PRINCETON, NJ / ACCESSWIRE / July 18, 2017 / Eric Weinstein, owner of 260,000 shares of the common stock of Female Health Company Inc. (FHCO) (the "Company"), today sent a letter to the Board of Directors (the "Board") demanding the formation of a Special Committee to investigate the Company's deviation from generally accepted norms for principled business strategy, capital structure and corporate governance practices since failing to obtain shareholder approval for proposals relating to its merger with Aspen Park Pharmaceuticals, Inc. ("Aspen Park"). The letter suggests that, after years of principled, albeit ineffective, stewardship, the past year has witnessed a reckless path taken by the Board that questions the vagaries of corporate governance and indicates the Board has breached its duty of loyalty and care to shareholders by (i) causing the Company to engage in unlawful conduct; (ii) engaging in oppressive and unethical behavior; and, (iii) exposing the Company to potential liability for the foregoing violations.
"The strategies and maneuvers employed by our Board to circumvent shareholder protections after failing to obtain approvals associated with its merger proposal have come at an exceptionally high cost," said Weinstein. He continued, "Shares are down 37% since the announcement of the originally proposed Aspen Park merger on April 6, 2016, versus the Russell 2000 up 31% over the same period for 68% underperformance."
In addition, the letter calls for the abandonment of a Special Meeting currently scheduled for July 28, 2017, where, among other things, the Board has recommended proposals that would improve the liquidity of preferred securities issued to Aspen Park investors, change stockholder voting requirements and reincorporate the Company in a less shareholder friendly domicile. Weinstein concluded, "Securities now representing approximately one-half of the Company's ownership that were issued without obtaining shareholder approval should not be permitted to participate in any Company vote, especially given the largest beneficiaries of such issuance now constitute much of the Company's reconstituted Board, in representing a serious conflict of interest."
The letter, a follow-up to one dated October 20, 2016 reviewing Mr. Weinstein's negative opinion of the Aspen Park merger proposal, outlines in detail several allegations of misconduct, disregard for shareholder rights, and wasteful spending that have since occurred, including:
- Completing a merger transaction without obtaining shareholder approval as required under Wisconsin Business Corporation Law
- Issuing securities representing more than 80% of the Company's then outstanding shares to Aspen Park without obtaining shareholder approval
- Issuing securities representing another 13% of the Company's then outstanding shares to the Company's Directors, Officers, and advisors as success-fees for completing the transaction
- Squandering nearly $4M for business development consulting costs, including special director compensation, and other fees associated with the "portfolio diversification strategy" leading up to the merger, representing 14% of the Company's market capitalization and 30% of the the Company's enterprise value (defined as market cap plus debt less working capital) at close.
- Turning over all corporate management responsibilities to Aspen Park and yielding Board control in retaining only 3 directors on a reconstituted 9 seat Board, without first obtaining shareholder approval
- Using common and preferred shares issued as part of a transaction that required but did not receive shareholder approval as a technique designed to "stack the deck" of votes in its favor
- Sponsoring Special Meeting proposals to provide liquidity to new management and Board members, primary beneficiaries of the aforementioned share issuances, despite the conflict of interest and potential self-dealing given they now constitute much of the reconfigured Board
- Sponsoring Special Meeting proposals designed to change stockholder voting requirements, move the state of incorporation to a less shareholder-friendly domicile and create a large stock incentive pool, in light of the Company's recent history of shareholder rights infringement and excessive compensation practices
The proposals for the Special Meeting are more fully described in the Schedule 14A filed by Female Health with the Securities and Exchange Commission on June 21, 2017, which includes a proxy statement and further supplemented Schedule 14A filed by FHCO with the Securities and Exchange Commission on July 14, 2017. Mr. Weinstein is not soliciting votes of other shareholders, but only informing other shareholders of FHCO of his reasons for opposing the Special Meeting. The information and opinions contained in this material are derived from publicly available information. None of the information provided herein is intended to be relied upon as investment advice.
SOURCE: Eric Weinstein