Exhibit 10.3

Execution Copy

 

STANDSTILL AGREEMENT

 

THIS STANDSTILL AGREEMENT (the “Agreement”) dated as of June 11, 2008 (the
“Effective Date”) by and among The Management Network Group, Inc., a Delaware
corporation (the “Company”), Potomac Capital Management, LLC, Potomac Capital
Management, Inc., Potomac Capital Partners LP, Potomac Capital International
Ltd, Pleiades Investment Partners-R LP, and Paul J. Solit (collectively, the
“Stockholder”).

A.     The Company has outstanding approximately 36,069,7531 shares of Common
Stock (as defined below).

B.        Stockholder is currently the Beneficial Owner of 5,696,499 shares of
the Common Stock, par value .001 per share of the Company.

C.        The Company is willing to purchase 1,000,000 of such shares on the
condition that Stockholder executes and delivers this Agreement to the Company.

NOW, THEREFORE, in consideration of the premises, covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each Party, intending to be
legally bound, hereby agrees as follows:

ARTICLE I

DEFINITIONS AND CONSTRUCTION

Section 1.1      Certain Definitions. As used in this Agreement, the following
terms will have the meanings specified below:

“13D Group” has the meaning ascribed to it in Section 3.1(a)(i).

“Affiliate” has the meaning set forth in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.

“Applicable Law” means all applicable provisions of all (a) constitutions,
treaties, statutes, laws (including common law), rules, regulations, ordinances
or codes of any Governmental Authority, and (b) orders, decisions, injunctions,
judgments, awards and decrees of any Governmental Authority.

“Articles” means the Certificate of Incorporation of the Company, as amended,
restated or supplemented from time to time.

_________________________

1 Based on number in Form 10-Q for the Quarter Ended March 29, 2008.

 

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“Associate” has the meaning ascribed to such term in Rule 12b-2 of the General
Rules and Regulations of the Exchange Act.

“Beneficial Owner” A Person will be deemed the “Beneficial Owner” of, and will
be deemed to “Beneficially Own,” any securities:

(a)       which such Person or any of such Person’s Affiliates or Associates
beneficially owns, directly or indirectly (as determined pursuant to Rule 13d-3
and Rule 13d-5(b) of the General Rules and Regulations of the Exchange Act as in
effect on the date hereof);

(b)       which such Person or any of such Person’s Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement or
understanding (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of
securities), or upon the exercise of conversion rights, exchange rights, rights
(other than rights issued pursuant to the Rights Plan), warrants or options, or
otherwise; or (ii) the right to vote pursuant to any agreement, arrangement or
understanding, provided, however, that a Person will not be deemed the
“Beneficial Owner” of any security under this clause (ii) if the agreement,
arrangement or understanding to vote such securities (A) arises solely from a
revocable proxy or consent given in response to a proxy or consent solicitation
made pursuant to, and in accordance with, the applicable rules and regulations
of the Exchange Act and (B) is not also then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor report).

“Business Day” means a day other than a Saturday, a Sunday, a day on which
banking institutions in the States of New York are authorized or obligated by
law or required by executive order to be closed, or a day on which the NASDAQ is
closed.

“Common Stock” means the common stock of the Company.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder.

“Governmental Authority” means any federal, state, local or political
subdivision, governmental or administrative body, instrumentality, department or
agency or any court, administrative hearing body, arbitration tribunal,
commission or other similar dispute resolution panel or body, and any other
entity exercising executive, legislative, judicial, regulatory or administrative
functions of a government.

“Person” means an individual, a partnership, an association, a joint venture, a
corporation, a limited liability company, a business, a trust, any entity
organized under Applicable Law, an unincorporated organization or any
Governmental Authority.

“Rights Plan” means the Rights Agreement, dated as of March 27, 2008. by and
between the Company and Computershare Trust Company N.A., as rights agent.

“SEC” means the Securities and Exchange Commission.

 

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“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations thereunder.

“Termination Date” shall have meaning ascribed to it in Section 5.1.

“Vote” means, as to any entity, the ability to cast a vote at a stockholders’ or
comparable meeting of such entity with respect to the election of directors or
other members of such entity’s governing body.

“Voting Power” means the aggregate number of Votes of the Company outstanding as
at such date.

“Voting Securities” means the Common Stock and any other securities of the
Company having the right to Vote.

Section 1.2      Interpretation and Construction of this Agreement. The
definitions in Section 1.1 will apply equally to both the singular and plural
forms of the terms defined. Whenever the context may require, any pronoun will
include the corresponding masculine, feminine and neuter forms. The words
“include,” “includes” and “including” will be deemed to be followed by the
phrase “without limitation.” All references herein to articles, Sections and
Schedules will be deemed to be references to articles and Sections of, and
Schedules to, this Agreement unless the context will otherwise require. The
headings of the articles and Sections are inserted for convenience of reference
only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement. Unless the context will otherwise require or
provide, any reference to any agreement or other instrument or statute or
regulation is to such agreement, instrument, statute or regulation as amended
and supplemented from time to time (and, in the case of a statute or regulation,
to any successor provision).

ARTICLE II

REPRESENTATIONS AND WARRANTIES

Section 2.1      Representation and Warranties by Stockholder. Stockholder
hereby represents and warrants to the Company as follows:

(a)       Stockholder has all requisite power and authority to execute, deliver
and perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all requisite action.

(b)       This Agreement has been duly executed and delivered by Stockholder and
constitutes a legal, valid and binding obligation, enforceable in accordance
with its terms, except to the extent that enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting creditors rights
generally or by general principles of equity.

(c)       No governmental consent, approval, authorization, license or
clearance, or filing or registration with any governmental or regulatory
authority, is required in order to permit Stockholder to perform its obligations
under this Agreement, except for such as have been obtained.

 

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(d)       The shares of Common Stock referenced in Recital B represent all of
the shares of Voting Securities of the Company, if any, which are Beneficially
Owned by Stockholder on the date hereof. Such shares are owned free and clear of
any charge, claim, equitable interest, lien, option, pledge, security interest,
right of first refusal, encumbrance or similar restriction. Stockholder does not
have the right to vote shares of Voting Securities of the Company other than
those set forth on Schedule 2.1(d), and has not granted any other Person the
right to vote such shares.

Section 2.2      Representations and Warranties by the Company. The Company
represents and warrants to Stockholder as follows:

(a)       The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement. The
execution, delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby have been duly authorized
by all requisite corporate action on the part of the Company.

(b)       This Agreement has been duly executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting creditors rights generally or by general principles of equity.

(c)       No governmental consent, approval, authorization, license or
clearance, or filing or registration with any governmental or regulatory
authority, is required in order to permit the Company to perform its obligations
under this Agreement, except for such as have been obtained.

ARTICLE III

COVENANTS AND OTHER LIMITATIONS

Section 3.1      Covenants. Prior to the Termination Date and subject to the
further provisions hereof:

(a)       Neither Stockholder nor Affiliate or Associate of Stockholder, will,
directly or indirectly, acquire any Voting Securities (except by way of stock
dividends or other distributions or offerings made available to holders of
Voting Securities generally).

(b)       The Stockholder, shall be present, in person or by proxy, at all
meetings of stockholders of the Company so that all Voting Securities
beneficially owned by Stockholder and its Affiliates and Associates may be
counted for the purpose of determining the presence of a quorum at such
meetings.

(c)       No member of the Stockholder Group shall deposit any Voting Securities
in a voting trust or subject any Voting Securities to any arrangement or
agreement with respect to the voting of such Voting Securities.

(d)       In addition to the foregoing, Stockholder agrees that, without the
prior consent of the Board of Directors of the Company, it will not, and it will
cause each of its Affiliates and

 

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Associates not to, directly or indirectly, alone or in concert with others, take
any of the actions set forth below:

(i)        own (except for securities of the Company acquired prior to the date
of this letter agreement and previously disclosed to the Company) or acquire, by
purchase or otherwise (including, without limitation, any option or similar
arrangement), any securities or assets of the Company or any of its
subsidiaries;

(ii)       make, effect or commence any tender or exchange offer, merger or
other business combination involving the Company or any of its subsidiaries;

(iii)      consummate any recapitalization, restructuring, liquidation,
dissolution or other extraordinary transaction with respect to the Company or
any of its subsidiaries;

(iv)      make, or in any way participate in, any “solicitation” of “proxies”
(as such terms are used in the proxy rules of the SEC) to vote, or seek to
advise or influence any person with respect to the voting of, any voting
securities of the Company or any of its subsidiaries;

(v)       form, join or in any way participate in a “group” (within the meaning
of Section 13(d)(3) of the Exchange Act and Rule 13d-5(b) thereunder) with
respect to any Voting Securities of the Company or any of its subsidiaries;

(vi)      otherwise act, alone or in concert with others, to seek to control or
influence the management, Board of Directors or policies of the Company;

(vii)     disclose any intention, plan or arrangement inconsistent with the
foregoing or take any action which might require the Company to make a public
announcement regarding the possibility of an acquisition of securities, a
business combination or a merger; or

 

(viii)

request the Company to waive or amend any provision of this Agreement.

ARTICLE IV

TERM AND TERMINATION

Section 4.1      Termination. The respective covenants and agreements of
Stockholder and the Company contained in this Agreement will continue in full
force and effect until June 10, 2010 (the “Termination Date”). Any termination
of this Agreement as provided herein will be without prejudice to the rights of
any Party arising out of the breach by any other Party of any provision of this
Agreement prior to the date of such termination.

ARTICLE V

MISCELLANEOUS

Section 5.1      Remedies. Stockholder acknowledges and agrees that irreparable
damage would occur in the event any of the provisions of this Agreement were not
performed in accordance with its specific terms or were otherwise breached. It
is accordingly agreed that the

 

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Company shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state thereof having
jurisdiction, in addition to any other remedy to which the Company may be
entitled at law or equity. In the event an action seeking injunctive relief
hereunder, the Company shall not be required to post a bond.

Section 5.2      Notices. All notices, requests and other communications to any
Party hereunder will be in writing (including prepaid overnight courier,
facsimile transmission or similar writing) and will be given to such Party at
its address or facsimile number set forth in this Section 5.2 or at such other
address or facsimile number as such Party may hereafter specify in writing. Each
such notice, request or other communication will be effective (a) if given by
facsimile, when transmitted to the facsimile number specified in this Section
5.2 and confirmation of receipt is received by the sender, (b) if given by mail,
upon the earlier of actual receipt or three (3) Business Days after deposit in
the United States Mail, registered or certified mail, return receipt requested,
properly addressed and with proper postage prepaid, (c) one (1) Business Day
after deposit with an internationally reputable overnight courier properly
addressed and with all charges prepaid or (d) when received, if by any other
means.

 

The Company:

The Management Network Group, Inc.
7300 College Boulevard, Suite 302
Overland Park, Kansas 66210
Attn: Legal Department
Fax: (913) 451-3066

 

 

with a copy to:

Stinson Morrison Hecker LLP
1201 Walnut, Suite 2800
Kansas City, Missouri 64106
Attn: John A. Granda, Esq.
Fax: (816) 691-3495

 

 

Stockholder:

Potomac Capital Management
825 Third Avenue, 33rd Floor
New York, NY 10022
Attn: PJ Solit
Fax: (212) 521-5107

 

 

with a copy to:

Gersten Savage LLP
600 Lexington Avenue, 9th Floor
New York, NY 10022
Fax: (212) 980-5192
Attention: Peter J. Gennuso, Esq.

 

The Parties will promptly notify each other in the manner provided in this
Section 5.2 of any change in their respective addresses. A notice of change of
address will not be deemed to have been given until received by the addressee.
Communications by facsimile also will be sent concurrently by mail, but will in
any event be effective as stated above.

 

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Section 5.3      Expenses. The Company and Stockholder will each pay its own
expenses with respect to this Agreement.

Section 5.4      Assignment. No Party will assign this Agreement or any rights,
interests or obligations hereunder, or delegate performance of any of its
obligations hereunder, without the prior written consent of each of the other
Parties.

Section 5.5      Entire Agreement. This Agreement embodies the entire agreement
and understanding of the Parties in respect of the subject matter contained
herein. This Agreement supersedes all prior agreements and understandings
between the Parties with respect to such subject matter.

Section 5.6      Waiver, Amendment, etc. This Agreement may not be amended or
supplemented, and no waivers of or consents to departures from the provisions
hereof will be effective, unless set forth in a writing signed by, and delivered
to, all the Parties. No failure or delay of any Party in exercising any power or
right under this Agreement will operate as a waiver thereof, nor will any single
or partial exercise of any right or power, or any abandonment or discontinuance
of steps to enforce such right or power, preclude any other or further exercise
thereof or the exercise of any other right or power.

Section 5.7      Binding Agreement; No Third Party Beneficiaries. This Agreement
will be binding upon and inure to the benefit of the Parties and their
successors and permitted assigns. Nothing expressed or implied herein is
intended or will be construed to confer upon or to give to any third party any
rights or remedies by virtue hereof.

Section 5.8      Governing Law; Exclusive Jurisdiction; Service of Process. This
Agreement will be governed by and construed in accordance with the internal laws
of the state of Delaware, without regard to conflicts of laws principles.

Section 5.9      Severability. The invalidity or unenforceability of any
provision hereof in any jurisdiction will not affect the validity or
enforceability of the remainder hereof in that jurisdiction or the validity or
enforceability of this Agreement, including that provision, in any other
jurisdiction. To the extent permitted by Applicable Law, each Party waives any
provision of Applicable Law that renders any provision hereof prohibited or
unenforceable in any respect. If any provision of this Agreement is held to be
unenforceable for any reason, it will be adjusted rather than voided, if
possible, in order to achieve the intent of the Parties to the extent possible.

Section 5.10    Counterparts. This Agreement may be executed in one or more
counterparts each of which when so executed and delivered will be deemed an
original but all of which will constitute one and the same Agreement.

[signature page follows]

 

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IN WITNESS WHEREOF, the Company and Stockholder have caused their respective
duly authorized officers to execute this Agreement as of the day and year first
above written.

 

 

THE MANAGEMENT NETWORK GROUP, INC.

 

 

 

 

 

By:

/s/ Don Klumb

 

 

Donald Klumb

 

 

 

POTOMAC CAPITAL MANAGEMENT LLC

 

 

 

By:

/s/ Paul J. Solit

 

 

Paul J. Solit, Managing Member

 

 

 

POTOMAC CAPITAL MANAGEMENT INC.

 

 

 

By:

/s/ Paul J. Solit

 

 

Paul J. Solit, President

 

 

 

POTOMAC CAPITAL INTERNATIONAL LTD

 

 

 

By:

/s/ Paul J. Solit

 

 

 

 

 

 

POTOMAC CAPITAL PARTNERS LP

 

 

 

By:

/s/ Paul J. Solit

 

 

 

 

 

 

PLEIADES INVESTMENT PARTNERS-R LP

 

 

 

By:

/s/ Paul J. Solit

 

 

 

 

 

 

 

 

/s/ Paul J. Solit

 

Paul J. Solit

 

 

 

 

 

 

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Schedule 2.1(d)

 

See shares set forth on Recital B of this Agreement.

 

 

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