Tag Along Sample Clauses

Tag Along. A Participating Seller may Transfer Shares pursuant to and in accordance with the provisions of Section 4(a) below. Shares Transferred pursuant to this Section 3(b)(ii) shall conclusively be deemed thereafter not to be Shares under this Addendum.
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Tag Along. If the Management Shareholder shall propose to sell or convey in a single transaction or in a series of related transactions a number of shares of Common Stock or options or warrants to acquire Common Stock equal to or greater than 5% of the then outstanding shares of Common Stock to an Independent Third Party (other than in a sale pursuant to a registration statement in which the Holders may exercise their "piggyback" registration rights under the Registration Rights Agreement), the Management Shareholder shall provide each Holder with written notice (the "Tag-Along Notice") setting forth the terms and conditions of the proposed transfer, including the identity of the Independent Third Party, the number of shares of Common Stock to be transferred, the per share price to be paid for the shares of Common Stock to be transferred and the type and nature of the consideration to be received therefor; provided, however, notwithstanding the foregoing, the Management Shareholder shall not be required to provide any Holder with a Tag-Along Notice, and the Holders shall not be entitled to sell any Warrant Shares under this Section 15(b), if the Management Shareholder proposes to sell or convey shares of Common Stock on account of personal hardship, including, but not limited to, (i) the commencement of a voluntary or involuntary case under the United States Code entitled "Bankruptcy" by the Management Shareholder or his creditors, (ii) a sale or other transfer pursuant to a separation agreement or a final decree or judgment of divorce in favor of or against the Management Shareholder, or (iii) a serious illness of the Management Shareholder or any parent, spouse, sibling or child of the Management Shareholder. Each Holder, by written notice to the Management Shareholder delivered within 10 days after the date of such Tag-Along Notice, shall be entitled to require the Management Shareholder to include in the proposed sale to the Independent Third Party in the same transaction all of their Warrant Shares (or, if the Management Shareholder is selling less than all of his Common Stock or the prospective transferee is not willing to purchase all of the shares of Common Stock and Warrant Shares proposed to be sold by the Management Shareholder and the Holders exercising their rights pursuant to this Section 15(b), then the Management Shareholder and the Holders participating in such sale shall each be entitled to sell their pro rata portion of the total number of shares o...
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Tag Along. If one or more holders of Investor Shares (each such holder, a “Prospective Selling Investor”) proposes to Sell any such Shares to any Prospective Purchaser in a transaction (a) not constituting a Transfer pursuant to the terms of Sections 3.1 or 3.2(a)(iii) and (b) in connection with which the Majority Investors have not elected to exercise their “drag along” rights under Section 4.2:
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See more samples of Tag Along

Tag Along: Everything you need to know

Tag-Along rights, commonly known as "co-sale rights" or the piggyback clause, are in place to protect the minority shareholders in a company. Often companies sell with the majority stakeholder selling their share through a transaction; this is when Tag Along rights come in. These rights allow the minority investor to also hop onto the negotiation train and sell their shares as well if needed.

Effectively, the majority shareholder is obliged to include the interests of the minority shareholder due to the contractual obligations, which are co-sale rights. This is a common scenario seen in a venture capital deal, especially in startups and other companies.

Minority investors can protect themselves with the help of Tag Along with rights. They will ensure that the price and terms delivered to the majority holder are the same as for the minority. The basic idea of these rights is to provide greater liquidity to minority holders.

Why is Tag Along rights required?

Co-sale rights are exactly as the term suggests. The minority investors can tag along with the majority shareholders to protect their interests. In a situation where stakeholders wish to sell their shares in the company, they would offer those shares to the other shareholders. If you want to further understand how Tag-along rights can be structured, this article can be helpful.

More control for shareholders

Given, the other shareholders exercise their first right to refusal; both can exist on a fair plane. What makes the situation further fair is that minority holders can exercise their co-sale right, as mentioned in the Article of Association. Minority shareholders are restricted in selling their shares to other shareholders. Tag-Along is a helpful clause that allows them to join the majority shareholders.

Encouraging for investors

Tag-Along right is usually a pre-negotiated clause and is added to the agreement. It is common when a company works in a high risk-bearing sector where results expected are high. The presence of Tag Along is also an encouragement for investors to buy a company's stock.

Attracts better investors

Angel Investors are known to fund a startup for a part of their equity, given Tag Along is present in the agreement. In simple terms, in a situation where investor A wishes to sell their shares, B can also do so by exercising Tag Along. This would get B the same price and terms as A, ensuring balance and fair play.

Benefits of Tag-Along

These rights offer legal and financial protection to investors who might not have the resources. This helps them negotiate a better deal for their shares with the majority shareholder. There are ideally two benefits that Tag Along rights bring with them:

Control over decisions

Minority shareholders will otherwise not have as much control over a company's sale as compared to a majority shareholder. They can't sell their shares to other holders, but their rights can obligate the majority holders to turn over control to them. Technically, they have a say in the situation provided by the control Tag Along offers.

Protection of rights

When a company is being sold, owners can just sell their stake and leave the minority shareholders on their own. This will happen when co-sale is not present. In a reverse scenario, owners will be obligated to sell their stake as well as that of the minority. This means the minority will not be left with selling their stake at bad prices.

Fair play

Often owners or majority holders will have resources in terms of legal knowledge and the means to exercise it. This will allow them to initiate a better sale transaction which will most likely not happen with minority investors. Hence, using a piggyback clause becomes fair for either party.

Reasons for not using Tag Along

Co-sale rights are one of the best deals for minority investors. Things become even for them, but it is not the best scenario for majority holders. Sometimes, it can even become a difficult situation for the minority shareholders.

Difficulty in Liquidation

Most investors are looking to buy a certain number of shares or are willing to invest only a certain amount. Now, this amount will be distributed over X + the minority shares as well. Liquidation will become rather difficult, along with bargaining for the price.

This can be better explained by an example. Say, company A is being bought by investor B, who is offering a certain price for X number of shares. When the investor is informed that he/she has to buy additional shares, which would be the minority shares, he might waive the price.

Uncertainty in the company

When the minority holders sell their shares to the majority under Tag Along, a major part of the company will be possessed by them. This could cause a lot of issues given only a certain number of shareholders have a major part of ownership. Decisions could be affected, especially when a company is going under sale.

Common mistakes in understanding Tag Along

Often terms are misunderstood when it comes to defining what minority is and what majority is. These common mistakes have been found when it comes to exercising Tag Along rights.

Unclear definitions

Most important of all is defining what percentage of the ownership is declared to be the majority and how much remaining will be the minority. Most of the time, 51% ownership is called majority, but whatever it must be, the definition of it should be present in the contract.

Not defined parties

The agreement should also clearly mention which types of shares will have Tag Along rights. All shareholders don't need to have these rights, and the difference must be specified in the agreement itself.

Not showing interest

When the situation arises where Tag Along rights are available, a notice of sale is sent to applicable holders. Interested shareholders must respond to the notice to be a part of the sale. No response will be considered as no interest.

Exceptions from Tag Along

There are always exceptions to any clause. The key shareholder can, in such a situation, request a certain number of his/her shares to be exempted from the co-sale clause. This will further allow him/her to sell that portion of shares to a willing buyer.

In a way, it would be a rewarding situation for the key shareholder, which can keep them motivated towards the progress of the company. You can find a few samples of a Tag-Along clause here to understand them better.

The Piggyback clause can be a beneficial aspect for both parties if used wisely. There are different ways to even structure the clause, which could result in the majority and minority both ending up happy. There is a lot to consider as well here, including which shareholders are of more importance to the company's progress. If the inclusion of Tag Along would be something that aids it, then that's a green signal.

More Samples of Tag Along

Tag Along. Subject to prior compliance with Section 4.4, if applicable, if any Prospective Selling Stockholder proposes to Sell any Shares to any Prospective Buyer(s) that is not a Permitted Transferee (including a First Offer Purchaser pursuant to Section 4.4) in a Transfer that is subject to Section 3.1.5:
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Tag Along. If either Xxxxx or Xxxxxx (for purposes of this Section 8.4, a “Tag-Along Member”) receives a bona-fide offer from a third party (a “Tag-Along Transferee”) to effect a Transfer of all or a portion of its Interest (which such Transfer shall otherwise satisfy the terms of this Agreement) (such Transfer, a “Tag-Along Transfer”) and such Tag-Along Member (the “Tag-Along Seller”) desires to effect such Tag-Along Transfer, then prior to consummation thereof, the Tag-Along Seller or its Affiliate shall cause the Tag-Along Transferee to offer (the "Tag-Along Offer") in writing to the Tag-Along Member that is not the Tag-Along Seller (the “Tag-Along Optionor”) to purchase that portion of the Tag-Along Optionor’s and/or its Affiliates’ Interest equivalent to the portion of the Tag-Along Seller’s aggregate Interest proposed to be the subject of the Tag-Along Transfer for the Tag-Along Purchase Price and otherwise on the same terms and conditions on which the Tag-Along Transferee has agreed to acquire, and the Tag-Along Seller or its Affiliate has agreed to sell, such portion of the Tag-Along Seller’s or such Affiliate’s Interest (the "Tag-Along Terms"). The Tag-Along Optionor shall have ten (10) Business Days from the date of receipt of the Tag Along Offer in which to accept such Tag Along Offer, and the closing of such purchase shall occur within fifteen (15) calendar days after such acceptance or at such other time as the Tag-Along Seller and the Tag-Along Transferee may agree. The Tag-Along Optionor shall be deemed to have rejected such Tag Along Offer if such offer is not affirmatively accepted, in writing, by the Tag-Along Optionor within such ten (10) Business-Day period, and the Tag-Along Seller or its Affiliate, shall for one hundred twenty (120) days thereafter, be permitted to proceed with the Transfer on the Tag Along Terms without again obtaining a Tag Along Offer as above-provided.
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Tag Along. With the exception of Transfers by the Oaktree Entities of an aggregate of twenty-five percent (25%) or less of the aggregate number of shares of Common Stock held by the Oaktree Entities on the date hereof as set forth on Schedule 1 hereto, at least twenty (20) days prior to any subsequent Transfer by any Oaktree Entities (the "Selling Oaktree Entity") to any person or entity other than (a) partners of any Oaktree Entity pursuant to in-kind distributions (so long as no sale of such shares is then contemplated), (b) pursuant to a sale on a national securities exchange, an automated quotation system or over the counter system, or (c) an Affiliate of such Oaktree Entity if such Affiliate has first agreed in writing to be bound by the terms of this Agreement, the Selling Oaktree Entity shall provide to Prudential/Gateway a Transfer Notice explaining the terms of such Transfer and identifying the name and address of the potential Acquiror. Upon receipt of such Transfer Notice, each of Prudential and Gateway shall have the right, upon delivery of a written request to the Selling Oaktree Entity within twenty (20) days of the date the Transfer Notice is received by Prudential/Gateway, to cause to be sold to the potential Acquiror its Pro-Rata Portion of the total number of shares of Common Stock which are proposed to be sold by the Selling Oaktree Entity in the Transfer Notice at the same price and on the same terms and conditions contained in the Transfer Notice delivered in connection with such proposed transaction, simultaneously with (and conditioned upon) the Transfer described in the Transfer Notice. The rights and obligations set forth in this Section 3 shall terminate concurrent with any termination of the agreements of Prudential/Gateway set forth in Section 5 resulting from an election to terminate the agreement of Prudential/Gateway set forth in Section 5 hereof permitted pursuant to the terms of Section 5 hereof.
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Tag Along. Subject to Section 13.8(c), no holder of Class A Membership Interest shall Transfer Class A Membership Interest to a third party without complying with the terms and conditions set forth in this Section 13.8, as applicable.
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Tag Along. If any Prospective Selling Shareholder proposes to Sell any Shares to any Prospective Buyer(s) other than in a Transfer pursuant to Section 3.2.1, 3.2.2, 3.2.3 or 3.2.7:
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Tag Along. If a bona fide purchaser offers to purchase shares constituting 51% or more of the issued share capital in the Company, the Disposing Shareholder(s) will not be entitled to sell his shareholding to such third party unless the same proportionate offer is made by the purchaser to acquire the shares of the Remaining Shareholders.
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Tag Along. (a) If at any time any member of the Onex Group proposes to sell any Shares except for (i) sales to another member of the Onex Group that becomes bound by the terms of this Agreement (an "Onex Group Member"), (ii) sales to a Director Holder or other management employee or director of the Corporation or a subsidiary of the Corporation, (iii) sales of the 500 Shares purchased by Onex on June 30, 1992 for later disposition to persons providing services to the Corporation or any of the Corporation's subsidiaries (the "500 Shares"), (iv) sales effected on a national securities exchange in the regular way or in the over-the-counter market, or (v) sales made pursuant to an offering of securities registered under the 1933 Act (a "Tag Along Disposition"), each of the Director Holders shall have the right to sell to the proposed purchaser a number of his Director Shares equal to the total number of his Director Shares multiplied by a ratio, the numerator of which is the number of Shares to be sold by the Onex Group Member to the proposed purchaser and the denominator of which is the total number of Shares then owned by the Onex Group. Such ratio is referred to herein as the "Share Ratio." A sale of Director Shares pursuant to this Section shall be made at the same price, upon the same terms, and at the same time as the sale by the Onex Group Member of its Shares.
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