Standstill Provision Confidentiality Agreement
A company that is pressured by an aggressive bidder or activist investor believes that a status quo agreement is useful in weakening the unsolicited approach. The agreement gives the target entity greater control over the deal process by requiring the bidder or investor to buy or sell the company`s shares or launch proxy contests. Considering a transaction of M-A? Negotiating a confidentiality agreement, often referred to as a confidentiality agreement or “NOA,” is one of the first steps in the ATM process. While the NDA negotiations may appear to be a superficial step in the AM process, the NDAs raise many issues that buyers and sellers should carefully consider before intensifying discussions and moving towards an agreement. A status quo agreement is a contract that contains provisions governing how a bidder in a company can buy, sell or vote shares of the target company. A status quo agreement can effectively paralyze or stop the hostile takeover process if the parties are unable to negotiate a friendly agreement. The first clause is the “status quo clause,” which effectively prohibits one party from making an offer or offer hostile to the other party and expressly prohibits the use of confidential information for that purpose. This clause is typical of a certification body in which state-owned enterprises participate. However, even in the absence of the clause, the court may consult it with the certification body on the basis of the other conditions of the certification body and the parties` previous operations. In Martin Marietta Materials, Inc. v. Vulcan Materials Co.2, Delaware Chancery Court interpreted a CA, initially received as part of a potential friendly acquisition, to prohibit the use of confidential information in a hostile offer from one party (Martin Marietta) to the other party (Vulcan), while the Board did not contain an explicit status quo regime, and followed the hostile offer for a period of four months.
The moral of the story is to add a status quo to your CA from the beginning and save you the costs of litigation and the sleepless nights that Vulcan experienced in this case. In banking, a status quo agreement between a lender and a borrower terminates the contractual repayment plan of a struggling borrower and imposes certain steps that the borrower must take. However, given the ambiguity generated by the genomics, the participants of the agreement must decide how to proceed with respect to the cessation of the auction process. Some seem to suggest that “do not ask, not give up” provisions are abandoned in the light of genomics.  We believe that this goes too far and, as Chancellor Strine explained in Ancestry.com, is inconsistent with Delaware`s principled jurisprudence in the context of the merger. As noted above, the House should be informed of the recommended conditions of the auction process, including the shutdown, and confirm the approach on the basis of recommendations from external consultants. Given that Chancellor Strine and Vice-Chancellor Laster have focused on the impact of the provision on possible competing bids after the signing, the more cautious approach to the objectives may be to continue to insist on making it available and, if necessary, to adopt or condition it only when a final agreement is signed. In some circumstances, it may even be appropriate for the objectives to be limited to the provisions of the merger agreements that require them to impose confidentiality agreements, referring to an agent who may be limited to participants in the process who have not received detailed information or have not submitted concrete proposals.