SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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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)
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(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.
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HEMISPHERX BIOPHARMA, INC.
1617 JFK BOULEVARD
PHILADELPHIA, PENNSYLVANIABoulevard
Philadelphia, Pennsylvania 19103
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 24, 2001SEPTEMBER 10, 2003
To the Stockholders of Hemispherx Biopharma, Inc.:
You are cordially invited to attend the Annual Meeting of Stockholders
of Hemispherx Biopharma, Inc. ("Hemispherx" or the "Company"), a Delaware corporation, to be held
at the offices of Schnader Harrison Segal & Lewis LLP,
Suite 3600, 1600 Market Street,Embassy Suites, 1776 Benjamin Franklin Parkway, Philadelphia Pennsylvania
19103, on Friday,
August 24, 2001,Wednesday, September 10, 2002, at 10:00 a.m. local time, for the
following purposes:
1. To elect fourfive members to the Board of Directors of Hemispherx to serve
until their respective successors are elected and qualified;
2. To ratify the selection by Hemispherx of BDO Seidman, LLP, independent
public accountants, to audit the financial statements of Hemispherx for the year
ending December 31, 2001;2003; and
3. To amend Hemispherx's certificate of incorporation to increase the
number of authorized shares of Hemispherx's common stock.
4. 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 July 6, 200114, 2003
are entitled to notice of and to vote at the meeting.
A proxy statement and proxy are 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 self addressed stamped envelope provided. If you attend the
meeting in person, you may withdraw your proxy and vote your shares. We have
also enclosed our amended annual report on Form 10-K as amended, for the fiscal year ended
December 31, 2000.2002.
By Order of the Board
of Directors
/s/ s\Ransom W. Etheridge, Secretary
----------------------------------
Philadelphia, Pennsylvania
July 17, 200121, 2003
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 of stockholders of Hemispherx
Biopharma, Inc. ("Hemispherx" or the "Company") to be held on Friday, August 24, 2001,Wednesday,
September 10, 2003, and at any adjournments. The accompanying proxy is solicited
by the Board of Directors of Hemispherx and is revocable by the stockholder by
notifying Hemispherx's corporate secretaryCorporate Secretary at any time before it is voted, or by
voting in person at the annual meeting. This proxy statement and accompanying
proxy will be distributed to stockholders beginning on or about July 17, 2001.21, 2003.
The principal executive offices of Hemispherx 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 July 6, 2001,14, 2003,
the record date, are entitled to receive notice of, and vote at the annual
meeting. As of July 6,
2001,the record date, the number and class of stock outstanding and
entitled to vote at the meeting was 30,922,16635,821,275 shares of common stock, par value
$.001 per share. Each share of common 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 five nominees receiving the highest number of votes cast by the
holders of common stock represented and voting at the meeting will be elected as
Hemispherx's directors and constitute the entire Boardboard of Directorsdirectors of
Hemispherx. 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. The affirmative vote of at
least a majority of the issued and outstanding shares as of the record date is
necessary for approval of Proposal No.3. A quorum is representation in person or
by proxy at the annual meeting of at least a majority of the outstanding shares of
common stock of Hemispherx on the record date.
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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 Secretarycorporate secretary of Hemispherx at its
principal offices, 1617 JFK Boulevard, Suite 660, 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.$40,000. 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 proxiesProxies
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 proposed fee of not more than $5,000$5,000.00 plus
out-of-pocket expenses.
ADJOURNED MEETING
If a quorum is not present at the scheduled timeThe chair of the meeting the
stockholders who are represented may adjourn the meeting until a quorumfrom time to time to
reconvene at the same or some other time, date and place. Notice need not be
given of any such adjournment meeting if the time, date and place thereof are
announced at the meeting at which the adjournment is present. Thetaken. If the time, date
and place of the adjournment meeting will beare not announced at the timemeeting which the
adjournment is taken, then the Secretary of the Corporation shall give written
notice of the time, date and no other notice willplace of the adjournment meeting not less than ten
(10) days prior to the date of the adjournment meeting. Notice of the
adjournment meeting also shall be given. Angiven if the meeting is adjourned in a single
adjournment will have no effect onto a date more than 30 days or in successive adjournments to a date
more than 120 days after the business that may be conducted atoriginal date fixed for 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 onentitled to vote at the record dateannual
meeting, 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.
DEADLINESDEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders to be considered for inclusion in the Proxy
Statement and proxy card for the 20022004 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, 2002.25, 2004.
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 3
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 SHAREHOLDERSSTOCKHOLDERS
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Each nominee to the Boardboard of Directorsdirectors will serve until the next annual
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.Mitchell and Iraj-Eqhbal Kiani. Information is furnished below with
respect to all nominees.
Set forth below is the biographical information of the nominees and
directors of Hemispherx:
WILLIAM A. CARTER, M.D., 63,65, the co-inventor of Ampligen, joined Hemispherx
in 1978, and has served as: (a) Hemispherx's Chief Scientific Officer since May
1989; (b) the Chairman of Hemispherx's Board of Directors since January 1992;
(c) Hemispherx's Chief Executive Officer since July 1993; (d) Hemispherx's
President since April, 1995; and (e) a director since 1987. From 1987 to 1988,
Dr. Carter served as Hemispherx'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. Dr. 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
Hemispherx'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 NeoplasticNoeplastic Diseases at Hahnemann Medical University, a
position he held from 1980 to 1998. Dr. Carter served as Director of Clinical
Research for Hahnemann Medical University'sUniversity 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. Dr. 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, 73,76, has been a director of Hemispherx since May 1995. Mr.
Piani has beenwas employed as a principal delegate for Industry to the City of Science
and Industry, Paris, France, a billion dollar scientific and educational complex, since 1985.from 1985
through 2000. Mr. Piani provided consulting to Hemispherx in 1993, with respect
to general business strategies for Hemispherx's European operations and markets.
Mr. Piani served as Chairman of Industrielle du Batiment-Morin, a building
materials corporation, from 1986 to 1993. Previously Mr. Piani was a 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 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 Faculte de Droit, Paris Sorbonne and a Business Administration
degree from Ecole des Hautes Etudes Commerciales, Paris.
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RANSOM W. ETHERIDGE, 62,64, has been a director of Hemispherx since October
1997, and presently serves as our Secretary. Mr. Etheridge first became
associated with Hemispherx in 1980 when he provided consulting services to
Hemispherx and participated in negotiations with respect to Hemispherx's initial
private placement through Oppenheimer & Co., Inc. Mr. Etheridge has been
practicing law since 1967, specializing in transactional 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., 65,68, has been a director of Hemispherx since July 1998. Dr.Mr.
Mitchell is a Professor of Pathology at Vanderbilt University School of
Medicine. Dr. Mitchell earned aan M.D. from Vanderbilt and a Ph.D. from Johns
Hopkins University, where he served as an Intern in 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. Dr.
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 Hemispherx from 1987 to 1989.
IRAJ-EQHBAL KIANI, M.B.A.,PH.D., 58, was appointed to the Board of
Directors on May 1, 2002. Dr. Kiani is a citizen of England and resides in
Newport, California. As a native of Iran, Dr. Kiani served in various local
government positions including the Governor of Yasoi, Capital of Boyerahmad,
Iran. In 1980, Dr. Kiani moved to England, where he established and managed
several trading companies over a period of some 20 years. Dr. Kiani is a
planning and logistic specialist who is now applying his knowledge and
experience to build a worldwide immunology network which will use the Company's
proprietary technology. Dr. Kiani received his Ph.D. degree from the University
of Warwick in England.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 1 TO BE IN THE BEST INTERESTS OF
HEMISPHERXHEMISPHERx AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" ALL FOURFIVE OF THE
ABOVE-NAMED NOMINEE DIRECTORS OF HEMISPHERX.HEMISPHERx'.
INFORMATION CONCERNING BOARD MEETINGS
Hemispherx's BoardHemispherx board of Directorsdirectors met four times the Executive Committee metand executed four times,Unanimous
Consents, the Compensation Committee met once, the Audit Committee met fourfive
times, and the Strategic Planning Committee met once during the fiscal year
ended December 31, 2000. The2002. Four of the incumbent directors attended at least 75%100% of the
board meetingsBoard Meetings and meetings of committees on which they served.one incumbent, Iraj Eqhbal Kiani attended two meetings.
INFORMATION CONCERNING COMMITTEES OF THE BOARD
The Boardboard of Directorsdirectors maintains the following committees:
EXECUTIVE COMMITTEEExecutive Committee.
The Executive Committee is composed of William A. Carter, Chairman, Chief Executive
Officer and President, and Ransom W. Etheridge, Secretary and director.Iraj-Eqhbal Kiani. The
Executive Committee makes recommendations to management regarding general
business matters of Hemispherx.
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COMPENSATION COMMITTEECompensation Committee.
The Compensation Committee is composed of Ransom W. Etheridge, Secretary
and director, and Richard C. Piani, director. The Compensation Committee makes
recommendations concerning salaries and compensation for employees of and
consultants to Hemispherx.
AUDIT COMMITTEE
TheAudit Committee.
Our Audit Committee is composed of Ransom W. Etheridge,the Board of Directors consists of Richard Piani,
Committee Chairman, William Mitchell, M.D. and RichardIraj-Eqhbal Kiani. Mr. Piani, allDr.
Mitchell and Iraj-Eqhbal Kiani are Independent Directors. We do not have a
financial expert as defined in Securities and Exchange Commission rules on the
committee in the true sense of which the description. However, Mr. Piani is a
Businessman and has 40 years of experience of working with budgets, analyzing
financials and dealing with financial institutions. The Company believes areMr.
Piani, Dr. Mitchell and Iraj-Eqhbal Kiani to be independent of management and
free of any relationship that would interfere with their exercise of independent
judgmentjudgement 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 REPORTAudit Committee Report.
The Audit Committee of the Board of Directors iswas composed of three
independent directors and operates under a written charter prepared and adopted
by the Board of Directors (a copyDirectors. One of which is attached heretothese members, Ransom Etheridge, as Exhibit A).a result
of his increased activity with the Company, no longer deemed independent. The
Committee recommends to the Board of Directors, subject to shareholders'stockholders'
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 auditing
standards generally accepted auditing
standards,in the United States of America, and for expressing
an opinion on the conformity of the financial statements to accounting
principles generally accepted accounting principles.in the United States of America. The Committee's
responsibility, as the representative of the Board of Directors, is to monitor
and oversee thesethe 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 accounting principles
generally accepted accounting principles,with the United States of America, 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.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,Independence Discussions with Audit Committees, and has discussed with BDO its
independence from the Company.
Based on reviews, discussions and other matters 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 Form on Form 10-K for the fiscal year ended December 31, 2000.
7
2002.
This report is submitted by the Audit
Committee of the Company's Board of Directors.
Ransom W. EtheridgeRichard C. Piani, Chairman
William M. Mitchell
Richard C. Piani
STRATEGIC PLANNING COMMITTEEIraj-Eqhbal Kiani
Code of Ethics.
Our Board of Directors adopted a code of ethics and business conduct for
officers, directors and employees that went into effect on May 19, 2003. This
code has been presented and reviewed by each officer, director and employee. You
may obtain a copy of this code by visiting our web site at www.hemispherx.net or
by written request to our office at 1617 JFK Boulevard, Suite 660, Philadelphia,
PA 19103.
Strategic Planning Committee.
The Strategic Planning Committee is composed of William A. Carter and
Richard C. Piani. The Strategic Planning Committee makes recommendations to the
Boardboard of Directorsdirectors of priorities in the application of Hemispherx'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 Hemispherx.
INFORMATION CONCERNING EXECUTIVE OFFICERS
The following sets forth biographical information about Hemispherx's executive
officers:
NAME AGE POSITIONofficers and key personnel:
Name Age Position
William A. Carter, M.D. 6365 Chairman, Chief Executive
Officer and President
Robert E. Peterson 6466 Chief Financial Officer
David R. Strayer, M.D. 5557 Medical Director,Affairs, Regulatory
Affairs
Carol A. Smith, Ph.D. 4951 Director of Manufacturing
and Process Development
Josephine M. Dolhancryk 38 Ransom W. Etheridge 64 Secretary/Treasurer Assistant Secretary
Harris Freedman 66 Vice President for Strategic Alliances
For biographical information about William A. Carter, M.D., and Ransom
Etheridge, please see the discussion under the heading "Proposal No. 1 Election
of Directors" above.
ROBERT E. PETERSON has served as Chief Financial Officer of the Company
since April, 1993 and served as an Independent Financial Advisor to the Company
from 1989 to April, 1993. Also, Mr. Peterson has served as Vice President of the
Omni Group, Inc., a business consulting group based in Tulsa, Oklahoma since
1985. From 1971 to 1984, Mr. Peterson worked for PepsiCo, Inc. and served in
various financial management positions including Vice President and Chief
Financial Officer of PepsiCo Foods International and PepsiCo Transportation,
Inc. Mr. Peterson is a graduate of Eastern New Mexico University.
DAVID R. STRAYER, M.D. who servesserved as Professor of Medicine at the Medical
College of Pennsylvania and Hahnemann University, 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.DPh.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(R). Dr. Smith was
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
director of several companies in the pharmaceutical, health care and
entertainment fields. Mr. Freedman was Vice President of 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have employment agreements with certain of our executive officers
and have granted such officers and directors of the Companystock options and warrants to purchase common stock of the Company, asto our
officers and directors. These employment agreements and grants are discussed
under the headings "Compensation of Executive Officers and Directors" and
"Security Ownership of Certain Beneficial Owners and Management" below.
Ransom W. Etheridge, a directorDirector of the Company is an attorney in
private practice who has rendered corporate legal services to us from time to
time, for which he has received fees. Richard C. Piani, a Director of the
Company, lives in Paris, France and assists the Company's European subsidiary in
their dealings with medical institutions and the European Medical Evaluation
Authority. William M. Mitchell, M.D., a Director of the Company, works with
David R. Strayer, M.D. (our Medical Director) in establishing clinical trial
protocols as well as performs other scientific work for the Company from time to time.
For these services, these Directors were paid an aggregate of $125,690.00$170,150 in the
year 2000.2002. No individual Director was paid in excess of $60,000.
9
William A. Carter, Chief Executive Officer of the Company, received an
aggregate of $12,486 in short term advances in 2002 which were repaid as of
December 31, 2002. All advances bear interest at 6% per annum. The Company
loaned $60,000 to Ransom W. Etheridge, a Director of the Company in November,
2002 for the purpose of exercising 15,000 Class A Redeemable warrants. This loan
bears interest at 6% per annum. Dr. Carter's short term advances and Mr.
Etheridge's loan were approved by the Board of Directors.
We paid $33,450 to Carter Realty for the rental of property used by us for
business purposes at various times in 2002. The property is owned by others and
managed by Carter Realty. Carter Realty is owned by Robert Carter, the brother
of William A. Carter.
There are no material proceedings to which any officer, director or affiliate,
or any associate thereof is a party adverse to the Company or has a material
interest adverse to the Company.
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 class of
Hemispherx's equity securities, to file reports with the Securities and Exchange
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,
2000,2002, 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 DIRECTORSDIRECRTORS
The summary compensation table below sets forth the aggregate
compensation paid or accrued by Hemispherx for the fiscal years ended December
31, 2002, 2001 and 2000 1999
and 1998 to (i)(I) the Chief Executive Officer and (ii) Hemispherx's
four most highly paid executive officers other than the CEO who were serving as executive
officersexecutives at the end of the
last completed fiscal year and whose total annual salary and bonus exceeded
$100,000 (collectively, the "Named Executives").
SUMMARY COMPENSATION TABLE
RESTRICTED
NAME AND OTHER ANNUAL STOCK OPTION ALL OTHER
PRINCIPAL POSITION YEAR SALARY COMPENSATION AWARDS AWARDS COMPENSATION
- ------------------ ---- ------ ------------ ------ ------ ------------
($) ($)(1) (2)
Name and Principal Position Year Salary ($) Restricted Stock Warrants & All Other
Awards Option Awards Compensation (1)
- ------------------------------------------ -------- ---------------- --------------------- ------------------ ------------------
William A. Carter 2000 539,620 (3)2002 (5)$468,830 - - - $22,917(2)1,000,000 $25,747
Chairman of the 1999 531,810 (3) - - 100,000 (5) 17,672
Board and CEO 1998 438,780 (4)2001 (5) 456,608 - (3) 386,650 22,917
2000 (5) 539,620 - 830,000 (6) 19,183100,000 22,917
Robert E. Peterson (7)2002 $151,055 - (2) 200,000 -
Chief Financial Officer 2001 146,880 - (4) 40,000 -
2000 145,944 - - -
-
Chief Financial 1999 138,930 - - - -
Officer 1998 132,000 - - 100,000 (8) -
David R. Strayer, M.D. 2000 172,3172002 $178,594 - - -(2) 50,000 -
Medical Director 1999 166,2312001 174,591 - (7) 10,000 -
2000 (7)172,317 - - -
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 (12) -
Carol A. Smith, Ph.D. 20002002 $128,346 - (4) 20,000 -
Director of Manufacturing 2001 124,800 - - -
2000 124,000 - Director of 1999 120,000 - - 5,000 (13) -
Manufacturing 1998 80,231 - - -(7) 10,000 -
- ----------------------
10
(1) Hemispherx makes available certain non-monetary benefits to its officers
with a view to attracting and retaining qualified personnel and
facilitating job performance. Hemispherx 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 Hemispherx with respect to term
life and disability insurance for the benefit of the named executive officer.
(2) Represents warrants to purchase shares of our common stock at $2.00 per
share.
(3) Consists of 188,325 warrants to purchase common stock at $6.00 per
share and 188,325 warrants to purchase common stock at $9.00 per share. Also
includes a stock option grant of 10,000 shares exercisable at $4.03 per share.
(4) Consists of a stock option grant of 10,000 shares exercisable at $4.03
per share and 30,000 warrants to purchase common stock at $5.00 per share.
(5) Includes a bonus of $90,397 paid in 1999 and 2000. (4) IncludesAlso includes funds
previously paid to Dr. Carter by Hahnemann Medical University where he served as
a professor until 1998. This compensation was continued by the Company and
totaled $79,826 in each of 1998, 19992000, and 2000.
(5)2001 and $82,095 in 2002.
(6) Represents warrants to purchase common stock exercisable at $6.25 per
share.
(6) Represents warrants to purchase common(7) Consists of a stock and includes: (i) 360,000
warrantsoption grant of 10,000 shares 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$4.03
per share.
(7) Mr. Peterson is paid on a fee basis.
(8) Represents warrants to purchase 100,000 shares of common stock at $5.00 per
share.
(9) Represents warrants to purchase 50,000 shares of common stock at $4.00 per
share.
(10) Includes $98,926 previously paid by Hahnemann Medical University.University where Dr. Strayer
served as a professor until 1998. This compensation was continued by the Company
in 1998, 19992000, 2001 and 2000.
(11) Represents warrants to purchase 25,0002002.
(9) Consists of stock option grant of 10,000 shares of common stockexercisable at $10.00$4.03
per share.
(12) Represents warrants to purchase 80,000 shares of common stock at $4.00 per
share.
(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
The following table sets forth certain information regarding the stock
options and warrants held as of December 31, 2000 by the individuals
The following table sets forth certain information regarding the stock options
and warrants granted during 2002 to the executive officers named in the above
Summary Compensation Table.
================================================================ ================================= ================================
POTENTIAL REALIZABLE VALUE
AT ASSUMED RATES
OF STOCK PRICE APPRECIATION
FOR OPTION AND WARRANTS TERM
- ------------ --------------------- ----------------------------- --------------- ----------------- -------------- -----------------
PERCENTAGE OF TOTAL OPTIONS
NAME NUMBER OF SECURITIES AND WARRANTS GRANTED TO EXERCISE PRICE EXPIRATION DATE
UNDERLYING OPTIONS AND EXPLOYEES IN FISCAL YEAR PER SHARE (3)
WARRANTS GRANTED (1) 2001(2) AT 5% (4) AT 10% (4)
- ------------ --------------------- ----------------------------- --------------- ----------------- -------------- -----------------
Carter, W.A. 1,000,000 61.6% $2.00 8/13/07 $1,879,500 $ 1,969,000
- ------------ --------------------- ----------------------------- --------------- ----------------- -------------- -----------------
Peterson, R. 200,000 12.3% $2.00 8/13/07 $ 375,900 $ 393,800
- ------------ --------------------- ----------------------------- --------------- ----------------- -------------- -----------------
Smith, C. 20,000 1.2% $2.00 8/13/07 $ 37,590 $ 39,380
- ------------ --------------------- ----------------------------- --------------- ----------------- -------------- -----------------
Strayer, D. 50,000 3.1% $2.00 8/13/07 $ 93,975 $ 98,450
============ ===================== ============================= =============== ================= ============== =================
* Amounts indicate warrants granted.
(1) Options vest over a three-year period. Warrants vest immediately.
(2) Total warrants issued to employees in 2002 were 1,622,000.
(3) The exercise price is equal to the closing price of the Company's
common stock at the date of issuance.
(4) Potential realizable value is based on an assumption that the market
price of the common stock appreciates at the stated rates compounded annually,
from the date of grant until the end of the respective option term. These values
are calculated based on requirements promulgated by the Securities and Exchange
Commission and do not reflect the Company's estimate of future stock price
appreciation.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE
Shares Securities Underlying Value of Unexercised
Acquired on Value Unexercised Option In-the-Money Options In-the-Money-Options
Name Exercise Realized at Fiscal Year End (#) at Fiscal Year End ($) (1)
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(#) ($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
William A. Carter - - 2,618,7283,552,044 (2) 300,000753,334 (3) 3,565,405 0$209,200 $97,500
Robert E. Peterson - - 177,574314,240 (4) 0 60,355 0
Harris Freedman - - 895,160103,334 (5) 0 1,631,450 06,300 6,300
David R. Strayer - - 70,000101,666 (6) 0 62,500 028,334 (7) 3,250 3,250
Carol A. Smith - - 11,791 (7) 0 11,811 028,457 (8) 13,334 (9) 1,300 1,300
- -------------------
(1) Computation based on $4.75,$2.13, the December 29, 200031, 2002 closing bid price for
the common stock on the American Stock Exchange.
(2) RepresentsConsists of (i) 1,400,000 currently250,000 warrants exercisable at $2.00 per share
expiring on August 13, 2007, (ii) 188,325 warrants issued under Rule
701 of the Securities Act to purchase common stock at $3.50 per share; (ii)
73,728 stock options to purchase common stock at $2.71 per share; (iii)
warrants to purchase 465,000 shares of common stock at $1.75 per share; and
(iv) warrants to purchase 680,000 shares of common stock at a weighted
average of $4.82 per share.
(3) Represents warrants to purchase 300,000 shares of common stockexercisable at $6.00 per
share.
(4) Represents (i) 27,574 stock optionsshare expiring on February 22, 2006, (iii) 188,325 warrants exercisable at an average price of
$3.92$9.00
per share; (ii) 50,000 warrants to purchase common stock at $3.50 per
share; and (iii)share expiring on February 22, 2006, (iv) 100,000 warrants to purchase common stock at $5.00 per
share.
(5) Represents (i) 400,000 warrants issued under Rule 701 of the Securities Act
exercisable at
$3.50 per share; (ii) 95,160 warrants to purchase common
stock at $3.50 per share; (iii) 325,000 warrants to purchase common stock
at $1.75 per share; (iv) 50,000 warrants to purchase common stock at $4.00$6.25 per share expiring on April 8, 2004, (v) 25,000 warrants exercisable at
$6.50 per share expiring on September 17, 2004 (vi) 25,000 warrants to purchase
common stock at $10.00$8.00 per share.
(6) Representsshare expiring September 17, 2004 and 6,666 stock
option exercisable at $8.00 per share expiring on January 3, 2011. Also include
2,768,728 warrants and options held in the name of Carter Investments, L.C. of
which W. A. Carter is the principal beneficiary. These securities consist of (i)
15,000340,000 warrants exercisable at $4.00 per share expiring on January 1, 2008,
(ii) 170,000 warrants exercisable at $5.00 per share expiring on January 1,
2005, (iii) 300,000 warrants exercisable at $6.00 per share expiring on January
1, 2005, (iv) 20,000 warrants exercisable at $4.00 per share expiring on January
1, 2008, (v) 465,000 warrants exercisable at $1.75 expiring on June 3, 2005,
(vi) 1, 400,000 warrants exercisable at $3.50 per share expiring on October 16,
2004 and 73,728 stock options exercisable at $2.71 per share until exercised.
(3) Consists of (i) 750,000 warrants exercisable at $2.00 per share
expiring on August 13, 2007 and (ii) 3,334 start options exercisable at $4.03
per share expiring on January 3, 2011.
(4) Consists of (i) 6,666 stock options exercisable at $4.03 per share
expiring on January 3, 2011 (ii) 13,750 stock options exercisable at $3.50 per
share;share expiring on January 22, 2007, (iii) 13,824 stock option exercisable at
$4.34 per share expiring on July 17, 2003, (iv) 100,000 warrants exercisable at
$2.00 per share expiring on August 13, 2007, (v) 50,000 warrants exercisable at
$3.50 expiring on March 1, 2006, (vi) 100,000 warrants exercisable at $5.00 per
share expiring on April 14, 2006 and (vii) 30,000 warrants exercisable at $5.00
per share expiring on February 28, 2009.
(5) Consists of (i) 100,000 warrants exercisable at $2.00 per share
expiring on August 13, 2007 and (ii) 3,334 stock options exercisable at $4.03
per share expiring on January 3, 2011.
(6) Consists of (i) 25,000 warrants exercisable at $2.00 per share expiring
on August 13, 2007, (ii) 50,000 warrants to purchase common stockexercisable at $4.00 per share andexpiring
on February 28, 2008, (iii) 6,666 stock options to purchase 5,000 shares of commonexercisable at $4.08 expiring on
January 3, 2011 and (iv) 20,000 stock options exercisable at $3.50 per share.share
expiring on January 22, 2007.
(7) Consists of 25,000 warrants exercisable at $2.00 per share expiring on
August 13, 2007 and 3,334 stock options exercisable at $4.03 per share expiring
on August 13, 2007.
(8) Consists of (i) 10,000 warrants exercisable at $2.00 per share expiring
on August 13, 2007, (ii) 5,000 warrants to purchase common stockexercisable at $4.00 per share expiring
on June 7, 2008, (iii) 6,666 stock options exercisable at $4.03 per share
expiring on January 3, 2016, and (iv) 6,791 stock options exercisable at $3.50
per share.
12
EMPLOYMENT AGREEMENTSshare expiring on January 22, 2007.
(9) Consists of 10,000 warrants exercisable at $2.00 per share and 3,334
stock options exercisable at $4.03 per share expiring on January 3, 2004.
Employment 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 Boardboard of Directors.directors.
Dr. Carter willdoes not participate in any discussions concerning the determination
of his annual bonus. Dr. Carter is also entitled to an incentive bonus of 0.5%
of the gross proceeds received by Hemispherx 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 provides that he be paid
a 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 Hemispherx's common stock at an exercise price of
$2.71 per share. TheThis agreement is automatically renewed for successive one year
periods unless written noticewas extended to May 8, 2008 by the Board of
refusal to renew is given by one party to the
other at least 90 days prior to the expiration of the renewal period.Directors in August, 2002.
Hemispherx entered into an amended and restated engagementemployment agreement with
Robert E. Peterson dated April 1, 2001 which provides for Mr. Peterson's
employment as Hemispherx's Chief Financial Officer until December 31, 20022003 at an
annual base salaryfee of $146,880.00$155,988 per year, subject to annual cost of living increases.increase.
In addition, Mr. Peterson shall receive bonus compensation upon Federal Drug
Administration approval of Ampligen based on the number of years of his
employment by Hemispherx up to the date of such approval. Mr. Peterson also
received 30,000200,000 warrants to purchase shares of common stock with an exercise
price of $5.00 per share.
Hemispherx entered into an amended and restated employment agreement with
Harris Freedman providing for Mr. Freedman's employment as Vice President for
Strategic Alliances on August 1, 2000. The agreement provides for Mr. Freedman
to be employed for a one year term for a fee of $10,000 each month that Mr.
Freedman's services are used and provides for termination of the agreement upon
certain circumstances including termination by Hemispherx or Mr. Freedman on 14
days' written notice.
COMPENSATION OF DIRECTORS
An extensive and$2.00 in depth study of board compensation for companies in the
U.S. was conducted and upon review it was determined that the Company's
compensation for the members of it's Board2002.
Compensation of Directors
was significantly below
average. The existing compensation package had been in place since 1990. In
order to bringDuring the compensation for board members within the average range of
compensation based upon the study, the Company increased board compensation
consisting ofyear ended December 31, 2002, each non-employee Director
received an annual retainer to $35,000.00 plus $1,000.00 perof $35,000 for serving on the Board of Directors. In
addition, each non-employee Director received $1,000 for each meeting attended.
Committee chairmenThe Chairman of each committee received an additional retainer of $5,000 per
year and committee members receive an additional retainer of $5,000.00
per year and committee members each receive an additional retainer of $3,000.00$3,000 per year.
All non-employee directors received some compensation in 20002002 for special
project work performed on behalf of Hemispherx. See "Certain
Relationships and Related Transactions" above. All directors have been granted
options to purchase common stock under Hemispherx's 1990 Stock Option Plan
13
and/and\or warrantsWarrants to purchase common stock. Hemispherx believes such compensation
and payments are necessary in order for Hemispherx to attract and retain
qualified outside directors.
1993 STOCK OPTION PLANStock 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 Boardboard of Directors,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, noThis plan terminated as of
July 7, 2003. No options have
beenwere granted under the 1993 Plan.
1992 STOCK OPTION PLANStock Option Plan
Hemispherx's 1992 Stock Option Plan (1992 Plan), provides for the grant of
options for the purchase of up to an aggregate of 92,160 shares of common stock
to Hemispherx's employees, directors, consultants and others whose efforts are
important to the success of Hemispherx. The 1992 Plan is administered by the
Compensation Committee of the Boardboard of Directors,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 stock available for grant under the 1992 Plan is
subject to adjustment for changes in capitalization. To date, noThis plan expired as of
December 3, 2002. No options have
beenwere granted under the 1992 Plan.
1990 STOCK OPTION PLAN
Hemispherx'sStock Option Plan
Hemispherx 1990 Stock Option Plan, as amended, (1990 Plan), provides for the grant of
options to employees, directors, officers, consultants and advisors of
Hemispherx for the purchase of up to an aggregate of 460,798 shares of common
stock. The 1990 Planplan is administered by the Compensation Committee of the Boardboard of
Directors,directors, which has complete discretion to select eligible individuals to
receive and to establish the terms of option grants. The number of shares of
commonCommon stock available for grant under the 1990 Plan is subject to adjustment
for changes in capitalization. As of December 31, 2000,2002, options to acquire an
aggregate of 242,231245,782 shares of the common stock were available for grants under
the 1990 Plan.
14
401(k) PLANplan. This plan remains in effect until terminated by the Board of
Directors or until all options are issued.
401(K) Plan
In December 1995, Hemispherx established a defined contribution plan,
effective January 1, 1995, entitled the Hemispherx Biopharma Employees 401(k)employees 401(K) Plan and
Trust Agreement. All full time employees of Hemispherx are eligible to
participate in the 401(k)401(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 commissions)commissions per
annum. Participants' contributions to the 401(k)401(K) plan may be matched by
Hemispherx at a rate determined annually by the Boardboard of Directors.directors. Each
participant immediately vests in his or her deferred salary contributions, while
Hemispherx contributions will vest over one year. In 20002002 Hemispherx provided
matching contributions to each employee for up to 6% of annual pay for a total
contribution of $47,590$38,000 for all employees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIONCompensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 2000,2002, the members of Hemispherx's
Compensation Committee were Ransom W. Etheridge and Richard C. Piani. Mr. Etheridge
serves as the Company's Secretary and is an attorney in private practice and has
rendered legal services to Hemispherx for which he received a fee. Mr. Piani
lives in Paris, France and assists the Company's European subsidiary in their
dealings with medical institutions and the European Medical Evaluation Authority
for which he received a fee in 2001. The fees for certain
consulting work performedpaid to Mr. Etheridge and Mr.
Piani in Europe on behalf2002 were less than $60,000 each.
Notwithstanding anything to the contrary, the following report of the
Company.
NOTWITHSTANDING ANYTHING TO THE CONTRARY, THE FOLLOWING REPORT OF THE
COMPENSATION COMMITTEE, THE REPORT OF THE AUDIT COMMITTEE ON PAGECompensation 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 OFand the
performance graph on page 20 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 OFor 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 COMPENSATIONexcept 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 consultantsconsultant 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
There 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.Base Salary
In establishing base salary levels for individual executives, the
Compensation Committee will consider factors such as the executive's scope of
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 20002002 by our
executive officers. The base salary compensation for each of Dr. William A.
Carter and Robert E. Peterson and Harris Freedman is set by the terms of the employment or engagement
agreement entered into with each such executive
officer.Executive Officer. Hemispherx established the
base salary for its Chief Executive Officer, Dr. William A. Carter under an
employment agreement dated December 3,31, 1998 which provided(as amended on August 14, 2002) for
a base salary of $369,397 in 2000 and has a term running
through$361,586 until May 8, 2004.2008. Hemispherx also extended its
engagement agreement with Robert E. Peterson, Chief Financial Officer, which
providedprovides for a base salaryfee of $145,944 in 2000 and has a term running through$155,988 until December 31, 2002.2003. Dr. CarterCarter's and
Mr. Peterson's agreements provide for annual cost of living increases. Harris Freedman, our Vice PresidentDr.
Carter's compensation also includes funds previously paid to Dr. Carter by
Hahnemann Medical University where he served as a professor until 1998. This
compensation was continued by company and totaled $79,826 in each 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 INCENTIVES.and
2001. In 2002, this compensation was $82,095.
Annual Incentives
Annual incentive bonus awards are granted from time to time to executives
in recognition of their contributionscontribution to the Company's business and operations,
as measured against competitors of the Companycompany 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 tomay receive 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 1999 and 2000 was determined based on provisions of his
employment agreement.
LONG-TERM INCENTIVES.Long-Term Incentives
The Company grants long-term incentive awards periodically to align a
significant portion of the executive compensation program with shareholderstockholder
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 2000connection with extending Dr. Carter's
employment agreement in 2002, the Compensation Committee 16
did not approve orapproved a grant any options,of
1,000,000 warrants or other long-term incentive
awards to any executive officers or directors.
CHIEF EXECUTIVE OFFICER COMPENSATION.our Chief Executive Officer and President, Dr. William
Carter. These warrants are exercisable at $2.00 per share. All warrants expire
on August 13, 2008 unless previously exercised. Also, our Chief Financial
Officer, Robert E. Peterson was granted 200,000 warrants to purchase common
stock at $2.00 per share which expires August 13, 2008 unless previously
exercised.
Chief Executive Officer Compensation
The Summary Compensation Table shows that during the year 20002002 the
Company's Chief Executive Officer and President, Dr. William A. Carter earned
$369,397$376,782 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 20002002 also includes funds previously
paid by Hahnemann University where he served as a Professor until 1998. In 2000,2002,
Dr. Carter also received an aggregate of $65,000$12,486 in short term advances bearing
interest at 6% per annum, of which the outstanding balance
waswere repaid as of March 2, 2001.by December 31, 2002.
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 SECTIONCompliance 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
17William M. Mitchell
COMPARATIVE STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholderstockholder return for
the Company's common stock since December 31, 19951997 to the cumulative total
returns of (i)(I) the Standard & Poor's&Poor's Smallcap 600 Index and (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 and the peer
group index.
[In the printed proxy statement a graph
appears depicting the following plot points][GRAPH OF TOTAL SHAREHOLDER RETURNS]
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
2001
ANNUAL RETURN PERCENTAGE
Years Ending
Company Name / Index Dec98 Dec99 Dec00 Dec01 Dec02
- -------------------------------------------------------------------------------
HEMISPHERX BIOPHARMA INC 69.25 44.55 -52.20 -5.26 -52.67
S&P SMALLCAP 600 INDEX -1.31 12.40 11.80 6.54 -14.63
PEER GROUP 6.85 13.61 54.46 63.31 -7.96
INDEXED RETURNS
Base Years Ending
Period
Company Name / Index Dec97 Dec98 Dec99 Dec00 Dec01 Dec02
- -------------------------------------------------------------------------------
HEMISPHERX BIOPHARMA INC 100 169.25 244.65 116.94 110.78 52.44
S&P SMALLCAP 600 INDEX 100 98.69 110.94 124.03 132.13 112.80
PEER GROUP 100 106.85 121.39 187.50 306.22 281.85
Peer Group Companies:Companies
- -------------------------------------------------------------------------------
GILEAD SCIENCES INC.INC
ISIS PHARMACEUTICALS INC.
18
INC
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of June 13, 2001,July 10, 2003, the number and
percentage of outstanding shares of common stock beneficially owned by each of
our directors and the Named Executives; and all of our officers and directors as
a group. As of June 13, 2001,July 10, 2003, there were no persons, individually or as a group,
known to Hemispherx to be deemed the beneficial owners of five percent or more
of the issued and outstanding 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)OFFICERS, DIRECTORS SHARES BENEFICIALLY OWNED %OF SHARE BENEFICIALLY OWNED(1)
AND PRINCIPAL
STOCKHOLDERS
- ---------------------- ------------------------- ------------------------------
William A. Carter, M.D. (2) 4,202,107 (9.2%)
Robert E. Peterson (3) 314,074 *
Ransom W. Etheridge (4) 214,316 *
Richard C. Piani (5) 196,747 *
William M. Mitchell,M.D.(6) 175,640 *
David R. Strayer, M.D. (7) 87,246 *
Carol A. Smith (8) 28,457 *
Iraj-Eqhbal Kiani (9) 12,000 *
All directors and executive officers as 5,797,689 17.1 a
group (9 persons)
5,230,587 (13.3%)
- ----------------------------------------------
* 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 stock which such person has
the right to acquire within 60 days of June 13, 2001.July 10, 2003. For purposes of
computing the percentage of outstanding shares of common 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, Hemispherx believes based on information supplied
by such persons, that the persons named in this table have sole voting and
investment power with respect to all shares of common stock which they
beneficially own.
(2) Includes (i) an option to purchase 73,728 shares of common stock from
Hemispherx at an exercise price of $2.71 per share and expiring on August
8 2001,2004, (ii) Rule 701 warrantsWarrants to purchase 1,400,000 shares of common
stock at a price of $3.50 per share, originally expiring on September 30,
2002;2002 was extended to September 30, 2007; (iii) warrants to purchase
465,000 shares of common stock at $1.75 per share issued in connection
with the 1995 Standby Financing Agreement and expiring on June 30, 2005;
(iv) 340,000 common stock warrants exercisable at $4.00 per share and
originally expiring on January 1, 2003;2003 was extended to January 1, 2008;
(v) 170,000 common stock warrants exercisable at $5.00 per share and
expiring on January 2, 2003;2005; (vi) 25,000 warrants to purchase common stock
at $6.50 per share and expiring on September 17, 2004;2003; (vii) 25,000
warrants to purchase common stock at $8.00 per share and expiring on
September 17, 2004; (viii) 100,000 warrants to purchase common stock at
$6.25 per share and expiring on April 8, 2004, (v)2004; (ix) 20,000 warrants to
purchase common stock 19
at $4.00 per share originally expiring January 1,
2003 (vi)was extended to January 1, 2008, (x) 188,325 common stock warrants
exercisable at $6.00 per share and expiring on February 22, 2006; (xi)
188,325 common stock warrants exercisable at $9.00 per share and expiring
on February 22, 2006 (vii)(xii) 300,000 common stock warrants granted in 1998
that are exercisable at $6.00 per share and expireexpiring on January 1, 2006
(xiii) options to purchase 6,666 shares of common stock at $4.03 per share
and (viii) 975,090expiring on January 3, 2011 (xiv) 250,000 warrants exercisable $2.00
per share on August 13, 2007 and 650,060 shares of common stock.
Does not include 188,325 common stock warrants granted in
2001 that have not vested.
(3) Includes (i) 27,75427,574 options to purchase common stock at an average
exercise price of $3.92 per share, expiring on July 17, 2003;2003 (ii) warrants
to purchase 50,000 shares of common stock at an exercise price of $3.50
per share, expiring on March 1, 2006;2006 (iii) warrants to purchase 100,000
shares of common stock at $5.00 per share, expiring on April 14, 2006;2006 (iv)
30,000 warrants to purchase common stock at $5.00 per share, expiring on
February 28, 2009 (v) options to purchase 6,000 shares at $4.03 per share
that expires on January 3, 2011 (vi) 200,000 warrants exercised at $2.00
per share expiring on November 13, 2007 and (v) 500 shares of common
stock.
(4) Includes (i) 20,000 warrants to purchase common stock at $4.00 per share,
originally expiring on January 1, 2003; (ii) 31,800 Class A Warrants2003 and was extended to purchase
common stock at $4.00 per share, expiring on November 2, 2001; (iii)January 1,
2008; 25,000 warrants to purchase common stock at $6.50 per share andshare; 25,000
warrants to purchase common stock at $8.00 per share, all expiring on
September 12, 2004; 100,000 warrants exercisable $2.00 per share expiring
on August 13, 2007 and (iv) 10,51644,316 shares of common stock.
(5) Includes (i) 62,000 shares of common stock held by Bridge Ventures, Inc.,
of which Mr. Freedman is an officer; (ii) 57,000 shares of common 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 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.; (v) 400,000 warrants issued under
Rule 701 of the Securities Act to purchase common stock of Hemispherx at an
exercise price of $3.50 and expiring on September 30, 2002; (vi) 95,160
warrants to purchase common stock exercisable at $3.50 per share, expiring
on October 15, 2002; (vii) 50,000 warrants to purchase common stock at
$4.00 per share, expiring on January 1, 2004; and (viii) 25,000 warrants to
purchase common stock at $10.00 per share, expiring on January 1, 2003.
(6) Includes (i) options to purchase 4,608 shares of common stock at an
exercise price of $4.34, expiring on December 11, 2002; (ii) 20,000
warrants to purchase common stock at $4.00 per share, (iii) warrants to purchase 25,000 shares of common stock at
$6.50 per share (ii) warrants to purchase 25,000 shares of common stock at
$6.50 per share (iii) 25,000 warrants to purchase at $8.00 per share, all
expiring on September 17, 2004; (iv) 100,000 warrants exercisable at $2.00
per share expiring on August 13, 2007, (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.
(6) Includes (i) warrants to purchase 12,000 shares of common stock at $6.00
per share, expiring on August 25, 2003; (ii) 25,000 warrants to purchase
common stock at $6.50 per share; (iv)(iii) 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(iv) 100,000
warrants to purchase 12,000 shares of common stockexercisable at $6.00$2.00 per share expiring on August 25, 200113, 2007 and
warrants to purchase 25,00013, 640 shares at $6.50 per share and 25,000 warrants to purchaseof common stock at $8.00
per share all expiring on September 17, 2004.
(8)stock.
(7) Includes (i) stock options to purchase 20,000 shares of common stock at
$3.50 per share; (ii) 50,000 warrants to purchase common stock at $4.00
per share; (iii) 2,500 stock options exercisable at $4.03 per share and
(iii) 12,746expiring on January 3, 2011 and; (iv) 14,746 shares of common stock.
(9) Includes (i) options to purchase 461 shares of common stock at an exercise
price of $3.80, expiring on February 13, 2002; (ii) options to purchase 359
shares of common stock $3.80 per share, expiring on May 5, 2002; (iii)
50,000 warrants to purchase common stock at an exercise price of $3.50 per
share, expiring on March 1, 2006; (iv) 5,000 warrants to purchase common
stock at $4.00 per share, expiring on 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 common stock.
(10)(8) Consists of 5,000 warrants to purchase common stock at $4.00 per share
expiring June 7, 2003 and2008; 6,791 stock options exercisable at $3.50 expiring
January 22, 2007.
20
2007, 10,000 warrants exercisable at $2.00 per share expiring
in August 13, 2007 and options to purchase 6,666 shares of common stock at
$4.03 per share expiring on January 3, 2011.
(9) Consist s of 12,000 warrants exercisable at $3.86 per share expiring on
April 30, 2005.
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF AUDITORS
The firm of KPMG LLP audited the consolidated balance sheets of Hemispherx
and its subsidiaries as of December 31, 1999 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, 1999.
KPMG LLP informed the Company on May 3, 2000 that the client-auditor
relationship was ceased. On May 3, 2000, with the prior approval of the Board of Directors, upon 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 voterecommendation of the Board of Directors,Audit Committee,
has appointed the firm of BDO Seidman, LLP was selected to audit the financial statementsas independent auditors of
Hemispherx for the fiscal year ending December 31, 2000, which was ratified2003 subject to
ratification by the stockholders ofstockholders. BDO Seidman, LLP has served as
Hemispherx's independent auditors since June, 2000.
At the Company at its 2000 Annual Stockholder's Meeting of Stockholders.
Uponon August 14, 2002 and pursuant to
the recommendation of itsthe Audit Committee of the Board of Directors,
has
appointedstockholders ratified the appointment of the firm of BDO Seidman, LLP, as
independent accountants, to audit the financial statements of Hemispherxthe Company
for the year endingend December 31, 2001.
Accordingly, the Board of Directors will offer the following resolution at the
Annual Meeting.
RESOLVED, that the appointment by the Board of Directors of BDO
Seidman, LLP, independent public accountants, to2002.
All audit the
financial statements of Hemispherx for the year ending December
31, 2001 be, and hereby is, ratified and approved.
All auditprofessional services provided by BDO Seidman, LLP are
approved by the Audit Committee. During 2000,The total fees billed by BDO Seidman, LLP
performed certain non-audit serviceswere $104,885 in 2001 and $178,429 in 2002. The fees for the Company. A summarywork in 2001 and
2002 are summarized below in terms of the audit work and non-audit fees paid toother work. BDO
Seidman, LLP did not perform any tax work for the company in 2000 is as follows:
21
AUDIT FEES2001 or 2002.
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 was2001 and 2002 were
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$96,707 in 2001 and implementation fees.
ALL OTHER FEES$131,284 in 2002. These fees included
review of the Company's quarterly filings with the SEC.
Other Fees - The aggregate fees billed to the Company by BDO Seidman, LLP for all other
services, such as financingsfees was $8,178 in 2001 and taxes, was
approximately $5,600.$47,145 in 2002. These fees basically reflect
BDO Seidman, LLP's work on reviewing Form S-3 registration statements and
acquisition due diligence.
The Audit Committee has considered whether the provision bydetermined that BDO Seidman, LLPLLP's rendering of
thethese 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.auditors
independence. 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 shareholdersstockholders 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 representative of BDO Seidman, LLP
will be present at the Annual Meeting and will be available to respond to
appropriate questions. It is
not anticipated that such representative will make a prepared statement at the
meeting; however, the representative shall have the opportunity to 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
HEMISPHERX AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
PROPOSAL NO. 3
APPROVAL OF THE COMPANY'S PROPOSAL TO AMEND
THE ARTICLES OF INCORPORATION
The Board of Directors is proposing the approval and adoption of an
amendment to the Company's Certificate of Incorporation, which increases
the number of common shares authorized for issuance. The complete text of
the proposed Amendment to the Certificate of Incorporation is attached as
Appendix A to this Proxy Statement.
The Company's Articles currently authorize the issuance of 50,000,000
common shares, $.001 par value, and 5,000,000 Preferred Shares, $.001 par
value per share. In May, 2003, the Board of Directors adopted a resolution
proposing that the Articles be amended to increase the authorized number of
common shares to 100,000,000 subject to stockholder approval of the
Amendment to the Articles. The Board of Directors has determined that
adoption of the Amendment is in the best interest of the Company and
unanimously recommends approval by the stockholders.
As of July 14, 2003, the Company had 35,821,275 common shares
outstanding and 13,294,527 common shares reserved for future issuance under
the Company's existing stock option plans and outstanding options, warrant
and convertible debentures, leaving 884,198 common shares available for
future grants.
The Board of Directors believes that the proposed increase in
authorized common shares will benefit the Company by providing flexibility
to issue common shares for a variety of business and financial objectives
in the future without the necessity of delaying such activities for further
stockholder approval, except as may be required in particular cases by the
Company's charter documents, applicable law or the rules of any stock
exchange or national securities association trading system on which the
Company's securities may be listed or quoted. In addition, the Company's
Board of Directors could issue large blocks of Company Common Stock to fend
off unwanted tender offers or hostile takeovers without further stockholder
approval.
On March 12, 2003, we issued an aggregate of $5,426,000 in principal
amount of 6% Senior Convertible Debentures due January 31, 2005 and an
aggregate of 743,288 warrants to two investors in a private placement for
aggregate gross proceeds of $4,650,000. The Debentures mature on January
31, 2005 and bear interest at 6% per annum, payable quarterly in cash or,
subject to satisfaction of certain conditions, common stock. Pursuant to
the terms and conditions of the Senior Convertible Debentures, we have
pledged all of our assets including the assets acquired from Interferon
Sciences, Inc. other than intellectual property, as collateral and are
subject to comply with certain financial and negative covenants, which
include but are not limited to the repayment of principal balances upon
achieving certain revenue milestone.
The Debenture are convertible at the option of the investors at any
time through January 31, 2005 into shares of our common stock. The
conversion price under the Debentures is fixed at $1.46 per share, subject
to adjustment for anti-dilution protection for issuance of common stock or
securities convertible or exchangeable into common stock at a price less
than the conversion price then in effect.
The investors also received warrants to acquire at any time through
March 12, 2008 an aggregate of 743,288 shares of common stock at a price of
$1.68 per share. On March 12, 2004, the exercise price of the warrants will
reset to the lesser of the exercise price then in effect or a price equal
to the average of the daily price of the common stock between March 13,
2003 and March 11, 2004 (but in no event less than $1.176 per share). The
exercise price (and the reset price) under the warrants also is subject to
similar adjustments for anti-dilution protection.
As of July 14, 2003, the debenture holders have converted $1,790,222 of
debt into 1,126,179 shares of common stock and exercised all of the 743,288
warrants, which produced $1,248,724 in additional operating funds for the
Company.
On July 10, 2003, we issued a second set of 6% Senior Convertible
Debentures in the aggregate principal amount of $5,426,000 and 507,103
warrants to the same investors. These Debentures are due on July 31, 2005
unless converted prior to that date. The terms of the Debentures are
similar to those issued to the investors in March, 2003.
To assure that there are adequate shares available to be reserved for
issuance pursuant to conversion of the Debentures, as payment of interest
on the Debentures and upon exercise of the Warrants related thereto, Dr.
William A. Carter, the Company's Chairman, President and Chief Executive
Officer, has agreed to waive his right to exercise an aggregate of
3,006,650 Company options and warrants (collectively, hereinafter referred
to as "Options") held by him unless and until the Company's authorized
shares are increased by the stockholders as presented in Proposal No. 3.
For this waiver of rights and for the possible diminution in value of these
Options that could result in the event that this proposal is not approved,
we plan to compensate Dr. Carter. An independent valuation firm will be
engaged to assist the independent directors in determining the monetary
value of this waiver and the possible loss, if any.
For a more complete description of this transaction, please refer to
the Form 8-K and Exhibits filed with the SEC on July 14, 2003.
Other than reserving shares issuable upon exercise of certain options
and warrants, which shares were needed for the recent Debenture offering,
the Company has no specific plans with regard to its use of the authorized
but unissued/unreserved shares; however, it anticipates that it will (i)
attempt to raise capital through the sale of its common stock or securities
convertible into or exercisable for Common Stock: and/or (ii) acquire
additional assets.
The Board of Directors has no specific plans, understandings,
agreements or commitments to issue additional common shares for capital
raising transactions or acquisitions. Failure to obtain stockholders
approval of this proposal will not impact the Company's existing agreements
to issue common shares.
The Board believes that the Company will be adversely impaired of this
proposal is not approved.
Recommendation and Required Vote
The affirmative vote of at least a majority of the issued and
outstanding shares as of the record date is necessary for approval of
Proposal No. 3. Under Delaware law, there are no rights of appraisal or
dissenter's rights, which arise as a result of a vote to amend the
Certificate of Incorporation.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 3 TO BE IN THE BEST INTERESTS OF
HEMISPHERX AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
GENERAL
Unless contrary instructions are indicated on the proxy, all shares of
common stock represented by valid proxies received pursuant to this
solicitation (and not revoked before they are voted) will be voted FOR the
election of all directors nominated and FOR Proposal No. 2.2 and 3.
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 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 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
July 17, 2001
2321, 2003
EXHIBIT AAPPENDIX "A"
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
HEMISPHERX BIOPHARMA, INC.
AUDIT COMMITTEE CHARTER
The Audit Committee is appointedUnder Section 242 of the
Corporation Law of the State of Delaware
William A. Carter, the President of HEMISPHERX BIOPHARMA, INC. (the
"Company"), a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board to assistof Directors of said corporation, by written consent filed
with the minutes of the Board, in monitoring
(1)adopted the integrityfollowing resolutions proposing and
declaring advisable the following amendment to the Certificate of Incorporation
of said corporation:
"Article `FOURTH' of the financial statementsCertificate of Incorporation, which sets forth the
capitalization of the Company, (2)is amended and, as amended, reads as follows:
`FOURTH. The total number of shares of all classes of capital
stock which the compliance
by the Company with legal and regulatory requirements and (3) the independence
and performanceCorporation shall have authority to issue is
105,000,000 of which 100,000,000 shares shall be Commons Stock of
the Company's internalpar value of $0.001 and external auditors.
The members5,000,000 shares shall be Preferred
Stock of the Audit Committee shall meet the independencepar value of $0.01, with such designations, rights
and experience
requirements of the NASDAQ/AMEX. The members of the Audit Committee shallpreferences as may be appointed by the Board on the recommendation of the Executive Committee.
The Audit Committee shall have the authoritydetermined from time 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 adoptedtime by the
Board of Directors on June 12, 2000.
A-2Directors.'"
SECOND: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of section 242 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, the undersigned, being the President hereinbefore
named, has executed, signed and acknowledged this amendment to the Certificate
of Incorporation this ___ day of September, A.D. 2003.
William A. Carter, President
HEMISPHERX BIOPHARMA, INC.
ANNUAL MEETING OF STOCKHOLDERS
FRIDAY, AUGUST 24, 2001SEPTEMBER 10, 2003
THIS PROXY IS SOLICTED 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 offices of
Schnader Harrison Segal & Lewis LLP, Suite 3600, 1600 Market Street,Embassy
Suites, 1776 Benjamin Franklin Parkway, Philadelphia, Pennsylvania Friday, August 24, 2001,19103, on
Wednesday, September 10, 2003, 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, upon the
following matters:
Please mark boxesbox in blue or black ink.
1. Proposal No. 1--ElectionNo.1-Election of Directors.
Nominees: William A. Carter, Richard C. Piani, Ransom W. Etheridge, and
William
M. Mitchell.Mitchell, and Iraj-Eqhbal Kiani.
/ / For All Nomineesall nominees (except as marked to the contrary below)
/ / Authority
WithheldAuthorityWithheld as to Allall Nominees
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUALINIVDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME)
William A. Carter Richard C. Piani Ransom W. Etheridge
William M. Mitchell Iraj-Eqhbal Kiani
2. Proposal No. 2--Ratification2-Ratification of the selection of BDO Seidman, LLP, as the
independent auditors of Hemispherx Biopharma, Inc. for the year ending December
31, 2001.2003.
/ /For / For/Against / /Abstain
3. Proposal No. 3 - Amend the Company's Certificate of Incorporation to
increase the authorized shares of common stock from 50,000,000 to 100,000,000.
/ Against/For / /Against / Abstain
3./Abstain
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. THE BOARD
RECOMMENDS A VOTE "FOR" ITEMS NOS. 1, 2 AND 2.3. IF NO CONTRARY INSTRUCTION IS
GIVEN, THE SHARES WILL BE VOTED FOR THE ELECTION OF WILLIAM A. CARTER, RICHARD
C. PIANI, RANSOM W. ETHERIDGE, WILLIAM A. MITCHELL AND WILLIAM M. MITCHELLIRAJ-EQHBAL KIANI AS
DIRECTORS, FOR PROPOSALPROPOSALS NO. 2 AND 3 AND IN THE DISCRETION OF THE PROXIES ON ALL
OTHER MATTERS PROPERLY BROUGHT BEFORE THE ANNUAL MEETING.
1469:
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
_____________________________----------------------------
(Print Name)
SIGN, DATE AND RETURN PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE