Syndicate Agreement: Definition & Sample

A syndicate agreement is a contract between two parties in which one party agrees to provide capital for another party's business venture. It can also be used as a legal document that defines the relationship and terms of the investment. Syndicates are often used when businesses need additional capital but don't want to give away any control over their company.

A syndicate agreement is a type of legal document that helps determine how much money a party will receive from their investment and what percentage of ownership they will have in a company. If a party is looking for investors or trying to raise more funds, a syndicate agreement may be an essential document that protects both parties involved in the transaction.

Common Sections in Syndicate Agreements

Below is a list of common sections included in Syndicate Agreements. These sections are linked to the below sample agreement for you to explore.

Syndicate Agreement Sample

SYNDICATE INVESTORS STOCKHOLDERS AGREEMENT

GOODMAN GLOBAL, INC.

This Syndicate Investors Stockholders Agreement (the “ Agreement ”) is entered into as of February 17, 2005, by and among Goodman Global, Inc., a Delaware corporation (the “ Company ”), Frio Holdings LLC, a Delaware limited liability company (“ FHL ”), and each of the purchasers who become parties hereto from time to time in accordance with the terms hereof (each individually, a “ Syndicate Stockholder ,” and collectively, the “ Syndicate Stockholders ”). These parties are sometimes referred to herein individually by name or as a “ Party ” and collectively as the “ Parties .”

WHEREAS, pursuant to that certain Syndicate Investors Stock Purchase Agreement, dated as of the date hereof (the “ Stock Purchase Agreement ”), among FHL and the Syndicate Stockholders who are parties thereto, FHL has sold and each such Syndicate Stockholder has purchased the number of shares of the Company’s common stock, par value $0.01 per share (“ Common Stock ”), and the number of shares of the Company’s 9.5% Series A Cumulative Senior Redeemable Exchangeable Preferred Stock, par value $0.01 per share, with a liquidation preference of $1,000 per share at the time of initial issuance (“ Preferred Stock ” and, together with Common Stock, “ Equity Securities ”) designated therein, on the terms and conditions set forth in the Stock Purchase Agreement;

WHEREAS, the Company, FHL and the Syndicate Stockholders desire to enter into this Agreement to provide for certain matters with respect to the ownership and transfer by the Syndicate Stockholders of all shares of Equity Securities owned as of the date hereof or hereafter issued to or acquired by the Syndicate Stockholders (collectively, the “ Restricted Shares ”); and

WHEREAS, capitalized terms used herein without definition elsewhere in this Agreement are defined in Section 8.

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements set forth herein, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties hereto, intending to be legally bound, hereby agree as follows:

Section 1. Sales to Third Parties .

(a) Each Syndicate Stockholder hereby agrees that it shall not sell, assign, transfer, convey, pledge or otherwise dispose of (collectively, “ Transfer ”) any Restricted Shares without the prior written consent of the Company, which consent shall have been authorized by a majority of the members of the Board of Directors of the Company (the “ Board ”), which consent may be (i) withheld in the sole discretion of the Board, or (ii) given subject to reasonable terms and conditions determined by the Board in its sole discretion; provided , that the Company agrees

to definitively respond to a written request with respect to a Transfer not more than 45 days after receipt of such request so long as such request includes all of the information to be included in an Offer Notice (as defined pursuant to Section 1(b)(i)). Each Syndicate Stockholder further agrees that in connection with any Transfer consented to by the Company, such Syndicate Stockholder shall, if requested by the Company, deliver to the Company an opinion of counsel in form and substance reasonably satisfactory to the Company and counsel for the Company, to the effect that the Transfer is not in violation of this Agreement, the Securities Act of 1933, as amended (the “ Securities Act ”), or the securities laws of any state. Any purported Transfer in violation of the provisions of this Section 1 shall be null and void and shall have no force or effect.

(b) (i) If a Syndicate Stockholder (the “ Offering Stockholder ”) shall have received a bona fide offer or offers from a third party or parties to purchase any Restricted Shares which such Offering Stockholder desires to accept, and the Transfer shall have been approved pursuant to Section 1(a), prior to selling any Restricted Shares to the third party or parties, the Offering Stockholder shall deliver, within 30 days following such approval of the Transfer pursuant to Section 1(a), to the Company and FHL a letter (the “ Offer Notice ”) signed by the Offering Stockholder setting forth: (A) the name of the third party or parties; (B) the prospective purchase price per share of the Restricted Shares; (C) all material terms and conditions contained in the offer of the third party or parties; and (D) the Offering Stockholder’s offer (irrevocable by its terms for 45 days following the later of (x) the date of the delivery of such Offer Notice or (y) the six month anniversary of the date such Restricted Shares were first purchased by the Syndicate Stockholder (such 45-day period, the “ Offer Period ”)) to sell to the Company and FHL all (but not less than all) of the Restricted Shares covered by the offer of the third party or parties, for a purchase price per share and on other terms and conditions not less favorable to the Company and FHL than those contained in the offer of the third party or parties (an “ Offer ”).

(ii) Upon receipt of such Offer Notice, the Company shall have an option to purchase any or all of the Restricted Shares described in the Offer Notice at the purchase price and upon the terms and conditions specified in the Offer. If the Company desires to exercise the option set forth in the preceding sentence, it shall deliver a notice (an “ Election Notice ”) to the Offering Stockholder and FHL at any time during the first 45 days of the Offer Period (such 45-day period, the “ Election Period ”), which Election Notice shall specify the number of Restricted Shares subject to the Offer to be acquired. In the event that the Company delivers an Election Notice for less than all of the Restricted Shares subject to the Offer, such Election Notice shall not be effective unless and until FHL delivers an Election Notice to purchase the remaining Restricted Shares subject to the Offer pursuant to Section 1(b)(iii) below.

(iii) In the event the Company does not deliver an Election Notice before the end of the Election Period or any Election Notice so delivered does not relate to the purchase of all the Restricted Shares described in the Offer Notice, then FHL (or, in its discretion, any other Principal Stockholder(s) designated by FHL) shall have the option to purchase no less than all of the remaining Restricted Shares subject to the Offer at the purchase price and upon the terms and conditions specified in the Offer by delivering an Election Notice to the Offering Stockholder and the Company within 15 days after the first to occur of (A) the expiration of the Election Period or (B) receipt of an Election Notice from the Company which relates to less than all of the Restricted Shares described in the Offer Notice. In the event

Election Notices are delivered by both the Company and FHL (or any other applicable Principal Stockholder), and, as a result of miscalculation or similar error, the aggregate number of Restricted Shares described in such Election Notices exceeds the aggregate number of Restricted Shares specified in the Offer, the number of Restricted Shares to be purchased by FHL (or any other applicable Principal Stockholder) shall be reduced accordingly.

(iv) If the Company and/or FHL (or any other applicable Principal Stockholder) delivers an Election Notice, then it shall be obligated to purchase, and the Offering Stockholder shall be obligated to sell, the Restricted Shares described in such Election Notice at the purchase price per share and on other terms and conditions indicated in the Offer, except that the closing of such purchase and sale shall occur on a closing date selected by the Company or FHL (or any other applicable Principal Stockholder), as applicable; provided , however , that such closing date shall be not less than 45 days nor more than 90 days following the date of the Offer Notice. Unless otherwise mutually agreed, the closing shall be consummated at the principal offices of the Company.

(v) If neither the Company nor FHL (or any other applicable Principal Stockholder) delivers an Election Notice to the Offering Stockholder within the time periods described in Section 1(b)(ii) and 1(b)(iii), as applicable, or the Election Notices delivered in the aggregate relate to less than all of the Restricted Shares subject to the Offer, then the Offering Stockholder may, during the period beginning on the 46 th day following the receipt of the Offer Notice by the Company and FHL and ending on the 90 th day following the receipt of the Offer Notice by the Company and FHL, sell to the third party or parties all (but not less than all) of the Restricted Shares covered by the Offer, for the purchase price and on the other terms and conditions contained in the Offer.

(c) Notwithstanding the foregoing but subject to Section 1(d) below, nothing in this Section 1 shall prevent the Transfer of any Restricted Shares by any Syndicate Stockholder to (i) the Company, (ii) any Principal Stockholder, or (iii) an Affiliate of such Syndicate Stockholder. Notwithstanding the foregoing, nothing in this Section 1 shall prevent the Transfer of any Restricted Shares by any Syndicate Stockholder pursuant to (i) the exercise by the FHL Stockholders of their Bring-Along Right (as defined below) in accordance with Section 2 below, or (ii) the exercise by a Syndicate Stockholder of its Syndicate Tag-Along Right (as defined below) in accordance with Section 3 below.

(d) In addition to the restrictions set forth elsewhere in this Agreement, any Transfer of Restricted Shares by a Syndicate Stockholder to a transferee shall be permitted only if the transferee shall agree in writing to be bound by the terms and conditions of this Agreement pursuant to an instrument of assumption reasonably satisfactory in form and substance to FHL. Upon the execution of the instrument of assumption by such transferee, such transferee shall be deemed to be a Syndicate Stockholder for all purposes of this Agreement.

Section 2. FHL Stockholders Bring-Along Right .

(a) If the FHL Stockholders at any time, or from time to time, in one transaction or a series of related transactions, propose to Transfer any class of Equity Securities (or rights to acquire Equity Securities ) to one or more Persons (a “ Third Party Purchaser ”), then

the FHL Stockholders shall have the right (a “ Bring-Along Right ”), but not the obligation, to require each Syndicate Stockholder to tender for purchase to the Third Party Purchaser, on the same terms and conditions as apply to the FHL Stockholders, a number of Restricted Shares of such class that, in the aggregate, equal the lesser of (A) the number derived by multiplying (1) the total number of Restricted Shares of such class owned by the Syndicate Stockholder; by (2) a fraction, the numerator of which is the total number of shares of Equity Securities of such class to be sold by the FHL Stockholders in connection with the transaction or series of related transactions and the denominator of which is the total number of the then outstanding Equity Securities of such class (including shares issuable upon the exercise of rights to acquire Equity Securities of such class) held by the FHL Stockholders; or (B) the number of shares as the FHL Stockholders shall designate in the Bring-Along Notice (as defined below). Notwithstanding the foregoing, the obligation of the Syndicate Stockholders with respect to the Bring-Along Rights are subject to the satisfaction of the following conditions: (i) all holders of a class of securities receive the same consideration per share, and to the extent that any such holder is provided an election as to the form or type of consideration to be received, all holders of such class of security are provided the same election, (ii) the Syndicate Stockholders shall not be required to make any representations, warranties, indemnities or other agreements which are different from those made by the FHL Stockholders, (iii) no Syndicate Stockholder shall have any indemnification obligation with respect to any class of securities sold in such transaction which is disproportionate with the indemnity obligations of other selling stockholders holding securities of the same class, and (iv) no Syndicate Stockholder shall have any indemnification obligation in excess of the net proceeds received by such Syndicate Stockholder in such transaction.

(b) If the FHL Stockholders elect to exercise their Bring-Along Right under this Section 2 with respect to the Restricted Shares held by the Syndicate Stockholders, the FHL Stockholders shall notify each Syndicate Stockholder in writing (collectively, the “ Bring-Along Notices ”). Each Bring-Along Notice shall set forth: (i) the proposed amount and form of consideration and terms and conditions of payment offered by the Third Party Purchaser(s) and a summary of any other material terms pertaining to the Transfer (“ Third Party Terms ”); and (ii) the number of Restricted Shares that the FHL Stockholders elect each Syndicate Stockholder to sell in the Transfer. The Bring-Along Notices shall be given at least five days before the closing of the proposed Transfer.

(c) Upon the giving of a Bring-Along Notice, each Syndicate Stockholder shall be obligated to sell the number of Restricted Shares set forth in each Syndicate Stockholder’s Bring-Along Notice on the Third Party Terms.

(d) At the closing of the Transfer to any Third Party Purchaser(s) pursuant to this Section 2, the Third Party Purchaser(s) shall remit to the Syndicate Stockholder the consideration for the total sales price of the Equity Securities held by the Syndicate Stockholder sold pursuant hereto minus any consideration to be escrowed or otherwise held back in accordance with the Third Party Terms (which in no event shall be disproportionate from the aggregate consideration received by such Syndicate Stockholder in connection with such Transfer), against delivery by the Syndicate Stockholder of certificates for Equity Securities, duly endorsed for Transfer or with duly executed stock powers reasonably acceptable to FHL, and the compliance by the Syndicate Stockholder with any other conditions to closing generally

applicable to the FHL Stockholders and all other holders of Equity Securities selling shares in the transaction.

Section 3. Syndicate Stockholders Tag-Along Rights .

(a) Except as otherwise provided by Section 3(d), if the FHL Stockholders at any time propose to Transfer any class of Equity Securities (or rights to acquire Equity Securities) to a Third Party Purchaser (other than a Principal Stockholder), in a single Transfer or a series of related Transfers constituting more than 10% of the Equity Securities of such class held by the FHL Stockholders on the date immediately preceding the date this Agreement is first entered into, then each Syndicate Stockholder shall have the right (the “ Syndicate Tag-Along Right ”) to require that the proposed Third Party Purchaser purchase from such Syndicate Stockholder, on the same terms and conditions as apply to the FHL Stockholders, up to the number of Restricted Shares of such class equal to the number derived by multiplying (x) the total number of Equity Securities of such class that the proposed Third Party Purchaser has agreed or committed to purchase, by (y) a fraction, the numerator of which is the total number of Restricted Shares of such class owned by the Syndicate Stockholder (including shares issuable upon the exercise of rights to acquire Equity Securities of such class), and the denominator of which is the aggregate number of Equity Securities of such class owned by the FHL Stockholders, the Syndicate Stockholder and all other holders of Equity Securities of such class who have exercised a tag-along right similar to the rights granted to the Syndicate Stockholder in this Section 3 (including shares issuable upon the exercise of rights to acquire Equity Securities of such class and including, in the case of a Transfer of shares of Common Stock, any shares of Common Stock issuable to such other holders upon the exercise of all vested options (including options that vest as a result of the consummation of the Transfer to the Third Party Purchaser)). For the avoidance of doubt, it is intended that the Syndicate Tag-Along Right always be exercised on a class by class basis, and the intent of this computation is to accord to the Syndicate Stockholder the right to sell the same percentage of his or her direct and indirect holdings of Equity Securities of such class as the FHL Stockholders are entitled to sell in such transaction.

(b) The FHL Stockholders shall notify each Syndicate Stockholder in writing in the event the FHL Stockholders propose to make a Transfer or series of Transfers giving rise to a Syndicate Tag-Along Right at least fifteen (15) business days prior to the date on which the FHL Stockholders expect to consummate such Transfer (the “ Syndicate Sale Notice ”) which notice shall specify the number of shares of each class of Equity Securities which the Third Party Purchaser(s) intends to purchase in such Transfer and the Third Party Terms. The Syndicate Tag-Along Right may be exercised by any Syndicate Stockholder by delivery of a written notice to the FHL Stockholders proposing to sell Restricted Shares (the “ Syndicate Tag-Along Notice ”) within ten (10) business days following receipt of the Syndicate Sale Notice from the FHL Stockholders. The Syndicate Tag-Along Notice shall state the number of Restricted Shares that the Syndicate Stockholder proposes to include in such Transfer to the proposed Third Party Purchaser (not to exceed the number as determined above). In the event that the proposed Third Party Purchaser does not purchase the specified number of Restricted Shares from the Syndicate Stockholder on the same terms and conditions as specified in the Syndicate Sale Notice, then the FHL Stockholders shall not be permitted to sell any shares of Equity Securities to the proposed Third Party Purchaser unless the FHL Stockholders purchases from the Syndicate Stockholder

such specified number of Restricted Shares on the same terms and conditions as specified in such Syndicate Sale Notice.

(c) At the closing of the Transfer to any Third Party Purchaser pursuant to this Section 3, the Third Party Purchaser shall remit to each Syndicate Stockholder who exercised its Syndicate Tag-Along Right the consideration for the total sales price of the Restricted Shares held by the Syndicate Stockholder sold pursuant hereto minus any such consideration to be escrowed or otherwise held back in accordance with the Third Party Terms (which in no event shall be disproportionate from the aggregate consideration received by such Syndicate Stockholder in connection with such Transfer), against delivery by the Syndicate Stockholder of certificates for the Restricted Shares, duly endorsed for Transfer or with duly executed stock powers reasonably acceptable to FHL, and the compliance by the Syndicate Stockholder with any other conditions to closing generally applicable to the FHL Stockholders and all other holders of Common Stock selling shares in the transaction.

(d) Notwithstanding anything contained in this Section 3 to the contrary, the Syndicate Tag-Along Right shall not apply to any Transfer of a “strip” of Equity Securities (a “ FHL Syndicate Transfer ”) to a non-Affiliate third party (a “ FHL Syndicate Transferee ”) consummated by the FHL Stockholders prior to December 23, 2005; provided that after giving pro forma effect to such FHL Syndicate Transfer, FHL and its Affiliates shall continue to own at least 50% of the Equity Securities of the Company on a fully-diluted basis. Any FHL Syndicate Transferee shall agree in writing to be bound by this Agreement as a Syndicate Stockholder at the time of the FHL Syndicate Transfer to such FHL Syndicate Transferee and such FHL Syndicate Transferee shall be treated as part of the Syndicate Stockholders hereunder for all purposes.

(e) If the members of FHL at any time propose to Transfer interests in FHL to a purchaser (other than a Principal Stockholder) in a single Transfer or a series of Transfers following which no Principal Stockholder will be the managing member of FHL, then each Syndicate Stockholder shall be provided the right to sell the same percentage of each class of its Restricted Shares to the purchaser of such interests in FHL or, at the election of FHL, to FHL, subject to the same procedures and terms as an exercise of Syndicate Tag-Along Rights pursuant to this Section 3.

Section 4. Cooperation .