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Standstill Agreement Shareholder

A status quo agreement is often used as a form of defence in a hostile takeover. With respect to mergers and acquisitions, the agreement includes the commitment of the unsolicited bidder (often an activist investor) to limit the amount of shares the bidder can buy, sell or vote in the target company. This gives the target company more time to implement additional defenses (such as a poison pill or a toxic put) and gives the target company more control over the deal process if it decides to interact with the potential acquirer. In 2019, video game distributor GameStop signed a status quo agreement with a group of investors who wanted changes in corporate governance, believing that the company had intrinsic value when the share price reflected. A status quo agreement between a lender and a borrower may also exist when the lender stops requiring a planned interest or capital payment for a loan to give the borrower time to restructure its debts. A status quo agreement provides different levels of protection and stability to a target company in the event of hostile adoption and promotes an orderly sales process. It refers to an agreement between the parties not to take further action. An example of a status quo agreement signed by Autobytel, CCM Master Qualified Fund, Coghill Capital Management and Clint Coghill and submitted to the SEC contains the following provisions Another type of status quo agreement occurs when two or more parties agree not to deal with other parties in a particular case for a certain period of time. For example, in merger or acquisition negotiations, the intended buyer and potential purchaser may agree not to seek acquisitions with other parties. The agreement strengthens the incentives of the parties to invest in negotiation and diligence, while preserving their own potential agreement.

During the status quo period, a new agreement is negotiated, which generally changes the original loan repayment plan. This option is used as an alternative to bankruptcy or enforced execution if the borrower cannot repay the loan. The status quo agreement allows the lender to save some value from the loan. In the event of forced execution, the lender must receive nothing. By working with the borrower, the lender can improve its chances of repaying some of the outstanding debt. Status quo agreements are also used to suspend the usual limitation period to make a claim in court. [1] A status quo agreement is a form of anti-care measure. A status quo agreement can be used as a form of defence of a hostile takeover when a target company receives a commitment from a hostile bidder to limit the amount of shares it buys or holds in the target company. By committing to the promise of the potential acquirer, the target company saves more time to set up new takeover defenses. In many cases, the target company promises in return to repurchase the equity holdings of the potential purchaser for the purpose of an increase. As a temptation to do nothing, the target company can promise to repurchase the equity holdings of the potential acquirer on the target share with a premium. (This is also called greenmail and is no longer generally allowed).

The objective may also allow the bidder (limited) access to the financial information of the target entity as part of a confidentiality agreement. In the following example of status quo agreements, the target company proposes to amend the Shareholder Rights Plan (Poison Pill) if the bidder enters into the agreement. This indicates an agreement that has never been truly hostile, but could be concluded if the negotiations were discussed in depth. As a hostile anti-opaque defense mechanism, the target company can obtain a promise from an unfriendly bidder to limit the amount of shares the bidder can buy or hold in the target company. This gives the target company time to implement other acquisition defence strategies. In return, the target entity may repurchase the equity holdings of the potential purchaser on the target share with a premium.