sale or sold at any auction (public, private, silent or otherwise), public sale,
through any ask/bid market, or through any lottery (except as set forth in B-4
below)
B. Private Sale or Placement
Fractional Interests and Breeding Rights granted pursuant to Section 10
may be sold, transferred, assigned, alienated, or disposed only as follows:
1. The Members shall have the right of first refusal for the purchase of
any Fractional Interest(s) or Breeding Right(s) granted pursuant to
Section 10 which any Member or holder thereof may at any time desire to
sell, subject to the provisions of Subsections 12-E. Accordingly, any
Member (or his mortgagee or pledgee) or holder thereof who desires to
sell or dispose of one or more Fractional Interests or Breeding Rights
granted pursuant to Section 10 shall, upon receipt of a bona fide offer for
such Fractional Interest or Breeding Right granted pursuant to Section 10
which he desires to accept, notify the Syndicate Manager in writing of the
price, terms and conditions at which he will sett such Fractional Interest(s)
or Breeding Rights granted pursuant to Section 10 and the name of the
offeror. If such Fractional Interest or breeding Right granted pursuant to
Section 10 is to be exchanged, the Member or holder thereof shall
indicate the consideration to be received and an equivalent cash
value therefore.
2. In the event a Member or holder of a Breeding Right granted
pursuant to Section 10 transfers a Fractional Interest or Breeding Right
granted pursuant to Section 10 to a secured party in satisfaction of a
debt, the price at which the Fractional Interest or Breeding Right granted
pursuant to Section 10 shall be offered to the Members shall be the lesser
of the fair market value of the Fractional Interest or Breeding Right granted
pursuant to Section 10 or the total amount of the debt satisfied by the
transferor.
3. Prior to the close of business (number) days following receipt of
such notice, the Syndicate Manager shall notify each of the other
Members of the name of the individual wishing to sell his interest, the
name of the offeror, the amount of such offer and the terms and conditions
thereof. Thereupon, each of the other Members shall have (number) days
from the date such notification is given by the Syndicate Manager within
which to notify the Syndicate Manager whether he elects to purchase such
Fractional Interest(s) or Breeding Right(s) granted pursuant to Section 10
and the number of such interests he desires to purchase. Such election to
purchase shall be at the price and subject to the same terms and
conditions as the bona fide offer received by the selling Member or holder.
4. In the event more than one Member shall elect to acquire the
Fractional Interest or Breeding Right granted pursuant to Section 10
offered, and the number of Fractional Interests or Breeding Rights granted
pursuant to Section 10 available for purchase is insufficient to enable
each electing Member to purchase one Fractional Interest or Breeding
Right granted pursuant to Section 10 then the Member or Members who
shall be entitled to purchase the available Fractional Interest(s) or
Breeding Right(s) granted pursuant to Section 10 shall be determined by
lot. The number of chances in such lottery allocated to any Member shall
be equal to the sum of the number of each Member’s Fractional Interests
and the number of such Member’s Breeding Rights, whether derived from
Section 9 or Section 10 hereof. The Member determined by lot to be
entitled to purchase the Fractional Interest or Breeding Right granted
pursuant to Section 10 shall be required to purchase the same at
(time) on the first business day following the determination by the
Syndicate Manager if, and only if, at such time Horse is in good general
health and sound for breeding purposes, at which point risk of loss shall
pass. No Member shall be precluded from participating in any lottery by
virtue of having been successful in any prior lottery.
5. In the event none of the other Members elects to purchase the
available Fractional Interest(s) or Breeding Right(s) granted pursuant to
Section 10, the Syndicate Manager shall have the exclusive right and
option, for a period of two (2) business days following the expiration of the
ten (10) day period provided for in Subsection 12-B-2 hereof, to
purchase, at the specified price and upon the specified terms, any or all
such available unpurchased Fractional Interests or Breeding Rights
granted pursuant to Section 10.
6. If neither the Syndicate Manager nor any of the Members elects to
purchase the available Fractional Interest(s) or Breeding Right(s) granted
pursuant to Section 10 at such price and upon such terms and conditions
from the Member (or his mortgagee or pledgee) or holder thereof who
desires to sell the same, then such Fractional Interest(s) or Breeding
Right(s) granted pursuant to Section 10 shall be freely alienable, if and
only if, the sale is made by the selling Member or holder thereof within
(number) days following the expiration of the (number) day period
provided for in Subsection 12-B-4 above:
a. At the price and upon the terms and conditions specified in
the notice,
b. To the offeror from whom he has received such offer, and
c. Upon proper execution and delivery of all documents
required in Section 5 hereof as to Fractional Interests or such
documentation as the Syndicate Manager may require in its
discretion (as to Breeding Rights granted pursuant to Section 10 ).
7. In the event a Member or holder of a Breeding Right granted
pursuant to Section 10 grants a security interest in a Fractional Interest or
Breeding Right granted pursuant to Section 10 and subsequently
defaults, the secured party, as selling agent for the defaulting Member or
holder of a Breeding Right granted pursuant to Section 10, shall be
subject to the provisions of this Section 12 .
C. Restrictions on Transferability and Survival Thereof
No Fractional Interest of Breeding Right granted pursuant to Section 10
may be sold, transferred, assigned or otherwise disposed of except in
accordance with the terms and provisions of this Section 12, and the transferee
of any Fractional Interest or Breeding Right granted pursuant to Section 10 that
is to be sold, transferred, assigned, alienated, or disposed of shall:
1. Along with the transferor of such interest be obligated to pay any
outstanding or unpaid invoice relating to such Fractional Interest or
breeding Right granted pursuant to Section 10 notwithstanding the fact
that the expenses or costs covered by such invoice may have been
incurred prior to such transfer, and
2. Shall continue to be subject to all of the terms, provisions and
restrictions contained in this Agreement.
D. Effectiveness of Transfer
No transfer of a Fractional Interest or Breeding Right granted pursuant to
Section 10 shall become effective as between the selling Member or holder
thereof and the transferee, unless and until the selling Member or holder thereof
and his transferee shall have satisfied all of the requirements of documentation
required by Section 5 hereof (as to Fractional Interests) or as the Syndicate
Manager may require (as to Breeding Rights granted pursuant to Section 10 ).
E. Related Party Transfers
Fractional Interests and Breeding Rights granted pursuant to Section 10
may pass by inheritance or will without such transfer being subject to the right of
first refusal, but subject to all other terms and conditions of this Agreement.
Further, Fractional Interests and Breeding Rights granted pursuant to Section 10
may be transferred to any member of any owner’s immediate family or to any
firm, entity or trust owned or controlled by the owner of such Fractional Interest or
Breeding Right granted pursuant to Section 10 or to a trust, the beneficiaries of
which are descendants or immediate family members of the owner of such
Fractional Interest or Breeding Rights granted pursuant to Section 10
(hereinafter collectively referred to as Related Parties), without being subject to
the right of first refusal, provided, that:
1. In the case of a transfer to a firm, entity or trust owned or controlled
by the transferor an affidavit stating ownership or control of the transferee
be signed by the transferor and provided to the Syndicate Manager and
2. Such transfer is not being made for the purpose of avoiding any of
the terms of this Agreement. Any subsequent transfers to individuals or
entities who are not Related Parties will be subject to the right of first
refusal.
F. Applicability to Initial Owner’s Interests
Fractional Interests retained by the Initial Owners shall be subject to
the right of first refusal as provided in Subsection 12-B above.
G. Expenses
All direct expenses incurred by the Syndicate Manager in performing its
duties under this Section 12 shall be paid by the selling Member or owner of the
Breeding Right granted pursuant to Section 10 and until such expenses have
been paid in full, the Syndicate Manager may, at is election,
1. Refuse to recognize the transfer of the Fractional Interest or such
breeding right, or
2. Recognize such transfer, in which event transferor and transferee
shall be jointly and severally liable for such costs
13. Mortality Insurance on Horse
Horse shall NOT be insured by the Syndicate Manager for the benefit of or at the
expense of the Members of the Syndicate herein created. Reach Member may, at his
election, insure the mortality of Horse at his individual cost and expense to the extent of,
but only to the extent of, his insurable interest in Horse . No member shall be entitled to
obtain or maintain in force mortality insurance on Horse to the prejudice or exclusion of
any other Member who has an insurable interest in Horse and who desires to obtain
such insurance.
14. Tax Election
It is not the purpose or intention of this Agreement to create, and this Agreement
shall not be considered as creating a joint venture, partnership or other relationship
whereby any party shall be held liable for the omissions or commissions of any other
party. No partnership, legal person, or association are intended or hereby created by
the parties.
A. Election Not to Be Treated as a Partner . If for federal tax purposes this
Agreement, the relationships established hereby and the operations conducted
hereunder are regarded as a partnership, as that term is defined by the Internal
Revenue Code of 1986, as amended (the Code ), then the owners of all
Fractional Interests, whenever owned, hereby elect not to be treated as a
partnership and to be excluded from the application of all the provisions of
Subchapter K of the Code, pursuant to an election under Section 761(a) of the
Code (Treas. Reg. §1.761-2). In addition, to the extent that the laws of the
Commonwealth of (name of state) , or any other state with jurisdiction over the
subject matter hereof, contain, or hereafter contain, provisions similar to those
contained in Subchapter K of the Code, under which a similar election is
permitted, the owners of all Fractional Interests, whenever owned, hereby agree
and elect to be excluded from such provisions. In making this election, the
owners of all Fractional Interests, whenever owned, acknowledge that the
income derived by each Member by virtue of his ownership of same can be
determined adequately without the necessity for any computation of partnership
taxable income, and all such owners agree not to give any notice or to take any
action inconsistent with the election hereby made.
B. Documents Evidencing Election
Syndicate Manager is hereby authorized and directed to execute such
evidence of the foregoing election pursuant to Treas. Reg. §1.761.2, or to make
such election if the election herein contained is insufficient for any reason, as
may be required by the Secretary of the Treasury of the United States or the
Internal Revenue Service. Should there be any requirement that the Members
evidence further such an election, the Members agree to execute such
documents and furnish such other evidence as may be required to evidence such
election.
C. Allocation of Income, Expenses and Depreciation of a Partnership
If for federal income tax purposes the Syndicate is regarded as a
partnership, then to each Member shall be allocated the proportion of income,
expenses, and depreciation arising from such operations as the number of
Fractional Interests owned by such Member bears to the total number of
Fractional Interests. Notwithstanding the foregoing if the relationship established
by this Agreement is treated as a partnership for tax purposes, all depreciation,
gain, loss, deduction, credit or item thereof shall, as required by Section
704 of the Code, be determined with respect to Horse and shared among the
Members so as to take full account of the variation (if any) between the basis of
Horse to the Syndicate and Horse’s fair market value at the time of the
Syndicate’s formation using the traditional method with curative allocations within
the meaning of Treas. Reg. §1.704-3(c), Syndicate Manager shall not, without
the prior consent of the owners of a majority of the Fractional Interests, be
required to make the election described by Section 754 of the Code.
D. Tax Matters Partner
If the Syndicate is regarded as a partnership the Syndicate Manager is, if
permitted by law, hereby designated as the tax matters partner described in
Code Section 6231(a)(7) and shall possess all necessary power and authority to
act in such capacity on behalf of the Syndicate. If the Syndicate Manager is not
permitted by law to be the tax matters partner, such partner shall be chosen by a
simple majority of the members. All costs incurred by the tax matters partner
including, without limitation, the cost of legal accounting services, shall be
reimbursed to the tax matters partner by the Members.
15. Termination or Modification of Agreement
This Agreement and the Syndicate created hereby may not be terminated,
canceled, altered, amended, or modified in any manner or respect, without the written
consent of the owners of more than ____% of the Fractional Interests (or, with respect
to certain matters, such higher percentage as may be set forth elsewhere herein),
provided, however, that no amendment or modification to this Agreement shall affect the
rights of the owners of the Breeding Rights granted pursuant to Section 10.
16. Breach of Warranty or Representation
Should any purchaser of any Fractional Interest or Breeding Right institute an
action against the person from whom he acquired such Fractional Interest or Breeding
Right granted pursuant to Section 10 based upon an alleged breach of one or
more representations or warranties made by such seller, the person against whom that
action is instituted (upon being notified hereof) shall defend such action at this individual
cost and expense, and, if a final judgment is entered from which no appeal can be taken
to the effect that such a breach did occur, the person against whom that action was
instituted shall be solely liable to the person or persons who instituted the same for such
damages as they, or any of them, may have sustained by reason of such breach,
limited, however, to the cash consideration paid for each Fractional Interest or Breeding
Right granted pursuant to Section 10 owned by such person or persons, plus interest
and court costs, exclusive of counsel fees. Each Selling Member or seller of any
Breeding Right granted pursuant to Section 10 agrees to hold harmless
and indemnify each non-selling Member and other holders of breeding Rights granted
pursuant to Section 10 and the Syndicate created hereby from any costs, expenses
and liabilities resulting from a breach or alleged breach of one or more representations
or warranties made in connection with the sale or transfer of a Fractional Interest or
Breeding Right granted pursuant to Section 19 by such selling party.
17. Evidence of Syndication
The Jockey Club Certificate of Foal Registration for HORSE shall be endorsed to
the Syndicate created hereby the Initial Owners and shall be delivered to the Syndicate
Manager, who shall hold same on behalf of the Syndicate.
18. Notices
Any notice given or required to be given to the Members hereunder shall be
effective and binding if, and the same shall be deemed to have been given when
delivered in writing,
1. Delivered in person;
2. Mailed postage prepaid by certified or registered mail;
3. Dispatched by express courier; or
4. Dispatched by facsimile transmission, telegram or cable to the
person to whom it is required to be given at his address designated herein or to
such other address as he shall designate by written notice sent to the Syndicate
Manager for that purpose, and notices to the Syndicate Manager shall only be
effective and binding upon the actual and timely receipt thereof by the Syndicate
Manager.
19. Waiver of Right to Demand Partition
The Members hereby waive whatever right they may have to demand the
partition, or sale for partition, of Horse under any law of the Commonwealth of (name of
state) , or any other jurisdiction, and they do hereby agree that the sole and
adequate means by which an owner of a Fractional Interest may divest himself of his
interest in Horse shall be the transfer of the Fractional Interest(s) which he owned
therein pursuant to the provisions of Section 12 hereof.
20. Binding Agreement
This Agreement and each and every provision hereof shall be binding upon and
shall inure to the benefit of the parties to this Agreement and all other persons who
acquire Fractional Interests or the right thereto, and their respective heirs, personal
representatives, administrators, successors, assigns and transferees, whether with or
without consideration.
21. Applicability of Agreement to Subsequent Agreement of Purchasers of
Fractional Interests and Breeding Rights
Any person or entity not a party to this Agreement at the time of its original
execution who purchases or otherwise acquires a Fractional Interest or breeding right or
the right thereto in Horse shall be deemed a party to this Agreement to the same extent
and in the same manner as though he had signed and executed the original hereof, and
any such person or entity agrees to execute any agreement reasonably requested by
the Syndicate Manager evidencing such person’s consent to the terms of this
Agreement.
22. Representations; Disclaimers
A. As a condition of sale, any Purchaser of a Fractional Interest or Breeding
Right acknowledges and agrees, and represents and warrants the following,
which representations and warranties such Purchaser shall make by his act of
submitting the transfer form or other required documentation to the Syndicate
Manager:
1. That the Purchaser is engaged in the business of racing and
breeding Thoroughbred Horse’s and that the purchase of the Fractional
Interest or other breeding right is for the purpose of facilitating such
endeavor.
2. The Purchaser is not dependent upon the expertise or
management of the Syndicate Manager in order to successfully conduct
the affairs of the purchaser’s own breeding endeavor either as a result of
the Purchaser’s acquisition of the Fractional Interest or other breeding
right or otherwise, other than the purchaser’s reliance upon the Syndicate
Manager’s normal custodial responsibilities as set forth in this Agreement.
3. The Purchaser is acquiring the Fractional Interest or other breeding
right with the intention of using the Fraction Interest or breeding right in the
Purchaser’s own breeding operation with said Fractional Interest or
breeding right being purchased for the Purchaser’s own account and not
for the present purpose of reselling, assigning or in any way redistributing
same.
4. The Purchaser is aware of the costs and risks associated with the
ownership of Thoroughbred Horse and interests in stallions.
5. The Purchaser understands that the purchase of an undivided
fractional interest or other breeding right in a Horse is speculative and
involved a high degree of risk, and Purchaser is able to afford the payment
of the purchase price of the Fractional Interest or other breeding right and
is financially able to bear the costs associated with the ownership thereof;
that he has the ability to retain the Fractional Interest or other breeding
right for an indefinite period of time and to sustain a possible loss of the
purchase price and any subsequent expense contributions without a
significant impact on the Purchaser’s other assets.
6. The Purchaser acknowledges that he and/or his representatives
have been afforded the opportunity to ask questions of and to receive
answers from the Syndicate Manager and Initial Owners or persons
authorized to act on their behalf concerning Horse, the Syndicate
operations, and any aspect of membership in the Syndicate, all to
Purchaser’s satisfaction.
7. The Purchaser acknowledges that he and/or his representatives
have been granted the right to inspect Horse, and the Syndicate’s legal
documents, and to obtain any additional information to the extent the
Syndicate Manager or Initial Owners possess such information or can
acquire it without unreasonable effort or expense, which is necessary to
make an informed business decision or to verify any other information
provided.
B. Each of the representations set forth in Section 22(a)(1-7) are also made
by the Initial Owners each to the other and to the Syndicate Manager.
C. THE INITIAL OWNERS AS BETWEEN THEMSELVES, AND THE INITIAL
OWNERS AND THE SYNDICATE MANAGER AS TO ALL PURCHASERS OF
FRACTIONAL INTERESTS OR OTHER BREEDING RIGHTS, DISCLAIMS ANY AND
ALL WARRANTIES, EXPRESS OR IMPLIED, AS TO HORSE, INCLUDING
WITHOUT LIMITATION (A) ANY WARRANTY AS TO BREEDING SOUNDNESS, (B)
FITNESS FOR ANY INTENDED PURPOSE, AND (C) MERCHANTABILITY.
25. Severability
The invalidity of any portion of this Agreement will not and shall not be deemed to
affect the validity of any other provision. If any provision of this Agreement is held to be
invalid, the parties agree that the remaining provisions shall be deemed to be in full
force and effect as if they had been executed by both parties subsequent to the
expungement of the invalid provision.
26. No Waiver
The failure of either party to this Agreement to insist upon the performance of any
of the terms and conditions of this Agreement, or the waiver of any breach of any of the
terms and conditions of this Agreement, shall not be construed as subsequently waiving
any such terms and conditions, but the same shall continue and remain in full force and
effect as if no such forbearance or waiver had occurred.
27. Governing Law
This Agreement shall be governed by, construed, and enforced in accordance
with the laws of the State of __________.
28. Mandatory Arbitration
Any dispute under this Agreement shall be required to be resolved by binding
arbitration of the parties hereto. If the parties cannot agree on an arbitrator, each party
shall select one arbitrator and both arbitrators shall then select a third. The third
arbitrator so selected shall arbitrate said dispute. The arbitration shall be governed by
the rules of the American Arbitration Association then in force and effect.
29. Entire Agreement
This Agreement shall constitute the entire agreement between the parties and
any prior understanding or representation of any kind preceding the date of this
Agreement shall not be binding upon either party except to the extent incorporated in
this Agreement.
30. Modification of Agreement
Any modification of this Agreement or additional obligation assumed by either
party in connection with this Agreement shall be binding only if placed in writing and
signed by each party or an authorized representative of each party.
31. Counterparts
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute but one and
the same instrument.
32. In this Agreement, any reference to a party includes that party's heirs, executors,
administrators, successors and assigns, singular includes plural and masculine includes
feminine.
WITNESS our signatures as of the day and date first above stated.
_____________________________
(Printed Name of Initial Owner One)
(Signature of Initial Owner One)
_____________________________
(Printed Name of Initial Owner Two)
(Signature of Initial Owner Two)
______________________________
(Printed Name of Syndicate Manager)
(Signature of Syndicate Manager)
