STANDSTILL AGREEMENT
EXHIBIT
10.1
This
Standstill Agreement (the "Agreement") is made and entered into as of March
28, 2007, by and between THE FEMALE HEALTH COMPANY, a Wisconsin corporation
("FHC"), and RED OAK FUND, L.P., a Delaware Limited Partnership ("Red
Oak").
RECITALS
A. Red
Oak
desires to increase its ownership in FHC and is considering an Offer (as defined
in Section 3 below) to acquire a portion of the issued and outstanding shares
of
common stock, par value $.01 per share (the "Common Stock"), of FHC, as more
fully described in this Agreement.
B. In
connection with the Offer rather than seeking access to FHC holders under Rule
14d-5 under the Exchange Act (defined below), Red Oak desires to obtain access
to certain information regarding FHC and its shareholders from FHC and its
transfer agent, including, without limitation, the identities and addresses
of
FHC's shareholders, and, subject to the terms and conditions of this Agreement,
FHC is willing to provide such information to Red Oak.
C. In
connection with the Offer and Red Oak's acquisition of shares of Common Stock,
FHC and Red Oak wish to agree to certain terms and conditions regarding the
Offer and Red Oak's activities relating to FHC, as more fully described in
this
Agreement.
AGREEMENTS
In
consideration of the recitals and the mutual agreements set forth below, the
parties agree as follows:
1. Certain
Definitions.
For
purposes of this Agreement, certain terms used in this Agreement but not
otherwise defined have the meanings set forth below:
(a) "13D
Group" means any group of persons formed for the purpose of acquiring, holding,
voting or disposing of Voting Securities which would be required under Section
13(d) of the Exchange Act, and the rules and regulations promulgated thereunder,
to file a statement on Schedule 13D pursuant to Rule 13d-1(a) or a Schedule
13G
pursuant to Rule 13d-1(c) with the SEC as a "person" within the meaning of
Section 13(d)(3) of the Exchange Act.
(b) "Affiliate"
means a Person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the first mentioned
Person. "Control" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of the management or policies
of a
Person, whether through the ownership of stock or as trustee or executor, by
contract or credit arrangement or otherwise.
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(c) "Beneficial
owner," "beneficial ownership" and "beneficially owned" (or variations of such
terms) shall have the meaning set forth in, and shall be determined in
accordance with the provisions of Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder.
(d) "Change
of Control" means any of the following: (i) a merger, consolidation or other
business combination or transaction to which the FHC is a party if the
shareholders of FHC immediately prior to the effective date of such merger,
consolidation or other business combination or transaction, as a result of
such
share ownership, have beneficial ownership of voting securities representing
less than 60% of the Total Current Voting Power of the surviving or successor
entity (or its ultimate parent company) following such merger, consolidation
or
other business combination or transaction; (ii) an acquisition by any person,
entity or 13D Group of direct or indirect beneficial ownership of Voting
Securities representing 40% or more of the Total Current Voting Power of FHC;
(iii) a sale of all or substantially all the assets of FHC or (iv) a liquidation
or dissolution of FHC.
(e) "Exchange
Act" means the Securities Exchange Act of 1934, as amended, and the regulations,
rules and forms issued thereunder.
(f) "Person"
means an individual, partnership, corporation, limited liability company, trust,
unincorporated organization, association, or joint venture or a governmental,
agency, political subdivision, or instrumentality thereof.
(g) "SEC"
means the U.S. Securities and Exchange Commission.
(h) "Short
Sale" means any sale of a security which the seller does not own, any sale
of a
security which is consummated by the delivery of a security borrowed by, or
for
the account of, the seller, or any other hedging, collar or similar transaction
relating to a security.
(i) "Standstill
Period" means the period commencing on the date of this Agreement and ending
on
the first anniversary of the date of this Agreement or, if earlier, nine months
from the end of the offer period if the Offer is made.
(j) "Total
Current Voting Power" means, with respect to any entity, at the time of
determination of Total Current Voting Power, the total number of votes which
may
be cast in the election of members of the board of directors of the entity
if
all securities entitled to vote in the election of such directors are present
or
voted (or, in the event the entity is not a corporation, the governing members,
board or similar body of such entity). With respect to Section 2(a)(i), the
percentage of the Total Current Voting Power represented by Voting Securities
beneficially owned in the aggregate by Red Oak and its Affiliates shall assume
the conversion or exchange into Common Stock of all options, warrants or other
securities beneficially owned by Red Oak or any of its Affiliates that are
convertible or exchangeable for Common Stock but not the conversion or exchange
into Common Stock of any such securities that are not beneficially owned by
Red
Oak or any of its Affiliates.
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(k) "Voting
Securities" means securities of FHC, including the shares of Common Stock,
with
the power to vote with respect to the election of directors generally, including
any securities that are convertible or exchangeable for Voting Securities,
it
being understood that the number of Voting Securities outstanding as of any
time
of determination shall be determined as though all such securities, whether
or
not in the money, had been converted or exchanged, in accordance with their
terms, into or for Voting Securities immediately prior to the time of
determination.
2. Standstill
Agreements.
(a) Standstill
by Red Oak.
Except
as provided below in Section 2(b), Red Oak covenants and agrees, during the
Standstill Period, without FHC's prior written consent, neither it nor any
of
its Affiliates will in any manner, directly or indirectly, do any of the
following:
(i)
acquire,
announce an intention to acquire, offer or propose to acquire, or agree to
acquire, directly or indirectly, by purchase or otherwise, beneficial ownership
of any Voting Securities, or direct or indirect rights to options to acquire
(through purchase, exchange, conversion or otherwise) any Voting Securities,
if,
immediately after any such acquisition or exercise of all rights to acquire,
Red
Oak and its Affiliates would beneficially own, in the aggregate, Voting
Securities representing more than 15% of the Total Current Voting
Power;
(ii) seek
representation on the Board of Directors of FHC or the removal of director
of
FHC or a change in the composition or size of FHC's Board of
Directors;
(iii) make
any
statement or proposal, whether written or oral, to the Board of Directors of
FHC, or to any director, officer or agent of FHC, or make any public
announcement or proposal whatsoever with respect to a merger or other business
combination, sale or transfer of assets, recapitalization, dividend, share
repurchase, liquidation or other extraordinary corporate transaction with FHC
or
any other transaction which could result in a change of control, solicit or
encourage any other person to make any such statement or proposal, or take
any
action which might require FHC to make a public announcement regarding the
possibility of any transaction referred to in this Section 2(a)(iii) or similar
transaction, or advise, assist or encourage any other persons in connection
with
the foregoing;
(iv) make,
or
in any way participate, directly or indirectly, in any "solicitation" of
"proxies" (as such terms are defined in Rule 14a-1 under the Exchange Act)
to
vote any Voting Securities, seek to advise, encourage or influence any person
or
entity with respect to the voting of any Voting Securities, initiate or propose
any shareholder proposal or induce or attempt to induce any other person to
initiate any shareholder proposal, or execute any written consent with respect
to FHC;
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(v) deposit
any Voting Securities into a voting trust or subject any Voting Securities
to
any arrangement or agreement with respect to the voting of any Voting Securities
other than this Agreement;
(vi) form,
join or in any way participate in a 13D Group with respect to any Voting
Securities unless all members of the 13D Group agree to be bound by this
Agreement;
(vii) otherwise
act, alone or in concert with others, to seek to exercise any control or
influence over the management, Board of Directors or policies of FHC (provided
that this clause (vii) shall not preclude discussions with the management or
the
Board of Directors);
(viii) request
that FHC (or its directors, officers, shareholders, employees or agents) amend
or waive any provision of this Section 2(a) (including this
subsection (viii));
(ix) enter
into any agreement, plan or arrangement relating to a Short Sale of any Common
Stock, or otherwise effect any Short Sale of any Common Stock; or
(x) disclose
any intention, plan or arrangement inconsistent with the foregoing.
(b) Permitted
Exceptions.
Notwithstanding the terms of Section 2(a) above, the restrictions contained
in
Section 2(a) of this Agreement shall immediately and automatically be suspended
upon the occurrence, and during (but only during) the continuation, of any
of
the following events:
(i) the
filing with the SEC of a Schedule 13D (or any successor schedule or form) by
any
Person (other than any current executive officer of FHC, any member of FHC's
Board of Directors or Red Oak or any of its Affiliates) or 13D Group (other
than
any 13D Group that contains among its members any current executive officer
of
FHC, any member of FHC's Board of Directors or Red Oak or any of its Affiliates)
indicating that such Person or 13D Group has acquired beneficial ownership
of
15% or more of the outstanding Voting Securities, which Schedule 13D expresses
an intention or possible intention of the filing party to assume control of
FHC,
whether by tender offer, merger, proxy contest or otherwise (provided that
the
foregoing shall no longer suspend such restrictions if a subsequent filing
is
made by such Person or 13D Group with the SEC indicating that such Person or
13D
Group ceases to beneficially own at least 15% of the outstanding Voting
Securities or such Person or 13D Group subsequently makes a public announcement
to the effect that such Person or 13D Group no longer has an intention or
possible intention to assume control of FHC, whether by tender offer, merger,
proxy contest or otherwise);
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(ii) the
commencement of a tender offer by any Person (other than FHC or Red Oak or
any
of its Affiliates) or 13D Group (which does not include FHC or Red Oak or
any of its Affiliates) to acquire beneficial ownership of 15% or more of the
Total Current Voting Power (provided that the foregoing shall no longer suspend
such restrictions after a subsequent filing is made by such Person or 13D Group
with the SEC indicating that such Person or 13D Group ceases to beneficially
own
at least 15% of the Total Current Voting Power or such tender offer is
terminated without such Person or 13D Group acquiring beneficial ownership
of
15% or more of the Total Current Voting Power);
(iii) the
solicitation of proxies by any Person (other than FHC, any current executive
officer of FHC, any member of FHC's Board of Directors or Red Oak or any of
its
Affiliates) or 13D Group (which does not include FHC, any current executive
officer of FHC, any member of FHC's Board of Directors or Red Oak or any of
its
Affiliates) to which Rules 14a-3 to 14a-15 under the Exchange Act (or any
successor rules) apply, which proxies are intended to effect a change in the
majority of the members of the Board of Directors of FHC (provided that the
foregoing shall no longer suspend such restrictions after such solicitation
is
withdrawn, terminated or otherwise completed); or
(iv) the
entry
by FHC into any agreement which provides for a Change of Control of
FHC.
(c) The
expiration or termination of any suspension of restrictions pursuant to
subsection 2(b) shall not require Red Oak to divest any Voting Security or
rights to acquire Voting Securities obtained during the suspension.
3. The
Offer.
During
the Standstill Period, Red Oak may in its sole discretion commence (within
the
meaning of Rule 14d-2 under the Exchange Act and the rules and regulations
promulgated thereunder) and, subject to the terms and conditions set forth
in
this Agreement, close one cash tender offer (within the meaning of Section
14(d)
of the Exchange Act) (the "Offer") to purchase up to that number of the issued
and outstanding shares of Common Stock (each, a "Share" and, collectively,
the
"Shares") that may result, upon consummation of the Offer, in Red Oak
beneficially owning not more than 15% of the outstanding Total Current Voting
Power.
4. FHC
Obligations.
Upon
Red Oak's request, FHC shall promptly make available to Red Oak FHC's transfer
agent and information containing the names and addresses of all record holders
of Shares and with security position listings of Shares held in stock
depositories, each as of a recent date, together with all other available
listings and computer files containing names, addresses and security position
listings of record holders and beneficial owners of Shares. FHC shall furnish
Red Oak with such additional information, including updated listings and
computer files of shareholders, mailing labels and security position listings,
and such other assistance as Red Oak or its agents may reasonably require in
communicating the Offer to the record and beneficial holders of Shares. Subject
to the requirements of applicable law, and except for such steps as are
necessary to disseminate the offer to purchase, related letter of
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transmittal
and all ancillary documents relating to the Offer and any other documents
necessary to consummate the Offer, Red Oak shall hold in confidence the
information contained in such documents, labels, listings and files, shall
use
such information solely in connection with the Offer, and, if the Offer is
terminated, shall promptly deliver or cause to be delivered to FHC all copies
of
such information, documents, labels, listings and files then in its possession
or control or in the possession or control of its agents or representatives.
FHC
consents to any appointment by Red Oak of FHC's transfer agent to act as
depository in connection with the Offer. Red Oak shall reimburse FHC, within
five business days of FHC's written request, for FHC's reasonable costs and
expenses associated with FHC's obligations under this section.
5. Voting
Agreement.
During
the period from the date of this Agreement until FHC's 2008 annual meeting
of
shareholders, except for any period of suspension pursuant to Section 2(b)
and unless the requirements of this section are waived by FHC pursuant to a
resolution adopted by FHC's Board of Directors, Red Oak shall, and shall cause
its Affiliates to, promptly and timely at any meeting of the shareholders of
the
Company, however called, and at every adjournment thereof, or in connection
with
any written consent of the shareholders of the Company, vote all of Voting
Securities beneficially owned by Red Oak or such Affiliate (a) in favor of
the election as directors of FHC of all persons nominated by FHC's Board of
Directors, and against the election as directors of FHC of any other person
not
nominated by FHC's Board of Directors, (b) in favor of any other proposal
or matter which FHC's Board of Directors recommend that the shareholders of
FHC
approve and (c) against any other proposal or matter which FHC's Board of
Directors do not recommend that the shareholders of FHC approve, except that
Red
Oak shall not be obligated to vote in favor of any merger, sale of assets or
similar transaction involving FHC or of any compensation plan for which
Institutional Shareholder Services or a similar firm recommends a “no” vote,
provided that Red Oak or its Affiliates shall not make any public statement
opposing any such transaction or compensation plan.
6. Additional
Agreements.
(a) Compliance
with Law.
Red Oak
represents and warrants to and covenants with FHC that the execution, delivery
and performance by Red Oak of this Agreement, the conduct and consummation
of
the Offer and the other transactions contemplated by this Agreement will not
contravene or conflict with or constitute the violation of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to Red Oak,
including, without limitation, the provisions of the Exchange Act applicable
to
the Offer.
(b) Indemnification.
(i) Red
Oak
agrees to indemnify and hold FHC and its representatives, officers, directors,
employees, agents, shareholders and Affiliates harmless from and against any
and
all loss, damage, cost or expense (including reasonable attorneys fees)
resulting from or arising out of any breach of this Agreement by Red
Oak.
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(ii) FHC
agrees to indemnify and hold Red Oak and its representatives, officers,
directors, employees, agents, shareholders and Affiliates harmless from and
against any and all loss, damage, cost or expense (including reasonable
attorneys fees) resulting from or arising out of any breach of this Agreement
by
FHC.
(c) State
Takeover Laws.
For
avoidance of doubt, FHC and Red Oak agree that neither the execution and
delivery of this Agreement by FHC nor any action taken by FHC or its Board
of
Directors in connection with this Agreement or the transactions contemplated
by
this Agreement shall constitute any approval by the Company or its Board of
Directors of any acquisition of Voting Securities by Red Oak or any other
transaction by Red Oak for purposes of, or shall create any exemption from,
the
requirements of any "moratorium," "control share," "fair price," "business
combination" or other antitakeover laws of any jurisdiction applicable to FHC,
including, but not limited to, Wisconsin Statutes Sections 180.1130 to
180.1150.
7. Miscellaneous.
(a) Expenses.
Except
as otherwise provided in this Agreement, all costs and expenses incurred in
connection with this Agreement and the Offer shall be paid by the party
incurring such cost or expense.
(b) Additional
Agreements.
Subject
to the terms and conditions of this Agreement, each of the parties hereto agrees
to use all reasonable efforts to take, or cause to be taken, all action and
to
do, or cause to be done, all things reasonably necessary, proper or advisable
under applicable laws and regulations and which may be required under any
agreements, contracts, commitments, instruments, understandings, arrangements
or
restrictions of any kind to which such party or by which such party is governed
or bound, to consummate and make effective the transactions contemplated by
this
Agreement.
(c) Notices.
All
notices and other communications given or made pursuant hereto shall be in
writing and shall be deemed to have been duly given or made as of the date
delivered, mailed or transmitted if delivered personally, mailed by registered
or certified mail (postage prepaid, return receipt requested) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses or sent by electronic transmission to the following facsimile numbers
(or at such other address or facsimile number for a party as shall be specified
by like notice):
If
to
FHC:
The
Female Health Company
000
Xxxxx
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxxxxx 00000
Telephone:
000-000-0000
Facsimile:
000-000-0000
Attn:
X.X. Xxxxxxx, Chief Executive Officer
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With
a
copy (which shall not constitute notice) to:
Xxxxx
X.
Xxxxxx, Esq.
Xxxxxxxx
Xxxxxxx Van Deuren s.c.
0000
Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx,
Xxxxxxxxx 00000
Telephone:
000-000-0000
Facsimile:
414-298-8097
If
to Red
Oak:
c/o
Red
Oak Partners, LLC
000
Xxxxxx Xxxxxx, Xxxxx 00X
Xxx
Xxxx,
Xxx Xxxx 00000
Telephone:
000-000-0000
Facsimile:
000-000-0000
Attn:
Xxxxx Xxxxxxxx
With
a
copy (which shall not constitute notice) to:
Xxxxx
X.
Xxxxxxxx, Esq.
Paul,
Hastings, Xxxxxxxx & Xxxxxx LLP
000
Xxxx
Xxxxxx Xxxxx, Xxxxxxxxxxx Xxxxx
Xxxxx
Xxxx, Xxxxxxxxxx 00000
Telephone:
000-000-0000
Facsimile:
000-000-0000
(d) Headings.
The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this
Agreement.
(e) Severability.
If any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon
such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely
as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
(f) Amendments.
This
Agreement may not be modified, amended, altered or supplemented, except upon
the
execution and delivery of a written agreement executed by the parties
hereto.
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(g) Entire
Agreement.
This
Agreement constitutes the entire agreement of the parties, and supersedes all
prior agreements and undertakings, both written and oral, among the parties,
or
any of them, with respect to the subject matter hereof and, except as expressly
provided herein, are not intended to confer upon any other Person any rights
or
remedies hereunder.
(h) Assignment.
This
Agreement shall not be assigned by any party hereto, by operation of law or
otherwise.
(i) Governing
Law.
This
Agreement shall be construed in accordance with and governed by the law of
Wisconsin without giving effect to the principles of conflicts of laws
thereof.
(j) Counterparts;
Effectiveness.
This
Agreement may be signed in any number of counterparts, each of which shall
be an
original, with the same effect as if the signatures thereto and hereto were
upon
the same instrument. This Agreement shall become effective when each party
hereto shall have received counterparts hereof signed by all of the other
parties hereto.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
THE
FEMALE HEALTH COMPANY
BY
/s/ O.B.
Parrish_______________
X.X.
Xxxxxxx, Chairman and Chief
Executive
Officer
RED
OAK
FUND, LP
BY:
Red Oak Partners, LLC
General
Partner
BY
/s/
Xxxxx Sandberg____________
Xxxxx
Xxxxxxxx
Managing
Member
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