February 11, 1998
Electronically Transmitted
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, NW
Washington, DC 20549
Gentlemen:
In accordance with Rule 14a-6(b), transmitted herewith is the definitive proxy
statement and proxy card in connection with the 1998 Annual Meeting of
Shareholders of The Female Health Company (The "Company"). Shareholders are
being asked to vote on the election of directors and to ratify the appointment
of McGladrey & Pullen, LLP as the Company's independent public accountants.
Because the solicitation relates to only the above items, no preliminary proxy
statement has been filed. By separate paper filing of the date herewith, the
Company has mailed to the Securities and Exchange Commission for its
information seven copies of the Company's Annual Report to Shareholders
pursuant to Rule 14a-3(c). The Company expects to mail definitive proxy
statements to security holders on or about February 13, 1998.
The Company meets the requirements to qualify as a "Small Business Issuer" in
accordance with Regulation 12(b)(2) of the Exchange Act. In accordance with
Item 10(a)(2) (iii) of Regulation S-B the Company continues to qualify as a
"Small Business Issuer".
In addition, please note that certain information required by Items 10, 11, 12
and 13 to Part III of the Company's 1997 Form 10-KSB for the year ended
September 30, 1997 was incorporated by reference to the Company's 1998 Proxy
Statement included herein.
Very truly yours,
THE FEMALE HEALTH COMPANY
s/s William R. Gargiulo, Jr.
- -----------------------------
William R. Gargiulo, Jr.
Secretary
cc: J. Bedore, Reinhart, Boerner
D. Krosner, Reinhart, Boerner<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
X Filed by the Registrant
- ------
Filed by a Party other than the Registrant
- ------
Check the appropriate box:
Preliminary Proxy Statement
- ------
- ------ Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
X Definitive Proxy Statement
- ------
Definitive Additional Materials
- ------
Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
The Female Health Company
(Name of Registrant as Specified in Its Charter)
The Female Health Company
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
X No fee required.
- ------
- ------ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
___ Fee paid previously with preliminary materials:
- ------- Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule
and the date of its filing.<PAGE>
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:<PAGE>
THE FEMALE HEALTH COMPANY
919 North Michigan Avenue
Suite 2208
Chicago, Illinois 60611
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held April 8, 1998
To the Stockholders of The Female Health Company:
Notice is hereby given that the Annual Meeting of the Stockholders of The
Female Health Company (the "Company") will be held at The Knickerbocker
Hotel-Towers East Room, 14th Floor, 163 East Walton Place, Chicago, Illinois on
Wednesday, April 8, 1998 at 2:00 p.m., local time, for the following purposes:
1. To elect five members to the Board of Directors, the names of whom are set
forth in the accompanying proxy statement, to serve until the 1999 Annual
Meeting.
2. To consider and act upon a proposal to ratify the appointment of McGladrey &
Pullen, LLP as the Company's independent public accountants for the fiscal year
ending September 30, 1998.
3. To transact such other business as may properly come before the Annual
Meeting and any adjournments thereof.
Stockholders of record at the close of business on February 9, 1998 are
entitled to vote at the meeting. All stockholders are cordially invited to
attend the meeting in person. Stockholders who are unable to be present in
person are requested to execute and return promptly the enclosed proxy, which
is solicited by the Board of Directors of the Company.
By Order of the Board of Directors,
s/s William R. Gargiulo, Jr.
- -------------------------------
William R. Gargiulo, Jr.
Secretary
Chicago, Illinois
February 13, 1998<PAGE>
THE FEMALE HEALTH COMPANY
919 North Michigan Avenue
Suite 2208
Chicago, Illinois 60611
PROXY STATEMENT
FOR THE 1998 ANNUAL
MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of The Female Health Company (the "Company")
to be voted at the Annual Meeting of Stockholders to be held at The
Knickerbocker Chicago Hotel-Towers East Room, 163 East Walton Place, Chicago,
Illinois at 2:00 p.m. local time on Wednesday, April 8, 1998, and at any
adjournments thereof, for the purposes set forth in the accompanying Notice of
Meeting. The mailing to stockholders of this Proxy Statement and accompanying
form of proxy will take place on or about February 13, 1998.
GENERAL INFORMATION
The Board of Directors knows of no business which will be presented to the
meeting other than the matters referred to in the accompanying Notice of
Meeting. However, if any other matters are properly presented to the meeting,
it is intended that the persons named in the proxy will vote on such matters in
accordance with their judgment. If the enclosed form of proxy is executed and
returned, it nevertheless may be revoked at any time before it has been voted
by a later dated proxy or a vote in person at the Annual Meeting. Shares
represented by properly executed proxies received on behalf of the Company will
be voted at the Annual Meeting (unless revoked prior to their vote) in the
manner specified therein. If no instructions are specified in a signed proxy
returned to the Company, the shares represented thereby will be voted in FAVOR
of the election of the directors listed in the enclosed proxy and FOR
ratification of McGladrey & Pullen, LLP as the Company's independent auditors.
Only holders of the common stock of the Company (the "Common Stock") and
holders of the Class A Convertible Preferred Stock Series 1 and Series 2 whose
names appear of record on the books of the Company at the close of business on
February 9, 1998 are entitled to vote at the meeting. On that date, there were
9,556,163 shares of Common Stock, 680,000 shares of Class A Convertible
Preferred Stock - Series 1 and 729,927 shares of Class A Convertible Preferred
Stock - Series 2 outstanding. Each share of Common Stock and Class A
Convertible Preferred Stock - Series 1 and Series 2 is entitled to one vote on
each matter to be presented at the meeting. A majority of the votes entitled
to be cast with respect to each matter submitted to the shareholders,
represented either in person or by proxy, shall constitute a quorum with
respect to such matter.<PAGE>
Under Wisconsin law, directors are elected by plurality, meaning that the five
individuals receiving the largest number of votes are elected as directors.
Abstentions and broker non-votes (i.e., shares held by brokers in street name,
voting on certain matters due to discretionary authority or instruction from
the beneficial owners but not voting on other matters due to lack of authority
to vote on such matters without instructions from the beneficial owners) will
count toward the quorum requirement but will not count toward the determination
of whether directors are elected.
ELECTION OF DIRECTORS
(Item 1)
Pursuant to the authority contained in the Amended and Restated By-Laws of the
Company, the Board of Directors has established the number of directors at
five. The Board of Directors has nominated William R. Gargiulo, Jr., Mary Ann
Leeper, Ph.D., O. B. Parrish, Stephen M. Dearholt and David R. Bethune for
election as directors, all to serve until the 1999 Annual Meeting of
Stockholders.
As indicated below, all persons nominated by the Board of Directors are
incumbent directors. The Company anticipates that all of the nominees listed
in this Proxy Statement will be candidates when the election is held. However,
if for any reason any nominee is not a candidate at that time, proxies will be
voted for any substitute nominee designated by the Company (except where a
proxy withholds authority with respect to the election of directors).<PAGE>
NOMINEES FOR ELECTION AS DIRECTORS
O. B. PARRISH
Age: 64; Elected Director: 1987; Present Term Ends: 1998 Annual Meeting:
Mr. Parrish has served as Chief Executive Officer of the Company since 1994 and
as Chairman of the Board since 1987. Mr. Parrish has also served as the
President and as a director of Phoenix Health Care of Illinois, Inc. ("Phoenix
of Illinois") since 1987. Phoenix of Illinois is the owner of approximately
3% of the outstanding Common Stock of the Company. Mr. Parrish was Co-Chairman
and a director of Inhalon Pharmaceuticals, Inc. until its sale to Medeva PLC,
and is Chairman and a director of ViatiCare LLC, a financial services company.
Mr. Parrish is also a Trustee of Lawrence University. From 1977 until 1986, Mr.
Parrish was President of the Global Pharmaceutical Group of G.D. Searle & Co.,
a pharmaceutical/consumer products company. From 1974 until 1977, Mr. Parrish
was the President of Searle International, the foreign sales operations of
Searle. Prior to that, Mr. Parrish was Executive Vice President of Pfizer's
International Division.
MARY ANN LEEPER, Ph.D.
Age: 57; Elected Director: 1987; Present Term Ends: 1998 Annual Meeting:
Dr. Leeper has served as the President and Chief Operating Officer of the
Company since January 22, 1996 and as President and Chief Executive Officer of
The Female Health Company division from May 1994 until January 29, 1996 (when
the division was consolidated with the Company). Dr. Leeper also served as
Senior Vice President-Development of the Company from 1989 until January 22,
1996. Dr. Leeper has served as a Vice President and director of Phoenix of
Illinois since 1987. From 1981 until 1986, Dr. Leeper was Vice
President-Markets Development of the Pharmaceutical Group of G.D. Searle & Co.
WILLIAM R. GARGIULO, JR.
Age: 69; Elected Director: 1987; Present Terms Ends: 1998 Annual Meeting:
Mr. Gargiulo has served as Vice President and Secretary of the Company since
January 22, 1996. Prior to that Mr. Gargiulo served as Vice
President-International of The Female Health Company division from May 1994
until January 29, 1996 (when the division was consolidated with the Company),
Chief Operating Officer of the Company from 1989 to 1994, Assistant Secretary
of the Company from 1989 to January 22, 1996 and General Manager of the Company
from 1988 to 1994. Mr. Gargiulo is also a trustee of a trust which is a
stockholder of Phoenix of Illinois. From 1984 until 1986, Mr. Gargiulo was
the Executive Vice President of the Pharmaceutical Group of G.D. Searle & Co.,
in charge of its European operations. From 1976 until 1984, Mr. Gargiulo was
the Vice President of Searle's Latin American operations.
STEPHEN M. DEARHOLT
Age: 51; Elected Director: 1996; Present Term Ends: 1998 Annual Meeting
Mr. Dearholt is co-founder of and partner in Response Marketing, one of the
largest privately owned life insurance marketing organizations in the United
States. He has over 23 years of experience in direct response advertising and
database marketing of niche products. Since 1985 Mr. Dearholt has been a 50%
owner of R.T. of Milwaukee, a private investment holding company which operates
a stock brokerage business in Milwaukee, Wisconsin. Mr. Dearholt is also very
active in the non-profit sector. He is currently on the Board of Directors of
Children's Hospital Foundation of Wisconsin, an honorary board member of the<PAGE>
Zoological Society of Milwaukee, and the national Advisory Council of the
Hazelden Foundation. He is a past board member of Planned Parenthood
Association of Wisconsin, and past Chairman of the Board of the New Day Club,
Inc.
DAVID R. BETHUNE
Age: 57; Elected Director: 1996; Present Term Ends: 1998 Annual Meeting
Mr. Bethune is President and Chief Operating Officer of the IVAX Corporation.
Mr. Bethune was Group Vice President of American Cyanamid Company and a member
of its Executive Committee until the recent sale of the company to American
Home Products. He had global executive authority for human biologicals,
consumer health products, pharmaceuticals and opthalmics as well as medical
research. Previously, he was President of the Lederle Laboratories Division of
American Cyanamid Company. Mr. Bethune rejoined Lederle from Searle, where he
was President of Operations in the United States, Canada and the Caribbean
since December 1986. From 1984 until his appointment as President of
Operations, Mr. Bethune served as Vice President and General Manager, United
States Pharmaceuticals. Mr. Bethune is on the Board of Directors of Elan
Corporation, Atrix Pharmaceuticals and the American Foundation for
Pharmaceutical Education, Partnership for Prevention. He is a founding trustee
of the American Cancer Society Foundation and an associate member of the
National Wholesale Druggists' Association and the National Association of Chain
Drug Stores. He is the founding chairman of the Corporate Council of the
Children's Health Fund in New York City and served on the Arthritis Foundation
Corporate Advisory Council.
The Board of Directors recommends that shareholders vote FOR all nominees.<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
(Item 2)
The Board of Directors has appointed McGladrey & Pullen, LLP, independent
public accountants, to audit the financial statements of the Company for the
fiscal year ending September 30, 1998. The Board proposes that the
stockholders ratify this appointment. McGladrey & Pullen, LLP audited the
Company's financial statements for the fiscal year ended September 30, 1997.
The Company expects that representatives of McGladrey & Pullen, LLP will be
present at the Meeting, with the opportunity to make a statement if they so
desire, and will be available to respond to appropriate questions.
In the event that ratification of the appointment of McGladrey & Pullen, LLP as
the independent public accountants for the Company is not obtained at the
Meeting, the Board of Directors will reconsider its appointment.
A majority of the shares voted at the Meeting is required to ratify the
appointment of the independent public accountants.
The Board of Directors recommends that shareholders vote FOR the ratification
of McGladrey & Pullen, LLP as the independent public accountants for the
Company.
Directors
The Board of Directors currently consists of five members: O. B. Parrish,
William R. Gargiulo, Jr., Mary Ann Leeper, Ph.D., Stephen M. Dearholt and David
R. Bethune. At each annual meeting of stockholders, directors are elected for
a term of one year to succeed those directors whose terms are expiring.
Committees of the Board of Directors and Meeting Attendance
The Company has an Audit Committee. The Board's Audit Committee is comprised
of Mr. Bethune and Mr. Dearholt. The responsibilities of the Audit Committee,
in addition to such other duties as may be specified by the Board of Directors,
include the following: (1) recommendation to the Board of Directors of
independent auditors for the Company; (2) review of the timing, scope and
results of the independent auditors audit examination; (3) review of periodic
comments and recommendations by the auditors and of the Company's response
thereto; and (4) review of the scope and adequacy of internal accounting
controls. The Audit Committee did not meet during the fiscal year ended
September 30, 1997.
During fiscal 1997, all compensation matters were handled by the Company's
Board of Directors. There is no standing nominating or similar committee of
the Board of Directors.
The Board of Directors held 10 meetings during the Company's fiscal year ended
September 30, 1997. No incumbent director attended fewer than 75% of the
aggregate of (1) the total number of meetings of the Board of Directors and (2)
the total number of meetings held by all committees of the Board on which
he/she served, if any.
Director Compensation and Benefits
Directors who are officers of the Company do not receive compensation for
serving in such capacity. Individual directors who are not officers of the<PAGE>
Company receive $1,000 for attendance at each board meeting or meeting of a
committee of which he or she is a member. In addition, each director who is
not an employee of the Company receives an automatic grant of options to
purchase 30,000 shares of the Company's Common Stock under the Company's
Outside Director Stock Option Plan. This grant is made upon the director's
initial appointment to the Board of Directors and the options vest in
accordance with the vesting criteria set forth in the plan.
Executive Officers
The names of, and certain information regarding, executive officers of the
Company who are not directors of the Company, are set forth below.
Name Age Position
- ------------------------------------------------------------------------
Jack Weissman 50 Vice President, Trade Sales
Michael Pope 39 Vice President, General Manager Chartex
Jack Weissman
Vice President - Trade Sales
Mr. Weissman has served as Vice President-Trade Sales since June 1995. From
1992 to 1994, Mr. Weissman was Vice President-Sales for Capitol Spouts, Inc., a
manufacturer of pouring spouts for gable paper cartons. During the 1989-1992
period, he acted as General Manager-HTV Group, an investment group involved in
the development of retail stores. Mr. Weissman joined Searle's Consumer
Products Group in 1979 and held positions of increasing responsibility,
including National Account and Military Sales Manager. From 1985-1989 he was
Director - Retail Business Development for The NutraSweet Company, a Searle
subsidiary. Prior to Searle, Mr. Weissman worked in the consumer products
field as account manager and territory manager for Norcliff Thayer and
Whitehall Laboratories.
Michael Pope
Vice President, General Manager - The Female Health Company (UK) Plc.
Mr. Pope has served as Vice President of the Company since 1996 and as General
Manager of The Female Health Company (UK) Plc. (formerly Chartex International,
Plc.) since the Company's acquisition of Chartex. Mr. Pope has also served as
a Director of The Female Health Company, Ltd. (formerly Chartex Resources
Limited) and The Female Health Company (UK) Plc. since 1995. From 1990 until
1996, Mr. Pope was Director of Technical Operations for Chartex with
responsibility for manufacturing, engineering, process development and quality
assurance. Mr. Pope was responsible for the development of the high speed
proprietary manufacturing technology for the female condom and securing the
necessary approvals of the manufacturing process by regulatory organizations,
including the FDA. Mr. Pope was also instrumental in developing and securing
Chartex's relationship with its Japanese marketing partner. Prior to joining
Chartex, from 1986 to 1990 Mr. Pope was Production Manager and Technical
Manager for Franklin Medical, a manufacturer of disposable medical devices.
During the period from 1982 to 1986, Mr. Pope was Site Manager, Engineering and
Production Manager, Development Manager and Silicon Manager for Warne Surgical
Products.
EXECUTIVE COMPENSATION<PAGE>
The following table sets forth the annual and long-term compensation for each
of the last three fiscal years for the Company's Chief Executive Officer and
the two highest-paid executive officers other than the Chief Executive Officer
(the "named executive officers"), who served in such capacity as of September
30, 1997, as well as the total compensation paid to each individual during the
Company's last three fiscal years. No other executive officers of the Company
received salary and bonus of in excess of $100,000 during the fiscal year ended
September 30, 1997.
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Awards
Annual Securities
Fiscal Compensation Underlyling
Name and Principal Position Year Salary Options/SARs
O. B. Parrish 1997 $90,000 264,000(a)
Chairman, Chief
Executive Officer 1996 $90,000 164,000(b)
and Acting Chief
Financial Officer 1995 $90,000 44,000
Mary Ann Leeper, Ph.D. 1997 $225,000 290,000(a)
President and Chief 1996 $215,833 200,000(b)
Operating Officer 1995 $175,000 200,000
William R. Gargiulo, Jr. 1997 $100,000 50,000
Vice President - 1996 $100,000
International 1995 $100,000
(a) Includes 164,000 and 200,000 options for Mr. Parrish and Dr. Leeper,
respectively, which were granted in 1995 and 1996 fiscal years but repriced in
1997.
(b) Includes 44,000 and 200,000 options for Mr. Parrish and Dr. Leeper,
respectively, which were granted in the 1995 fiscal year but repriced in 1996.<PAGE>
Options/SAR Grants in Last Fiscal Year
The following table sets forth certain information concerning options/SARs
granted during fiscal 1997 to the named executive officers:
Individual Grants
% of Total
Number of Options/SARs
Securities Granted to Exercise
Underlying Employees or Base
Options/ in Fiscal Price Expiration
Name SARs Granted (1) Year (2) ($/Share)(3) Date
O. B. Parrish 100,000 (4) 10% $2.00 3/12/07
Mary Ann Leeper, Ph.D. 90,000 (4) 9% $2.00 3/12/07
William R. Gargiulo, Jr. 50,000 (4) 5% $2.00 3/12/07
O. B. Parrish 120,000 (5) 12% $2.00 9/20/04
O. B. Parrish 44,000 (5) 5% $2.00 11/20/04
Mary Ann Leeper Ph.D. 200,000 (5) 21% $2.00 11/20/04
(1) The options vest in one-third increments on each of (i) the first
anniversary of the initial grant date, (ii) the date when the average sale
price for the Company's Common Stock for any 10 consecutive trading days is at
least $7.50 per share and (iii) the date the Company and its subsidiaries, on a
consolidated financial basis, achieve a positive cash flow for a six-month
period
(2) The percentages represent the sum of options granted and options repriced
which each named executive officer received during the fiscal year divided by
the sum of the total number of options granted and options repriced for all
employees in the fiscal year.
(3) On April 22, 1997, the exercise price for employee stock options granted
under the 1997 plan and the 1994 Stock option plan were amended to $2.00 per
share (the last sale price of the Company's Common Stock as of April 22, 1997).
The Board of Directors elected to reprice the options because the Committee
felt that due to changed circumstances, including the reduction in the trading
price of the Company's Common Stock, the options were no longer providing the
incentive they were designed to provide.
(4) Represents options granted in fiscal 1997.
(5) Represents options granted in fiscal 1995 or fiscal 1996 which were
repriced in fiscal 1997
Repricing of Options/SARs
On April 22, 1997 the Board of Directors of the Company repriced options
granted to officers and employees of the Company under the 1997 plan, the 1996
Special plan and the 1994 Stock option plan. The preceding table (Individual
Grants) sets forth the details regarding the named executive officers and the
options repriced for them.
The option exercise price per share for the 1994 and 1996 options was reduced
from an exercise price of $3.875 to $2.00 and the option exercise price per<PAGE>
share for the 1997 options was reduced from $2.75 to $2.00 which was the last
sale price of the Company's Common Stock on the American Stock Exchange on the
date of the repricing. The Board of Directors elected to reprice the options
because the Board felt that due to changed circumstances, including the
reduction in the trading price of the Company's Common Stock, the options were
no longer providing the incentive they were designed to provide.
Aggregated Option Values at September 30, 1997
The following table presents the value of unexercised options held by the named
executive officers at September 30, 1997:
Number of Securities Value of Unexercised
Underlying In-The-Money
Unexercised Options at Options at
September 30, 1997 September 30, 1997(1)
Name Exercisable/Unexercisable Exercisable/Unexercisable
O. B. Parrish 54,667 / 209,333 $82,000 / $314,000
Mary Ann Leeper, Ph.D. 66,667 / 223,333 $100,000 / $335,000
William R. Gargiulo, Jr. 0 / 50,000 $ 0 / $75,000
(1) Values are calculated by subtracting the exercise price from the $3.50 per
share closing price of the Company's Common Stock on September 30, 1997.
Employment Agreements
Dr. Leeper renewed an employment agreement with the Company effective May 1,
1997. The term of Dr. Leeper's renewed employment extends to April 30, 2000
and renews automatically thereafter for additional three year terms unless
notice of termination is given. The employment agreement is terminable by the
Company at any time if such termination is for cause (as defined in the
employment agreement). If Dr. Leeper is terminated without cause, the Company
is obligated to continue to pay Dr. Leeper her base salary and any bonus to
which she would have otherwise been entitled for a period equal to the longer
of two years from date of termination or the remainder of the then applicable
term of the employment agreement. In addition, the Company is obligated to
continue Dr. Leeper's participation in any health, life insurance or disability
plan sponsored by the Company in which Dr. Leeper participated prior to her
termination of employment. Dr. Leeper's employment agreement provided for a
base salary of $175,000, $195,000 and $225,000, respectively, for each of the
first three years of her employment term, subject to the achievement of certain
performance goals established by Dr. Leeper and the Company. During the three
year renewal term, the initial base salary is $225,000 and thereafter the base
salary will be increased annually by the Board of Directors based upon Dr.
Leeper's performance and such other factors as the Board of Directors deems
appropriate. The employment agreement also provides Dr. Leeper with certain
fringe benefits including an annual cash bonus of up to 100% of her base salary
if certain performance goals to be established by the Board of Directors are
achieved.
SECURITY OWNERSHIP<PAGE>
The following table sets forth certain information as of January 30, 1998 with
respect to (a) each person known to the Company to own beneficially more than
5% of the Company's Common Stock, (b) each named executive officer and each
director of the Company and (c) all directors and executive officers as a
group:
Amount of Beneficial Ownership
Name of Beneficial Owner Shares Percent
O. B. Parrish (1) 444,001 4.59%
William R. Gargiulo, Jr. (1) 316,668 3.30%
Mary Ann Leeper, Ph.D. (1) 405,668 4.19%
Stephen M. Dearholt (2)(3) 909,777 9.10%
David R. Bethune (2) 30,000 0.31%
Phoenix Health Care of Illinois, Inc. 299,501 3.12%
State of Wisconsin Investment Board 635,000 6.64%
All directors, nominees and executive
officers, as a group (eight persons)
(1)(2)(3)(4) 1,562,112 15.15%
(1) Includes 269,501 shares owned by and 30,000 shares under option to Phoenix
Health Care of Illinois, Inc. ("Phoenix of Illinois"). Messrs. Parrish and
Gargiulo and Dr. Leeper may be deemed to share voting and dispositive power as
to such shares since Mr. Gargiulo is a trustee of a trust which is a
stockholder of, and Mr. Parrish and Dr. Leeper are officers, directors and
stockholders of Phoenix of Illinois. For Dr. Leeper, also includes 9,500
shares owned by and 96,667 shares under option to her (which options are
currently exercisable or exercisable within 60 days); for Mr. Parrish also
includes 56,500 shares owned by and 88,000 shares under option to him (which
options are currently exercisable or exercisable within 60 days); and for Mr.
Gargiulo, also includes 500 shares owned by and 16,667 shares under option to
him which options are exercisable within 60 days.
(2) Includes options to purchase 30,000 shares (which are currently
exercisable) granted pursuant to the terms of the Company's Outside Director
Stock Option Plan.
(3) Includes 199,257 shares owned directly by Mr. Dearholt and 410,000 Warrants
which are currently exercisable. Also includes the following shares which Mr.
Dearholt may be deemed to beneficially own: 69,500 shares held by the
Dearholt, Inc. Profit Sharing Plan; 9,680 shares held by the Response Marketing
Money Purchase Plan; 5,000 and 141,240 held by trusts of which Mr. Dearholt is
a trustee; 18,100 shares held by Mr. Dearholt's minor child and 27.000 shares
held by a child sharing the same home.
(4) Includes 55,000 shares which other executive officers have the right to
acquire (based on options which are currently exercisable or exercisable within
60 days) pursuant to the terms of the Company's 1990 and 1997 Stock Option
Plans.
The address of Phoenix is 919 North Michigan Avenue, Suite 2208, Chicago,
Illinois 60611. The address of the State of Wisconsin Investment Board is 121
East Wilson Street, Madison, Wisconsin 53702. The business address of all
other shareholders beneficially owning 5% or more of the Company's outstanding
shares of Common Stock is the same as the address of the principal office of
the Company. The above beneficial ownership information is based on<PAGE>
information furnished by the specified person and is determined in accordance
with Rule 13d-3 of the Securities Exchange Act of 1934, as amended, as required
for purposes of this Proxy Statement. This information should not be construed
as an admission of beneficial ownership for other purposes.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater-than ten percent shareholders are
also required by SEC regulation to furnish the Company with copies of all
reports filed pursuant to Section 16(a). To the Company's knowledge, based
solely on a review of the copies of such reports furnished to the Company, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were satisfied, except that Stephen
M. Dearholt, a director of the Company, filed a Form 4 Notice with the
Securities and Exchange Commission on September 30, 1997, reporting that on
July 31, 1997 a trust for the benefit of his spouse purchased 60,000 shares of
the Company's Class A Convertible Preferred Stock - Series 1. This Form 4
should have been filed by August 15, 1997.
CERTAIN TRANSACTIONS
On March 25, 1997, the Company borrowed $1,000,000 from Mr. Dearholt, a current
Director of the Company, under a one year note payable due in full March 25,
1998 with interest at 12% payable monthly. As part of this transaction, the
Company issued warrants to Mr. Dearholt which entitle him to purchase 200,000
shares of the Company's Common Stock at $1.848 per share, which represented the
average trading price of the Company's Common Stock for the five trading days
prior to the originally scheduled closing date for the transaction. In
addition, if the Company defaults on its obligation under this note, the
Company is required to issue an additional 200,000 shares of its Common Stock
to Mr. Dearholt, in addition to all other remedies to which Mr. Dearholt may be
entitled. Any stock issued under the warrants carries certain registration
rights. The warrants expire upon the earlier of their exercise or 2004.
On July 27, 1997, Stephen M. Dearholt, a director of the Company, purchased
60,000 shares of the Company's Class A Convertible Preferred Stock - Series 1
at a price of $2.50 per share, which represented the per share price offered to
all subscribers in the private placement offering of these shares.
During fiscal 1996, the Company entered into an agreement with John A. Wundrock
and Thomas J. Bonesho, two of its former directors. Pursuant to this
agreement, the Company acknowledged that Mr. Wundrock and Mr. Bonesho incurred
$67,186.87 of expenses in connection with the Company's special meeting proxy
related to the approval of the sale of Holdings and the change in the Company's
name. In accordance with this agreement, the Company agreed to reimburse
Messrs. Wundrock and Bonesho for such expenses by issuing them 15,580 shares of
the Company's Common Stock, representing the number of shares required to
reimburse them for such expenses based on the last sale price of the Company's
Common Stock on March 11, 1996.
During fiscal 1996, the Compensation Committee of the Board of Directors of the
Company repriced and changed one of the vesting criteria on options granted to<PAGE>
certain employees of the Company on November 21, 1994, including options for
200,000 shares to Dr. Leeper, options for 44,000 shares to Mr. Parrish and
options for 90,000 shares to Phoenix Health Care of Illinois, Inc., a
corporation in which Mr. Parrish and Dr. Leeper are officers, directors and
shareholders. The option exercise price was reduced from the initial exercise
price of $6.00 to $3.875 (which was the last sale price of the Company's Common
Stock on the American Stock Exchange on the date of the repricing) and the
vesting criterion has changed. The Compensation Committee elected to reprice
the options and change the final vesting criteria because the Committee felt
that due to changed circumstances, including the reduction in the trading price
of the Company's Common Stock, the options were no longer providing the
incentive they were designed to provide.
During fiscal 1996, the Company paid $60,000 for consulting services to Phoenix
Health Care of Illinois, Inc., a corporation in which Mr. Parrish and Dr.
Leeper are officers, directors and shareholders. The Company has an informal
agreement to reimburse Phoenix for office space used by the officers of the
Company. The space is leased by Phoenix Health Care of Illinois from a third
party.
On October 2, 1995, the Company borrowed $160,000 from Mr. Parrish. These
funds were used to make a non-refundable deposit in connection with the
Company's acquisition of Chartex Resources Limited. The borrowing is evidenced
by a $160,000 demand note with interest payable on the first day of each
quarter at a bank's prime rate of interest plus 1 1/4%. The note is secured by
a stock issuance agreement which provides that, upon default, Mr. Parrish may
require the Company to issue up to 68,572 shares of Company Common Stock (with
demand registration rights) to be used by him as reimbursement for any amounts
due under the note. The Company repaid the demand note during fiscal 1997.
On November 21, 1995, the Company borrowed $1,000,000 from an affiliate of Mr.
Dearholt, a current director of the Company, under a one year note payable due
in full November 20, 1996 with interest at 12% payable monthly. As part of
this transaction, Mr. Dearholt personally guaranteed repayment of the Company's
obligations under the $1,000,000 promissory note. In consideration of the
transaction, the Company issued warrants to each of Mr. Dearholt and the
lender, which entitles each of them to purchase 10,000 shares of the Company's
Common Stock at $3.00 per share, which represented the average trading price of
the Company's Common Stock for the five trading days prior to the issuance of
such warrants. The warrants expire upon the earlier of the exercise of the
warrant rights or November 20, 2000. Any stock issued under the warrants
carries certain registration rights. The Company repaid the note during fiscal
1997.
On March 25, 1996, the Company borrowed $1,000,000 from Mr. Dearholt, a current
Director of the Company, under a one year note payable due in full March 25,
1997 with interest at 12% payable monthly. As part of this transaction, the
Company issued warrants to Mr. Dearholt which entitle him to purchase 200,000
shares of the Company's Common Stock at $3.10 per share, which represented the
average trading price of the Company's Common Stock for the five trading days
prior to the originally scheduled closing date for the transaction. In
addition, if the Company defaults on its obligation under this note, the
Company is required to issue an additional 200,000 shares of its Common Stock
to Mr. Dearholt, in addition to all other remedies to which Mr. Dearholt may be
entitled. Any stock issued under the warrants carries certain registration
rights. The warrants expire upon the earlier of their exercise or 2001. The<PAGE>
note was repaid by issuance of a new promissory note due March 25, 1998, as
described above.
Mr. O. B. Parrish and Mr. William R. Gargiulo, Jr. work out of office space at
919 N. Michigan Avenue, Chicago, Illinois which is leased by Phoenix Health
Care of Illinois from a third party. The Company paid the monthly lease
payments of $53,911 and $51,256 for this lease in fiscal 1996 and fiscal 1997,
respectively.
During fiscal 1997, the Board of Directors of the Company repriced options
granted to certain employees of the Company on November 21, 1994, March 19,
1996 and on April 22, 1997, including 1994 options for 200,000 shares to Dr.
Leeper, 1994 options for 44,000 shares to Mr. Parrish, 1994 options for 90,000
shares to Phoenix Health Care of Illinois, Inc., a corporation in which Mr.
Parrish and Dr. Leeper are officers, directors and shareholders, 1996 options
for 120,000 to Mr. Parrish, 1997 options for 90,000 shares to Dr. Leeper, 1997
options for 100,000 shares to Mr. Parrish and 1997 options for 50,000 shares to
Mr. Gargiulo. The option exercise price for the 1994 and 1996 options was
reduced from $3.875 to $2.00 and the option exercise price for the 1997 options
was reduced from $2.75 to $2.00 (which was the last sale price of the Company's
Common Stock on the American Stock Exchange on the date of the repricing) and
the vesting criterion has changed. The Compensation Committee elected to
reprice the options and change the final vesting criteria because the Committee
felt that due to changed circumstances, including the reduction in the trading
price of the Company's Common Stock, the options were no longer providing the
incentive they were designed to provide. <PAGE>
INDEPENDENT ACCOUNTANTS
For the fiscal year ending September 30, 1997, McGladrey & Pullen, LLP served
as the Company's independent auditors.
PROPOSALS FOR 1999 ANNUAL MEETING
Any stockholder who desires to submit a proposal for inclusion in the 1999
Proxy Statement should submit the proposal in writing to Mr. O. B. Parrish,
Chief Executive Officer, The Female Health Company, 919 North Michigan Avenue,
Suite 2208, Chicago, Illinois, 60611. The Company must receive a proposal by
October 31, 1998 in order to consider it for inclusion in the 1999 Proxy
Statement.
EXPENSES OF SOLICITATION
The cost of this solicitation of proxies will be paid by the Company. It is
anticipated that the proxies will be solicited only by mail, except that
solicitation personally or by telephone may also be made by the Company's
regular employees who will receive no additional compensation for their
services in connection with the solicitation. Arrangements will be made with
brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation material and annual reports to beneficial owners of
stock held by such persons. The Company will reimburse such parties for their
expenses in so doing.
By Order of the Board of Directors,
s/s William R. Gargiulo, Jr.
----------------------------
William R. Gargiulo, Jr., Secretary
Chicago, Illinois
February 13, 1998<PAGE>
THE FEMALE HEALTH COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William R. Gargiulo, Jr. and O. B. Parrish, or
either one of them, with full power of substitution, as proxy or proxies of the
undersigned to attend the annual meeting of stockholders of The Female Health
Company to be held on Wednesday, April 8, 1998, at 2 p.m., local time, at The
Knickerbocker Hotel-Towers East Room, 14th Floor, 163 East Walton Place,
Chicago, Illinois, and at any adjournment thereof, and to vote all shares of
Common Stock and all shares of Class A Convertible Preferred Stock - Series 1
and Series 2 which the undersigned would be entitled to vote if personally
present as specified upon the following matters and in their discretion upon
such other matters as may properly come before the meeting.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting and
accompanying Proxy Statement, ratifies all that said proxies or their
substitutes may lawfully do by virtue hereof, and revokes all former proxies.
Please sign exactly as your name appears hereon, date and return this proxy.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSAL 1 AND
PROPOSAL 2.
DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED
THE FEMALE HEALTH COMPANY ANNUAL MEETING
1 ELECTION OF DIRECTORS: 1 - O. B. Parrish 2 - William R. Gargiulo, Jr.
3 - Mary Ann Leeper, Ph.D. 4 - Stephen M. Dearholt
5 - David R. Bethune ___ GRANT ___ WITHHOLD for the
election of directors
(Instructions: To withhold authority to vote for any indicated nominee, write
the number(s) of the nominee(s) in the box provided to the right.)
- --------------------------> ________
2. Ratification of the appointment of McGladrey & Pullen, LLP as the Company's
independent public accountants for the fiscal year ending September 30, 1998.
____ FOR ____ AGAINST
Address Change? ______
Mark Box Indicate changes below:
Date ___________, 1998 NO. OF SHARES
_______________________________
Signature(s) In Box
If signing as attorney, executor, administrator, trustee or guardian, please
add your full title as such. If shares are held by two or more persons, all
holders must sign the proxy. <PAGE>
