Stand Still Agreement
A standstill agreement is a contract between two parties that may be enacted when a hostile takeover of a company is threatened by another party. It can also be utilized if a lender cannot make payments to a debtor and is in danger of foreclosure or default.
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Benefits
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All Business reports a standstill agreement can help prevent defaulting on a loan or foreclosure. The lender agrees to stop demanding repayment of a debtor's current loan while the two involved parties renegotiate a new loan, often with lower interest rates and rescheduling of payments.
Considerations
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Research Lawyers states a standstill agreement preserves the status quo for a specified period of time in situations where a hostile takeover of a company is threatened. It helps avoid litigation between the two parties and allows the target company time to implement preventative measures.
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Example
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An example of a standstill agreement occurred in February, 1996. The Chrysler Corporation was threatened with a hostile takeover by Kirk Kerkorian, who had amassed nearly 13.6 percent of Chrysler's common stock. The standstill contract between these two parties ensured that Kerkorian's ally would have a seat on Chrysler's board of directors and that Kerkorian would receive an increase in the value of his stock. In turn, he would halt the takeover attempt.
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