SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
HEMISPHERX BIOPHARMA, INC.
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(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)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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/ / 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:
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HEMISPHERX BIOPHARMA, INC.
1617 JFK Boulevard
Philadelphia, PennsylvaniaBOULEVARD
PHILADELPHIA, PENNSYLVANIA 19103
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 14, 1999AUGUST 24, 2001
To the Stockholders of Hemispherx Biopharma, Inc.:
You are cordially invited to attend the Annual Meeting of Stockholders of
Hemispherx Biopharma, Inc. ("Company"Hemispherx" or the "Company"), a Delaware
corporation, to be held at The Embassy Suites, 1776 Ben Franklin Parkway,the offices of Schnader Harrison Segal & Lewis LLP,
Suite 3600, 1600 Market Street, Philadelphia, Pennsylvania 19103, on Wednesday, July 14, 1999,Friday,
August 24, 2001, at 10:00 a.m. local time, for the following purposes:
1. To elect four members to the Board of Directors of the CompanyHemispherx to
serve until their respective successors are elected and qualified;
2. To ratify the selection by the CompanyHemispherx of KPMGBDO Seidman, LLP,
independent public accountants, to audit the financial statements of
the CompanyHemispherx for the year ending December 31, 1999;2001; and
3. To transact such other matters as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on May 17, 1999
("Record Date"),July 6, 2001 are
entitled to notice of and to vote at the meeting.
A proxy statement and proxy are enclosed herewith.enclosed. If you are unable to attend the
meeting in person you are urged to sign, date and return the enclosed proxy
promptly in the enclosedself addressed stamped envelope which requires no postage if
mailed within the United States.provided. If you attend the
meeting in person, you may withdraw your proxy and vote your shares. AlsoWe have
also enclosed herewith is the
Company's Annual Reportour annual report on Form 10-K, as amended, for the fiscal year
ended December 31, 1998.2000.
By Order of the Board
of Directors
s\/s/ Ransom W. Etheridge, Secretary
----------------------------------
Philadelphia, Pennsylvania
May 19, 1999July 17, 2001
PROXY STATEMENT
HEMISPHERX BIOPHARMA, INC.
1617 JFK Boulevard
Philadelphia, PennsylvaniaBOULEVARD
PHILADELPHIA, PENNSYLVANIA 19103
INTRODUCTION
This proxy statement is furnished in connection with the solicitation of
proxies for use at the annual meeting ("Annual Meeting") of stockholders of Hemispherx Biopharma, Inc. ("Company"), to be held
on Wednesday, July 14, 1999,Friday, August 24, 2001, and at any adjournments thereof.adjournments. The accompanying proxy is
solicited by the Board of Directors of the CompanyHemispherx and is revocable by the
stockholder by notifying the Company'sHemispherx's corporate secretary at any time before it
is voted, or by voting in person at the Annual Meeting.annual meeting. This proxy statement and
accompanying proxy will be distributed to stockholders beginning on or about
May 25, 1999.July 17, 2001. The principal executive offices of the CompanyHemispherx are located at 1617
JFK Boulevard, Philadelphia, Pennsylvania 19103, telephone (215) 988-0080.
OUTSTANDING SHARES AND VOTING RIGHTS
RECORD DATE; OUTSTANDING SHARES
Only stockholders of record at the close of business on May 17, 1999,July 6, 2001, are
entitled to receive notice of, and vote at the Annual Meeting.annual meeting. As of May 17,
1999,July 6,
2001, the number and class of stock outstanding and entitled to vote at the
meeting was 26,403,56430,922,166 shares of common stock, par value $.001 per share
("Common Stock").share. Each
share of Common Stockcommon stock is entitled to one vote on all matters. No other class of
securities will be entitled to vote at the meeting. There are no cumulative
voting rights.
The nominees receiving the highest number of votes cast by the holders of
Common Stockcommon stock will be elected as the Company'sHemispherx's directors and constitute the entire
Board of Directors of the Company.Hemispherx. The affirmative vote of at least a majority of
the shares represented and voting at the Annual Meetingannual meeting at which a quorum is
present (which shares voting affirmatively also constitute at least a majority
of the required quorum) is necessary for approval of Proposal No. 2. A quorum is
representation in person or by proxy at the Annual Meetingannual meeting of at least one-halfa
majority of the outstanding shares of common stock of Hemispherx on the record
date.
REVOCABILITY OF PROXIES
If you attend the meeting, you may vote in person, regardless of whether
you have submitted a proxy. Any person giving a proxy in the form accompanying
this proxy statement has the power to revoke it at any time before it is voted.
It may be revoked by filing, with the Secretary of Hemispherx at its principal
offices, 1617 JFK Boulevard, Philadelphia, PA 19103, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person.
VOTING AND SOLICITATION
Every stockholder of record is entitled, for each share held, to one vote
on each proposal or item that comes before the meeting. There are no cumulative
voting rights. By submitting your proxy, you authorize William A. Carter and
Ransom W. Etheridge and each of them to represent you and vote your shares at
the meeting in accordance with your instructions. Messrs. Carter and Etheridge
and each of them may also vote your shares to adjourn the meeting from time to
time and will be authorized to vote your shares at any adjournment or
postponement of the meeting.
Hemispherx has borne the cost of preparing, assembling and mailing this
proxy solicitation material. The total cost estimated to be spent and the total
expenditures to date for, in furtherance of, or in connection with the
solicitation of stockholders is approximately $30,000. Hemispherx may reimburse
brokerage firms and other persons representing beneficial owners of shares for
their expenses in forwarding soliciting materials to beneficial owners. This
particular solicitation is being made by mail, but proxies may also be solicited
by certain of Hemispherx's directors, officers and employees, without additional
compensation, personally, by telephone or by facsimile.
We have hired the firm of MacKenzie Partners, Inc. to assist in the
solicitation of proxies on behalf of the Board of Directors. MacKenzie has
agreed to perform this service for a fee of not more than $5,000 plus
out-of-pocket expenses.
ADJOURNED MEETING
If a quorum is not present at the scheduled time of the meeting, the
stockholders who are represented may adjourn the meeting until a quorum is
present. The time and place of the adjournment meeting will be announced at the
time the adjournment is taken, and no other notice will be given. An adjournment
will have no effect on the business that may be conducted at the meeting.
TABULATION OF VOTES
The votes will be tabulated and certified by Hemispherx's transfer agent.
VOTING BY STREET NAME HOLDERS
If you are the beneficial owner of shares held in "street name" by a
broker, the broker, as the record holder of the shares, is required to vote
those shares in accordance with your instructions. If you do not give
instructions to the broker, the broker will nevertheless be entitled to vote the
shares with respect to "discretionary" items but will not be permitted to vote
the shares with respect to "non-discretionary" items in accordance with rules of
the American Stock Exchange (in which case, the shares will be treated as
"broker non-votes").
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the annual meeting
is a majority of the shares of common stock outstanding on the record date in
person or by proxy. Shares that are
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voted "FOR," "AGAINST" or "WITHHELD FROM" a matter are treated as being
present at the meeting for purposes of establishing a quorum and are also
treated as shares represented and voting the votes cast at the annual meeting
with respect to such matter.
While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions, Hemispherx believes that abstentions
should be counted for purposes of determining both: (i) the presence or absence
of a quorum for the transaction of business; and (ii) the total number of votes
cast with respect to a proposal (other than the election of directors). In the
absence of controlling precedent to the contrary, Hemispherx intends to treat
abstentions in this manner. Accordingly, abstentions will have the same effect
as a vote against the proposal (other than the election of directors).
Under current Delaware case law, while broker non-votes (i.e. the votes of
shares held of record by brokers as to which the underlying beneficial owners
have given no voting instructions) should be counted for purposes of determining
the presence or absence of a quorum for the transaction of business, broker
non-votes should not be counted for purposes of determining the number of votes
cast with respect to the particular proposal on which the broker has expressly
not voted. Hemispherx intends to treat broker non-votes in this manner. Thus, a
broker non-vote will make a quorum more readily obtainable, but the broker
non-vote will not otherwise affect the outcome of the voting on a proposal.
DEADLINES FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders to be considered for inclusion in the Proxy
Statement and proxy card for the 2002 Annual Meeting of Stockholders must be
received by the Company's Secretary, at Hemispherx Biopharma, Inc., 1617 JFK
Boulevard, Philadelphia, PA 19103 no later than March 19, 2002.
Pursuant to the Company's Restated and Amended Bylaws all stockholder
proposals may be brought before an annual meeting of stockholders only upon
timely notice thereof in writing having been given to the Secretary of the
Company. To be timely, a stockholder's notice, for all stockholder proposals
other than the nomination of candidates for director, shall be delivered to the
Secretary at the principal executive offices of the Company not less than sixty
(60) nor more than ninety (90) days prior to the anniversary date of the
immediately preceding annual meeting of stockholders; provided, however, that in
the event that the annual meeting is called for a date that is not within thirty
(30) days before or after such anniversary date, the stockholder's notice in
order to be timely must be so received not later than the close of business on
the tenth (10th) day following the day on which such notice of the date of the
annual meeting was mailed or public disclosure of the date of the annual meeting
was made, whichever first occurs. To be timely, a stockholder's notice, with
respect to a stockholder proposal for nomination of candidates for director,
shall be delivered to the Secretary at the principal executive offices of the
Company not less than ninety (90) nor more than one hundred twenty (120) days
prior to the anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the annual meeting is
called for a date that is not within thirty (30) days before or after such
anniversary date, the stockholder's notice in order to be timely must be so
received not later than the close of business on the tenth (10th) day following
the day on which such notice of the date of the annual meeting was mailed or
public disclosure of the date of the annual meeting was
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made, whichever first occurs. Provided, however, in the event that the
stockholder proposal relates to the nomination of candidates for director and
the number of directors to be elected to the Board of Directors of the Company
at an annual meeting is increased and there is no public announcement by the
Company naming all of the nominees for director or specifying the size of the
increased Board of Directors at least one hundred days prior to the first
anniversary of the preceding year's annual meeting, a stockholder's notice shall
also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary at
the principal executive offices of the Company not later than the close of
business on the tenth day following the day on which such public announcement is
first made by the Company. All stockholder proposals must contain all of the
information required under the Company's Bylaws, a copy of which is available
upon written request, at no charge, from the Secretary. The Company reserves the
right to reject, rule out of order, or take other appropriate action with
respect to any proposal that does not comply with these and other applicable
requirements.
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PROPOSALS TO SHAREHOLDERS
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Each nominee to the Board of Directors will serve until the next Annual
Meetingannual
meeting of stockholders, or until his earlier resignation, removal from office,
death or incapacity.
Unless otherwise specified, the enclosed proxy will be voted in favor of
the election of William A. Carter, Richard C. Piani, Ransom W. Etheridge and
William M. Mitchell. Information is furnished below with respect to all
nominees.
The followingSet forth below is the biographical information with respect to the principal occupation or
employment of the nominees the name and
principal businessdirectors of the corporation
or other organization in which such occupation or employment is carried on and
other affiliations and business experience during the past five years has been
furnished to the Company by the respective nominees:Hemispherx:
WILLIAM A. CARTER, M.D., 63, the co-inventor of Ampligen, joined the CompanyHemispherx
in 1978, and has served asas: (a) the Company'sHemispherx's Chief Scientific Officer since May
1989,1989; (b) the Chairman of the Company'sHemispherx's Board of Directors since January 19921992;
(c) the Company'sHemispherx's Chief Executive Officer since July 1993,1993; (d) the Company'sHemispherx's
President since April, 1995,1995; and (e) a director since 1987. From 1987 to 1988,
Dr. Carter served as the Company'sHemispherx's Chairman. Dr.CarterDr. Carter was a leading innovator
in the development of human interferon for a variety of treatment indications
including various viral diseases and cancer. In this context, heDr. Carter received the first FDA
approval to initiate clinical trials on a beta interferon product manufactured
in the U.S. under his supervision. From 1985 to October 1988, Dr. Carter served
as the Company'sHemispherx's Chief Executive Officer and Chief Scientist. He received his
M.D. degree from Duke University and underwent his post-doctoral training at the
National Institutes of Health and Johns Hopkins University. Dr. Carter also
served as Professor of Neoplastic Diseases at HahnemanHahnemann Medical University, a
position he held from 1980 to 1998. He alsoDr. Carter served as Director of Clinical
Research for HahnemanHahnemann Medical University's Institute for Cancer and Blood
Diseases, and as a professor at Johns Hopkins School of Medicine and the State
University of New York at Buffalo. HeDr. Carter is a Board certified physician and
author of more than 200 scientific articles, including the editing of various
textbooks on anti-viral and immune therapy.
RICHARD C. PIANI, serves as73, has been a director of the CompanyHemispherx since May 1995. Mr.
Piani has been employed as a principal delegate for Industry to the City of
Science and Industry, Paris, France, a billion dollar scientific and educational
complex since 1995.1985. Mr. Piani provided consulting to the CompanyHemispherx in 1993, with
respect to general business strategies for the Company'sHemispherx's European operations and
markets. HeMr. Piani served as Chairman of Industrielle du Batiment-Morin, a
building materials corporation, from 1986 to 1993. Previously heMr. Piani was a
Professor of International Strategy at Paris Dauphine University from 1984 to
1993. From 1979 to 1985, Mr. Piani served as Group 2
Director in Charge of
International and Commercial Affairs for Rhone-Poulenc and from 1973 to 1979 he
was Chairman and Chief Executive Officer of Societe "La Cellophane", the French
company which invented cellophane and several other worldwide products. Mr.
Piani has a Law degree from FaciliteFaculte de Droit, Paris Sorbonne and a Business
Administration degree from EcolaEcole des Hautes Etudes Commerciales, Paris.
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RANSOM W. ETHERIDGE, was elected62, has been a director of the Company inHemispherx since October
1997, and presently serves as our Secretary. Mr. Etheridge first became
associated with the
CompanyHemispherx in 1980 when he provided consulting services to
the CompanyHemispherx and participated in negotiations with respect to the Company'sHemispherx's initial
private placement through Oppenheimer & Co., Inc. HeMr. Etheridge has been
practicing law since 1967, specializing in corporatetransactional law. Mr. Etheridge is a
member of the Virginia State Bar, a Judicial Remedies Award Scholar, and has
served as President of the Tidewater Arthritis Foundation. He is a graduate of
Duke University, the Wharton School of Business Real Estate Investment Analysis
Seminar, and the University of Richmond School of Law.
WILLIAM M. MITCHELL, M.D. was elected, 65, has been a director of the Company inHemispherx since July
1998. HeDr. Mitchell is a Professor of Pathology at Vanderbilt University School
of Medicine. Dr. Mitchell earned a M.D. from Vanderbilt and a Ph.D. from Johns
Hopkins University, where he later workedserved as an internIntern in its hospital,Internal Medicine, followed
by a Fellowship at its School of Medicine. Dr. Mitchell has published over 200
papers, reviews and abstracts dealing with viruses and anti-viral drugs. HeDr.
Mitchell has worked for and with many professional societies, including the
International Society for Interferon Research, and committees, among them the
National Institutes of Health, AIDS and Related Research Review Group. Dr.
Mitchell previously served as a director of the
CompanyHemispherx from 1987 to 1989.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 1 TO BE IN THE BEST INTERESTS OF
THE
COMPANYHEMISPHERX AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" ALL FOUR OF THE
ABOVE-NAMED NOMINEE DIRECTORS OF THE COMPANY.HEMISPHERX.
INFORMATION CONCERNING BOARD MEETINGS
The Company'sHemispherx's Board of Directors met threefour times, the Executive Committee met
four times, the Compensation Committee met once, the Audit Committee met twice,four
times, and the Strategic Planning Committee met once during the fiscal year
ended December 31, 1998. All of the2000. The incumbent Directorsdirectors attended at least 75% of such meetings.the
board meetings and meetings of committees on which they served.
INFORMATION CONCERNING COMMITTEES OF THE BOARD
The Board of Directors maintains anthe following committees:
EXECUTIVE COMMITTEE
The Executive Committee consistingis composed of William A. Carter, Chairman, Chief
Executive Officer and President, and Ransom W. Etheridge, whichSecretary and
director. The Executive Committee makes recommendations to management regarding
general business matters of the Company; aHemispherx.
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COMPENSATION COMMITTEE
The Compensation Committee consistingis composed of Ransom W. Etheridge, Secretary
and director, and Richard C. Piani, whichdirector. The Compensation Committee makes
recommendations concerning salaries and compensation for employees of and
consultants to the Company; anHemispherx.
AUDIT COMMITTEE
The Audit Committee consistingis composed of Ransom W.
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Etheridge, William Mitchell
and Richard Piani, all of which reviews the resultsCompany believes are independent of
management and scopefree of any relationship that would interfere with their exercise
of independent judgment as members of this committee. The principal functions of
the Audit Committee are to serve as an independent and objective party to assist
the Board of Directors in monitoring the integrity of the financial statements
of the Company, the compliance by the Company with legal and regulatory
requirements, and the independence and performance of the Company's auditors.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is composed of three
independent directors and operates under a written charter prepared and adopted
by the Board of Directors (a copy of which is attached hereto as Exhibit A). The
Committee recommends to the Board of Directors, subject to shareholders'
ratification, the selection of the Company's independent accountants.
Management is responsible for the Company's internal controls and financial
reporting process. The Company's independent accountants, BDO Seidman, LLP
("BDO"), are responsible for performing an independent audit of the Company's
consolidated financial statements in accordance with generally accepted auditing
standards, and for expressing an opinion on the conformity of the financial
statements to generally accepted accounting principles. The Committee's
responsibility, as the representative of the Board of Directors, is to monitor
and oversee these processes.
In this context, the Committee met and held discussions with management and
BDO. Management represented to the Committee that the Company's audited
financial statements were prepared in accordance with generally accepted
accounting principles, and the Committee has reviewed and discussed the audited
financial statements with management and BDO. In addition, the Committee has
discussed with BDO the matters required to be discussed by Statement on Auditing
Standards No. 61 COMMUNICATION WITH AUDIT COMMITTEES. The Audit Committee also
has received the written disclosures and letter from BDO required by
Independence Standards Board Standard No. 1 INDEPENDENCE DISCUSSIONS WITH AUDIT
COMMITTEES, and has discussed with BDO its independence from the Company.
Based on reviews, discussions and other services providedmatters referred to in the
preceding paragraph, the Committee recommended to the Board of Directors that
the audited consolidated financial statements be included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2000.
7
This report is submitted by independent auditors; and athe Audit Committee of the Company's Board of
Directors.
Ransom W. Etheridge
William M. Mitchell
Richard C. Piani
STRATEGIC PLANNING COMMITTEE
The Strategic Planning Committee consistingis composed of William A. Carter and
Richard C. Piani, whichPiani. The Strategic Planning Committee makes recommendations to the
Board of Directors of priorities in the application of the Company'sHemispherx's financial
assets and human resources in the fields of research, marketing and
manufacturing. The Strategic Planning Committee has engaged a number of leading
consultants in healthcare, drug development and pharmaeconomics to assist in the
analysis of various products being developed and/or potential acquisitions being
considered by the Company.
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MANAGEMENTHemispherx.
INFORMATION CONCERNING EXECUTIVE OFFICERS
The currentfollowing sets forth biographical information about Hemispherx's
executive officers and directors of the Company are set forth
below:
Name Age Position
---- --- --------officers:
NAME AGE POSITION
William A. Carter, M.D. 6163 Chairman, of the Board of Directors, Chief Executive Officer
and President
Robert E. Peterson 6264 Chief Financial Officer
Richard C. Piani 72 Director
Ransom W. Etheridge 60 Director and Secretary
William M. Mitchell, M.D. 64 Director
Harris Freedman 65 Vice President, Corporate Communications
Sharon D. Will 40 Vice President, Investor Relations
Josephine M. Dolhancryk 36 Treasurer, Assistant Secretary
David R. Strayer, M.D. 5355 Medical Director, Director of Regulatory Affairs
Carol A. Smith, Ph.D. 4749 Director of Manufacturing and
Process Development
WILLIAMJosephine M. Dolhancryk 38 Treasurer, Assistant Secretary
Harris Freedman 66 Vice President for Strategic Alliances
For biographical information about William A. CARTER,Carter, M.D., please see the
co-inventordiscussion under the heading "Proposal No. 1 Election of Ampligen, joined the Company
in 1978, and has served as (a) the Company's Chief Scientific Officer since May
1989, (b) the Chairman of the Company's Board of Directors since January 1992
(c) the Company's Chief Executive Officer since July 1993, (d) the Company's
President since April, 1995, and (e) a director since 1987. From 1987 to 1988,
Dr. Carter served as the Company's Chairman. Dr. Carter was a leading innovator
in the development of human interferon for a variety of treatment indications
including various viral diseases and cancer. In this context, he received the
first FDA approval to initiate clinical trials on a beta interferon product
manufactured in the U.S. under his supervision. From 1985 to October 1988, Dr.
Carter served as the Company's Chief Executive Officer and Chief Scientist. He
received his M.D. degree from Duke University and underwent his post-doctoral
training at the National Institutes of Health and Johns Hopkins University. Dr.
Carter also served as Professor of Neoplastic Diseases at Hahneman Medical
University, a position he held from 1980 to 1998. He also served as Director of
Clinical Research for Hahneman
5
Medical University's Institute for Cancer and Blood Diseases, and as a professor
at Johns Hopkins School of Medicine and the State University of New York at
Buffalo. He is a Board certified physician and author of more than 200
scientific articles, including the editing of various textbooks on anti-viral
and immune therapy.Directors" above.
ROBERT E. PETERSON has served as Chief Financial Officer of the Company
since April, 1993 and served as an independent financial advisorIndependent Financial Advisor to the Company
from 1989 to April, 1993. Also, Mr. Peterson has also served since 1990 as Vice President of the
Omni Group, Inc., a business consulting group based in Tulsa, Oklahoma. During the period 1983 through 1992,Oklahoma since
1985. From 1971 to 1984, Mr. Peterson was self-employed as
a financial consultant to businessesworked for PepsiCo, Inc. and served in
various industries. Mr. Peterson wasfinancial management positions including Vice President and Chief
Financial Officer of PepsicoPepsiCo Foods International from
1979 to 1983 and responsible for financial management of this multinational
operating unit with approximately $500 million in annual revenues.PepsiCo Transportation,
Inc. Mr. Peterson is a graduate of Eastern New Mexico University.
RICHARD C. PIANI has served as a director of the Company since May 1995.
Mr. Piani has been employed as a principal delegate for Industry to the City of
Science and Industry, Paris, France, a billion dollar scientific and educational
complex since 1995. Mr. Piani provided consulting to the Company in 1993, with
respect to general business strategies for the Company's European operations and
markets. He served as Chairman of Industrielle du Batiment-Morin, a building
materials corporation, from 1986 to 1993. Previously he was Professor of
International Strategy at Paris Dauphine University from 1984 to 1993. From 1979
to 1985 Mr. Piani served as Group Director in Charge of International and
Commercial Affairs for Rhone-Poulenc and from 1973 to 1979 was Chairman and
Chief Executive Officer of Societe "La Cellophane", the French company which
invented cellophane and several other worldwide products. Mr. Piani has a Law
degree from Facilite de Droit, Paris Sorbonne and a Business Administration
degree from Ecola des Hautes Etudes Commerciales, Paris.
RANSOM W. ETHERIDGE was elected a director of the Company in October 1997
and serves as Secretary. Mr. Etheridge first became associated with the Company
in 1980 when he provided consulting services to the Company and participated in
negotiations with respect to the Company's initial private placement through
Oppenheimer & Co., Inc. He has been practicing law since 1967, specializing in
corporate law. Mr. Etheridge is a member of the Virginia State Bar, a Judicial
Remedies Award Scholar and has served as President of the Tidewater Arthritis
Foundation. He is a graduate of Duke University, the Wharton School Business
Real Estate Investment Analysis Seminar, and the University of Richmond School
of Law.
WILLIAM M. MITCHELL, M.D. was elected a director of the Company in July
1998. He is a Professor of Pathology at Vanderbilt University School of
Medicine. Dr. Mitchell earned a Ph.D. from Johns Hopkins University where he
later worked as an intern in its hospital, followed by a Fellowship at its
School of Medicine. Dr. Mitchell has published over 200 papers, reviews and
abstracts dealing with viruses and anti-viral drugs. He has worked for and with
many professional societies, including the International Society for Interferon
Research, and committees,
6
among them the National Institutes of Health, AIDS and Related Research Review
Group. Dr. Mitchell previously served as a director of the Company from 1987 to
1989.
DAVID R. STRAYER, M.D., who previously servedserves as Professor of Medicine at the Medical
College of Pennsylvania and AlleghenyHahnemann University, of the Health Sciences, has acted as the Medical
Director of the Company since 1986. He is Board Certified in Medical Oncology
and Internal Medicine with research interests in the fields of cancer and immune
system disorders. Dr. Strayer has served as principal investigator in studies
funded by the Leukemia Society of America, the American Cancer
8
Society, and the National Institutes of Health. Dr. Strayer attended the
School of Medicine at the University of California at Los Angeles where he
received his M.D. in 1972.
CAROL A. SMITH, Ph.D.Ph.D has served as the Company's Director of Manufacturing
and Process Development since April 1995, as Director of Operations since 1993
and as the Manager of Quality Control from 1991 to 1993, with responsibility for
the manufacture, control and chemistry of Ampligen.Ampligen(R). Dr. Smith has also beenwas
Scientist/Quality Assurance Officer for Virotech International, Inc. from 1989
to 1991 and Director of the Reverse Transcriptase and Interferon Laboratories
and a Clinical Monitor for Life Sciences, Inc. from 1983 to 1989. She received
her Ph.D. from the University of South Florida College of Medicine in 1980 and
was an NIH post-doctoral fellow at the Pennsylvania State University College of
Medicine.
JOSEPHINE M. DOLHANCRYK joined the Company in 1990 as Office Manager, was
promoted to Executive Assistant to the Chairman of the Board and Chief Executive
Officer in 1991 and Assistant Secretary, Treasurer and Executive Administrator
in 1995. From 1989 to 1990 Ms. Dolhancryk was President of Medical/Business
Enterprises. Ms. Dolhancryk was employed by Children's Hospital of Philadelphia
from 1984 to 1989, where she also served as research coordinator on a drug study
from 1986 to 1988. Ms. Dolhancryk attended Saint Joseph's University and
Delaware County College.
HARRIS FREEDMAN has served as Vice President for Strategic Alliances since
August 1994 and has been a private venture capitalist and business consultant
for more than the past five years. He is the Secretary of Bridge Ventures, Inc.
and SMACS Holding Corp., both of which are private venture capital companies,
positions he has held for more than five years. His business experience has
encompassed developing significant business contacts and acting as an officer or
consultantdirector of several companies in the pharmaceutical, health care and
telecommunication industries. From July 1996 to January 1999,entertainment fields. Mr. Freedman was Vice President of Amplidyne,U. S. Alcohol Testing
of America, Inc. from August 1990 to February 1991. Additionally, he was Vice
President of East Coast Marketing for Music Source U.S.A., Inc. from October
1992 to January 1994. Mr. Freedman attended New York University from 1951 to
1954.
SHARON D. WILLCERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have employment agreements with certain of our executive officers and
have granted such officers and directors of the Company options and warrants to
purchase common stock of the Company, as discussed under the headings
"Compensation of Executive Officers and Directors" and "Security Ownership of
Certain Beneficial Owners and Management" below.
Ransom W. Etheridge, a director of the Company is an attorney in private
practice who has been Vice Presidentrendered corporate legal services to us from time to time, for
Corporate Communicationswhich he has received fees. Richard Piani, a Director of the Company, lives in
Paris, France and Investor Relations since November 1994. Priorassists the Company's European subsidiary in their dealings
with medical institutions and the European Medical Evaluation Authority. William
Mitchell, M.D., a Director of the Company, works with David Strayer, M.D. (our
Medical Director) in establishing clinical trial protocols as well as performs
other scientific work for the Company from time to that time, shetime. For these services,
these Directors were paid an aggregate of $125,690.00 in the year 2000. No
individual Director was paid in excess of $60,000.
9
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires Hemispherx's officers and
directors, and persons who own more than ten percent of a registered sales representativeclass of
Hemispherx's equity securities, to file reports with the Securities and Senior Vice PresidentExchange
Commission reflecting their initial position of ownership on Form 3 and changes
in ownership on Form 4 or Form 5.
Based solely on a review of the copies of such forms received by
Hemispherx, Hemispherx believes that, during the fiscal year ended December 31,
2000, its officers, directors and ten percent stockholders complied with all
applicable Section 16(a) filing requirements on a timely basis.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The summary compensation table below sets forth the aggregate compensation
paid or accrued by Hemispherx for Institutional Salesthe fiscal years ended December 31, 2000, 1999
and 1998 to (i) the Chief Executive Officer and (ii) Hemispherx's four most
highly paid executive officers other than the CEO who were serving as executive
officers at Westfield Financial Corporation from September 1994 to October 1994. She was a
registered sales representative with Marsh Block Corporation from July 1994 to
September 1994. From October 1993 to July 1994 she served as a registered sales
representative at Seaboard Securities Corp. From October 1991 to present, Ms.
Will has
7
been Presidentthe end of Worldwide Marketing Inc. a manufacturers' representative of
various companies selling to the retail trade markets. Ms. Will waslast completed fiscal year and whose total annual
salary and bonus exceeded $100,000 (collectively, the National
Sales Manager of Innovo, Inc., a domestic manufacturer of textiles, from October
1989 to November 1991. She attended Baylor College as an undergraduate for two
years with a primary focus on chemistry.
8
EXECUTIVE COMPENSATION"Named Executives").
SUMMARY COMPENSATION TABLE
Name and Other Annual Restricted Stock Options All Other
Principal Position Year Salary($) Compensation($)(1) Awards($) Awards Compensation($)(2)RESTRICTED
NAME AND OTHER ANNUAL STOCK OPTION ALL OTHER
PRINCIPAL POSITION YEAR SALARY COMPENSATION AWARDS AWARDS COMPENSATION
- ------------------ ---- --------- ------------------ ---------------- ------ ------------------------------ ------ ------ ------------
($) ($)(1) (2)
William A. Carter 1998 $438,780(3) -- -- 830,000(4) 19,1832000 539,620 (3) - - - $22,917
Chairman of the 1999 531,810 (3) - - 100,000 (5) 17,672
Board 1997 427,504(3) 13,683 -- -- 11,387 and CEO 1996 400,522(3) -- -- 300,000(5) 10,5801998 438,780 (4) - - 830,000 (6) 19,183
Robert E. Peterson(6)Peterson (7) 2000 145,944 - - - -
Chief Financial 1999 138,930 - - - -
Officer 1998 132,000 -- -- 100,000(7) --
Chief Financial Officer 1997 132,000 -- -- 13,750(8) --
1996 128,000 -- -- 50,000(9) --
Sharon Will 1998 132,000 -- -- 20,000(10) --
Vice President 1997 132,000 -- -- -- --
1996 126,000 -- -- 50,000(5) --- - 100,000 (8) -
David R. Strayer, M.D. 1998 193,544(12) -- -- 50,000(11) --2000 172,317 - - - -
Medical Director 1997 171,926(13) -- -- 20,000(8) --
1996 130,427(14) -- -- -- --1999 166,231 - - - -
1998 193,544 (10) - - 50,000 (9) -
Harris Freedman (14) 2000 108,000 - - - -
Vice President 1999 132,000 - - 25,000 (11) -
1998 132,000 -- -- 80,000(15) --
Vice President 1997 132,000 -- -- -- --
1996 126,000 -- -- 150,000(5) --- - 80,000 (12) -
Carol A. Smith, Ph.D. 2000 124,800 - - - -
Director of 1999 120,000 - - 5,000 (13) -
Manufacturing 1998 80,231 - - - -
- ----------------------
10
(1) The CompanyHemispherx makes available certain non-monetary benefits to its officers
with a view to attracting and retaining qualified personnel and
facilitating job performance. The CompanyHemispherx considers such benefits to be
ordinary and incidental business costs and expenses. The aggregate value of
such benefits, which cannot be precisely ascertained but which is less than
10% of the cash compensation of each of the above-named executive officers,
is not included in the table.
(2) Consists of insurance premiums paid by the CompanyHemispherx with respect to term life
and disability insurance for the benefit of the named executive officer.
9
(3) Includes a bonus of $90,397 paid in 1999 and 2000.
(4) Includes funds previously paid to Dr. Carter by HahnemanHahnemann Medical
University where he servesserved as a professor.professor until 1998. This compensation was
continued by the Company and totaled $79,826 in each of 1998, 19971999 and
$63,000 in 1996. Does not include a bonus of $90,397 approved by
the board of directors in December 1998 and paid in 1999.
(4)2000.
(5) Represents warrants to purchase Common Stockcommon stock exercisable at $6.25 per
share.
(6) Represents warrants to purchase common stock and includesincludes: (i) 360,000
warrants exercisable at $4.00 per share; (ii) 170,000 warrants exercisable
at $5.00 per share; and (iii) 300,000 warrants exercisable at $6.00 per
share.
(5) Represents stock options to purchase shares of the common stock of
BioAegean Corp., a wholly owned subsidiary of the Company, at $1.00 per
share.
(6)(7) Mr. Peterson is paid on a fee basis.
(7)(8) Represents warrants to purchase 100,000 shares of Common Stockcommon stock at $5.00 per
share.
(8) Represents stock options to purchase shares of common stock at $3.50 per
share. These options vest over a four year period.
(9) Represents warrants to purchase 50,000 shares of Common Stockcommon stock at $3.50$4.00 per
share.
(10) Represents warrants to purchase 20,000 shares of Common Stock at $3.00 per
share.Includes $98,926 previously paid by Hahnemann Medical University. This
compensation was continued by the Company in 1998, 1999 and 2000.
(11) Represents warrants to purchase 50,00025,000 shares of Common Stockcommon stock at $4.00$10.00 per
share.
(12) Includes $98,926 paid by Hahneman Medical University.
(13) Includes 98,926 paid by Hahneman Medical University and $23,000 of
deferred compensation from prior years.
(14) Includes $80,427 paid by Hahneman Medical University.
(15) Represents warrants to purchase 80,000 shares of Common Stockcommon stock at $4.00 per
share.
10(13) Represents warrants to purchase 5,000 shares of common stock at $4.00 per
share.
(14) Mr. Freedman is paid on a fee basis.
11
Year End Option Table.
The following table sets forth certain information regarding the stock
options and warrants held as of December 31, 19982000 by the individuals named in
the above Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE
Shares Securities Underlying Value of Unexercised
Acquired on Value Unexercised Options at In-the-Money-Options
---------------------- --------------------
Shares Acquired ValueName Exercise Realized at Fiscal Year End(#) AtEnd (#) at Fiscal Year End($End ($)(1)
Name on Exercise- -------------------------------------------------------------------------------------------------------------------
(#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ----- --------------- ------------ ----------- ------------- ----------- --------------------------------------------------------------------------------------------------------------------------------
William A. Carter -- -- 1,958,728(2) 1,110,000(3) 7,227,861 1,457,500- - 2,618,728 (2) 300,000 (3) 3,565,405 0
Robert E. Peterson -- -- 167,762(4) 10,312(5) 381,989 33,514
Sharon Will -- -- 645,000(6) 250,000(7) 2,747,500 295,000- - 177,574 (4) 0 60,355 0
Harris Freedman -- -- 888,160(8) 230,000(9) 3,422,870 200,000- - 895,160 (5) 0 1,631,450 0
David Strayer -- -- 55,000(10) 15,000(11) 153,750 48,750- - 70,000 (6) 0 62,500 0
Carol Smith - - 11,791 (7) 0 11,811 0
- -----------------------------
(1) Computation based on $6.75,$4.75, the December 31, 199829, 2000 closing bid price for the
Common Stockcommon stock on the American Stock Exchange.
(2) Represents (i) 1,400,000 currently exercisable warrants issued under Rule
701 Warrantsof the Securities Act to purchase Common Stockcommon stock at $3.50 per share; (ii)
73,728 stock options to purchase Common Stockcommon stock at $3.50$2.71 per share; (iii)
warrants to purchase 465,000 shares of Common Stockcommon stock at $1.75 per share; and
(iv) warrants to purchase 20,000680,000 shares of Common Stockcommon stock at $4.00a weighted
average of $4.82 per share.
(3) Represents (i) stock optionswarrants to purchase 300,000 shares of the common stock of BioAegean Corp., a wholly owned subsidiary of the Company, at $1.00 per share, for which there is no public market; and (ii) warrants to
purchase 810,000 shares of Common Stock at a weighted average price of
$4.95$6.00 per
share.
(4) Represents (i) 17,26227,574 stock options exercisable at an average price of
$4.17$3.92 per share; (ii) 50,000 warrants to purchase Common Stockcommon stock at $3.50 per
share; and (iii) 100,000 warrants to purchase Common Stockcommon stock at $5.00 per
share.
11
(5) Represents (i) stock options to purchase 50,000 shares400,000 warrants issued under Rule 701 of the common stock
of BioAegean Corp., a wholly owned subsidiary of the Company, at $1.00 per
share; and (ii) stock options to purchase 10,312 shares of Common Stock at
$3.50 per share.
(6) Represents (i) 200,000 currently exercisable Rule 701 warrantsSecurities Act
exercisable at $3.50 per share; (ii) 340,000 warrants to purchase Common Stock at
$1.75 per share; and (iii) 105,000 warrants to purchase Common Stock at
$3.50 per share.
(7) Represents (i) stock options to purchase 150,000 shares of the common
stock of BioAegean Corp., a wholly owned subsidiary of the Company at
$1.00 per share; and (ii) 100,000 warrants to purchase Common Stock at a
weighted average price of $3.80 per share.
(8) Represents (i) 400,000 Rule 701 warrants exercisable at $3.50 per share;
(ii) 97,16095,160 warrants to purchase common
stock at $3.50 per share; (iii) 325,000 warrants to purchase Common Stockcommon stock
at $1.75 per share; and (iv) 66,000 Class A Warrants50,000 warrants to purchase Common Stockcommon stock at $4.00
per share.
(9) Represents (i) stock options to purchase 150,000 shares of the common
stock of BioAegean Corp., a wholly owned subsidiary of the Company; and
(ii)share, (v) 25,000 warrants to purchase 80,000 shares of Common Stockcommon stock at $4.00$10.00 per
share.
(10)(6) Represents (i) 5,00015,000 stock options exercisable at $3.50 per share; and
(ii)
50,000 warrants to purchase Common Stockcommon stock at $4.00 per share.
(11) Representsshare and (iii) stock
options to purchase 15,0005,000 shares of Common Stockcommon stock at $3.50 per share.
(7) Consists of 5,000 warrants to purchase common stock at $4.00 per share, and
6,791 stock options exercisable at $3.50 per share.
12
Employment Agreements
The CompanyEMPLOYMENT AGREEMENTS
Hemispherx entered into an amended and restated employment agreement with
its President and Chief Executive Officer, Dr. William A. Carter, dated as of
December 3, 1998, which provided for his employment until May 8, 2004 at an
initial base annual salary of $361,586, subject to annual cost of living
increases. In addition, Dr. Carter could receive an annual performance bonus of
up to 25% of his base salary, at the sole discretion of the Board of Directors.
Dr. Carter will not participate in any discussions concerning the determination
of his annual bonus. Pursuant to the
agreement, Dr. Carter is also entitled to an incentive bonus of 0.5%
of the gross proceeds received by the CompanyHemispherx from any joint venture or corporate
partnering arrangement, up to an aggregate maximum incentive bonus of $250,000
for all such transactions. Dr. Carter's agreement also providedprovides that he would be paid
hisa base salary and benefits through May 8, 2004 if he is terminated without
"cause", as that term is defined in the agreement. Pursuant to his original
agreement, as amended on August 8, 1991, Dr. Carter was granted options to
purchase 73,728 shares of the Company's Common StockHemispherx's common stock at an exercise price of
$2.71 per share. The agreement is automatically renewed for successive one (1) year
periods unless written notice of refusal to renew is given by one party to the
other at least 90 days prior to the expiration of the renewal period.
The CompanyHemispherx entered into an employmentamended and restated engagement agreement with
Robert E. Peterson dated April 15, 1998 providing1, 2001 which provides for Mr. Peterson's
employment as the Company'sHemispherx's Chief Financial Officer until December 31, 20002002 at an
annual base salary of $132,000$146,880.00 per year, subject to annual cost of living
increase.increases. In addition, Mr. Peterson shall receive bonus compensation upon
the FDAFederal Drug Administration approval of Ampligen based on the number of years of
his employment by the CompanyHemispherx up to the date of such approval. Mr. Peterson also
received 100,00030,000 warrants to purchase shares of Common Stockcommon stock with an exercise
price of $5.00.
The Company$5.00 per share.
Hemispherx entered into an employment agreement with Sharon Will
providing for her employment as Vice President for Corporate Communicationsamended and Investor Relations on November 1, 1994. The agreement provides for Ms. Will to
be employed for a one-year term for a base salary of $120,000 and provides for
termination of the agreement upon certain circumstances including termination by
the Company or Ms. Will on 14 days written notice or the sale of Ms. Will's
stock in the Company. Pursuant to the agreement, Ms. Will was granted Rule 701
Warrants to purchase 200,000 shares of Common Stock of the Company at $3.50 per
share. Ms. Will's agreement provides that she shall devote 60% of her business
time, attention and energies to the Company during regular business hours. In
the event that Ms. Will's employment is terminated for any reason other than
breach of contract, she shall be entitled to receive accrued and unpaid
compensation plus an additional three months' compensation. In 1996, the base
salary was increased to $132,000 per year. In January 1998, the term of Ms.
Will's employment agreement was extended for an additional three years.
The Company entered into anrestated employment agreement with
Harris Freedman providing for Mr. Freedman's employment as Vice President for
Strategic Alliances on August 1, 1994.2000. The agreement provides for Mr. Freedman
to be employed for a one year term for a base salaryfee of 13
$120,000$10,000 each month that Mr.
Freedman's services are used and provides for termination of the agreement upon
certain circumstances including termination by the CompanyHemispherx or Mr. Freedman on 14
daysdays' written notice or the salenotice.
COMPENSATION OF DIRECTORS
An extensive and in depth study of Mr. Freedman's stockboard compensation for companies in the
Company. PursuantU.S. was conducted and upon review it was determined that the Company's
compensation for the members of it's Board of Directors was significantly below
average. The existing compensation package had been in place since 1990. In
order to bring the agreement, Mr. Freedman was granted Rule 701 Warrants to purchase 400,000
sharescompensation for board members within the average range of
Common Stock ofcompensation based upon the study, the Company at $3.50increased board compensation
consisting of an annual retainer to $35,000.00 plus $1,000.00 per share. Mr. Freedman's
agreement provides that he shall devote 30% of his business time, attention and
energies to the Company during regular business hours. In the event that Mr.
Freedman's employment is terminated for any reason other than breach of
contract, he shall be entitled tomeeting
attended. Committee chairmen each receive accrued and unpaid compensation plus an additional three months' compensation. In 1996, the base salary was increased
to $132,000. In January 1998, the termretainer of Mr. Freedman's employment agreement
was extended for$5,000.00
per year and committee members each receive an additional three years.
Compensationretainer of Directors
During the year ended December 31, 1998, each$3,000.00
per year. All non-employee directors received $1,250 per month assome compensation in 2000 for
servingspecial project work performed on the Boardbehalf of Directors
or any committee thereof.Hemispherx. See "Certain
Relationships and Related Transactions" above. All of the directors are reimbursed for their expenses
incurred in attending meetings of the Board of Directors and its committees.
Non-management directors receive an annual retainer of $15,000 and will receive
$600 for each Board or committee meeting they attend and will be reimbursed for
out of pocket expenses incurred in attending meetings. Certain non-employee
directors receive compensation as consultants to the Company and have been granted
options to purchase Common Stockcommon stock under the Company'sHemispherx's 1990 Stock Option Plan
and Rule 701 Warrants13
and/or warrants to purchase Common Stock of the Company. The Companycommon stock. Hemispherx believes such compensation
and payments are necessary in order for the CompanyHemispherx to attract and retain
qualified outside directors.
1993 STOCK OPTION PLAN
Hemispherx's 1993 Stock Option Plan (1993 Plan), provides for the grant of
options for the purchase of up to an aggregate of 138,240 shares of common stock
to Hemispherx's employees, directors, consultants and others whose efforts are
important to the success of Hemispherx. The 1993 Plan is administered by the
Compensation Committee of the Board of Directors, which has complete discretion
to select the eligible individuals to receive and to establish the terms of
option grants. The 1993 Plan provides for the issuance of either non-qualified
options or incentive stock options, provided that incentive stock options must
be granted with an exercise price of not less than fair market value at the time
of grant and that non-qualified stock options may not be granted with an
exercise price of less than 85% of the fair market value at the time of grant.
The number of shares of common stock available for grant under the 1993 Plan is
subject to adjustment for changes in capitalization. To date, no options have
been granted under the 1993 Plan.
1992 STOCK OPTION PLAN
Hemispherx's 1992 Stock Option Plan The Company's 1992 Stock Option Plan ("1992 Plan")(1992 Plan), provides for the grant of
options for the purchase of up to an aggregate of 92,160 shares of Common
Stockcommon stock
to the Company'sHemispherx's employees, directors, consultants and others whose efforts are
important to the success of the Company.Hemispherx. The 1992 Plan is administered by the
Compensation Committee of the Board of Directors, which has complete discretion
to select the eligible individuals to receive and to establish the terms of
option grants. The 1992 Plan provides for the issuance of either non-qualified
options or incentive stock options, provided that incentive stock options must
be granted with an exercise price of not less than fair market value at the time
of grant and that non-qualified stock options may not be granted with an
exercise price of less than 50% of the fair market value at the time of grant.
The number of shares of Common Stockcommon stock available for grant under the 1992 Plan is
subject to adjustment for changes in capitalization. To date, no options have
been granted under the 1992 Plan.
1990 Stock Option Plan
The Company'sSTOCK OPTION PLAN
Hemispherx's 1990 Stock Option Plan, as amended ("1990 Plan")(1990 Plan), provides for
the grant of options to employees, directors, officers, consultants and advisors
of the CompanyHemispherx for the
14
purchase of up to an aggregate of 460,798 shares of Common Stock.common
stock. The plan1990 Plan is administered by the Compensation Committee of the Board
of Directors, which has complete discretion to select eligible individuals to
receive and to establish the terms of option grants. The number of shares of
Common Stockcommon stock available for grant under the 1990 Plan is subject to adjustment
for changes in capitalization. As of December 31, 1998,2000, options to acquire an
aggregate of 294,609242,231 shares of the Common Stockcommon stock were available for grants under
the 1990 Plan.
401(K) Plan14
401(k) PLAN
In December 1995, the CompanyHemispherx established a defined contribution plan,
effective January 1, 1995, entitled the Hemispherx Biopharma employees 401(K)Employees 401(k)
Plan and Trust Agreement (the "401(K) Plan").Agreement. All full time employees of the companyHemispherx are eligible to
participate in the 401(K) Plan401(k) plan following one year of employment. Subject to
certain limitations imposed by federal tax laws, participants are eligible to
contribute up to 15% of their salary (including bonuses and/or commissionscommissions) per
annum. Participants' contributions to the 401(K) Plan401(k) plan may be matched by
the CompanyHemispherx at a rate determined annually by the Board of Directors. Each
participant immediately vests in his or her deferred salary contributions, while
CompanyHemispherx contributions will vest over one year. In 1998 the Company2000 Hemispherx provided
matching contributions to each employee for up to 6% of annual pay for a total
of $36,958$47,590 for all employees.
Compensation Committee Interlocks and Insider ParticipationCOMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 1998,2000, the members of the
Company'sHemispherx's
Compensation Committee were Ransom W. Etheridge and Richard C. Piani. Mr.
Etheridge is an attorney in private practice and has rendered legal services to
the CompanyHemispherx for which he received a fee. Mr. Piani received fees for certain
consulting work performed in Europe on behalf of the Company.
NOTWITHSTANDING ANYTHING TO THE CONTRARY, THE FOLLOWING REPORT OF THE
COMPENSATION COMMITTEE, THE REPORT OF THE AUDIT COMMITTEE ON PAGE 7, AND THE
PERFORMANCE GRAPH ON PAGE 18 SHALL NOT BE DEEMED INCORPORATED BY REFERENCE BY
ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY
FILING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES
EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY
INCORPORATES THIS INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED
FILED UNDER SUCH ACTS.
COMPENSATION COMMITTEE REPORT ON COMPENSATION
The Compensation Committee makes recommendations concerning salaries and
compensation for employees of and consultants to Hemispherx. In general, the
Compensation Committee seeks to link the compensation paid to each executive
officer to the performance of such executive officer. Within these parameters,
the executive compensation program attempts to provide an overall level of
executive compensation that is competitive with companies of comparable size and
with similar market and operating characteristics.
The Company's policy is that executive compensation should be directly and
materially related to the short-term and long-term operating performance and
objectives of the Company. As such, the Compensation Committee has determined
that compensation of executive officers should include a mixture of short and
long range compensation elements which are intended to attract, motivate and
retain competent executive personnel, increase executive ownership interests in
the Company and improve operating performance of the Company.
15
Total ReturnThere are three elements in Hemispherx's executive compensation program,
all determined by individual and corporate performance:
o Base salary
o Annual incentive
o Long-term incentive
BASE SALARY.
In establishing base salary levels for individual executives, the
Compensation Committee will consider factors such as the executive's scope of
Shareholder's
(Dividends reinvested monthly)responsibility, current and future potential performance, and overall
competitive positioning relative to comparable positions at other companies. The
objective of the Company is to structure salaries that are competitive with
those of similarly situated companies.
The Summary Compensation Table shows amounts earned during 2000 by our
executive officers. The base salary compensation for each of Dr. William A.
Carter, Robert E. Peterson and Harris Freedman is set by the terms of the
employment or engagement agreement entered into with each such executive
officer. Hemispherx established the base salary for its Chief Executive Officer,
Dr. William A. Carter under an employment agreement dated December 3, 1998,
which provided for a base salary of $369,397 in 2000 and has a term running
through May 8, 2004. Hemispherx also extended its engagement agreement with
Robert E. Peterson, Chief Financial Officer, which provided for a base salary of
$145,944 in 2000 and has a term running through December 31, 2002. Dr. Carter
and Mr. Peterson's agreements provide for annual cost of living increases.
Harris Freedman, our Vice President of Strategic Alliances, also entered into an
engagement agreement in August 2000, which provides for a base salary of $10,000
each month that Mr. Freedman's services are used.
ANNUAL RETURN PERCENTAGE
Years EndingINCENTIVES.
Annual incentive bonus awards are granted from time to time to executives
in recognition of their contributions to the Company's business and operations,
as measured against competitors of the Company Name/and the Company's internal
budgets and operating plans.
Under the terms of their respective agreements with the Company, our Chief
Executive Officer and President, Dr. William A. Carter, and our Chief Financial
Officer, Robert E. Peterson, are entitled to an annual incentive bonus as
determined by the Compensation Committee based on such executive officer's
performance during the previous calendar year. The cash bonus awarded to the
Company's Chief Executive Officer in 2000 was determined based on provisions of
his employment agreement.
LONG-TERM INCENTIVES.
The Company grants long-term incentive awards periodically to align a
significant portion of the executive compensation program with shareholder
interests over the long-term through encouraging and facilitating executive
stock ownership. Executives are eligible to participate in the Company's
incentive stock option plans. In 2000 the Compensation Committee
16
did not approve or grant any options, warrants or other long-term incentive
awards to any executive officers or directors.
CHIEF EXECUTIVE OFFICER COMPENSATION.
The Summary Compensation Table shows that during the year 2000 the
Company's Chief Executive Officer and President, Dr. William A. Carter earned
$369,397 in base compensation pursuant to the terms of his employment agreement.
In addition, Dr. Carter was paid a bonus of $90,397 in accordance with the terms
of his employment agreement. Dr. Carter's compensation in 2000 also includes
funds previously paid by Hahnemann University where he served as a Professor
until 1998. In 2000, Dr. Carter also received an aggregate of $65,000 in short
term advances bearing interest at 6% per annum, of which the outstanding balance
was repaid as of March 2, 2001.
The Compensation Committee believes that Dr. Carter's total compensation is
consistent with the median compensation for CEO's in comparable companies.
Factors reviewed by the Compensation Committee's assessment of the Company's and
the CEO's performance include individual performance, growth in revenue and
expense management and implementation of the Company's business strategy.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m).
One of the factors the Compensation Committee considers in connection with
compensation matters is the anticipated tax treatment to Hemispherx and to the
executives of the compensation arrangements. The deductibility of certain types
of compensation depends upon the timing of an executive's vesting in, or
exercise of, previously granted rights. Moreover, interpretation of, and changes
in, the tax laws and other factors beyond the Compensation Committee's control
also affect the deductibility of compensation. Accordingly, the Compensation
Committee will not necessarily limit executive compensation to that deductible
under Section 162(m) of the Code. The Compensation Committee will consider
various alternatives to preserving the deductibility of compensation payments
and benefits to the extent consistent with its other compensation objectives.
This report is submitted by the Compensation Committee of the
Company's Board of Directors.
Ransom W. Etheridge
Richard C. Piani
17
COMPARATIVE STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return for
the Company's common stock since December 31, 1995 to the cumulative total
returns of (i) the Standard & Poor's Smallcap 600 Index Dec95 Dec96 Dec97 Dec98
- -----------------------------------------------------------------------
HEMISPHERX BIOPHARMA INC. -37.43 2.74 80.53 69.25
S&P SMALLCAPand (ii) a peer group
index for the same period, assuming an investment of $100 in each of the
Company's common stock, the Standard & Poor's Smallcap 600 INDEX 4.13 21.32 25.58 -1.31
PEER GROUP 51.42 -3.97 19.49 6.85
INDEXED RETURNS
Years Ending
Base
Period
Company Name/Index 2Nov95 Dec95 Dec96 Dec97 Dec98
- --------------------------------------------------------------------------------
HEMISPHERX BIOPHARMA INC. 100 62.57 64.29 116.06 196.42
S&P SMALLCAP 600 INDEX 100 104.13 126.33 158.65 156.58
PEER GROUP 100 151.42 145.41 173.75 185.66and the peer
group index.
[In the printed proxy statement a graph
appears depicting the following plot points]
ASSUMES $100 INVESTED ON JAN. 1, 1996
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2000
Indexed Returns
Years Ending
Base
Company Name/Index Period Dec 96 Dec 97 Dec 98 Dec 99 Dec 00
- ------------------------------------------------------------------------------------------------------
Hemispherx Biopharma, Inc. 100 102.73 185.47 313.92 453.80 216.91
Peer Group 100 143.26 166.24 177.49 196.38 304.57
S&P Smallcap 600 Index 100 121.12 152.11 150.12 168.74 187.35
Peer Group Companies
- --------------------------------------------------------------------------------Companies:
GILEAD SCIENCES INC.
ISIS PHARMACEUTICALS INC.
1618
TOTAL SHAREHOLDERS RETURN
[The following information was dipicted as a line chart in the printed material]
Company Name/Index 2Nov95 Dec95 Dec96 Dec97 Dec98
- --------------------------------------------------------------------------------
HEMISPHERX BIOPHARMA INC. 100 62.57 64.29 116.06 196.42
S&P SMALLCAP 600 INDEX 100 104.13 126.33 158.65 156.58
PEER GROUP 100 151.42 145.41 173.75 185.66
17
Security Ownership of Certain Beneficial
Owners and ManagementSECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of May 15, 1999,June 13, 2001, the recordnumber and
beneficial ownershippercentage of Common Stockoutstanding shares of the Companycommon stock beneficially owned by each officerof
our directors and director,the Named Executives; and all of our officers and directors as
a group. As of June 13, 2001, there were no persons, individually or as a group, and each person
known to Hemispherx to be deemed the Company to own beneficially orbeneficial owners of record five percent or more
of the issued and outstanding shares of the Company:
Shares % of Share
Officers, Directors and Beneficially Beneficially
Principal Stockholders Owned Owned(1)common stock.
OFFICERS, DIRECTORS AND SHARES % OF SHARES
PRINCIPAL STOCKHOLDERS BENEFICIALLY OWNED BENEFICIALLY OWNED (1)
- -------------------------------------------------------------------------------------------------
William A. Carter, M.D. 4,082,143 (2) 12.1
Robert E. Peterson 208,254 (3) *
Ransom Etheridge 112,316 (4) *
Harris Freedman 1,054,160 (5) 3.4
Richard C. Piani 101,355 (6) *
William Mitchell, M.D. 62,000 (7) *
David R. Strayer, M.D. 82,746 (8) *
Josephine Dolhancryk 82,924 (9) *
Carol Smith, Ph.D. 11,791 (10) *
All directors and executive officers as 5,797,689 17.1
a group (9 persons)
- ----------------------
----- --------
William A. Carter 3,255,922(2) 11.3%
Robert E. Peterson 178,074(3) **
Ransom Etheridge 62,316(4) **
Harris Freedman 1,111,460(5) 4.0%
Sharon D. Will 815,000(6) 3.0%
Richard C. Piani 38,063(7) **
William Mitchell 25,640(8)
David R. Strayer, M.D. 82,746(9) **
Josephine Dolhancryk 75,820(10) **
Jerome Belson 1,544,100(11) 5.5%
Belson Enterprises, Inc.
495 Broadway
New York, NY 10012
All directors and 5,645,041(12) 18.3%
executive officers
as a group (8 persons)
- -------------
*Less* Less than 1%
(1) For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares of Common Stockcommon stock which such person has
the right to acquire within 60 days of May 15, 1999.June 13, 2001. For purposes of
computing the percentage of outstanding shares of Common Stockcommon stock held by
each person or group of persons named above, any security which such
person or persons has or have the right to acquire within such date is
deemed to be outstanding but is not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person. Except
as indicated in the footnotes to this table and pursuant to applicable
community property laws, the CompanyHemispherx believes based on information supplied
by such persons, that the persons named in this table have sole 18
voting and
investment power with respect to all shares of Common Stockcommon stock which they
beneficially own.
(2) Includes irrevocable proxies to vote 133,000 shares of Common Stock on all
matters that come before the stockholders of the Company until such time
as (i) the Company shall have achieved a market capitalization of
$300,000,000 or greater for at least 20 consecutive days of trading in the
public markets or (ii) the Company shall have received a bona fide offer
for acquisition or merger, the net effect of which, if consummated, would
be to establish a market capitalization of the Company of not less than
$300,000,000. This proxy shall be terminated upon the sale of such shares
in an arm's length public sale. Also includes (i) an option to purchase 73,728 shares of Common Stockcommon stock from
the CompanyHemispherx at an exercise price of $2.71 per share and expiring on August
8, 2001, (ii) Rule 701 Warrantswarrants to purchase 1,400,000 shares of Common Stockcommon
stock at a price of $3.50 per share, expiring on September 30, 2002; (iii)
warrants to purchase 465,000 shares of Common Stockcommon stock at $1.75 per share
issued in connection with the 1995 Standby Financing Agreement and
expiring on June 30, 2005 ;2005; (iv) 190,000340,000 common stock warrants exercisable
at $4.00 per share and expiring on January 1, 2003. Does not include 640,0002003; 170,000 common stock
warrants exercisable at $5.00 per share and expiring on January 2, 2003;
25,000 warrants to purchase common stock at $6.50 per share and expiring
on September 17, 2004; 25,000 warrants to purchase common stock at $8.00
per share and expiring on September 17, 2004; 100,000 warrants to purchase
common stock at $6.25 per share and expiring on April 8, 2004, (v) 20,000
warrants to purchase common stock
19
at $4.00 per share expiring January 1, 2003, (vi) 188,325 common stock
warrants exercisable at $6.00 per share and expiring on February 22, 2006,
(vii) 300,000 common stock warrants granted in 1998 that are exercisable at
$6.00 per share and 100,000expire on January 1, 2006, and (viii) 975,090 shares of
common stock. Does not include 188,325 common stock warrants granted in
1999, which are2001 that have not yet exercisable.vested.
(3) Includes (i) 27,754 options to purchase Common Stockcommon stock at an average exercise
price of $3.92 per share, expiring on July 17, 2003; (ii) warrants to
purchase 50,000 shares of Common Stockcommon stock at an exercise price of $3.50 per
share, expiring on March 1, 2006; (iii) warrants to purchase 100,000 shares
of Common Stockcommon stock at $5.00 per share, expiring on April 14, 2006; (iv) 30,000
warrants to purchase common stock at $5.00 per share expiring on February
28, 2009 and (iv)(v) 500 shares of Common Stock.common stock.
(4) Includes (i) 20,000 warrants to purchase Common Stockcommon stock at $4.00 per share,
expiring on January 1, 2001, and2003; (ii) 31,800 Class A Warrants to purchase
Common Stockcommon stock at $3.50$4.00 per share, expiring on November 2, 2000.2001; (iii) 25,000
warrants to purchase common stock at $6.50 per share and 25,000 warrants to
purchase common stock at $8.00 per share, all expiring on September 12,
2004; and (iv) 10,516 shares of common stock.
(5) Includes (i) 67,00062,000 shares of Common Stockcommon stock held by Bridge Ventures, Inc.,
of which Mr. Freedman is an officer; (ii) 63,00057,000 shares of Common Stockcommon stock
held by SMACS Holding Corp., of which Mr. Freedman is an officer; (iii)
40,000 shares of common stock, (iv) warrants to purchase 325,000 shares of
Common Stockcommon stock which are exercisable at $1.75 per share and expire on June
30, 2005, issued in connection with the 1995 Standby Financing Agreement
owned of record by Bridge Ventures, Inc.; (iv)(v) 400,000 warrants issued under
Rule 701 Warrantsof the Securities Act to purchase Common Stockcommon stock of the
CompanyHemispherx at an
exercise price of $3.50 and expiring on September 30, 2003;
(vii) 109,300 Class A Warrants exercisable at $4.00 per share and expiring
on November 2, 2000, 71,000 of which are owned by Bridge Ventures, Inc.
and 38,300 of which are owned by SMACS Holding Corp.; (viii) 97,1602002; (vi) 95,160
warrants to purchase Common Stockcommon stock exercisable at $4.00$3.50 per share, expiring
on October 15, 1999; and (ix)2002; (vii) 50,000 warrants to purchase Common Stockcommon stock at
$4.00 per share, expiring on January 1, 2004. Bridge Ventures, Inc.
19
has given an irrevocable proxy to vote its 63,000 shares to William A.
Carter on the same terms as the proxy described in Note 2.
(6) Includes (i) 70,000 shares of Common Stock, of which 10,000 are held by
Saggi Capital Corp. Money Purchase Plan, of which Ms. Will is trustee,
10,000 are held by Saggi Capital Corp. Profit Sharing Plan, of which Ms.
Will is trustee;2004; and 50,000 are held by Worldwide Marketing, a company for
which Ms. Will serves as President; (ii) Rule 701(viii) 25,000 warrants to
purchase 200,000 shares of Common Stockcommon stock at an exercise price of $3.50 per share,
expiring on September 30, 2002; (iii) 340,000 warrants to purchase Common
Stock of the Company at an exercise price of $1.75, expiring on June 30,
2005; (iv) 20,000 warrants to purchase Common Stock exercisable at $3.00$10.00 per share, expiring on January 1, 2003; (v) 105,000 warrants to purchase
Common Stock at $3.50 per share and expiring on October 15, 2004, held by
Saggi Capital Corp., of which Ms. Will is president; and (vi) 80,000
warrants to purchase Common Stock at $4.00 per share and expiring on
January 1, 2003, held by Saggi Capital Corp., of which Ms. Will is
president. Worldwide Marketing has given an irrevocable proxy to vote its
shares to William A. Carter on the same terms as the proxy described in
Note 2.
(7)2003.
(6) Includes (i) options to purchase 4,608 shares of Common Stockcommon stock at an
exercise price of $4.34, expiring on and 4,608 shares of Common Stock
owned of record by Mr. Piani's wife; andDecember 11, 2002; (ii) 20,000
warrants to purchase Common Stockcommon stock at $4.00 per share.
(8)share, (iii) warrants to
purchase 25,000 shares of common stock at $6.50 per share; (iv) 25,000
warrants to purchase common stock at $8.00 per share, all expiring on
September 17, 2004; (v) 8,847 shares of common stock owned by Mr. Piani;
(vi) 12,900 shares of common stock owned jointly by Mr. and Mrs. Piani; and
(vii) 5,000 shares of common stock owned by Mrs. Piani.
(7) Includes warrants to purchase 12,000 shares of Common Stockcommon stock at $6.00 per
share, expiring on August 25, 2001.
(9)2001 and warrants to purchase 25,000 shares
at $6.50 per share and 25,000 warrants to purchase common stock at $8.00
per share all expiring on September 17, 2004.
(8) Includes (i) stock options to purchase 20,000 shares of Common Stockcommon stock at
$3.50 per share; (ii) 50,000 warrants to purchase Common Stockcommon stock at $4.00 per
share; and (iii) 12,746 shares of Common Stock.
(10)common stock.
(9) Includes (i) options to purchase 461 shares of Common Stockcommon stock at an exercise
price of $3.80, expiring on February 13, 2002; (ii) options to purchase 359
shares of Common Stockcommon stock $3.80 per share, expiring on May 5, 2002; (iii)
50,000 Warrantswarrants to purchase Common Stockcommon stock at an exercise price of $3.50 per
share, expiring on March 1, 2006; and (iv) 5,000 warrants to purchase Common Stockcommon
stock at $4.00 per share, expiring on November 2, 2000.
(11) Includes 561,000 Class A Warrants,June 7, 2003; (v) 7,104 options to
purchase common stock at $3.50 per share expiring January 22, 2007; and
(vi) 20,000 shares of which (i) 25,000 are ownedcommon stock.
(10) Consists of record
by Maxine Belson, Mr. Belson's wife; and (ii) 21,000 are owned of record
by Matthew Belson, Mr. Belson=s son. Also includes (i) 100,0005,000 warrants to purchase Common Stock at $3.50 per share; (ii) 30,000 warrants to purchase
Common Stock at $1.75 per share; (iii) 20,000 shares of Common Stock owned
of record by The Jerome Belson Foundation, of which Mr. Belson is a
trustee; (iv) 15,000 shares of Common Stock held by Maxine Belson; and (v)
25,500 shares of Common Stock held by Matthew Belson.
(12) Includes options or warrants to purchase 4,215,370 shares of Common Stock.
20
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 5, 1998, the Company authorized the issuance of 12,000 warrants
to purchase Common Stock exercisable at $6.00 per share and expiring on August
25, 2001 to William Mitchell, a director of the Company.
In April 1998, the Company authorized the issuance of 100,000 warrants to
purchase Common Stock at an exercise price of $5.00 per share to Robert E.
Peterson, and 50,000 warrants to David R. Strayer at an exercise price of $4.00
per share.
In January 1998, the Company authorized the issuance of the following five
year common stock purchase warrants to certain officers and directors of the
Company for services rendered: (i) 810,000 warrants to William A. Carter, of
which 170,000 are immediately exercisable at $4.00 per share
170,000 are
exercisable at $4.00 per share beginning one year from issuance, 170,000 are
exercisable at $5.00 per share beginning two years from issuance,expiring June 7, 2003 and 300,000
are exercisable at $6.00 per share beginning three years from the date of
issuance; (ii) 160,000 warrants to Bridge Ventures, Inc., a company of which
Harris Freedman is Vice President, immediately exercisable at $4.00 per share;
and (iii) 45,000 warrants to Sharon Will, immediately exercisable at $3.00 per
share.
In January 1998, the Company authorized the issuance of 20,000 common6,791 stock purchase warrants to each of three of the Company's directors. The
aforesaid warrants are exercisable at $4.00 per share during the two year period
commencing on the date of issuance.
In January 1997, the Company authorized the issuance of stock options to
Josephine Dolhancryk (7,104), Robert E. Peterson (13,750), and David R. Strayer
(20,000). All are exercisable at $3.50 per share.
In March 1997, Bridge Ventures, Inc. purchased 75 shares of Series E
Preferred at $1,000 per share in a private offering pursuant to Rule 506 the
Securities Act and Regulation D promulgated thereunder. The Series E Preferred
is convertible into shares of Common Stock at $2.00 per share. Harris Freedman,
the Company's Vice President, is an officer of Bridge Ventures, Inc.
Compliance with Section 16(a) of the Exchange Act
William A. Carter, Harris Freedman, Sharon Will and Ransom Etheridge did
not timely file respective Forms 4 in connection with transactions made in
fiscal 1998. All applicable individuals have since complied with Section 16 of
the Act.
21expiring
January 22, 2007.
20
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF AUDITORS
The firm of KPMG LLP audited the consolidated balance sheets of the
CompanyHemispherx
and its subsidiaries as of December 31, 19971999 and 1998, and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for each of the years in the three-year period ended December 31, 1998.1999.
KPMG LLP informed the Company on May 3, 2000 that the client-auditor
relationship was ceased. On February 18,May 3, 2000, with the prior approval of the Board of
Directors, the Company informed KPMG that the client-auditor relationship with
the Company had ceased and on May 10, 2000 filed a Form 8-K with the SEC, which
Form 8-K is hereby incorporated by reference and a copy of which is available,
at no charge, from the Secretary.
The reports of KPMG LLP on our financial statements for the years ended
December 31, 1998 and December 31, 1999 contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. In connection with its audits for the
years ended December 31, 1998 and 1999 and, prior to the disengagement of KPMG
LLP, we had no disagreements with KPMG LLP on matters of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure,
which disagreements if not resolved to the satisfaction of KPMG LLP would have
caused them to make reference thereto in their report on the consolidated
financial statements for such years.
On June 5, 2000, pursuant to a vote of the Board of Directors, the firm of
KPMGBDO Seidman, LLP was selected to audit the financial statements of the CompanyHemispherx
for the year ending December 31, 1999.2000, which was ratified by the stockholders of
the Company at its 2000 Annual Meeting of Stockholders.
Upon the recommendation of its Audit Committee, the Board of Directors has
appointed the firm of BDO Seidman, LLP, as independent accountants, to audit the
financial statements of Hemispherx for the year ending December 31, 2001.
Accordingly, the Board of Directors will offer the following resolution at the
Annual Meeting:Meeting.
RESOLVED, that the appointment by the Board of Directors of KPMGBDO
Seidman, LLP, independent public accountants, to audit the
financial statements of the CompanyHemispherx for the year ending December
31, 19992001 be, and hereby is, ratified and approved.
All audit services provided by BDO Seidman, LLP are approved by the Audit
Committee. During 2000, BDO Seidman, LLP performed certain non-audit services
for the Company. A summary of the audit and non-audit fees paid to BDO Seidman,
LLP in 2000 is as follows:
21
AUDIT FEES - The aggregate fees billed by BDO Seidman, LLP for
professional services rendered for the audit and the reviews of the
Company's financial statements for the year ending December 31, 2000 was
approximately $151,265.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES - The
Company did not retain BDO Seidman, LLP for professional services relating
to financial information system design and implementation fees.
ALL OTHER FEES - The aggregate fees billed to the Company by BDO
Seidman, LLP for all other services, such as financings and taxes, was
approximately $5,600.
The Audit Committee has considered whether the provision by BDO Seidman,
LLP of the non-audit services discussed above under "All Other Fees" is
compatible with maintaining BDO Seidman LLP's independence and has concluded
that providing such services is compatible with that firm's independence from
the Company and its management.
The Board of Directors considers BDO Seidman, LLP to be well qualified to
serve as the independent public accountants of the Company. If, however, the
shareholders do not ratify the appointment of BDO Seidman, LLP, the Board of
Directors may, but is not required to, reconsider the appointment. It is
anticipated that a memberrepresentative of KPMGBDO Seidman, LLP will be present at the
Annual Meeting and will be available to respond to appropriate questions andquestions. It is
not anticipated that such representative will make a prepared statement at the
meeting; however, the representative shall have the opportunity if he
desires, to make a statement.do so.
The affirmative vote of at least a majority of the shares represented and
voting at the Annual Meeting at which a quorum is present (which shares voting
affirmatively also constitute at least a majority of the required quorum) is
necessary for approval of Proposal No. 2. Under Delaware law, there are no
rights of appraisal or dissenter's rights, which arise as a result of a vote to
ratify the selection of auditors.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 2 TO BE IN THE BEST INTERESTS OF
THE
COMPANYHEMISPHERX AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
STOCKHOLDERS' PROPOSALS
It is anticipated that the Company's 2000 Annual Meeting of Stockholders
will be held in July 2000. Stockholders who seek to present proposals at the
Company's next Annual Meeting of Stockholders must submit their proposals to the
Secretary of the Company on or before March 1, 2000.
22
GENERAL
Unless contrary instructions are indicated on the proxy, all shares of
Common Stockcommon stock represented by valid proxies received pursuant to this solicitation
(and not revoked before they are voted) will be voted FOR Proposal No. 2 and for
the election of all
directors nominated.nominated and FOR Proposal No. 2.
The Board of Directors knows of no business other than that set forth above
to be transacted at the meeting, but if other matters requiring a vote of the
stockholders arise, the persons designated as proxies will vote the shares of
Common Stockcommon stock represented by the proxies in accordance with their judgment on
such matters. If a stockholder specifies a different choice on the proxy, his or
her shares of Common Stockcommon stock will be voted in accordance with the specification so
made.
22
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WE URGE YOU TO FILL IN,
SIGN AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE PREPAID ENVELOPE PROVIDED,
NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE.
By Order of the Board of Directors,
/s/ RANSOM W. ETHERIDGE
-----------------------------------
Ransom W. Etheridge, Secretary
Philadelphia, Pennsylvania
May 19, 1999July 17, 2001
23
EXHIBIT A
HEMISPHERX BIOPHARMA, INC.
AUDIT COMMITTEE CHARTER
The Audit Committee is appointed by the Board to assist the Board in monitoring
(1) the integrity of the financial statements of the Company, (2) the compliance
by the Company with legal and regulatory requirements and (3) the independence
and performance of the Company's internal and external auditors.
The members of the Audit Committee shall meet the independence and experience
requirements of the NASDAQ/AMEX. The members of the Audit Committee shall be
appointed by the Board on the recommendation of the Executive Committee.
The Audit Committee shall have the authority to retain special legal, accounting
or other consultants to advise the Committee. The Audit Committee may request
any officer or employee of the Company or the Company's outside counsel or
independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.
The Audit Committee shall make regular reports to the Board.
The Audit Committee shall:
1. Review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval.
2. Review the annual audited financial statements with management,
including major issues regarding accounting and auditing principles
and practices as well as the adequacy of internal controls that could
significantly affect the Company's financial statements.
3. Review an analysis prepared by management and the independent auditor
of significant financial reporting issues and judgments made in
connection with the preparation of the Company's financial statement.
4. Review with management and the independent auditor the Company's
quarterly financial statements prior to the filing of its Form 10-Q.
5. Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to monitor
and control such exposures.
6. Review major changes to the Company's auditing and accounting
principles and practices as suggested by the independent auditor,
internal auditors or management.
7. Recommend to the Board the appointment of the independent auditor,
which firm is ultimately accountable to the Audit Committee and the
Board.
8. Approve the fees to be paid to the independent auditor.
9. Receive periodic reports from the independent auditor regarding the
auditor's independence consistent with Independence Standards Board
Standard 1, discuss such reports with the auditor, and if so
determined by the Audit Committee, take or recommend that the full
Board take appropriate action to oversee the independence of the
auditor.
10. Evaluate together with the Board the performance of the independent
auditor and, if so determined by the Audit Committee, recommended that
the Board replace the independent auditor.
11. Review the significant reports to management prepared by the internal
auditing department and management's responses.
12. Meet with the independent auditor prior to the audit to review the
planning and staffing of the audit.
13. Obtain from the independent auditor assurance that Section 10A of the
Securities Exchange Act of 1934 has not been implicated.
14. Obtain reports from management and the independent auditor that the
Company's subsidiary/foreign affiliated entities are in conformity
with applicable legal requirements and the Company's Code of Conduct.
15. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit.
16. Review with the independent auditor any problems or difficulties the
auditor may have encountered and any management letter provided by the
auditor and the Company's response to that letter. Such review should
include:
a. Any difficulties encountered in the court of the audit work,
including any restrictions on the scope of activities or
access to required information.
b. Any changes required in the planned scope of the internal
audit.
c. The internal audit department responsibilities, budget and
staffing.
17. Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Company's annual proxy
statement.
18. Advise the Board with respect to the Company's policies and procedures
regarding compliance with applicable laws and regulations and with the
Company's Code of Conduct.
19. Review with the Company's General Counsel legal matters that may have
a material impact on the financial statements, the Company's
compliance policies and any material reports or inquiries received
from regulators or governmental agencies.
20. Meet at least annually with the chief financial officer, the
independent auditor, and other involved parties in separate executive
sessions.
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of Audit Committee to plan or conduct audits or to
determine that the Company's financial statements are complete and accurate and
are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent auditor. Nor is it the duty of
the Audit Committee to conduct investigations, to resolve disagreements, if any,
between management and the independent auditor or to assure compliance with laws
and regulations and the Company's Code of Conduct.
*This Charter was adopted by the Board of Directors on June 12, 2000.
A-2
HEMISPHERX BIOPHARMA, INC.
Annual Meeting of Stockholders -- Wednesday, July 14, 1999ANNUAL MEETING OF STOCKHOLDERS
FRIDAY, AUGUST 24, 2001
THIS PROXY IS SOLICITEDSOLICTED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William A. Carter and Ransom W. Etheridge
and each of them, with full power of substitution, as proxies to represent the
undersigned at the Annual Meeting of Stockholders to be held at The Embassy
Suites, 1776 Ben Franklin Parkway,the offices of
Schnader Harrison Segal & Lewis LLP, Suite 3600, 1600 Market Street,
Philadelphia, Pennsylvania, Wednesday, July
14, 1999Friday, August 24, 2001, at 10:00 a.m. local time
and at any adjournment thereof, and to vote all of the shares of common stock of
Hemispherx Biopharma, Inc. the undersigned would be entitled to vote if
personally present, as indicted onupon the reverse side hereof.
The shares represented by the proxy will be voted as directed. If no
contrary instruction is given, the shares will be voted FOR Proposal No. 2 and
for the election of William A. Carter, Richard C. Piani, Ransom W. Etheridge and
William M. Mitchell as Directors.following matters:
Please mark boxes in blue or black ink.
1. Proposal No. 1 - Election1--Election of Directors.
Nominees: William A. Carter, Richard C. Piani, Ransom W. Etheridge and
William M. Mitchell.
FOR all nominees |_| AUTHORITY WITHHELD/ / For All Nominees (except as marked to the contrary below) / / Authority
Withheld as to all nominees |_|
For, except authority withheld as to the following nominee(s):
________________________________________________________________________________
All Nominees
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME)
William A. Carter Richard C. Piani Ransom W. Etheridge William M.
Mitchell
2. Proposal No. 2 for ratification2--Ratification of the selection of KPMGBDO Seidman, LLP, as the
independent auditors of Hemispherx Biopharma, Inc. for the Company.
|_| FOR |_| AGAINST |_| ABSTAINyear ending
December 31, 2001.
/ / For / / Against / / Abstain
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Please
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. THE BOARD
RECOMMENDS A VOTE "FOR" ITEMS NOS. 1 AND 2. IF NO CONTRARY INSTRUCTION IS GIVEN,
THE SHARES WILL BE VOTED FOR THE ELECTION OF WILLIAM A. CARTER, RICHARD C.
PIANI, RANSOM W. ETHERIDGE AND WILLIAM M. MITCHELL AS DIRECTORS, FOR PROPOSAL
NO. 2 AND IN THE DISCRETION OF THE PROXIES ON ALL OTHER MATTERS PROPERLY BROUGHT
BEFORE THE ANNUAL MEETING.
Please date, sign as name
appears at left, and return
promptly. If the stock is
registered in the name of two
or more persons, each should
sign. When signing as
Corporate Officer, Partner,
Executor, Administrator,
Trustee, or Guardian, please
give full title. Please note
any change in your address
alongside the address as it
appears in the Proxy.
Dated:__________________________________
________________________________________
(Signature)
_____________________________________________________________________
Signature
_____________________________
(Print Name)
SIGN, DATE AND RETURN PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
ENVELOPE