Confidentiality clauses are often part of standstill agreements. These clauses must be executed before obtaining due diligence documents. They allow some recourse when a bidder uses confidential information to launch a hostile acquisition, when a sales contract cannot be concluded. This is one of the main objectives of a status quo agreement, along with the prevention of hostile acquisitions. A status quo agreement may also exist between a lender and a borrower if the lender stops requiring a planned payment of interest or principal for a loan, in order to give the borrower time to restructure their debts. A subordination and standstill agreement defines the specific or general collateral used, the junior lender`s rights to payments and the priority of those rights. The agreement contains a detailed definition and description of the conditions of subordination and what happens in the event of default or bankruptcy. In a subordination and status quo agreement, the junior lender undertakes to notify the senior Lender in the event of the company`s default with the junior loan. The agreement is particularly relevant, as the bidder would have access to the confidential financial information of the target company. Upon receipt of the potential acquirer`s commitment, the target company will have more time to put in place other defenses during the acquisition. In certain situations, the target company undertakes to buy back shares of the target company in return for a mark-up for the potential acquirer.
As a result of a borrower`s delay with a loan, the standstill agreement prevents the junior lender from taking steps to remedy the situation for a certain period of time. The actions of the junior lender likely to remedy this situation are therefore stopped so that the senior Lender can take the measures as he wishes. A standstill agreement can practically be an agreement between the parties, in which both parties decide to suspend a particular subject for a certain period of time. This may be an agreement to defer planned payments in order to help a customer overcome strict market conditions. They can also be agreements to interrupt the production of a product. A standstill agreement or provision prohibits younger or subordinated lenders from exercising a remedy for a specified period of time after a business defaults. A «remedy» is the enforcement action a lender can take to remedy a default. The judgment develops the junior lender`s default hardening activities to give senior Lender time to take certain measures if he decides to do so. During the standstill period, all appeals are in principle prohibited, unless the agreement explicitly refers to exceptions. As a general rule, standstill measures do not last more than 150 to 180 days after a junior lender has informed the senior Lender of its intention to take enforcement action. In other industries, a standstill agreement can be virtually any agreement between the parties, in which both parties agree to discontinue the case for a specified period of time. It can be an agreement to defer planned payments in order to help a company overcome difficult market conditions, agreements, stop production of a product, agreements between governments or many other types of agreements….