January 8, 1999
Electronically Transmitted
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, NW
Washington, DC 20549
Gentlemen:
In accordance with Rule 14a-6(a), transmitted herewith is the preliminary proxy
statement and proxy card in connection with the 1999 Annual Meeting of
Shareholders of The Female Health Company (The "Company"). Shareholders are
being asked to vote on an amendment to the Company's Amended and Restated
Articles of Incorporation increasing the authorized number of shares of Common
Stock, the election of directors and to ratify the appointment of McGladrey &
Pullen, LLP as the Company's independent public accountants. The Company
expects to mail definitive proxy statements to security holders on or about
February 10, 1999. At that time, the Company will mail 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 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".
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:
X Preliminary Proxy Statement
___ Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
___ 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)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party: <PAGE>
(4) Date Filed:<PAGE>
THE FEMALE HEALTH COMPANY
875 North Michigan Avenue
Suite 3660
Chicago, Illinois 60611
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held April 9, 1999
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 Hotel
Inter-Continental, Empire Ballroom, South Tower, 7th Floor, 505 N. Michigan
Avenue, Chicago, Illinois on Friday, April 9, 1999 at 2:00 p.m., local time,
for the following purposes:
1. To amend the Company's Amended and Restated Articles of Incorporation to
increase the number of shares of Common Stock authorized to 22,000,000 and the
total number of shares authorized to 27,015,000. Details of the proposed
increase in authorized shares of Common Stock are set forth in the accompanying
Proxy Statement which you are urged to read carefully.
2. 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 2000 Annual
Meeting.
3. 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, 1999.
4. 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 1, 1999 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 10, 1999<PAGE>
THE FEMALE HEALTH COMPANY
875 North Michigan Avenue
Suite 3660
Chicago, Illinois 60611
PRELIMINARY PROXY STATEMENT
FOR THE 1999 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 Hotel
Inter-Continental, Empire Ballroom, South Tower, 7th Floor, 505 N. Michigan
Avenue, Chicago, Illinois at 2:00 p.m. local time on Friday, April 9, 1999, 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 10, 1999.
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: FOR the
amendment of the Company's Amended and Restated Articles of Incorporation; in
FOR 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 (the "Series 1
Preferred Stock") whose names appear of record on the books of the Company at
the close of business on January 5, 1999 are entitled to vote at the meeting.
On that date, there were 10,441,227 shares of Common Stock, and 670,000 shares
of Series 1 Convertible Preferred Stock outstanding. Each share of Common
Stock and Series 1 Convertible Preferred Stock 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.
Under Wisconsin law, directors are elected by plurality, meaning that the five
individuals receiving the largest number of votes are elected as directors. In
addition, under Wisconsin law, an amendment to the Company's Amended and
Restated Articles of Incorporation must be approved by the affirmative vote of
holders of two-thirds of the shares "entitled" to vote on the proposal.
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. However, because the amendment to the<PAGE>
Company's Amended and Restated Articles of Incorporation must be approved by
the affirmative vote of holders of two-thirds of the Company's outstanding
common stock and Series 1 Preferred Stock, voting together, abstentions and
broker non-votes will act as a vote against the proposed amendment.
AMENDMENT OF COMPANY'S AMENDED AND RESTATED ARTICLES OF INCORPORATION
(Item 1)
The Company's Amended and Restated Articles of Incorporation authorize the
issuance 20,015,000 shares consisting of; (a) 15,000,000 shares designated as
"Common Stock" with a par value of $0.01 per share; (b) 5,000,000 shares
designated as "Class A Preferred Stock" with a par value of $0.01 per share;
and (c) 15,000 shares designated as "Class B Preferred Stock" with a par value
of $).50 per share.
As of January 5, 1999 the Company had 10,441,227 shares of Common Stock, and
670,000 shares of Series 1 Convertible Preferred Stock outstanding. In
addition, as of January 5, 1999 the Company has reserved 3,618,000 shares of
Common Stock for the purposes of covering Company stock option plans, warrants
outstanding, conversion of Series 1 Convertible Preferred Stock, employee
restricted stock incentive program, and contingent obligations relating to an
outstanding note payable. After giving effect for the reserved Common Stock,
the Company has 940,773 unreserved and unissued shares of Common Stock for
general corporate purposes.
In order to have sufficient shares of Common Stock available for general
corporate purposes and, if management deems it advisable, to fully utilize a
recently executed Equity Line Agreement, as described below, Board of Directors
of the Company recommends increasing the authorized shares of Common Stock to
22,000,000 shares, and increasing total shares authorized to 27,015,000 shares.
Equity Line Agreement
To provide a potential ready source of capital for the Company, which the
Company anticipates using for general working capital purposes, effective
November 19, 1998, the Company entered into a private Equity Line of Credit
Agreement (the "Equity Line Agreement") with Kingsbridge Capital Limited, a
private investor (the "Selling Stockholder"). Under the Equity Line Agreement,
the Company may issue and sell to the Selling Stockholders, from time to time,
shares of its Common Stock for cash consideration up to an aggregate of $6
million. Pursuant to the requirements of the Equity Line Agreement, the Company
has filed a registration statement with the Securities and Exchange Commission
in order to permit the Selling Stockholder to resell to the public any shares
that it acquires pursuant to the Equity Line Agreement. Commencing as of the
date the registration statement is declared effective by the Securities and
Exchange Commission and continuing for a period of 24 months thereafter, the
Company may from time to time at its sole discretion, and subject to certain
restrictions set forth in the Equity Line Agreement, sell ("put") shares of its
Common Stock to the Selling Stockholder at a price equal to (a) 88% of the then
current average market price of a share of the Company's Common Stock, as
determined under the Equity Line Agreement, if such average market price is at
least $2 or (b) 82% of such average market price if the average market price is
less than $2. Puts can be made every 20 trading days in amounts ranging from a
minimum of $100,000 to a maximum of $1,000,000, depending on the trading volume
and the market price of the Common Stock at the time of each put. The Company
is required to put at least $1,000,000 of its Common Stock to the Selling
Stockholder over the two-year life of the Equity Line Agreement. If the Company<PAGE>
does not put at least $1 million of the Common Stock to the Selling Stockholder
during the term of the Equity Line Agreement, the Company must pay the Selling
Stockholder at the end of such two-year term an amount equal to the portion of
the $1 million not so put, multiplied by 12% (17% if the failure to put the
required minimum occurs as a result of certain specified events). As of the
date of this Proxy Statement, no shares of Common Stock have been sold to the
Selling Stockholder under the Equity Line Agreement.
Under the Equity Line Agreement, the average market price of the Company's
Common Stock for purposes of calculating the purchase price to be paid by the
Selling Stockholder will be calculated as the average of the lowest bid prices
of the Common Stock (as reported by Bloomberg L.P.) on each of the five days on
which the American Stock Exchange (the "Exchange") is open for business (a
"trading day"), during the period which includes the two trading days preceding
the day on which the Company delivers notice to the Selling Stockholder that
the Company is exercising a put (a "Put Notice"), the trading day on which the
Put Notice is delivered, and the two trading days following the trading day on
which the Put Notice is delivered.
The Company's ability to put shares of its Common Stock, and the Selling
Stockholder's obligation to purchase the shares, is conditioned upon the
satisfaction of certain conditions. These conditions include: (1) the
registration statement must have been declared effective by the Securities and
Exchange Commission; (2) the representations and warranties of the Company set
forth in the Equity Line Agreement must be accurate as of the date of each put;
(3) the Company must have performed and complied with all of the Company's
obligations under the Equity Line Agreement, a registration rights agreement
entered into between the Company and the Selling Stockholder in connection with
the Equity Line Agreement and a warrant issued to the Selling Stockholder; (4)
no statute, rule, regulation, executive order, decree, ruling or injunction may
be in effect which prohibits or directly and adversely affects any of the
transactions contemplated by the Equity Line Agreement; (5) at the time of a
put, there may not have been any material adverse change in the Company's
business, operations, properties, prospects or financial condition since the
date of fling of the Company's most recent periodic report filed with the
Securities and Exchange Commission pursuant to the Exchange Act; (6) the
Company's Common Stock must not have been delisted from the Exchange nor
suspended from trading; (7) the number of shares to be put to the Selling
Stockholder, together with any shares then held by the Selling Stockholder, may
not exceed 9.9% of all shares of Common Stock of the Company that would be
outstanding upon completion of the put; (8) the Company's Common Stock must
have a minimum bid price of $1.00 per share at the time of the put; and (9) the
average trading volume of the Company's Common Stock for 20 consecutive trading
days immediately preceding a put must be at least 17,000 shares per day.
As indicated above, the Company has filed a registration statement with the
Securities and Exchange Commission registering the Selling Shareholder's resale
of the shares of Common Stock which it may purchase under the Equity Line
Agreement. That registration statement contains additional information
concerning the Equity Line Agreement and the Company. Accordingly, you should
review that registration statement for additional information. The Company
filed the registration statement on Form SB-2 with the Securities and Exchange
Commission on December 8, 1998. You may obtain a copy through the Securities
and Exchange Commission or by contacting the Company.<PAGE>
The Company will receive the put price paid by the Selling Stockholder pursuant
to the Equity Line Agreement if and to the extent Common Stock is sold by the
Company pursuant thereto.
Any funds received by the Company under the Equity Line Agreement will be used
for general working capital purposes.
The Board of Directors recommends that shareholders vote FOR the proposed
amendment to the Company's Amended and Restated Articles of Incorporation.
ELECTION OF DIRECTORS
(Item 2)
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 2000 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).
NOMINEES FOR ELECTION AS DIRECTORS
O. B. PARRISH
Age: 65; Elected Director: 1987; Present Term Ends: 1999 Annual Meeting:
Mr. Parrish has served as Chief Executive Officer of the Company since 1994, as
acting Chief Financial and Accounting Officer since February 1996 and as the
Chairman of the Board since 1987. Mr. Parrish is a shareholder and 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
295,000 shares of the Company's outstanding Common Stock. Mr. Parrish also 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, and he is a director of Microbyx., a diagnostics 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: 58; Elected Director: 1987; Present Term Ends: 1999 Annual Meeting:
Dr. Leeper has served as the President and Chief Operating Officer of the
Company since 1996 and as President and Chief Executive Officer of The Female
Health Company division from May 1994 until January, 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, 1996. Dr. Leeper
is a shareholder and has served as a Vice President and director of Phoenix of<PAGE>
Illinois since 1987. From 1981 until 1986, Dr. Leeper was Vice
President-Markets Development of the Pharmaceutical Group of G.D. Searle & Co.
As Vice-President - Market Development, Dr. Leeper was responsible for
worldwide licensing and acquisition, marketing and market research. In earlier
positions, She was responsible for preparation of new drug applications and was
a liaison with the FDA.
WILLIAM R. GARGIULO, JR.
Age: 70; Elected Director: 1987; Present Terms Ends: 1999 Annual Meeting:
William R. Gargiulo, Jr. has served as Secretary of the Company from 1996 to
present, as Vice President from 1996 to September 30, 1998, as Assistant
Secretary of the Company from 1989 to 1996, as Vice President - International
of The Female Health Company Division from 1994 until January, 1996 (when the
division was consolidated with the Company), as Chief Operating Officer of the
Company from 1989 to 1994, and as General Manager of the Company from 1988 to
1994. Mr. Gargiulo is 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: 52; Elected Director: 1996; Present Term Ends: 1999 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. In late 1995, Mr. Dearholt
arranged, on very short notice, a $1 million bridge loan which assisted the
Company in its purchase of Chartex. 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 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: 58; Elected Director: 1996; Present Term Ends: 1999 Annual Meeting
Mr. Bethune is a business consultant to the pharmaceutical industry and
previously held the position of President and Chief Operating Officer of the
IVAX Corporation. Prior to IVAX, Mr. Bethune was Group Vice President of
American Cyanamid Company and a member of its Executive Committee until the
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 the Southern Research Institute, Atrix
Pharmaceuticals and the American Foundation for Pharmaceutical Education,
Partnership for Prevention. He is a founding trustee of the American Cancer<PAGE>
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.
INDEPENDENT PUBLIC ACCOUNTANTS
(Item 3)
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, 1999. 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, 1998.
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, 1998.
During fiscal 1998, 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 7 meetings during the Company's fiscal year ended
September 30, 1998. Mr. Bethune was unable to attend 4 meetings. No other
incumbent director attended fewer than 75% of the aggregate of (1) the total<PAGE>
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
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 51 Vice President, Trade Sales
Michael Pope 42 Vice President, General Manager
- The Female Health Company
(UK) Plc.
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<PAGE>
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
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 one highest-paid executive officer other than the Chief Executive Officer
(the "named executive officers"), who served in such capacity as of September
30, 1998, 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 $100,000 during the fiscal year ended
September 30, 1998.
SUMMARY COMPENSATION TABLE
Annual Long-Term
Compensation Compensation Awards
Name and Principal Fiscal Restricted Stock Securities Underlying
Position Fiscal Year Salary Awards (1) Options/SARs
($) (#)
O. B. Parrish 1998 $90,000 $117,955(2) ---
Chairman, Chief 1997 $90,000 --- 100,000
Executive Officer and 1996 $90,000 --- 120,000
Acting Chief Financial Officer
Mary Ann Leeper, Ph.D. 1998 $225,000 $84,210(2) ---
President and Chief 1997 $225,000 --- 90,000
Operating Officer 1996 $225,000 --- ---
(1) Represents fair market value of restricted Common Stock on the date of
grant based on the $2.88 closing price of the Company's Common Stock on
such date.
(2) At September 30, 1998, the named executive officer owned 25,000 shares of
restricted Common Stock, having a fair market value of $71,875 on such
date, based on the closing price of the Company's Common Stock on such
date. For Mr. Parrish, also includes his pro rata portion of 25,000 shares
of restricted stock granted to Phoenix Health Care of Illinois, Inc.
("Phoenix of Illinois"), based on his 64% ownership of such entity. For Dr.
Leeper, also includes her pro rata portion of such restricted stock based
on her approximately 16.7% ownership of such entity. All of these shares
were granted on May 5, 1998 and vest in full on the first anniversary of
the grant date. The owner is entitled to receive any dividends declared on
these shares of restricted stock.
Aggregated Option Values at September 30, 1998
The following table presents the value of unexercised options held by the named
executive officers at September 30, 1998:
Number of Securities Value of Unexercised In-
Underlying Unexercised The-Money Options<PAGE>
Options at September 30, 1998 at September 30, 1998
Name Exercisable / Unexercisable Exercisable/Unexercisable
O. B. Parrish 88,000 / 176,000 $0
Mary Ann Leeper, Ph.D. 96,667 / 193,333 $0
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
The following table sets forth certain information as of January 5, 1999 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) 494,001 4.68%
William R. Gargiulo, Jr. (1) 351,668 3.35%
Mary Ann Leeper, Ph.D. (1) 455,668 4.31%
Stephen M. Dearholt (4) 1,235,466 11.07%
David R. Bethune (2) 50,000 *
Phoenix Health Care of Illinois, Inc. (3) 324,501 3.10%
State of Wisconsin Investment Board 635,000 6.08%
All directors, nominees and executive officers,
as a group (seven persons) (1)(2)(4) 1,972,801 17.24%
* Less than 1%<PAGE>
(1) Includes 294,501 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 34,500 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 81,500 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 held by a trust (of which Mr. Gargiulo is a trustee), 10,000 shares
owned by and 16,667 shares under option to him which options are
exercisable within 60 days.
(2) Represents options which are currently exercisable.
(3) Includes 294,501 shares owned by and 30,000 shares under option to Phoenix
of Illinois.
(4) Includes 238,057 shares owned directly by Mr. Dearholt. Also includes
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 148,129 and
60,000 (Series 1 Convertible Preferred Stock) held by trusts (of which Mr.
Dearholt is a trustee) and 45,100 shares held by Mr. Dearholt's minor
children. Also includes warrants to purchase 610,000 shares of Common
Stock and options to purchase 50,000 shares.
The address of Phoenix of Illinois is 875 North Michigan Avenue, Suite 3660,
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 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 Series 1 Convertible Preferred Stock. This Form 4 should have
been filed by August 15, 1997.<PAGE>
CERTAIN TRANSACTIONS
On March 25, 1997 and again on March 25, 1998, the Company extended a $1
million one-year promissory note payable by the Company to Mr. Dearholt in
connection with a previous loan Mr. Dearholt made to the Company. The
promissory note is now payable in full on March 25, 1999 and bears interest at
12% per annum payable monthly. The note proceeds were initially used by the
Company to provide working capital needed to fund the initial stages of the
Company's U.S. marketing campaign ($0.2 million) and to fund operating losses
($0.8 million). The borrowing transactions were effected in the form of a
promissory note from the Company to Mr. Dearholt and related Note Purchase and
Warrant Agreements and Stock Issuance Agreements. Under the 1997 and 1998 Note
Purchase and Warrant Agreements, the Company issued to Mr. Dearholt warrants to
purchase 200,000 and 200,000 shares of the Company's Common Stock in 1997 and
1998, respectively, at exercise prices of $1.848 and $2.25 per share,
respectively. The warrants expire upon the earlier of their exercise or five
years after the date of their issuances. Under the Stock Issuance Agreements,
if the Company fails to pay the $1 million under the note when due, the Company
must issue 200,000 shares of its Common Stock to Mr. Dearholt. This issuance
will not, however, alleviate the Company from its liability under the note. The
Company also granted Mr. Dearholt certain securities registration rights with
respect to any Common Stock he receives from the Company under these warrants
or the Stock Issuance Agreement. Mr. Dearholt has agreed that, if the Company
requests, he will extend the promissory note for an additional one-year term to
be due and payable on March 25, 2000 upon the same terms as the prior note
extensions. In consideration of this agreement, the Company extended the term
of certain warrants held by Mr. Dearholt to purchase 200,000 shares of the
Company's Common Stock which expire March 25, 2001 to March 25, 2002.
On July 27, 1997, a trust of which Stephen M. Dearholt, a director of the
Company, is a trustee, 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 of these shares.
Through November 15, 1998 Mr. O. B. Parrish and Mr. William R. Gargiulo, Jr.
worked 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 $51,256 and $48,146 for this lease in fiscal
1997 and fiscal 1998, respectively.
During fiscal 1998 the Company awarded Phoenix 25,000 shares of restricted
Common stock with a market value of approximately $71,875 at September 30,
1998, for consulting services provided to the Company.
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<PAGE>
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.
It has been and currently is the policy of the Company that transactions
between the Company and its officers, directors, principal shareholders or
affiliates are to be on terms no less favorable to the Company than could be
obtained from unaffiliated parties. The Company intends that any future
transactions between the Company and its officers, directors, principal
shareholders or affiliates will be approved by a majority of the directors who
are not financially interested in the transaction.
INDEPENDENT ACCOUNTANTS
For the fiscal year ending September 30, 1998, McGladrey & Pullen, LLP served
as the Company's independent auditors.
PROPOSALS FOR 2000 ANNUAL MEETING
Any stockholder who desires to submit a proposal for inclusion in the Company's
2000 Proxy Statement should submit the proposal in writing to Mr. O. B.
Parrish, Chief Executive Officer, The Female Health Company, 875 North Michigan
Avenue, Suite 3660, Chicago, Illinois, 60611. The Company must receive a
proposal by October 13, 1999 in order to consider it for inclusion in the
Company's 2000 Proxy Statement. Any stockholder who intends to present a
proposal at the 2000 Annual Meeting of Stockholders without inclusion of such
proposal in the Company's proxy materials are required to provide notice of
such proposal to the Company no later than December 27, 1999.
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 10, 1999<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 Friday, April 9, 1999, at 2 p.m., local time, at the
Hotel Inter-Continental, Empire Ballroom, South Tower, 7th Floor, 505 N.
Michigan Avenue, 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 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.
PLEASE NOTE, YOUR FAILURE TO VOTE OR YOUR ABSTENTION VOTE FOR PORPOSAL 1 WILL
HAVE THE SAME EFFECT AS A VOTE AGAINST THE AUTHORIZATION OF ADDITIONAL SHARES
OF COMMON STOCK. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR
PROPOSAL 1, PROPOSAL 2 AND PROPOSAL 3.
DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED
THE FEMALE HEALTH COMPANY ANNUAL MEETING
1. Approval of an amendment to the Company's Amended and
Restated Articles of Incorporation to increase authorized
shares to 27,015,000 including 22,000,000 shares of
Common Stock. ____ FOR ____ AGAINST
2. 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.) --------------------> | |
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3. Ratification of the appointment of McGladrey & Pullen,
LLP as the Company's independent public accountants
for the fiscal year ending September 30, 1999 ____ FOR ____ AGAINST
_______
Address Change? | |
Mark Box | |
Indicate changes below: |_______|
Date ___________, 1999 NO. OF SHARES
____________________
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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>
