Drag Along Right. Notwithstanding any other provision hereof, if any Holder has not exercised its Tag-Along Right with respect to the maximum number of Holder’s Shares for which such Holder is permitted (pursuant to Section 2(b)(ii)(B) above) to exercise such Tag-Along Right in respect of a Third Party Sale, then, upon the demand of any Selling Fortress Entity participating in such Third Party Sale (in each such entity’s sole discretion), such Holder shall sell to the respective Third Party the number of whole Holder’s Shares (rounded upwards or downwards, as applicable), whether or not the restrictions on Transfer of Common Stock have lapsed, equal to the product of (x) the total number of Holder’s Shares held by such Holder on the date of the Drag-Along Notice (as defined below) and (y) the Third Party Sale Percentage, at the same price and on the same terms and conditions as such Selling Fortress Entity has agreed to with such Third Party; provided, however, that each such Holder shall not be permitted to sell any unvested Holder’s Shares (provided that the Company may, in its sole discretion, accelerate the vesting of any unvested Holder’s Shares); provided further that such Selling Fortress Entity shall use its reasonable, good faith efforts to provide that (A) the only representation and warranty which such Holder shall be required to make in connection with the Third Party Sale is a representation and warranty with respect to such Holder’s own ownership of the Holder’s Shares to be sold by it and its ability to convey title thereto free and clear of liens, encumbrances and adverse claims and (B) the liability of such Holder with respect to any representation and warranty made in connection with the Third Party Sale is the several liability of such Holder (and not joint with any other person) and that such liability is limited to the amount of proceeds actually received by such Holder in the Third Party Sale; provided further, that a Holder shall not be obligated to participate in any Third Party Sale pursuant to this Section 2(b)(iii) unless such Holder is provided an opinion of counsel to the effect that the Third Party Sale is not in violation of applicable federal and state securities or other laws or, if such Holder is not provided with an opinion with respect to the matters contemplated by this proviso, each Selling Fortress Entity who has delivered a Drag-Along Notice to such Holder shall indemnify such Holder for any such violation. If the Third Party Sale is ...
Drag Along Right. (a) In the event that RN Stockholder (for so long as such Stockholder owns at least twenty-five percent (25%) of the then outstanding shares of Voting Stock) and MTVN Stockholder (for so long as such Stockholder owns at least twenty-five percent (25%) of the then outstanding shares of Voting Stock) (for purposes of this Section 3.06, each, an “Original Stockholder”) shall have jointly entered into an agreement with any Person (such Person, a “Drag-Along Purchaser”) regarding the Transfer of all of their Voting Stock, an Original Stockholder shall be entitled, at its option, to require each Stockholder holding less than fifteen percent (15%) of the then outstanding shares of Voting Stock (the “Drag-Along Party”) to include all of its Voting Stock in such sale (the “Drag-Along Right”). The Drag-Along Right shall be exercised by written notice (the “Drag-Along Notice”) to the Drag-Along Party, at least thirty (30) days prior to closing of the proposed Transfer, of the identity of the Drag-Along Purchaser, the consideration offered for the transferring Stockholder’s Voting Stock (the “Drag-Along Price”), the terms of the Drag-Along Purchaser’s financing (if any and if known), the anticipated date of closing of the proposed Transfer and any other material terms and conditions of the proposed Transfer (the “Drag-Along Terms”). The Drag-Along Party shall be obligated to sell all of its Voting Stock to the Drag-Along Purchaser on the Drag-Along Terms at a price equal to the product of (x) the ratio of the percentage of ownership of Voting Stock then outstanding of the Drag-Along Party over the percentage of ownership of Voting Stock then outstanding of the transferring Stockholder and (y) the Drag-Along Price; provided, however, that the holders of shares of Preferred Stock shall be entitled to be paid the amount determined pursuant to Section 3(c) of Article IV of the Charter to the extent applicable. At the closing of such Transfer (which anticipated date, place and time shall be designated in the Drag-Along Terms), the Drag-Along Party shall deliver an assignment agreement transferring all of its Voting Stock, duly executed, free and clear of any Liens, against delivery of the purchase price therefor. Each party shall bear its own expenses in connection with a Transfer pursuant to this Section 3.06.
(b) Notwithstanding the foregoing, a Drag Along Party will not be required to comply with Section 3.06(a) above in connection with any proposed Transfer of Voting S...
Drag Along Right. In the event that at any time following the Closing, (x) the Majority Preferred Holders, (y) the Majority Ordinary Holders and (z) in the case of any Sale of the Company (as defined below) where the valuation of the Company is not greater than US$2,100,000,000, holders of a majority of the Series D Preferred Shares, approve either: (A) a transaction or series of related transactions in which a Person, or a group of related Persons, acquires all or substantially all of the equity or assets or undertaking of the Company, or (B) a transaction that qualifies as a Liquidation Event (such events described in subsections (A) and (B) are referred to in this Agreement as a “Sale of the Company”), then each Shareholder hereby agrees with respect to all Shares that he, she or it holds and any other Company securities over which he, she or it otherwise exercises dispositive power:
(a) in the event the Sale of the Company requires the approval of shareholders, (a) if the matter is to be brought to a vote at a shareholder meeting, after receiving proper notice of any meeting of shareholders of the Company to vote on the approval of a Sale of the Company, to be present, in person or by proxy, as a holder of Shares, at all such meetings and be counted for the purposes of determining the presence of a quorum at such meetings; and (b) to vote (in person, by proxy or by action by written consent, as applicable) all Shares in favor of such Sale of the Company and in opposition of any and all other proposals that could reasonably be expected to delay or impair the ability of the Company to consummate such Sale of the Company;
(b) in the event that the Sale of the Company is to be effected by the sale of Shares held by another Shareholder (the “Selling Shareholder”), should be obliged to sell all shares of the Company beneficially held by such Shareholder (or in the event that the Selling Shareholder is selling fewer than all of its shares held in the Company, shares in the same proportion as the Selling Shareholder is selling) to the person to whom the Selling Shareholder propose to sell its shares, for the same per-share consideration (on an as-converted basis) and on the same terms and conditions as the Selling Shareholder, except that the Shareholder will not be required to sell its shares unless the liability for indemnification, if any, of the Shareholder in such Sale of the Company is several, not joint, and is pro rata in accordance with the Shareholder’s relative share...
See more samples of Drag Along Right
Drag Along Right: Everything you need to know
Drag Along Rights is a clause that gives the majority shareholders the power to enforce upon the minority shareholders and ensure that they join in the sale of the company. The cost, terms, and conditions given by the majority shareholders to minority shareholders must be the same as any seller.
If majority shareholders are looking for a smooth and profitable exit of the company and that sale is being blocked by the minority shareholders, then the majority shareholders can use this right to force them to accept the terms and conditions of the sale of the company.
The potential buyer who is going to make the purchase might want the full authority of the control of the company, which makes it imperative that both, the majority shareholders and the minority shareholders, agree to finalize the transaction to make the sale.
If it does not happen and minority shareholders do not agree to the sale, then majority shareholders can use this provision of Drag Along Rights to bend the minority shareholders to their will and complete the translation.
In this, the minority shareholders get the same benefits as the majority shareholders. Although the cause or provision is made to give supreme power to the majority shareholders over the minority shareholders, the benefits are extended to all three, the majority shareholders, the minority shareholders and the buyer too.
- Features of Drag Along Rights
- Why use Drag Along Rights?
- How to Trigger Drag Along Rights?
- Benefits of Drag Along Rights
- Disadvantages of Drag Along Rights
- Things to Keep in Mind While Negotiating Drag Along Rights
- Specific Provisions of Drag Along Rights
- An Example of Drag Along Rights
Features of Drag Along Rights
Some features of this clause are explained below. Have a look to understand this provision better for its application.
- To sell the company and for the transfer or change of ownership and shares, the majority shareholders have to sell their part of shares and the shares held by the majority section. For this, the majority shareholders force the minority shareholders to sell their shares as well to complete the transaction.
- The same price, terms, and conditions are offered to both the majority shareholders and the minority shareholders.
- This clause enables the buyer to get the full authority of the company in one go.
Why use Drag Along Rights?
Reasons to use the Drag Along Rights are as follows:
- The majority shareholders can get the sale done without being hindered by the minority shareholders.
- The buyers will not have to worry about the minority shareholders of the company because this clause will forfeit their bond with the company.
- Although this clause is a big benefit for the majority shareholders, the minority shareholders also get the same benefits as the majority shareholders.
- The majority shareholders are protected by this clause. It is extremely useful when a potential buyer is looking for total control over the company, that is, to remove the minority shareholders.
How to Trigger Drag Along Rights?
Without some significant steps, this clause cannot be moved into action by the majority shareholders for the sale of the company.
- Sales transactions: A considerable sale of assets, mergers, acquisitions, sale of a company's securities has the potential to trigger the Drag Along Rights.
- Transfer of ownership: Due to any type and mode of sale, if the ownership is transferred to someone else or a big change is seen in majority shareholders then, it can also trigger the Drag Along Rights. For a majority shareholder of the company, the percentage of shares is between 51% to 75%.
- No support by the minority shareholders: If the minority shareholders do not agree to the sale of the company, then the Drag Along Rights is triggered by the majority shareholders to force them to accept the terms and conditions of the sale.
Benefits of Drag Along Rights
Every clause is beneficial for at least one party. Some advantages of Drag Along Rights are given below.
- The majority shareholders consider it as a boon, and with the help of this provision, they can ensure a major profit and easy exit from the company without being blocked by the minority shareholders.
- Negotiation and deals are done between the majority shareholders and the potential buyers. The majority shareholders do not have to worry about any additional confirmation.
- The minority shareholders also profit from Drag Along Rights. They get the same benefits, profit percentage, terms and conditions as the majority shareholders. They might also get some extra benefits that are normally unattainable to them.
Disadvantages of Drag Along Rights
There is a minor disadvantage for the minority shareholders is that they are forced to make the sale despite being against it. They might get all the benefits and the same terms and conditions as the majority shareholder, but they are denied the right to choose and are forced to agree if the majority shareholders have already made up their mind to carry on the sale transaction.
Things to Keep in Mind While Negotiating Drag Along Rights
There are certain things a person should keep in mind while negotiating the deal and enforcing the Drag Along Rights.
- Price: For the minority shareholders, the minimum price level must be ensured to avoid the Drag Along Rights clause. The minority shareholders should place a method to verify that they are getting a fair value for their shares in case of non-cash consideration.
- Representation: While the majority shareholders are entitled to give any sort of representation and warranties, the minority shareholders are not required for any sort of representation that the majority shareholders agreed for.
- Type of consideration: Two types of consideration can be seen, cash and non-cash consideration. This clause can be applicable for both types of considerations. In case of non-cash consideration, the minority shareholders can resist the deal and even be forced to exchange their shares from a different company in which exit might prove a little more difficult.
Specific Provisions of Drag Along Rights
There are some special provisions for the Drag Along Rights that are explained below in detail.
- The potential buyer should be ready to give up more than 51% to make a better deal.
- The minority shareholders are provided with a limited period to step up and purchase the shares of the majority shareholders.
- The minority shareholders have to make a matching and enticing offer. The offer must be at least the minimum agreed price.
One can find the provision or the clause of Drag Along Rights in the Articles of Association or a Shareholder Agreement.
An Example of Drag Along Rights
Bristol-Myers Squibb Company and Celgene Corporation
Bristol-Myers Squibb had taken up Celgene Corporation in the year 2019 through a merger agreement. The cost to acquire Celgene was approximately $74 billion. Bristol-Myers Squibb had agreed to a cash and stock transaction in which it had taken up over 69% of total shares, reducing the shares of Celgene to just 31%. In this case. The minority shareholders were not given any type of special provisions and were offered just $50 for each of the Celgene shares they owned.
The minority shareholders were forced to agree with the deal between Celgene Corporation and Bristol-Myers Squibb. They were not given any special provisions, which are usually required in such cases. The shares of the Celgene corporation were removed from the official register of the stock exchange. In this case, the Drag Along rights could have played a more significant role for the minority shareholders.
Drag along rights are special rights that majority shareholders of a company hold. Using this, they can ensure a deal goes smoothly with not much fuss. With the right provisions, this clause is beneficial to both the majority and minority shareholders along with the buyers in case of an acquisition.
More Samples of Drag Along Right
Drag Along Right. In the event the holders of a majority of the Company’s voting capital stock then outstanding (the “Majority Shareholders”) determine to sell or otherwise dispose of all or substantially all of the assets of the Company or all or fifty percent (50%) or more of the capital stock of the Company to any Person (other than an Affiliate of the Company or any of the Majority Shareholders), or to cause the Company to merge with or into or consolidate with any Person (other than an Affiliate of the Company or any of the Majority Shareholders) (in each case, the “Buyer”) in a bona fide negotiated transaction (a “Sale”), each Holder of Shares issued under the Plan, shall be obligated to and shall upon the written request of the Majority Shareholders:
(a) sell, transfer and deliver, or cause to be sold, transferred and delivered, to the Buyer, his or her Shares issued under the Plan that are then presently held by such Holder or that will be issued as a result of any such transaction on substantially the same terms applicable to the Majority Shareholders (with appropriate adjustments to reflect the conversion of convertible securities, the redemption of redeemable securities and the exercise of exercisable securities as well as the relative preferences and priorities of preferred stock); and (b) execute and deliver such instruments of conveyance and transfer and take such other action, including voting such Shares in favor of any Sale proposed by the Majority Shareholders and executing any purchase agreements, merger agreements, indemnity agreements, escrow agreements or related documents as the Majority Shareholders or the Buyer may reasonably require in order to carry out the terms and provisions of this Section 10.2.
Drag Along Right. In the event the Manager approves a sale or other disposition of all of the interests in the Company, then, upon notice of the sale or other disposition, each Member shall execute such documents or instruments as may be requested by the Manager to effectuate such sale or other disposition and shall otherwise cooperate with the Manager. The following rules shall apply to any such sale or other disposition: (i) each Investor Member shall represent that he, she, or it owns his or its Shares free and clear of all liens and other encumbrances, that he, she, or it has the power to enter into the transaction, and whether he, she, or it is a U.S. person, but shall not be required to make any other representations or warranties; (ii) each Investor Member shall grant to the Manager a power of attorney to act on behalf of such Investor Member in connection with such sale or other disposition; and (iii) each Investor Member shall receive, as consideration for such sale or other disposition, the same amount he, she, or it would have received had all or substantially all of the assets of the Company been sold and the net proceeds distributed in liquidation of the Company.
Drag Along Right. If a Class A Member (“Transferring Member”) intends to sell Class A Units to a third party purchaser that would result in such third party purchaser acquiring control over more than fifty percent (50%) of all outstanding Class A Units and otherwise result in a Change of Control, after taking into account the sale of Units by the Members pursuant to the provisions of this Section 11.8, in which the Transferring Member (together with any affiliates of the Transferring Member) would not retain a controlling interest in the Company, then the Transferring Member shall have the right (the “Drag-Along Right”) to require each remaining Members to sell some or all of its or his or her Units to the third party in a proportionate amount and on the same terms and conditions as the Transferring Member (taking into account Section 11.8(f)) in accordance with the terms and conditions of this Section 11.8 and otherwise in accordance with the following provisions:
(a) The Drag-Along Right may only be exercised by written notice (the “Drag-Along Notice”) from the Transferring Member and the third party purchaser to the remaining Members.
(b) The Drag-Along Notice shall:
i. state the name of the third party purchaser, the purchase price for the Units of the Transferring Member(s) and the purchase price proposed to be paid for the Units of the remaining Members (in accordance with Section 11.8(f)) and the time, date and place of completion of such sale and purchase; and
ii. be given no later than fifteen (15) business days before the date fixed for completion of the sale by the Transferring Member of its or his or her Units to the third party.
(c) The delivery of the Drag-Along Notice to a Member shall constitute an irrevocable and binding obligation of the Member to sell, and the third party to purchase, some or all of the Member’s Units in a proportionate amount and on the same terms and conditions, taking into account Section 11.8(f) and subject to Section 11.8(e), as are applicable to the sale by the Transferring Member of its Units to the third party as set forth in the Drag-Along Notice (subject to such terms being accurately reflected in the Drag-Along Notice).
(d) At or before the time of completion of the sale of the Units of each Member to the third party purchaser, each such Member shall (i) use its best efforts to cause to be discharged any and all encumbrances of, and security interests in, its or his or her Units and provide written evidence of such discharges t...
Drag Along Right. 5.1. If at any time after the date hereof, the holders of more than fifty percent (50%) of Series E Preferred Shares (voting together as a single class and on an as-converted basis), the holders of more than fifty percent (50%) of Series D Preferred Shares (voting together as a single class and on an as-converted basis), the holders of more than seventy-five percent (75%) of Series C Preferred Shares (voting together as a single class and on an as-converted basis), the holders of more than fifty percent (50%) of Series B Preferred Shares (voting together as a single class and on an as-converted basis) and the holders of more than fifty percent (50%) of Series A Preferred Shares (voting together as a single class and on an as-converted basis) approve of a proposed Acquisition (as defined below), then, in any such event, upon written notice from any such holders of Preferred Shares of the Company requesting them to do so, all of the other shareholders of the Company (the “Dissenting Shareholders”) shall (i) vote, or give their written consent with respect to, all the Ordinary Shares and/or all the Preferred Shares (on an as-converted basis) directly or indirectly held by them in favor of such proposed Acquisition and in opposition of any proposal that could reasonably be expected to delay or impair the consummation of any such proposed Acquisition; (ii) refrain from exercising any dissenters’ rights or rights of appraisal under applicable law at any time with respect to or in connection with such proposed Acquisition; and (iii) take all actions reasonably necessary to consummate the proposed Acquisition, including without limitation amending the then existing memorandum and articles of association of the Company; provided, however, any of the Dissenting Shareholders may elect not to vote or give their consent with respect to, all the Ordinary Shares and/or all the Preferred Shares (on an as-converted basis) directly or indirectly held by it in favor of such proposed Acquisition, but in any such event, such Dissenting Shareholders shall be obliged to purchase all the Ordinary Shares and/or all the Preferred Shares (on an as-converted basis) held by the shareholders who vote or give their consent with respect to, all the Ordinary Shares and/or all the Preferred Shares (on an as-converted basis) directly or indirectly held by them in favor of such proposed Acquisition, under the same terms and conditions as offered by the prospective purchaser of the proposed A...
Drag Along Right. (a) No later than ten (10) days prior to the closing of a Drag-Along Sale or an Approved Sale, the Holder shall exercise the Applicable Drag Percentage of this Option; provided, however, that (x) in the event the Applicable Drag Percentage of this Option is greater than the vested portion of this Option at such time, then the Holder shall exercise the entire vested portion of this Option and (y) if the exercise price and any required withholding taxes with respect to the portion of the Option required to be exercised hereunder is greater than the sale price for the underlying Class A Common Units, then such portion of the Option shall not be exercised, shall be counted towards the Applicable Drag Percentage and shall be cancelled with no consideration received therefor. The Class A Common Units acquired pursuant to this Option shall be subject to the provisions of the Partnership Agreement. “Applicable Drag Percentage” has the meaning set forth in the Partnership Agreement.
Drag Along Right. (a) Notwithstanding anything contained herein to the contrary, if at any time a shareholder of the Company, or group of shareholders, owning a majority or more of the capital stock of the Company (hereinafter, collectively the “Transferring Shareholders”) proposes to enter into any transaction involving a Change in Control (as defined in Section 5(b) below) that involves the sale, assignment, tender or transfer of capital stock, the Company may require the Shareholder to participate in such Change in Control transaction with respect to all or such number of the Shareholder’s Shares as the Company may specify in its discretion, by giving the Shareholder written notice thereof at least ten days in advance of the date of the transaction or the date that tender is required, as the case may be. Upon receipt of such notice, the Shareholder shall tender the specified number of Shares, at the same price and upon the same terms and conditions applicable to the Transferring Shareholders in the transaction or, in the discretion of the acquiror or successor to the Company, upon payment of the purchase price to the Shareholder in immediately available funds. In addition, if at any time the Company and/or any Transferring Shareholders propose to enter into any Change in Control transaction, the Company may require the Shareholder to vote in favor of such transaction, where approval of the shareholders is required by law or otherwise sought, by giving the Shareholder notice thereof within the time prescribed by law and the Company’s Certificate of Incorporation and By-Laws for giving notice of a meeting of shareholders called for the purpose of approving such transaction. If the Company requires such vote, the Shareholder agrees that he or she will, if requested, deliver his or her proxy to the person designated by the Company to vote his or her Shares in favor of such Change in Control transaction.
(b) For purposes of this Section 2, a “Change in Control” shall have the meaning assigned such term under the Plan.
(c) The Shareholder hereby constitutes and appoints the Transferring Shareholders, and each of them, with full power of substitution, as proxy of the Shareholder with respect to the matters set forth herein, and hereby authorizes each of them to represent and to vote, if and only if the Shareholder (i) fails to vote or (ii) attempts to vote (whether by proxy, in person or by written consent), in a manner which is inconsistent with the terms of this Agreement, al...
Drag Along Right. (a) Subject to Section 5.2(b), if the Majority Onex Investors approve a Sale of the Company (the “Approved Sale”), the Stockholders will consent to and raise no objections to the Approved Sale and (i) if the Approved Sale is structured as a sale of Shares, the Stockholders will sell the types and classes of securities in the same relative proportions as do Onex Investors or Affiliates of Onex Investors on the same terms and conditions (except, with respect to persons who are not accredited investors, as permitted by Section 5.2(b)) as applicable to the Majority Onex Investors, (ii) if the Approved Sale is structured as a merger, consolidation or other reorganization, the Stockholders will vote in favor thereof and will not exercise any dissenters’ rights of appraisal they may have under Delaware law, and (iii) if the Approved Sale is structured as a sale of all or substantially all of the Company’s consolidated assets, the Stockholders will vote in favor thereof. The Stockholders will cooperate in the Approved Sale and will take all necessary and desirable actions in connection with the consummation of the Approved Sale as are reasonably requested by the Majority Onex Investors, including, but not limited to, entry into customary agreements and provision of customary representations, warranties and indemnification, provided, that no Stockholder shall be required to enter into substantively different agreements or provide substantively different representations and warranties or indemnification than any other Stockholder and each Stockholder’s obligations thereunder shall be several and limited to the proceeds received by such Stockholder in connection with such Approved Sale.
(b) The obligations of the Stockholders with respect to the Approved Sale are subject to the satisfaction of the following conditions: (i) upon the consummation of the Approved Sale, all of the Stockholders will receive the same form and per Share amount of consideration for their Shares as all other Stockholders, or if any Stockholders are given an option as to the form and amount of consideration to be received, all Stockholders must be given the same option (except that the Approved Sale may provide for payment in securities, or a combination of cash and securities, to all Stockholders that are accredited investors within the meaning of Regulation D under the Securities Act and in cash to Stockholders that are not accredited investors or may provide Stockholders that are accredited...
