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[THIS PAGE SUBMITTED WITH EDGAR FILING, BUT NOT DELIVERED TO STOCKHOLDERS]
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as Permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement [ ] Definitive Additional Materials
[ ] Solicitation Material Pursuant to Rule 14a-11(c) or rule 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)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
-----
2) Aggregate number of securities to which transaction applies:
--------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
----------------------
4) Proposed maximum aggregate value of transaction:
43:
5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
--------
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
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(4) Date Filed:
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PRELIMINARY COPY
HEMISPHERX BIOPHARMA, INC.
1617 JFK Boulevard
Philadelphia, Pennsylvania 19103
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 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"), a Delaware corporation, to be held
at the Embassy Suites, 1776 Benjamin Franklin Parkway, Philadelphia Pennsylvania
19103, on Wednesday, September 10, 2002, at 10:00 a.m. local time, for the
following purposes:
1. To elect five 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, 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 14, 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 for the fiscal year ended
December 31, 2002.
By Order of the Board
of Directors
/s/Ransom W. Etheridge, Secretary
Philadelphia, Pennsylvania
July, 2003
PRELIMINARY COPY
PROXY STATEMENT
HEMISPHERX BIOPHARMA, INC.
1617 JFK Boulevard
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 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 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 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 14, 2003,
the record date, are entitled to receive notice of, and vote at the annual
meeting. As of the record date, the number and class of stock outstanding and
entitled to vote at the meeting was 35,757,559 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 board of directors 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 a majority of the outstanding shares of
Hemispherx on the record date.
REVOCABILITY OF PROXIES
If you attend the meeting, you may vote in person, regardless of whether you
have submitted a proxy. Any person giving a proxy in the form accompanying this
proxy statement has the power to revoke it at any time before it is voted. It
may be revoked by filing, with the corporate 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 $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. Proxies
may 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 $5,000.00 plus
out-of-pocket expenses.
ADJOURNED MEETING
The chair of the meeting may adjourn the meeting from 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 taken. If the time, date
and place of the adjournment meeting are not announced at the meeting which the
adjournment is taken, then the Secretary of the Corporation shall give written
notice of the time, date and place 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 if the meeting is adjourned in a single
adjournment to a date more than 30 days or in successive adjournments to a date
more than 120 days after the original 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 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 entitled to vote at the annual
meeting, in person or by proxy. Shares that are 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.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders to be considered for inclusion in the Proxy
Statement and proxy card for the 2004 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 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 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 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.
PROPOSALS TO STOCKHOLDERS
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Each nominee to the board of directors 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,
William M. 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., 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 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 Noeplastic 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 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, 76, has been a director of Hemispherx since May 1995. Mr.
Piani was employed as a principal delegate for Industry to the City of Science
and Industry, Paris, France, a scientific and educational complex, 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.
RANSOM W. ETHERIDGE, 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 Business Real Estate Investment Analysis
Seminar, and the University of Richmond School of Law.
WILLIAM M. MITCHELL, M.D., 68, has been a director since July 1998. Mr.
Mitchell is a Professor of Pathology at Vanderbilt University School of
Medicine. Dr. Mitchell earned an 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
HEMISPHERx AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" ALL FIVE OF THE
ABOVE-NAMED NOMINEE DIRECTORS OF HEMISPHERx'.
INFORMATION CONCERNING BOARD MEETINGS
Hemispherx board of directors met four times and executed four Unanimous
Consents, the Compensation Committee met once, the Audit Committee met five
times, and the Strategic Planning Committee met once during the fiscal year
ended December 31, 2002. Four of the incumbent directors attended 100% of the
Board Meetings and one incumbent, Iraj Eqhbal Kiani attended two meetings.
INFORMATION CONCERNING COMMITTEES OF THE BOARD
The board of directors maintains the following committees:
Executive Committee.
The Executive Committee is composed of William A. Carter, Chief Executive
Officer and President, Ransom W. Etheridge, Secretary and Iraj-Eqhbal Kiani. The
Executive Committee makes recommendations to management regarding general
business matters of Hemispherx.
Compensation 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.
Our Audit Committee of the Board of Directors consists of Richard Piani,
Committee Chairman, William Mitchell, M.D. and Iraj-Eqhbal Kiani. Mr. Piani, Dr.
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 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 Mr.
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
judgement as members of this committee. The principal functions of the Audit
Committee are to serve as an independent and objective party to assist the Board
of Directors in monitoring the integrity of the financial statements of the
Company, the compliance by the Company with legal and regulatory requirements,
and the independence and performance of the Company's auditors.
Audit Committee Report.
The Audit Committee of the Board of Directors was composed of three
independent directors and operates under a written charter prepared and adopted
by the Board of Directors. One of these members, Ransom Etheridge, as a result
of his increased activity with the Company, no longer deemed independent. The
Committee recommends to the Board of Directors, subject to 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 in the United States of America, and for expressing
an opinion on the conformity of the financial statements to accounting
principles generally accepted in the United States of America. The Committee's
responsibility, as the representative of the Board of Directors, is to monitor
and oversee the 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 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. The Audit Committee also has received the written disclosures and
letter from BDO required by Independence Standards Board Standard No. 1
Independence Discussions with Audit Committees, and has discussed with BDO its
independence from the Company.
Based on reviews, discussions and other 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, 2002.
This report is submitted by the Audit
Committee of the Company's Board of Directors.
Richard C. Piani, Chairman
William M. Mitchell
Iraj-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
board of directors 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 and key personnel:
Name Age Position
William A. Carter, M.D. 65 Chairman, Chief Executive
Officer and President
Robert E. Peterson 66 Chief Financial Officer
David R. Strayer, M.D. 57 Medical Affairs, Regulatory
Affairs
Carol A. Smith, Ph.D. 51 Director of Manufacturing
and Process Development
Ransom W. Etheridge 64 Secretary/Treasurer
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 served 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 Society, and the
National Institutes of Health. Dr. Strayer attended the School of Medicine at
the University of California at Los Angeles where he received his M.D. in 1972.
CAROL A. SMITH, Ph.D. 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have employment agreements with certain of our executive officers
and have granted stock options and warrants to purchase common stock to 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 Director 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 other scientific work for the Company from time to time.
For these services, these Directors were paid an aggregate of $170,150 in the
year 2002. No individual Director was paid in excess of $60,000.
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,
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 DIRECRTORS
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 to (I) the Chief Executive Officer and (ii) Hemispherx's
four most highly paid executive who were serving as executives at the end of the
last completed fiscal year and whose total annual salary and bonus exceeded
$100,000 (collectively, the "Named Executives").
SUMMARY COMPENSATION TABLE
Name and Principal Position Year Salary ($) Restricted Stock Warrants & All Other
Awards Option Awards Compensation (1)
------------------------------------------ -------- ---------------- ------------------ ------------------ -----------------
William A. Carter 2002 (5)$468,830 - (2)1,000,000 $25,747
Chairman of the Board and CEO 2001 (5)456,608 - (3) 386,650 22,917
2000 (5)539,620 - (6) 100,000 22,917
Robert E. Peterson 2002 $151,055 - (2) 200,000 -
Chief Financial Officer 2001 146,880 - (4) 40,000 -
2000 145,944 - - -
David R. Strayer, M.D. 2002 $178,594 - (2) 50,000 -
Medical Director 2001 174,591 - (7) 10,000 -
2000 (7) 172,317 - - -
Carol A. Smith, Ph.D. 2002 $128,346 - (4) 20,000 -
Director of Manufacturing 2001 124,800 - - -
2000 124,000 - (7) 10,000 -
(1) 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 2000. 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 the Company and
totaled $79,826 in each of 2000, and 2001 and $82,095 in 2002.
(6) Represents warrants to purchase common stock exercisable at $6.25 per
share.
(7) Consists of a stock option grant of 10,000 shares exercisable at $4.03
per share.
(8) Includes $98,926 paid by Hahnemann Medical University where Dr. Strayer
served as a professor until 1998. This compensation was continued by the Company
in 2000, 2001 and 2002.
(9) Consists of stock option grant of 10,000 shares exercisable at $4.03
per share.
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 EXERCISE
NAME NUMBER OF SECURITIES AND WARRANTS GRANTED TO PRICE EXPIRATION
UNDERLYING OPTIONS AND EXPLOYEES IN FISCAL YEAR PER SHARE(3) DATE
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 $98,450
================ ============================== ============================= ============= =========== ============ =============
* Amounts indicate warrants granted.
(1) Options vest over a three-year period. Warrants vest immediately.
(2) Total warrants issued to employees in 2002 were 1,622,000.
(3) The exercise price is equal to the closing price of the Company's
common stock at the date of issuance.
(4) Potential realizable value is based on an assumption that the market
price of the common stock appreciates at the stated rates compounded annually,
from the date of grant until the end of the respective option term. These values
are calculated based on requirements promulgated by the Securities and Exchange
Commission and do not reflect the Company's estimate of future stock price
appreciation.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE
Shares Securities Underlying Value of Unexercised
Acquired on Value Unexercised Option In-the-Money Options
Name Exercise Realized at Fiscal Year End (#) at Fiscal Year End ($) (1)
---------------------------------------------------------------------------------------------------------
(#) ($) Exercisable Unexercisable Exercisable Unexercisable
---------------------------------------------------------------------------------------------------------
William A. Carter - - 3,552,044 (2) 753,334 (3) $209,200 $97,500
Robert E. Peterson - - 314,240 (4) 103,334 (5) 6,300 6,300
David R. Strayer - - 101,666 (6) 28,334 (7) 3,250 3,250
Carol A. Smith - - 28,457 (8) 13,334 (9) 1,300 1,300
(1) Computation based on $2.13, the December 31, 2002 closing bid price for
the common stock on the American Stock Exchange.
(2) Consists of (i) 250,000 warrants exercisable at $2.00 per share
expiring on August 13, 2007, (ii) 188,325 warrants exercisable at $6.00 per
share expiring on February 22, 2006, (iii) 188,325 warrants exercisable at $9.00
per share expiring on February 22, 2006, (iv) 100,000 warrants exercisable at
$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 $8.00 per share 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)
340,000 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 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 exercisable at $4.00 per share expiring
on February 28, 2008, (iii) 6,666 stock options exercisable at $4.08 expiring on
January 3, 2011 and (iv) 20,000 stock options exercisable at $3.50 per 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 exercisable 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 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 board of directors.
Dr. Carter does 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. This agreement was extended to May 8, 2008 by the Board of
Directors in August, 2002.
Hemispherx entered into an amended and restated employment 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, 2003 at an
annual base fee of $155,988 per year, subject to annual cost of living 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 200,000 warrants to purchase shares of common stock with an exercise
price of $2.00 in 2002.
Compensation of Directors
During the year ended December 31, 2002, each non-employee Director
received an annual retainer of $35,000 for serving on the Board of Directors. In
addition, each non-employee Director received $1,000 for each meeting attended.
The Chairman of each committee received an additional retainer of $5,000 per
year and committee members receive an additional retainer of $3,000 per year.
All non-employee directors received some compensation in 2002 for special
project work performed on behalf of Hemispherx. All directors have been granted
options to purchase common stock under Hemispherx's 1990 Stock Option Plan
and\or Warrants 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 Plan
Hemispherx's 1993 Stock Option Plan (1993 Plan), provides for the grant of
options for the purchase of up to an aggregate of 138,240 shares of common stock
to Hemispherx's employees, directors, consultants and others whose efforts are
important to the success of Hemispherx. The 1993 Plan is administered by the
Compensation Committee of the board of directors, which has complete discretion
to select the eligible individuals to receive and to establish the terms of
option grants. The 1993 Plan provides for the issuance of either non-qualified
options or incentive stock options, provided that incentive stock options must
be granted with an exercise price of not less than fair market value at the time
of grant and that non-qualified stock options may not be granted with an
exercise price of less than 85% of the fair market value at the time of grant.
The number of shares of common stock available for grant under the 1993 Plan is
subject to adjustment for changes in capitalization. This plan terminated as of
July 7, 2003. No options were granted under the 1993 Plan.
1992 Stock 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 board of directors, which has complete discretion
to select the eligible individuals to receive and to establish the terms of
option grants. The 1992 Plan provides for the issuance of either non-qualified
options or incentive stock options, provided that incentive stock options must
be granted with an exercise price of not less than fair market value at the time
of grant and that non-qualified stock options may not be granted with an
exercise price of less than 50% of the fair market value at the time of grant.
The number of shares of common stock available for grant under the 1992 Plan is
subject to adjustment for changes in capitalization. This plan expired as of
December 3, 2002. No options were granted under the 1992 Plan.
1990 Stock Option Plan
Hemispherx 1990 Stock Option Plan, as amended, 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 plan is administered by the Compensation Committee of the board of
directors, which has complete discretion to select eligible individuals to
receive and to establish the terms of option grants. The number of shares of
Common stock available for grant under the 1990 Plan is subject to adjustment
for changes in capitalization. As of December 31, 2002, options to acquire an
aggregate of 245,782 shares of the common stock were available for grants under
the 1990 plan. 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, the Hemispherx Biopharma employees 401(K) Plan and
Trust Agreement. All full time employees of Hemispherx are eligible to
participate in the 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 per
annum. Participants' contributions to the 401(K) plan may be matched by
Hemispherx at a rate determined annually by the board of directors. Each
participant immediately vests in his or her deferred salary contributions, while
Hemispherx contributions will vest over one year. In 2002 Hemispherx provided
matching contributions to each employee for up to 6% of annual pay for a total
contribution of $38,000 for all employees.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 2002, the members of Hemispherx's
Compensation Committee were Ransom W. Etheridge and Richard 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 paid to Mr. Etheridge and Mr.
Piani in 2002 were less than $60,000 each.
Notwithstanding anything to the contrary, the following report of the
Compensation Committee, the report of the Audit Committee on page 7, and the
performance graph on page 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, or under the Securities Exchange Act of
1934, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
Compensation Committee Report on Compensation
The Compensation Committee makes recommendations concerning salaries and
compensation for employees of and consultant 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 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.
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
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 2002 by our
executive officers. The base salary compensation for each of Dr. William A.
Carter and Robert E. Peterson is set by the terms of the employment engagement
agreement entered into with each Executive Officer. Hemispherx established the
base salary for its Chief Executive Officer, Dr. William A. Carter under an
employment agreement dated December 31, 1998 (as amended on August 14, 2002) for
a base salary of $361,586 until May 8, 2008. Hemispherx also extended its
engagement agreement with Robert E. Peterson, Chief Financial Officer, which
provides for a base fee of $155,988 until December 31, 2003. Dr. Carter's and
Mr. Peterson's agreements provide for annual cost of living increases. Dr.
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 2000 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 contribution to the Company's business and operations,
as measured against competitors of the company 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, may 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 on provisions of his
employment agreement.
Long-Term Incentives
The Company grants long-term incentive awards periodically to align a
significant portion of the executive compensation program with stockholder
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 connection with extending Dr. Carter's
employment agreement in 2002, the Compensation Committee approved a grant of
1,000,000 warrants to 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 2002 the
Company's Chief Executive Officer and President, Dr. William A. Carter earned
$376,782 in base compensation pursuant to the terms of his employment agreement.
In addition, Dr. Carter's compensation in 2002 also includes funds previously
paid by Hahnemann University where he served as a Professor until 1998. In 2002,
Dr. Carter also received an aggregate of $12,486 in short term advances bearing
interest at 6% per annum, of which were repaid 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 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 submitted by the Compensation Committee of the
Company's Board of Directors.
Richard C. Piani
William M. Mitchell
COMPARATIVE STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return for
the Company's common stock since December 31, 1997 to the cumulative total
returns of (I) the Standard &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.
[GRAPH OF TOTAL SHAREHOLDER RETURNS]
ASSUMES $100 INVESTED ON JAN. 1, 1996
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 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
------------------------------------------------------------------------------
GILEAD SCIENCES INC
ISIS PHARMACEUTICALS INC
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of 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 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 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 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 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 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 2004, (ii) Rule 701 Warrants to purchase 1,400,000 shares of common
stock at a price of $3.50 per share, originally expiring on September 30,
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 was extended to January 1, 2008;
(v) 170,000 common stock warrants exercisable at $5.00 per share and
expiring on January 2, 2005; (vi) 25,000 warrants to purchase common stock
at $6.50 per share and expiring on September 17, 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; (ix) 20,000 warrants to
purchase common stock at $4.00 per share originally expiring January 1,
2003 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 (xii) 300,000 common stock warrants granted in 1998
that are exercisable at $6.00 per share and expiring on January 1, 2006
(xiii) options to purchase 6,666 shares of common stock at $4.03 per share
and expiring on January 3, 2011 (xiv) 250,000 warrants exercisable $2.00
per share on August 13, 2007 and 650,060 shares of common stock.
(3) Includes (i) 27,574 options to purchase common stock at an average
exercise price of $3.92 per share, expiring on July 17, 2003 (ii) warrants
to purchase 50,000 shares of common stock at an exercise price of $3.50
per share, expiring on March 1, 2006 (iii) warrants to purchase 100,000
shares of common stock at $5.00 per share, expiring April 14, 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 20,000 warrants to purchase common stock at $4.00 per share,
originally expiring on January 1, 2003 and was extended to January 1,
2008; 25,000 warrants to purchase common stock at $6.50 per share; 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 44,316 shares of common stock.
(5) Includes (i) 20,000 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; (iii) 25,000 warrants to purchase common
stock 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 and
13, 640 shares of common 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
expiring on January 3, 2011 and; (iv) 14,746 shares of common stock.
(8) Consists of 5,000 warrants to purchase common stock at $4.00 per share
expiring June 7, 2008; 6,791 stock options exercisable at $3.50 expiring
January 22, 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 Board of Directors, upon the recommendation of the Audit Committee,
has appointed the firm of BDO Seidman, LLP as independent auditors of
Hemispherx for the fiscal year ending December 31, 2003 subject to
ratification by the stockholders. BDO Seidman, LLP has served as
Hemispherx's independent auditors since June, 2000.
At the Annual Stockholder's Meeting on August 14, 2002 and pursuant to
the recommendation of the Audit Committee of the Board of Directors,
stockholders ratified the appointment of the firm of BDO Seidman, LLP, as
independent accountants, to audit the financial statements of the Company
for the year end December 31, 2002.
All audit and professional services provided by BDO Seidman, LLP are
approved by the Audit Committee. The total fees billed by BDO Seidman, LLP
were $104,885 in 2001 and $178,429 in 2002. The fees for work in 2001 and
2002 are summarized below in terms of audit work and other work. BDO
Seidman, LLP did not perform any tax work for the company in 2001 or 2002.
Audit Fees - The aggregate fees billed by BDO Seidman, LLP for
professional services rendered for the audit of the Company's financial
statements for the year ending December 31, 2001 and 2002 were
approximately $96,707 in 2001 and $131,284 in 2002. These fees included
review of the Company's quarterly filings with the SEC.
Other Fees - The aggregate fees billed by BDO Seidman, LLP for other
fees was $8,178 in 2001 and $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 determined that BDO Seidman, LLP's rendering of
these non-audit services is compatible with maintaining 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 stockholders 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.
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 June 30, 2003, the Company had 35,757,559 common shares
outstanding and 13,565,064 common shares reserved for future issuance under
the Company's existing stock option plans and outstanding options, warrant
and convertible debentures, leaving 677,377 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 June 30, 2003, the debenture holders have converted $1,510,222 of
debt into 1,157,686 shares of common stock and exercised all of the 743,288
warrants, which produced $1,248,724 in additional operating funds for the
Company.
The debenture holders have expressed interest in providing additional
financing on similar terms with some modifications to the original
debenture. The Company is considering this offer and, if accepted, would
use some of the shares of the shares included in the increased
authorization.
Other than this offer, 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 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.
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,
Ransom W. Etheridge, Secretary
Philadelphia, Pennsylvania
July ____, 2003
APPENDIX "A"
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
HEMISPHERX BIOPHARMA, INC.
Under 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 of Directors of said corporation, by written consent
filed with the minutes of the Board, adopted the following resolutions proposing
and declaring advisable the following amendment to the Certificate of
Incorporation of said corporation:
"Article `FOURTH' of the Certificate of Incorporation, which sets forth the
capitalization of the Company, is amended and, as amended, reads as follows:
`FOURTH. The total number of shares of all classes of capital
stock which the Corporation shall have authority to issue is
105,000,000 of which 100,000,000 shares shall be Commons Stock of
the par value of $0.001 and 5,000,000 shares shall be Preferred
Stock of the par value of $0.01, with such designations, rights
and preferences as may be determined from time to time by the
Board of Directors.'"
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 ________, A.D. 2003.
1462:
William A. Carter, President
PRELIMINARY COPY OF PROXY CARD
HEMISPHERX BIOPHARMA, INC.
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 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 Embassy
Suites, 1776 Benjamin Franklin Parkway, Philadelphia, Pennsylvania 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 box in blue or black ink.
1. Proposal No.1-Election of Directors.
Nominees: William A. Carter, Richard C. Piani, Ransom W. Etheridge, William
M. Mitchell, and Iraj-Eqhbal Kiani.
/ /For all nominees (except as marked // Authority Withheld as to all
to the contrary below) Nominees
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INIVDUAL 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-Ratification of the selection of BDO Seidman, LLP, as
independent auditors of Hemispherx Biopharma, Inc. for the year ending December
31, 2003.
For // Against // Abstain //
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
4. 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.
For // Against // Abstain //
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. THE BOARD
RECOMMENDS A VOTE "FOR" ITEMS NOS. 1, 2 AND 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 IRAJ-EQHBAL KIANI AS
DIRECTORS, FOR PROPOSALS NO. 2 AND 3 AND IN THE DISCRETION OF THE PROXIES ON ALL
OTHER MATTERS PROPERLY BROUGHT BEFORE THE ANNUAL MEETING.
Please date, sign as name appears at left, and return
promptly. If the stock is registered in the name of two
or more persons, each should sign. When signing as
Corporate Officer, Partner, Executor, Administrator,
Trustee, or Guardian, please give full title. Please
note any change in your address alongside the address
as it appears in the Proxy.
Dated: -----------------------------
Signature -----------------------------
-----------------------------
(Print Name)
SIGN, DATE AND RETURN PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE