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
Filed by the registrant [x]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[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)
(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:
(4) Date filed:
<PAGE>
THE FEMALE HEALTH COMPANY
875 North Michigan Avenue
Suite 3660
Chicago, Illinois 60611
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 5, 2000
To the Shareholders of The Female Health Company:
Notice is hereby given that the Annual Meeting of the Shareholders of The
Female Health Company (the "Company" or "FHC") will be held at the Westin Hotel,
Consort Room, 16th Floor, 909 North Michigan Avenue, Chicago, Illinois 60611, on
Friday, May 5, 2000 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 from
22,000,000 to 27,000,000. 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 seven members to the Board of Directors, the names of whom
are set forth in the accompanying proxy statement, to serve until the 2001
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, 2000.
4. To transact such other business as may properly come before the
Annual Meeting and any adjournments thereof.
Shareholders of record at the close of business on March 14, 2000 are
entitled to vote at the Annual Meeting. All shareholders are cordially invited
to attend the Annual Meeting in person. Shareholders 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,
William R. Gargiulo, Jr.
Secretary
Chicago, Illinois
March 31, 2000
<PAGE>
THE FEMALE HEALTH COMPANY
875 North Michigan Avenue
Suite 3660
Chicago, Illinois 60611
PROXY STATEMENT
FOR THE 2000 ANNUAL
MEETING OF SHAREHOLDERS
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 Shareholders to be held at the Westin
Hotel, Consort Room, 16th Floor, 909 North Michigan Avenue, Chicago, Illinois
60611, at 2 p.m. local time on Friday, May 5, 2000, and at any adjournments
thereof, for the purposes set forth in the accompanying Notice of Meeting. The
mailing to shareholders of this Proxy Statement and accompanying form of proxy
will take place on or about March 31, 2000.
GENERAL INFORMATION
The Board of Directors knows of no business which will be presented to the
Annual Meeting other than the matters referred to in the accompanying Notice of
Meeting. However, if any other matters are properly presented to the Annual
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:
(a) the amendment of the Company's Amended and Restated Articles of
Incorporation; (b) the election of the directors listed in the enclosed proxy;
and (c) 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 March 14, 2000 are entitled to vote at the Annual
Meeting. On that date, there were 12,479,368 shares of Common Stock, and
660,000 shares of Series 1 Preferred Stock outstanding. Each share of Common
Stock and Series 1 Preferred Stock is entitled to one vote on each matter to be
presented at the Annual Meeting. A majority of the votes entitled to be cast
with respect to each matter submitted to the shareholders,
<PAGE>
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
seven individuals receiving the largest number of votes are elected as
directors, and the ratification of the appointment of the independent auditors
requires the affirmative vote of a majority of the shares represented, in person
or by proxy, at the Annual Meeting. 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 nonvotes (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 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 nonvotes will act as a vote
against the proposed amendment.
2
<PAGE>
AMENDMENT OF COMPANY'S AMENDED AND RESTATED ARTICLES OF INCORPORATION
(ITEM 1)
The Company's Amended and Restated Articles of Incorporation authorize the
issuance 27,015,000 shares consisting of: (a) 22,000,000 shares designated as
"Common Stock" with a par value of $.01 per share; (b) 5,000,000 shares
designated as "Class A Preferred Stock" with a par value of $.01 per share; and
(c) 15,000 shares designated as "Class B Preferred Stock" with a par value of
$.50 per share.
As of March 14, 2000 the Company had 12,479,368 shares of Common Stock, and
660,000 shares of Series 1 Preferred Stock outstanding. In addition, as of
March 14, 2000 the Company has reserved 9,194,133 shares of Common Stock for the
purposes of covering Company stock option plans, warrants outstanding,
conversion of Series 1 Preferred Stock, employee restricted stock incentive
program, conversion of convertible debentures, and contingent obligations
relating to an outstanding note payable. After giving effect to the reserved
Common Stock, the Company has 326,499 unreserved and unissued shares of Common
Stock for general corporate purposes.
The female condom will be launched in Japan in April 2000. The Company is
considering making shares available to Japanese investors subsequent to the
launch. In order to have sufficient shares of Common Stock available for
possible issuance to Japanese investors and for financing and other general
corporate purposes (including, if management deems it advisable, under the
Company's previously disclosed Equity Line Agreement with Kingsbridge Capital
Limited), the Board of Directors of the Company recommends increasing the
authorized shares of Common Stock to 27,000,000 shares, and increasing total
shares authorized to 32,015,000 shares. At present, the Company has no stock
issuances currently planned other than those which may be made in connection
with the Equity Line Agreement.
EQUITY LINE AGREEMENT
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 has the right, from time to time, at its sole discretion,
and subject to certain conditions set forth in the Equity Line Agreement, to
sell shares to the Selling Stockholder for cash consideration up to an aggregate
of $6 million 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 $2.00; or (b) 82% of
such average market price if the average market price is less than $2.00.
3
<PAGE>
As of the date of this Proxy Statement, the Company has completed three
sales to the Selling Stockholder under the Equity Line Agreement of a total of
482,964 shares of Common Stock for combined cash proceeds of $485,000. The last
of these sales occurred on April 10, 1999. The Selling Stockholder subsequently
resold all of these shares. Each sale was made while the trading price of the
Common Stock was below $2.00 per share and, accordingly, the Common Stock was
sold at the 18% discount. Under the Equity Line Agreement, the lowest price at
which the Company can sell shares of Common Stock effectively is $0.82 per
share. If all remaining shares under the Equity Line Agreement are sold at that
price, the Company may sell a maximum of approximately 6,725,610 additional
shares of Common Stock, or approximately 35% of the shares of Common Stock
outstanding as of March 14, 2000. However, one of the conditions to the
Company's right to sell under the Equity Line Agreement is that no sale may
cause the Selling Stockholder's ownership of the Common Stock to exceed 9.9% of
the outstanding shares of Common Stock at the time of the sale. Further, the
Company can make no assurance that it will complete any more sales under the
Equity Line Agreement or that it will be able to satisfy the conditions required
to sell Common Stock under the Equity Line Agreement at any time when such sales
are desired or needed.
CERTAIN EFFECTS OF THE PROPOSED AMENDMENT
If the proposed amendment to the Company's Amended and Restated Articles of
Incorporation is approved and effected, future issuances of shares of Common
Stock may not require the approval of the Company's shareholders. As a result,
the Board of Directors could issue shares of Common Stock in a manner that might
have the effect of discouraging or making it more difficult for a third party to
acquire control of the Company through a tender offer or proxy solicitation or
to effect a merger or other business combination that is not favored by the
Board of Directors. In addition, issuances of shares of Common Stock may
increase the number of shares of Common Stock that may become available for sale
in the public market and could adversely affect the price of the Common Stock in
the public market. The issuance of additional shares of Common Stock could also
adversely affect the voting power of the existing shareholders, including the
loss of voting control to others. Holders of Common Stock do not have
preemptive rights or other rights to subscribe for additional shares in the
event that the Board of Directors determines to issue additional shares of
Common Stock in the future.
NO DISSENTER'S RIGHTS
Under Wisconsin law, shareholders are not entitled to dissenters' rights
with respect to the proposed amendment to the Company's Amended and Restated
Articles of Incorporation.
4
<PAGE>
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that the shareholders vote FOR the
proposed amendment to the Company's Amended and Restated Articles of
Incorporation. All shares of Common Stock represented by properly executed
proxies received prior to or at the Annual Meeting and not revoked will be voted
FOR the proposal unless a vote against or an abstention with respect to such
proposal is specifically indicated. If the proposal is adopted by the requisite
vote of shareholders, the Board of Directors will promptly cause Articles of
Amendment to be filed with the Department of Financial Institutions of the State
of Wisconsin. The Articles of Amendment will become effective upon such filing.
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
seven. The Board of Directors has nominated William R. Gargiulo, Jr., Mary Ann
Leeper, Ph.D., O.B. Parrish, Stephen M. Dearholt, David R. Bethune, Michael R.
Walton and James R. Kerber for election as directors, all to serve until the
2001 Annual Meeting of Shareholders.
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: 66; Elected Director: 1987; Present Term Ends: 2000 Annual Meeting
Mr. Parrish has served as Chief Executive Officer of the Company since 1994
and as the Chairman of the Board since 1987. Mr. Parrish also served as the
Company's Acting Chief Financial Officer and Accounting Officer from February
1996 to March 1999. 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 Financial
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<PAGE>
Services, LLC, a financial services company, and he is Chairman and a director
of MIICRO Inc., a neuroimaging company, and a director of Amerimmune
Pharmaceuticals, Inc. 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: 59; Elected Director: 1987; Present Term Ends: 2000 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
Illinois since 1987. From 1981 until 1986, Dr. Leeper was Vice President -
Market Development of the Pharmaceutical Group of G.D. Searle & Co. As Vice
President - Market Development of Searle, 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. Dr. Leeper currently serves on the Board of Directors
of the Temple University School of Pharmacy and on the Board of Directors of the
Northwestern University School of Music. She is on the Board of CEDPA, an
international not-for-profit organization working on women's issues in the
developing world. Dr. Leeper is also a director of Influx, Inc., a
pharmaceutical research company.
WILLIAM R. GARGIULO, JR.
Age: 71; Elected Director: 1987; Present Terms Ends: 2000 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 shareholder 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.
6
<PAGE>
STEPHEN M. DEARHOLT
Age: 53; Elected Director: 1996; Present Term Ends: 2000 Annual Meeting
Mr. Dearholt is co-founder of and has been a partner in Response Marketing,
one of the largest privately owned life insurance marketing organizations in the
United States, since 1972. 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 nonprofit 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: 59; Elected Director: 1996; Present Term Ends: 2000 Annual Meeting
Mr. Bethune has been Chairman and Chief Executive Officer of Atrix
Laboratories since 1999. From 1997 to 1998, Mr. Bethune held the position of
President and Chief Operating Officer of the IVAX Corporation. From 1996 to
1997, Mr. Bethune was a consultant to the pharmaceutical industry. From 1995 to
1996, Mr. Bethune was President and Chief Executive Officer of Aesgen, Inc. a
generic pharmaceutical company. From 1992 to 1995, 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. 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 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.
MICHAEL R. WALTON
Age: 62; Elected Director: 1999; Present Term Ends: 2000 Annual Meeting
Mr. Walton is President and owner of Sheboygan County Broadcasting Co.,
Inc., a company he founded in 1972. In addition to its financial assets,
Sheboygan County Broadcasting Co. currently owns four radio stations. The
company has focused on
7
<PAGE>
start-up situations, and growing value in underperforming, and undervalued
business situations. It has purchased and sold properties in Wisconsin,
Illinois and Michigan. Prior to 1972, Mr. Walton was Owner and President of
Walton Co., an advertising representative firm which he founded in New York
City. He has held sales and management positions with Forbes Magazine, The
Chicago Sun Times, and Gorman Publishing Co., a trade magazine publisher
specializing in new magazines, which was subsequently sold to a large
international publishing concern. Mr. Walton has served on the Board of the
American Red Cross, The Salvation Army and the Chamber of Commerce.
JAMES R. KERBER
Age: 67; Elected Director: 1999; Present Term Ends: 2000 Annual Meeting
Mr. Kerber has been a business consultant to the insurance industry since
January 1996. He has over 40 years of experience in operating insurance
companies, predominantly those associated with life and health. From October
1994 until January 1996, he was Chairman, President, Chief Executive Officer and
director of the 22 life and health insurance companies which comprise the ICH
Group. In 1990, Mr. Kerber was founding partner in the Life Partners Group
where he was Senior Executive Vice President and a director. Prior to that, he
was involved with operating and consolidating over 200 life and health companies
for ICH Corporation, HCA Corporation and US Life Corporation.
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, 2000. The Board proposes that the shareholders
ratify this appointment. McGladrey & Pullen, LLP audited the Company's
financial statements for the fiscal year ended September 30, 1999. The Company
expects that representatives of McGladrey & Pullen, LLP will be present at the
Annual 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
Annual Meeting, the Board of Directors will reconsider its appointment.
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<PAGE>
A majority of the shares voted at the Annual 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 seven members: O.B. Parrish,
William R. Gargiulo, Jr., Mary Ann Leeper, Ph.D., Stephen M. Dearholt, David R.
Bethune, Michael R. Walton and James R. Kerber. At each annual meeting of
shareholders, directors are elected for a term of one year to succeed those
directors whose terms are expiring.
COMMITTEE OF THE BOARD OF DIRECTORS AND MEETING ATTENDANCE
The Company has an Audit Committee. The Board's Audit Committee is
comprised of Mr. Bethune, Mr. Dearholt and Mr. Kerber. The responsibilities of
the Audit Committee, in addition to such other duties as may be specified by the
Board of Directors, include the following: (a) recommendation to the Board of
Directors of independent auditors for the Company; (b) review of the timing,
scope and results of the independent auditors audit examination; (c) review of
periodic comments and recommendations by the auditors and of the Company's
response thereto; and (d) review of the scope and adequacy of internal
accounting controls. The Audit Committee met two times during the fiscal year
ended September 30, 1999.
The Board of Directors held 20 meetings during the Company's fiscal year
ended September 30, 1999. No incumbent director attended fewer than 75% of the
aggregate of (a) the total number of meetings of the Board of Directors and (b)
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.
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<PAGE>
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.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Jack Weissman 52 Vice President - Sales
Michael Pope 42 Vice President, Director and General Manager - The Female Health
Company (UK) Plc.
Mitchell Warren 33 Vice President - International Affairs
Robert R. Zic 36 Director of Finance and Administration
- --------------- --- -----------------------------------------------------------------
</TABLE>
JACK WEISSMAN
Vice President - Sales
Mr. Weissman has served as Vice President-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. From the 1989 to 1992,
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 to 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, Director and General Manager - The Female Health Company (UK)
Plc.
Mr. Pope has served as Vice President of the Company since 1996 and as
Director and 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
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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.
MITCHELL WARREN
Vice President - International Affairs.
Mr. Warren has served as Vice President - International Affairs of the
Company since February 2000 and as Director of International Affairs of the
Company from January 1999 to February 2000. From 1993 to 1998, Mr. Warren was
employed by Population Services International (PSI), an international social
marketing and communications organization, first as Executive Director of
PSI/South Africa and then of PSI/Europe. From 1989 to 1993, Mr. Warren was
Program Director of Medical Education for South African Blacks.
ROBERT R. ZIC
Director of Finance and Administration
Mr. Zic has served as the Company's Director of Finance and Administration
since March 1999. From 1998 to 1999, Mr. Zic held the dual positions of Acting
Controller and Acting Chief Financial Officer at Ladbroke's Pacific Racing
Association. From 1995 to 1998, Mr. Zic served as the Chief Accounting Manager
and Assistant Controller at Argonaut Insurance Company. In this capacity, he
was responsible for the financial and accounting operations at Argonaut's ten
divisions and the external and internal financial reporting of Argonaut and its
four subsidiaries. From 1990 to 1994, Mr. Zic was the Assistant Controller of
CalFarm Insurance Company, where he was responsible for the company's external
financial reporting duties. Mr. Zic's career began in 1986 as an auditor with
Arthur Andersen & Co.
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<PAGE>
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, 1999, 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 $100,000 during the fiscal
year ended September 30, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION LONG-TERM COMPENSATION AWARDS
RESTRICTED STOCK SECURITIES
FISCAL AWARDS (1) UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) OPTIONS/SARS
<S> <C> <C> <C> <C>
O.B. Parrish 1999 $ 90,000 - 200,000
Chairman and Chief 1998 $ 90,000 $ 117,955(2) 204,000
Executive Officer . . . . . 1997 $ 90,000 - 164,000(3)
Mary Ann Leeper, Ph.D. 1999 $225,000 - 500,000
President and Chief 1998 $225,000 $ 84,210(2) 290,000
Operating Officer . . . . . 1997 $225,000 - 200,000(3)
- --------------------------- ------ -------- ------------------ -------------
<FN>
(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, and a
fair market value of $40,625 on September 30, 1999, based on the closing price
of the Company's Common Stock on such date. For Mr. Parrish, also includes his
pro rata portion of 25,000 shares of restricted stock granted to Phoenix of
Illinois, based on his 64% ownership of such entity. For Dr. Leeper, also
includes her pro rata portion of such restricted stock based on her
approximately 16.7% ownership of such entity. All of these shares were granted
on May 5, 1998 and vest in full on the first anniversary of the grant date. The
owner is entitled to receive any dividends declared on these shares of
restricted stock.
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<PAGE>
(3) Includes 164,000 and 200,000 options for Mr. Parrish and Dr. Leeper,
respectively, which were granted in 1995 and 1996 fiscal years but repriced in
1997.
</TABLE>
OPTION GRANTS DURING THE YEAR ENDED SEPTEMBER 30, 1999
The following table provides certain information regarding stock options
granted to the named executive officers of the Company during the fiscal year
ended September 30, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION FOR
OPTIONS EMPLOYEE IN OPTION TERM($)
EXERCISE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR PRICE ($/SH) DATE 5% 10%
- ---------------------- ----------- ----------- ------------ ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
O.B. Parrish . . . . . 200,000 (1) 12.4 0.85 6/02/09 106,912 270,936
Mary Ann Leeper, Ph.D. 500,000 (1) 31.1 0.85 6/02/09 267,280 677,341
- ---------------------- ----------- ----------- ------------ ---------- ------------- --------
<FN>
(1) One-third of the options vest on the Company achieving sales of 13,000,000 units of the female
condom in a 12 month period and having positive operating earnings. One-third of the options vest on the
Company achieving sales of 23,000,000 units of the female condom in a 12 month period and having positive
operating earnings. One-third of the options vest if the average closing price of the Common Stock for any
period of five consecutive trading days is at least $5.00 per share.
</TABLE>
AGGREGATED OPTION VALUES AT SEPTEMBER 30, 1999
The following table presents the value of unexercised options held by the
named executive officers at September 30, 1999:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT SEPTEMBER 30, 1999 AT SEPTEMBER 30, 1999
--------------------------- --------------------------
NAME EXERCISABLE / UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------- --------------------------- --------------------------
<S> <C> <C>
O.B. Parrish . . . . . 88,000 / 376,000 $ 0 / 0
Mary Ann Leeper, Ph.D. 96,667 / 693,333 $ 0 / 0
- ---------------------- --------------------------- --------------------------
</TABLE>
13
<PAGE>
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Dr. Leeper effective
May 1, 1994. The original term of Dr. Leeper's employment extended to April 30,
1997 and after April 30, 1997 her employment term renews automatically for
additional three-year terms unless notice of termination is given. The
employment agreement has automatically renewed for a term ending on April 30,
2003. The Company may terminate the employment agreement at any time for cause.
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 otherwise
have 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 of its health, life insurance or disability plans in which
Dr. Leeper participated prior to her termination of employment. Dr. Leeper's
employment agreement provided for a base salary of $175,000 for the first year
of her employment term, $195,000 for the second year of her employment term and
$225,000 for the third year of her employment term, subject to the achievement
of performance goals established by Dr. Leeper and the Board of Directors. If
the employment agreement is renewed beyond the initial three-year term, it
requires her base salary to be increased annually by the Board of Directors
based upon her performance and any other factors that the Board of Directors
considers appropriate. For fiscal 1998 and 1999, Dr. Leeper's base salary was
$225,000 per year. The employment agreement also provides Dr. Leeper with
various fringe benefits including an annual cash bonus of up to 100% of her base
salary. The Board of Directors may award the cash bonus to Dr. Leeper in its
discretion. To date, Dr. Leeper has not been awarded a cash bonus.
CHANGE OF CONTROL AGREEMENTS
In fiscal 1999, the Company entered into Change of Control Agreements with
each of O.B. Parrish, the Company's Chairman and Chief Executive Officer, Mary
Ann Leeper, the Company's President and Chief Operating Officer, and Michael
Pope, the Company's Vice President. These agreements essentially act as
springing employment agreements which provide that, upon a change of control, as
defined in the agreement, the Company will continue to employ the executive for
a period of three years in the same capacities and with the same compensation
and benefits as the executive was receiving prior to the change of control, in
each case as specified in the agreements. If the executive is terminated
without cause or if he or she quits for good reason, in each case as defined in
the agreements, after the change of control, the executive is generally entitled
to receive a severance payment from the Company equal to the amount of
compensation remaining to be paid to the executive under the agreement for the
balance of the three-year term.
14
<PAGE>
SECURITY OWNERSHIP
The following table sets forth certain information as of February 15, 2000
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:
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL OWNERSHIP
------------------------------
NAME OF BENEFICIAL OWNER SHARES PERCENT
<S> <C> <C>
O.B. Parrish (1) . . . . . . . . . . . . . . . . 484,001 3.9%
William R. Gargiulo, Jr. (1) . . . . . . . . . . 351,668 2.9%
Mary Ann Leeper, Ph.D. (1) . . . . . . . . . . . 460,668 3.7%
Stephen M. Dearholt (2). . . . . . . . . . . . . 1,714,451 12.7%
David R. Bethune (3) . . . . . . . . . . . . . . 50,000 *
Michael R. Walton. . . . . . . . . . . . . . . . 527,810 4.3%
James R. Kerber. . . . . . . . . . . . . . . . . 343,710 2.8%
Gary Benson (4). . . . . . . . . . . . . . . . . 1,430,450 10.6%
All directors, nominees and executive officers,
as a group (eight persons) (1)(2)(5) . . . . . . 3,327,696 23.9%
- ------------------------------------------------ --------- --------
<FN>
*Less than 1%
(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
shareholder of, and Mr. Parrish and Dr. Leeper are officers, directors and
shareholders of Phoenix of Illinois. For Dr. Leeper, also includes 38,900
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 71,500 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) Includes 544,511 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; 153,129 shares of Common Stock
held by trusts (of which Mr. Dearholt is a trustee) and 42,400 shares held by
Mr. Dearholt's children living in his household. Also includes warrants to
purchase 860,000 shares of Common Stock and options to purchase 30,000 shares.
15
<PAGE>
(3) Represents options which are currently exercisable.
(4) Includes warrants to purchase 1,250,000 shares of Common Stock. Mr.
Benson's address is 2925 Dean Parkway, Minneapolis, Minnesota 55416
(5) Includes options to purchase 50,000 shares of Common Stock which are
currently exercisable.
</TABLE>
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.
16
<PAGE>
CERTAIN TRANSACTIONS
On February 18, 1999, the Company borrowed $50,000 from O.B. Parrish, the
Company's Chairman and Chief Executive Officer. The borrowing was completed
through the execution of a $50,000, one-year promissory note payable by the
Company to Mr. Parrish and a Note Purchase and Warrant Agreement and Stock
Issuance Agreement. Mr. Parrish was granted warrants to purchase 10,000 shares
of Common Stock at an exercise price of $1.35 per share. The exercise price of
the warrants equaled 80% of the average market price of the Common Stock for the
five trading days prior to the date of issuance. The warrants expire upon the
earlier of their exercise or nine years after the date of their issuance.
Effective February 18, 2000, the Company and Mr. Parrish extended the due date
of the note to February 18, 2001, and in connection with this extension, the
Company issued to Mr. Parrish warrants to purchase 12,500 shares of Common Stock
at an exercise price of $0.72 per share, which equaled 80% of the average market
price of the Common Stock for the five trading days prior to the date of
issuance. The warrants expire upon the earlier of their exercise or ten years
after the date of their issuance. Under the Stock Issuance Agreement, if the
Company fails to pay the $50,000 promissory note when due, it must issue 10,000
shares of Common Stock to Mr. Parrish. The issuance will not, however,
alleviate the Company's liability under the note. The Company also granted Mr.
Parrish securities registration rights for any common stock he receives from the
Company under these warrants or the Stock Issuance Agreement.
On February 12, 1999, the company borrowed $250,000 from Mr. Dearholt. The
borrowing was effectuated in the form of a $250,000, one-year promissory note
payable by the Company to Mr. Dearholt. As part of this transaction, the
Company entered into a Note Purchase and Warrant Agreement and a Stock Issuance
Agreement. Mr. Dearholt received a warrant to purchase 50,000 shares of Common
Stock at an exercise price of $1.248 per share. The exercise price of the
warrants equaled 80% of the average market price of the Company's common stock
for the five trading days prior to the date of issuance. The warrants expire
upon the earlier of their exercise or nine years after the date of their
issuance. Effective February 12, 2000, the Company and Mr. Dearholt extended
the due date of the note to February 12, 2001, and in connection with this
extension, the Company issued to Mr. Dearholt warrants to purchase 62,500 shares
of Common Stock at an exercise price of $0.77 per share, which equaled 80% of
the average market price of the Common Stock for the five trading days prior to
the date of issuance. The warrants expire upon the earlier of their exercise or
ten years after the date of their issuance. Under the Stock Issuance
Agreement, if the Company fails to pay the $250,000 under the note when due, it
must issue 50,000 shares of Common Stock to Mr. Dearholt. This issuance will
not, however, alleviate the Company's liability under the note. The Company
also granted Mr. Dearholt securities registration rights for any common stock he
receives from the Company under these warrants or the Stock Issuance Agreement.
17
<PAGE>
On March 25, 1997, 1998 and 1999, the Company extended a $1 million,
one-year promissory note payable by the Company to Mr. Dearholt for a previous
loan Mr. Dearholt made to it. The promissory note is now payable in full on
March 25, 2000 and bears interest at 12% annually, payable monthly. The Company
used $0.2 million of the note proceeds to provide working capital needed to fund
the initial stages of its U.S. marketing campaign and $0.8 million of the note
proceeds to fund operating losses. 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 a Stock Issuance Agreement. Under the 1997,
1998 and 1999 Note Purchase and Warrant Agreements, the Company issued to Mr.
Dearholt warrants to purchase 200,000 shares of Common Stock in 1997 at an
exercise price of $1.848 per share, 200,000 shares of Common Stock in 1998 at an
exercise price of $2.25 per share and 200,000 shares of Common Stock in 1999 at
an exercise price of $1.16 per share. In each case, the exercise price of the
warrants equaled 80% of the market price of the Common Stock on the date of
issuance. The warrants expire upon the earlier of their exercise or on March
25, 2005 for the warrants issued in 1997, March 25, 2007 for the warrants issued
in 1998 and March 25, 2009 for the warrants issued in 1999. Under the Stock
Issuance Agreement, if the Company fails to pay the $1 million under the note
when due, it must issue 200,000 shares of Common Stock to Mr. Dearholt. This
issuance will not, however, alleviate the Company's liability under the note.
The Company also granted Mr. Dearholt securities registration rights for any
Common Stock he receives from the Company under these warrants or the Stock
Issuance Agreement. In consideration of Mr. Dearholt's agreement to extend the
note's due date to March 25, 2000, the Company extended the expiration date of
warrants held by Mr. Dearholt to purchase 200,000 shares of Common Stock which
from March 25, 2001 to March 25, 2002.
On September 24, 1999, the Company completed a private placement of 666,671
shares of Common Stock to various investors at a purchase price of $0.75 per
share, representing a discount of 12% from the closing price of a share of
Common Stock on the Over the Counter Bulletin Board on that date. Stephen M.
Dearholt, one of the Company's directors, purchased 266,667 shares for $200,000
in this private placement. The terms of Mr. Dearholt's purchase were identical
to the terms offered to the other, unrelated investors. As part of this private
placement, the Company granted all of the investors, including Mr. Dearholt,
registration rights which require that the Company register the investors'
resale of these shares.
It has been and currently is the Company's policy that transactions between
the Company and its officers, directors, principal shareholders or affiliates
are to be on terms no less favorable to it than could be obtained from
unaffiliated parties. The Company intends that any future transactions between
it and its officers, directors, principal
18
<PAGE>
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, 1999, McGladrey & Pullen, LLP
served as the Company's independent auditors.
PROPOSALS FOR 2001 ANNUAL MEETING
Any shareholder who desires to submit a proposal for inclusion in the
Company's 2001 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 December 1, 2000 in order to consider it for inclusion in the
Company's 2001 Proxy Statement. Any shareholder who intends to present a
proposal at the 2001 Annual Meeting of Shareholders 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 February 9, 2001.
ANNUAL REPORT
Copies of the Company's Annual Report on Form 10-K for the year ended
September 30, 1999 accompany this Proxy Statement. Additional copies of the
Annual Report on Form 10-K for the year ended September 30, 1999 will be
provided without charge on written request of any shareholder whose proxy is
being solicited by the Board of Directors. The written request should be
directed to: Corporate Secretary, The Female Health Company, 875 North Michigan
Avenue, Suite 3660, Chicago, Illinois 60611.
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. The Company has retained Georgeson Shareholder Communications Inc. to
coordinate the solicitation of proxies through
19
<PAGE>
brokerage houses and other custodians, nominees, fiduciaries and other
shareholders for a fee of $9,000 for Georgeson's basic services, plus additional
fees for telephone solicitation and tabulation services and the reimbursement of
out-of-pocket expenses.
By Order of the Board of Directors,
William R. Gargiulo, Jr., Secretary
Chicago, Illinois
March 31, 2000
20
<PAGE>
PROXY
THE FEMALE HEALTH COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints O.B. Parrish and William R. Gargiulo, Jr.,
or either one of them, each with full power of substitution and resubstitution,
as proxy or proxies of the undersigned to attend the Annual Meeting of
Shareholders of The Female Health Company to be held on May 5, 2000 at 2:00
p.m., local time, at the Westin Hotel, Consort Room, 16th Floor, 909 North
Michigan Avenue, Chicago, Illinois 60611, and at any adjournment thereof, there
to vote all shares of Common Stock and 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
of Shareholders 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 TO GRANT AUTHORITY
TO APPROVE AND ADOPT THE AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED
ARTICLES OF INCORPORATION, TO ELECT THE NOMINATED DIRECTORS AND TO RATIFY THE
APPOINTMENT OF MCGLADREY & PULLEN, LLP AS THE COMPANY'S AUDITORS. IF OTHER
MATTERS COME BEFORE THE MEETING, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
BEST JUDGMENT OF THE PROXIES APPOINTED.
DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED
<TABLE>
<CAPTION>
<S><C>
- -----------------------------------------------------------------------------------------------------------------------------------
| |
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THE FEMALE HEALTH COMPANY ANNUAL MEETING OF SHAREHOLDERS
1. To approve and adopt the amendment to the Company's Amended and Restated [ ] FOR [ ] AGAINST [ ] ABSTAIN
Articles of Incorporation to increase the total number of authorized shares
of the Company's common stock from 22,000,000 to 27,000,000 shares.
2. ELECTION OF DIRECTORS: [ ] FOR all [ ] WITHHOLD
(terms expiring at the 2001 1-O.B. PARRISH 2-MARY ANN LEEPER, PH.D. 3-WILLIAM R. nominees listed AUTHORITY to
Annual Meeting) GARGIULO, JR. 4-STEPHEN M. DEARHOLT 5-DAVID R. BETHUNE to the left vote for all
6-MICHAEL R. WALTON 7-JAMES R. KERBER (except as nominees listed
specified below). to the left.
(Instructions: To withhold authority to vote for any indicated nominee, ----------------------------------
write the number(s) in the box provided to the right.) | |
| |
----------------------------------
3. To ratify the appointment of McGladrey & Pullen, LLP as the Company's [ ] FOR [ ] AGAINST [ ] ABSTAIN
auditors for the fiscal year ending September 30, 2000.
4. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting.
Date NO. OF SHARES
------------------------------------
CHECK APPROPRIATE BOX
Indicate changes below: ---------------------------------------------
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Address Change? [ ] Name Change? [ ] | |
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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 such shares are
held by two or more persons, all
holders must sign the Proxy.
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</TABLE>
