standstill agreement

standstill agreement
stand·still agreement /'stand-ˌstil-/ n: an agreement providing for the preservation of the status quo for a specified or indefinite period: as
a: an agreement under which litigation is forestalled between two parties
b: an agreement under which a party agrees to refrain from taking further steps to acquire control of a corporation (as by additional purchases of stock)

Merriam-Webster’s Dictionary of Law. . 1996.

standstill agreement
This expression covers a variety of arrangements:
• In a takeover situation, it is an agreement between a company and a shareholder which restricts the shareholder's ability to acquire further shares in the company.
• In a restructuring of a company's debts, it is an agreement between creditors to give the company time for information to be collected and for a survival strategy to be put together with a view to establishing a formal restructuring.
• In the context of limitation, a standstill agreement is an agreement which has the effect of suspending or extending a statutory or contractual limitation period.
+ standstill agreement
USA
An agreement in which a hostile bidder agrees to limit its holdings in a target company. A standstill agreement stops the takeover bid from progressing for a period of time.
A standstill agreement may also be used in a friendly transaction when a buyer or an investor in a PIPE transaction (PIPE) is restricted from purchasing the target's stock or taking any other actions that may lead to a business combination unless the target company's board and management are included in the process. These types of standstill agreements (usually contained in the confidentiality agreement) help the target company to control the deal process and prevent a hostile bid for the company after the buyer or investor has had the benefit of the target company's confidential information.
Standstill restrictions typically lapse after a period of time (commonly one to three years) or, in the case of PIPEs, when the investor owns less than a specified percentage of the target's stock (for example, 5%).

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

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