HEMISPHERX BIOPHARMA, INC.
1617 JFK Boulevard
Philadelphia, Pennsylvania 19103
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 14, 2002
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,
August 14, 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, 2002; and
3. To transact such other matters as may
properly come before the meeting or any adjournment
thereof.
Only stockholders of record at the close of
business on June 17, 2001 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 annual report on Form 10-K for the
fiscal year ended December 31, 2001.
By Order of the Board of Directors
s\Ransom W. Etheridge, Secretary
Philadelphia, Pennsylvania
June 24, 2002
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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 to be held on
Wednesday, August 14, 2002, 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 June 24, 2002. 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 June 17, 2002, are entitled to receive notice
of, and vote at the annual meeting. As of June 17,
2002, the number and class of stock outstanding and
entitled to vote at the meeting was 32,812,562 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 nominees receiving the highest number of
votes cast by the holders of common stock 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. 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
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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 $35,000 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.
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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
2003 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 February 23, 2003.
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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.
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PROPOSALS TO SHAREHOLDERS
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Each nominee to the board of directors will serve until the
next annual 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., 64, the co-inventor of
Ampligen, joined Hemispherx in 1978, and served as Chief
Executive Officer and Chief Scientist from 1985 to 1988.
After a brief hiatus, Dr. Carter rejoined Hemispherx in May,
1989 as Chief Scientific Officer, a position that he continues to
hold. In addition, Dr. Carter has served as Chairman of the
Board of Directors since 1992, Chief Executive Officer since
1993 and President since 1995. Dr. Carter has been a
Director since 1987. 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. He received his M.D. degree from Duke
University and underwent his post-doctoral training at the
National Institutes of Health and Johns Hopkins University.
Dr. Carter also served as Professor of Neoplastic Diseases at
Hahnemann Medical University, a position he held from 1980
to 1998. Dr. Carter served as Director of Clinical Research
for Hahnemann Medical University's Institute for Cancer and
Blood Diseases, and as a professor at Johns Hopkins School of
Medicine and the State University of New York at Buffalo.
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, 75, 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.
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RANSOM W. ETHERIDGE, 63, 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., 67, 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., 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, the
Compensation Committee met once, the Audit Committee met
four times, and the Strategic Planning Committee met once
during the fiscal year ended December 31, 2001. The
incumbent directors attended at least 75% of the Board
Meetings.
INFORMATION CONCERNING COMMITTEES OF THE BOARD
The board of directors maintains the following
committees:
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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.
The Audit Committee is composed of Ransom W.
Etheridge, William M. Mitchell and Richard C. Piani. Mr.
Etheridge, as a matter of convenience, serves as Secretary of
the Company and receives no compensation for such and is
substantially supported by Josephine Dolhancryk, Assistant
Secretary, in fulfilling the duties of the office. The Company
believes Mr. Etheridge and all other members of this
committee 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 is
composed of three independent directors and operates under a
written charter prepared and adopted by the Board of
Directors. The Committee recommends to the Board of
Directors, subject to shareholders' ratification, the selection of
the Company's independent accountants.
Management is responsible for the Company's internal
controls and financial reporting process. The Company's
independent accountants, BDO Seidman, LLP ("BDO"), are
responsible for performing an independent audit of the
Company's consolidated financial statements in accordance
with 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
8
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, 2001.
This report is submitted by the Audit Committee of the
Company's Board of Directors.
Ransom W. Etheridge
William M. Mitchell
Richard C. Piani
Strategic Planning Committee.
The Strategic Planning Committee 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:
Name Age Position
William A. Carter, M.D. 64 Chairman,
Chief Executive Officer
and President
Robert E. Peterson 65 Chief Financial Officer
David R. Strayer, M.D. 56 Medical Affairs, Regulatory
Affairs
Carol A. Smith, Ph.D. 50 Director of Manufacturing
and Process Development
Josephine M. Dolhancryk 39 Treasurer, Assistant Secretary
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For biographical information about William A. Carter, M.D.,
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
Ampligenr. 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 Mrs. Dolhancryk
was President of Medical/Business Enterprises. Mrs.
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.
Mrs. Dolhancryk attended Saint Joseph's University and
Delaware County College.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have employment agreements with certain of our
executive officers and have granted our officers and directors
of the Company options and warrants to purchase common
stock of the Company, as discussed under the headings
"Compensation of Executive Officers and Directors" and
"Security Ownership of Certain Beneficial Owners and
Management" below.
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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 $144,955 in the year
2001. No individual Director was paid in excess of $60,000.
William A. Carter, Chief Executive Officer of the
Company, received an aggregate of $21,949 in short term
advances in 2001 which were repaid as of April 3, 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 $51,750 to Carter Realty for the rental of property
used by us for business purposes at various times in 2001.
The property is owned by others and managed by Carter
Realty. Carter Realty is owned by Robert Carter, the brother
of William A. Carter.
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, 2001, its officers,
directors and ten percent stockholders complied with all
applicable Section 16(a) filing requirements on a timely basis,
with Dr. Carter filing one Form 5 to correct the lack of timely
filing of one Form 4.
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, 2001, 2000 and 1999 to
(I) the Chief Executive Officer and (ii) Hemispherx's four
most highly paid executive officers other than the CEO who
were serving as executive officers at the end of the last
completed fiscal year and whose total annual salary and
bonus exceeded $100,000 (collectively, the "Named
Executives").
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SUMMARY COMPENSATION TABLE
Restricted Stock Warrants & All Other
Name and Principal Position Year Salary ($) Awards Option Awards Compensation (1)
---- ---------- ---------------- ------------- ----------------
William A. Carter, 2001 $456,608 - (2)386,650 (5)100,000
Chairman of the Board and CEO 2000 (4)539,620 - - 22,917
1999 (4)531,810 - (5)100,000 17,672
Robert E. Peterson, 2001 $146,880 - (3) 40,000 -
Chief Financial Officer 2000 145,944 - - -
1999 138,930 - - -
David R. Strayer, M.D., 2001 $174,591 - (7) 10,000 -
Medical Director 2000 172,317 - - -
1999 (6)166,231 - - -
Carol A. Smith, Ph.D., 2001 $124,800 - (7) 10,000 -
Director of Manufacturing 2000 124,800 - - -
1999 120,000 - (8) 5,000 -
(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) 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.
(3) 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.
(4) Includes a bonus of $90,397 paid in 1999 and 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 1999, and 2000 and 2001.
(5) Represents warrants to purchase common stock exercisable at
$6.25 per share.
(6) 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 1999, 2000
and 2001.
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(7) Consists of stock option grant of 10,000 shares exercisable at
$4.03 per share.
(8) Represents warrants to purchase 5,000 shares of common
stock at $4.00 per share
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The following table sets forth certain information regarding
the stock options and warrants granted during 2001 to the
executive officers named in the above Summary Compensation Table.
PERCENTAGE
OF TOTAL
NUMBER OF OPTIONS AND POTENTIAL REALIZABLE
SECURITIES WARRANTS
UNDERLYING GRANTED TO EXERCISE VALUE AT ASSUMED RATES
OPTIONS AND EMPLOYEES PRICE OF STOCK PRICE
WARRANTS IN FISCAL PER EXPIRATION APPRECIATION FOR
NAME GRANTED YEAR 2001(2) SHARE (3) DATE OPTION AND WARRANTS TERM
------------ --------- ----------- --------- ----------- ------------------
5% (4) 10%(4)
-------- --------
Carter, W.A. 10,000 10.64% $4.03 1/03/11 $ 25,344 $ 64,228
Carter, W.A. 376,650* 43.97% $6.00-$9.00 2/22/06 $1,557,433 $3,836,033
Peterson, R. 10,000 10.64% $4.03 1/03/11 $ 25,344 $ 64,228
Peterson, R. 30,000* 3.50% $5.00 4/30/06 $ 82,699 $ 203,692
Smith, C. 10,000 10.64% $4.03 1/03/11 $ 25,344 $ 64,228
Strayer, D. 10,000 10.64% $4.03 1/03/11 $ 25,344 $ 64,228
* Amounts indicate warrants granted.
(1) Options vest over a three year period. Warrants vest immediately.
(2) Total options and warrants issued to employees in 2001 were 94,000
and 856,650, respectively.
(3) The exercise price is equal to the closing price of the
Company's common stock on 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.
14
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 - - 3,297,878 (2) 7,500 (3) $1,002,735 $3,675
Robert E. Peterson - - 210,074 (4) 7,500 (3) 2,218 3,675
David R. Strayer - - 72,500 (5) 7,500 (3) 11,275 3,675
Carol A. Smith - - 14,291 (6) 7,500 (3) 10,516 3,675
(1) Computation based on $4.50, the December 31, 2001 closing
bid price for the common stock on the American Stock
Exchange.
(2) Represents (i) 1,400,000 currently exercisable 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 at $1.75 per share; (iv) warrants
to purchase 680,000 shares of common stock at a weighted
average of $4.82 per share, warrants to purchase 300,000
shares of common stock at $6.00 per share; (v) 376,650
warrants to purchase common stock at a weighted average of
$7.50 per share and 2,500 stock options to purchase common
stock at $4.03 per share.
(3) Represents options to purchase 7,500 shares of common stock
at $4.03 per share.
(4) Represents (i) 27,574 stock options exercisable at an average
price of $3.92 per share; (ii) 50,000 warrants to purchase
common stock at $3.50 per share; (iii) 130,000 warrants to
purchase common stock at $5.00 per share and (iv) 2,500
stock options exercisable at $4.03 per share.
(5) Represents (i) 20,000 stock options exercisable at $3.50 per
share; (ii) 50,000 warrants to purchase
common stock at $4.00 per share; (iii) and stock options to
purchase 2,500 shares of common stock at $4.03 per
share.
(6) Consists of 5,000 warrants to purchase common stock at
$4.00 per share; 6,791 stock options exercisable at
$3.50 per share and 2,500 stock options exercisable at $4.03
per shares.
15
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 will
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. The agreement is
automatically renewed for successive one year periods unless
written notice of refusal to renew is given by one party to the
other at least 90 days prior to the expiration of the renewal
period.
Hemispherx entered into an amended and restated
employment agreement with Robert E. Peterson dated
February 26, 2001 which provides for Mr. Peterson's
employment as Hemispherx's Chief Financial Officer until
December 31, 2002 at an annual base salary of $146,880 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 30,000
warrants to purchase shares of common stock with an exercise
price of $5.00.
Compensation of Directors
During the year ended December 31, 2001, 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 the Board committees 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 2001 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
16
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 terminates as of July 7, 2003. To date, no options
have been 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 expires as
of December 3, 2002. To date, no options have been 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, 2000, 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 2001 Hemispherx provided
matching contributions to each employee for up to 6% of
annual pay for a total contribution of $47,538 for all
employees.
Compensation Committee Interlocks and Insider
Participation
During the fiscal year ended December 31, 2001, 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
17
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. Paini in 2001 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:
*Base salary
*Annual incentive
*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 2001 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 for a base salary of
$361,586 until May 8, 2004. Hemispherx also extended its
engagement agreement with Robert E. Peterson, Chief
Financial Officer, which provides for a base salary of
$146,880 until December 31, 2002. Dr. Carter's and Mr.
Peterson's agreements provide for annual cost of living
18
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 1999, 2000 and 2001.
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 shareholder interests over the
long-term through encouraging and facilitating executive stock
ownership. Executives are eligible to participate in the
Company's incentive stock option plans. In 2001 the
Compensation Committee approved a grant of 376,650
warrants to our Chief Executive Officer and President, Dr.
William Carter. This grant 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. All
warrants expire on February 22, 2006 unless previously
exercised. Also, our Chief Financial Officer, Robert E.
Peterson was granted 30,000 warrants to purchase common
stock at $5.00 per share which expires April 30, 2006 unless
previously exerecised.
Chief Executive Officer Compensation
The Summary Compensation Table shows that during the
year 2001 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 2001
also includes funds previously paid by Hahnemann University
where he served as a Professor until 1998. In 2001,
Dr.Carter also received an aggregate of $21,949 in short term
advances bearing interest at 6% per annum, of which the
outstanding balance was repaid as of April 3, 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
19
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.
Ransom W. Etheridge
Richard C. Piani
20
COMPARATIVE STOCK PERFORMANCE GRAPH
The Company's common stock since
December 31, 1996 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.
(In the printed proxy statement a graph appears
depicting the following plot points)
ASSUMES $100 INVESTED ON JAN. 1, 1996
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2001
INDEXED RETURNS
BASE YEARS ENDING
PERIOD
COMPANY NAME/INDEX DEC96 DEC97 DEC98 DEC99 DEC00 DEC01
------------------------ ------ ----- ----- ----- ----- -----
HEMISPHERX BIOPHARMA, INC. 100 180.53 305.56 441.67 211.11 200.00
S&P SMALL CAP 600 INDEX 100 125.58 123.95 139.32 155.76 165.94
PEER GROUP 100 119.49 127.67 145.05 224.04 365.89
PEER GROUP COMPANIES
--------------------------------------------------------------------
GILEAD SCIENCES INC.
ISIS PHARMACEUTICALS INC.
21
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth as of June 10, 2002, 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 10, 2002, 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 BENEFICIALLY % OF SHARE BENEFICIALLY
PRINCIPAL STOCKHOLDERS OWNED OWNED (1)
William A. Carter, M.D. (2) 4,073,968 11.3
Robert E. Peterson (3) 210,574 *
Ransom W. Etheridge (4) 112,118 *
Richard C. Piani (5) 101,355 *
Iraj-Eqhbal Kiani (6) 24,000 *
William M. Mitchell, M.D. (7) 75,640 *
David R. Strayer, M.D. (8) 87,246 *
Josephine M. Dolhancryk (9) 79,604 *
Carol A. Smith (10) 14,291 *
All directors and
executive officers
as a group (9 persons) 4,778,796 13.0
________________________
* 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 10, 2002. 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, 2004, (ii) Rule 701 Warrants to
purchase 1,400,000 shares of common stock at a price of
$3.50 per share, expiring on September 30, 2002; (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 expiring on January 1, 2003; (v) 170,000 common
22
stock warrants exercisable at $5.00 per share and expiring on
January 2, 2003; (vi) 25,000 warrants to purchase common
stock at $6.50 per share and expiring on September 17, 2004;
(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 expiring January 1, 2003,
(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 2,500 shares of common stock at $4.03 per share and
expiring on January 3, 2011 and 776,090 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 on April 14, 2006;
(iv) 30,000 warrants to purchase common stock at an exercise
price of $5.00 per share, expiring on February 28, 2009 (v)
500 shares of common stock and 2,500 stock options
exercisable at $4.03 per share.
(4) Includes 20,000 warrants to purchase Common stock at $4.00
per share, expiring on January 1, 2003; 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 and 42,118 shares of common stock.
(5) Includes (i) 20,000 warrants to purchase common stock at
$4.00 per share, expiring on January 1, 2003; (ii) warrants to
purchase 25,000 shares of 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) 8,847 shares
of common stock owned by Mr. Piani (v) 12,900 shares of
common stock owned jointly by Mr. And Mrs. Piani; (vi)
5,000 shares of common stock owned by Mrs. Piani and
options to purchase 4,608 shares of common stock at $4.34
per share expiring on December 11, 2002.
(6) Consists of 12,000 warrants to purchase common stock at
$3.86 per share, expiring on April 30, 2005 and 12,000 shares
of Common Stock.
(7) Includes warrants to purchase 12,000 shares of common stock
at $6.00 per share, expiring on August 25, 2003; 25,000
warrants to purchase 25,000 shares at $6.50 per share; 25,000
warrants to purchase common stock at $8.00 per share all
expiring on September 17, 2004 and 13,640 shares of common
stock.
(8) 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.
(9) Includes (i) 50,000 warrants to purchase common stock at an
exercise price of $3.50 per share, expiring on March 1, 2006;
(ii) 5,000 warrants to purchase common stock at $4.00 per
share, expiring on June 7, 2003; (iii) 7,104 options to
purchase common stock at $3.50 per share expiring January
22, 2007; (iv) options to purchase 2,500 shares of common
stock at $4.03 per share expiring on January 3, 2011 and; (v)
15,000 shares of common stock.
23
(10) Consists of 5,000 warrants to purchase common stock at
$4.00 per share expiring June 7, 2003; 6,791 stock options
exercisable at $3.50 expiring January 22, 2007 and options to
purchase 2,500 shares off common stock at $4.03 per share
expiring on January 3, 2011.
24
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, 2002 subject to ratification by the
stockholders. BDO Seidman, LLP has served as
Hemispherx's independent auditors since June, 2000.
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, 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 statement
for such years.
On June 5, 2000, pursuant to a vote of the Board of
Directors, the firm BDO Seidman, LLP was selected to audit
the financial statements of Hemispherx for the year ending
December 31, 2000, which was ratified by the stockholders of
the Company at its 2000 Annual Meeting of Stockholders.
At the Annual Shareholder's Meeting on August 24, 2001
and pursuant to the recommendation of the Audit Committee
of the Board of Directors, shareholders 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, 2001.
All audit services provided by BDO Seidman, LLP are
approved by the Audit Committee. During 2001, BDO
Seidman, LLP performed certain non-audit services for the
Company. A summary of the audit and non-audit fees paid to
BDO Seidman, LLP in 2001 is as follows:
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 limited reviews of the Company's quarterly
filings with the SEC was approximately $92,157.
25
All Other Fees - The aggregate fees billed to the Company
by BDO Seidman, LLP for all other services, such as
financing and taxes, was approximately $6,407.
The Audit Committee has considered whether the
provision by BDO Seidman, LLP of the non-audit services
discussed above under "All Other Fees" is compatible with
maintaining BDO Seidman LLP's independence and has
concluded that providing such services is compatible with that
firm's independence from the Company and its management.
The Board of Directors considers BDO Seidman, LLP to
be well qualified to serve as the independent public
accountants of the Company. If, however, the shareholders do
not ratify the appointment of BDO Seidman, LLP, the Board
of Directors may, but is not required to, reconsider the
appointment. It is anticipated that a 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.
26
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.
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
June 24, 2002