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 o
Check
the
appropriate box:
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o
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Preliminary
Proxy Statement
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o
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Confidential,
for Use of the Commission Only (as Permitted by Rule
14a-6(e)(2))
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x
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Definitive
Proxy Statement
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o
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Definitive
Additional Materials
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o
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Solicitation
Material Pursuant to Rule 14a-11(c) or rule
14a-12
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Hemispherx Biopharma,
Inc.
(Name
of
Registrant as Specified in its Charter)
(Name
of
Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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x
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No
fee required.
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o
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1)
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Title
of each class of securities to which transaction applies:
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2)
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Aggregate
number of securities to which transaction applies:
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3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11:
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4)
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Proposed
maximum aggregate value of transaction:
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5)
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Total
fee paid:
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o
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Fee
paid previously with preliminary
materials.
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o
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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.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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Date
Filed:
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HEMISPHERX
BIOPHARMA, INC.
1617
JFK Boulevard
Philadelphia,
Pennsylvania 19103
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON SEPTEMBER 17, 2008
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 Crown
Plaza Hotel, 1800 Market Street, Philadelphia Pennsylvania 19103, on Wednesday,
September 17, 2008, at 10:00 a.m. local time, for the following
purposes:
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1.
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To
elect five members to the Board of Directors of Hemispherx to serve
until
their respective successors are elected and qualified;
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2.
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To
ratify the selection by Hemispherx’s audit committee of McGladrey &
Pullen, LLP, independent registered public accountants, to audit
the
financial statements of Hemispherx for the year ending December 31,
2008;
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3.
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To
approve the issuance of our Common Stock to comply with AMEX Company
Guide
Section 713.
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4.
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To
transact such other matters as may properly come before the meeting
or any
adjournment thereof.
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Only
stockholders of record at the close of business on July 21, 2008 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 for the fiscal year ended December 31, 2007.
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By
Order of the Board of Directors
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s\Ransom
W. Etheridge, Secretary
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Philadelphia,
Pennsylvania
August
1,
2008
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YOUR
VOTE IS IMPORTANT
We
urge you to promptly vote your shares
by
completing, signing, dating and returning
your
proxy card in the enclosed
envelope.
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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 Biopharma, Inc.
(“Hemispherx” or the “Company”) to be held on Wednesday, September 17, 2008, 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 are
being distributed to stockholders beginning on or about August 4, 2008. 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 21, 2008, 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 74,805,334 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 and Proposal No. 3.
ADMISSION
TO THE MEETING
Stockholders
(or their authorized representatives) may attend the meeting. Verification
of
stock ownership will be required. If you own shares in your name or hold them
through a broker (and can provide documentation showing ownership as of the
end
of day on July 21, 2008, the record date), you will be permitted to attend.
Stockholders will be admitted to the meeting beginning at 9:45am EST. Seating
is
limited.
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.
1
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 $60,000. 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 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 Company 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).
2
Under
current Delaware case law, while broker non-votes (see “Voting
By
Street Name Holders”
above)
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 2009 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 January 13, 2009.
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.
INFORMATION
CONCERNING BOARD MEETINGS
The
Board
of Directors is responsible for the management and direction of Hemispherx
and
for establishing broad corporate policies.
A
primary responsibility of the Board is to provide effective governance
over the
Company’s affairs for the benefit of its stockholders. In all actions taken by
the Board, the Directors are expected to exercise their business judgment in
what they reasonably believe to be the best interests of the Company. In
discharging that obligation, Directors may rely on the honesty and integrity
of
the Company’s senior executives and its outside advisors and
auditors.
The
Board
of Directors and various committees of the Board meet periodically throughout
the year to receive and discuss operating and financial reports presented by
the
chief executive officer, the chief operating officer and chief financial officer
as well as reports by experts and other advisors. Corporate review sessions
are
also offered to Directors to help familiarize them with Hemispherx’s technology
and operations. Members of the Board are encouraged to attend Board meetings
in
person, unless the meeting is held by teleconference. The Board held four
meetings in 2007 and executed two unanimous consents. All directors attended
these meetings. Directors are expected to attend the Annual Meeting
absent unusual circumstances, although Hemispherx has no formal policy on the
matter. All of the Directors attended the 2007 Annual Meeting.
3
In
2007,
the non-employee members of the Board of Directors met one time in executive
session, i.e. with no employee Directors or management personnel present.
Richard Piani is the Lead Director to preside over meetings. Interested persons
may contact the Lead Director or the non-employee Directors by sending written
comments through the Office of the Secretary of the Company. The Office will
either forward the original materials as addressed or provide Directors with
summaries of the submissions, with the originals available for review at the
Directors’ request.
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 Chairman of the Board, Richard Piani, Lead Director, and Ransom Etheridge,
Secretary and director. The Executive Committee had two meetings in 2007. All
committee members attended these meetings. The Committee assists the Board
by
making recommendations to management regarding general business matters of
Hemispherx.
Compensation
Committee.
The
Compensation Committee is composed of Dr. William Mitchell, director, Richard
C.
Piani, director, and Dr. Iraj-Eqhbal Kiani, director. The
Compensation Committee makes recommendations concerning salaries and
compensation for officers, employees of and consultants to Hemispherx.
The
full
text of the Compensation Committee Charter, as approved by the Board, is
available on our website: www.hemispherx.net.
This
committee met three times consisting of one meeting and two conference calls
in
2007 and all committee members were in attendance
Corporate
Governance and Nomination Committee.
In
2007,
the Corporate Governance and Nomination Committee had one meeting and all
members were present.
The
Corporate Governance and Nomination Committee consists of Dr. William Mitchell,
Committee Chair, Richard Piani and Iraj E. Kiani, Ph.D. All
of
the members of the Committee meet the independence standards contained within
the AMEX Company Guide and the Hemispherx Corporate Governance Guidelines.
The
full
text of the Corporate Governance and Nomination Committee Charter
as well
as the Corporate Governance Guidelines,
as
approved by the Board, are available on our website: www.hemispherx.net.
As
discussed below, the Committee is responsible for recommending candidates to
be
nominated by the Board for election by the stockholders or to be appointed
by
the Board of Directors to fill vacancies consistent with the criteria approved
by the Board. It also is responsible for periodically assessing Hemispherx’s
Corporate Governance Guidelines and making recommendations to the Board for
amendments, recommending to the Board the compensation of Directors, taking
a
leadership role in shaping corporate governance, and overseeing an annual
evaluation of the Board.
The
Corporate Governance and Nomination Committee is responsible for identifying
candidates who are eligible under the qualification standards set forth in
Hemispherx’s Corporate Governance Guidelines to serve as members of the Board.
The Hemispherx qualification standards, inter alia, provide that no member
of
the board of directors may serve on more than six public company boards and
that
no member of the board of directors who also serves as a Chief Executive Officer
of a public company may serve on more than three public company boards. The
Committee is authorized to retain search firms and other consultants to assist
it in identifying candidates and fulfilling its other duties. The Committee
is
not limited to any specific process in identifying candidates and will consider
candidates suggested by stockholders. Candidates are recommended to the Board
after consultation with the Chairman of the Board. In recommending Board
candidates, the Committee considers a candidate’s: (1) general understanding of
elements relevant to the success of a large publicly traded company in the
current business environment, (2) understanding of Hemispherx’s business, and
(3) educational and professional background. The Committee also gives
consideration to a candidate’s judgment, competence, anticipated participation
in Board activities, experience, geographic location and special talents or
personal attributes. Stockholders who wish to suggest qualified candidates
should write to the Corporate Secretary, Hemispherx Biopharma, Inc., 1617 JKF
Blvd., Ste. 660, Philadelphia, PA 19103, stating in detail the qualifications
of
such persons for consideration by the Committee.
4
The
Company aspires to the highest standards of ethical conduct; reporting results
with accuracy and transparency; and maintaining full compliance with the laws,
rules and regulations that govern the Company’s business. Hemispherx’s Corporate
Governance Guidelines embody many of our policies and procedures which are
the
foundation of our commitment to best practices. The guidelines are reviewed
annually, and revised as necessary to continue to reflect best
practices.
Audit
Committee and Audit Committee Expert.
Hemispherx’s
Audit Committee of the Board of Directors consists of Richard Piani, Committee
Chairman, William Mitchell, M.D and Iraj E. Kiani, Ph.D. The Audit Committee
operates under a written charter approved by the Board of Directors and
available on our website: www.hemispherx.net.
Dr.
Iraj E. Kiani, Dr. Mitchell, and Mr. Piani
are all
determined by the Board of Directors to be independent directors as required
under Section 121B(2)(a) of the AMEX Company Guide.
We do
not have a financial expert as defined in the SEC rules on the committee in
the
true sense of the description. However, Mr. Piani has 40 years experience in
business and has served in senior level and leadership positions for
International Business. His working experience includes reviewing and analyzing
financial statements and dealing with financial institutions. Hemispherx
believes Dr. Iraj E. Kiani, Dr. Mitchell, and Mr. Piani to be independent of
management and free of any relationship that would interfere with their exercise
of independent judgment as members of this committee. The principal functions
of
the Audit Committee are to (i) assist the Board in fulfilling its oversight
responsibility relating to the annual independent audit of Hemispherx’s
consolidated financial statements and internal control over financial reporting,
the engagement of the independent registered public accounting firm and the
evaluation of the independent registered public accounting firm’s
qualifications, independence and performance, (ii) prepare the reports or
statements as may be required by AMEX or the securities laws, (iii) assist
the
Board in fulfilling its oversight responsibility relating to the integrity
of
Hemispherx’s financial statements and financial reporting process and
Hemispherx’s system of internal accounting and financial controls, (iv) discuss
the financial statements and reports with management, including any significant
adjustments, management judgments and estimates, new accounting policies and
disagreements with management, and (v) review disclosures by independent
registered public accounting firm concerning relationships with Hemispherx
and
the performance of Hemispherx’s independent registered public accounting firm.
Audit
Committee Report.
The
primary responsibility of the Audit Committee (the “Committee”) is to assist the
Board of Directors in discharging its oversight responsibilities with respect
to
financial matters and compliance with laws and regulations. The primary methods
used by the Committee to fulfill its responsibility with respect to financial
matters are:
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To
appoint, evaluate, and, as the Committee may deem appropriate, terminate
and replace the Company’s independent registered public
accountants;
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To
monitor the independence of the Company’s independent registered public
accountants;
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To
determine the compensation of the Company’s independent registered public
accountants;
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To
pre-approve any audit services, and any non-audit services permitted
under
applicable law, to be performed by the Company’s independent registered
public accountants;
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To
review the Company’s risk exposures, the adequacy of related controls and
policies with respect to risk assessment and risk
management;
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5
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·
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To
monitor the integrity of the Company’s financial reporting processes and
systems of control regarding finance, accounting, legal compliance
and
information systems;
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·
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To
facilitate and maintain an open avenue of communication among the
Board of
Directors, management and the Company’s independent registered public
accounting firm.
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The
Audit
Committee is composed of three Directors, and the Board has determined that
each
of those Directors is independent as that term is defined in Sections
121(B)(2)(a) of the American Stock Exchange Company Guide.
The
Committee met two times in 2007. All committee members were present at the
meetings. In addition, the Committee conducted four teleconference calls. All
Committee members were present, except for one call when one Committee member
was not available.
In
discharging its responsibilities relating to internal controls, accounting
and
financial reporting policies and auditing practices, the Committee discussed
with the Company’s independent registered public accounting firm, McGladrey
& Pullen, LLP, the overall scope and process for its audit. The Committee
regularly meets with McGladrey & Pullen, LLP, with and without management
present, to discuss the results of its examinations, the evaluations of our
internal controls and the overall quality of the Company’s financial
reporting.
The
Committee has discussed with McGladrey & Pullen, LLP its judgments about the
quality, in addition to the acceptability, of the Company’s accounting
principles as applied in the Company’s financial reporting, as required by
Statement on Auditing Standards No. 90 “Communications with Audit
Committees.”
The
Committee also has received the written disclosures and a letter from McGladrey
& Pullen, LLP that is required by the Independence Standards Board Standard
No. 1, Independence
Discussions with Audit Committees, and
has
discussed with McGladrey & Pullen, LLP their independence.
The
Committee has met and held discussions with management. The Committee has
reviewed and discussed with management Hemispherx’s audited consolidated
financial statements as of and for the fiscal year ended December 31, 2007,
as
well as the internal control requirements of the Sarbanes-Oxley Act of
2002.
Based
on
the reviews and discussions referred to above, the Committee recommended to
the
Board of Directors that the audited financial statements referred to above
be
included in the Company’s Annual Report for the year ended December 31,
2007.
This
report is respectfully submitted by the members of the Audit Committee of the
Board of Directors.
Richard
Piani, Chairman
William
M. Mitchell
Iraj
E.
Kiani
Strategic
Planning Committee.
The
Strategic Planning Committee is composed of William A. Carter, William M.
Mitchell, and Ransom W. Etheridge.
The
Committee met one time in 2007 and all committee members were in attendance.
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.
Lead
Director
Richard
Piani is the lead director. Mr. Piani has been a director of the Company since
1995. The lead director: (i) presides at all meetings of the Board at which
the
Chairman is not present, including executive sessions of the independent
Directors; (ii) serves as liaison between the Chairman and the independent
Directors; (iii) approves information sent to the Board; (iv) approves meeting
agendas for the Board; (v) approves meeting schedules to assure that there
is
sufficient time for discussion of all agenda items; (vi) has the authority
to
call meetings of the independent Directors; and (vii) if requested by major
stockholders, ensures that he is available for consultation and direct
communication.
6
Code
of Ethics and Business Conduct
Hemispherx’s
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 Administrator at 1617 JFK Boulevard, Suite 660,
Philadelphia, PA 19103. Our
Board
of Directors is required to approve any waivers of the code of ethics and
business conduct for Directors or executive officers and we are required to
disclose any such waiver in a Current Report on Form 8-K within four business
days.
Stock
Ownership Guidelines
In
April
2005, the Board of Directors adopted a set of stock ownership guidelines for
Directors and officers. The Board believes that Directors and officers more
effectively represent the interest of Hemispherx’s stockholders if they are
stockholders themselves. At this time, all of our Directors and officers are
stockholders and this guideline was adopted to assure that the present Directors
and officers continue to participate as well as future Directors and officers.
The
full
text of the Stock Ownership
Guidelines,
as
approved by the Board, are available on our website: www.hemispherx.net.
Communication
with the Board of Directors
Interested
parties wishing to contact the Board of Directors of the Company may do so
by
writing to the following address: Board of Directors, c/o Ransom W. Etheridge,
Director, Corporate Secretary and General Counsel, P.O. Box 3025., Virginia
Beach, VA 23454. All letters received will be categorized and processed by
the
Corporate Secretary and then forwarded to the Company’s Board of
Directors.
Director
Attendance at Annual Meetings of Stockholders
Directors
are encouraged, but not required, to attend the Annual Meeting of Stockholders.
At the 2007 Annual Meeting, all six sitting Directors were in
attendance.
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.
|
70
|
Chairman,
Chief Executive Officer
|
|
Anthony
A. Bonelli
|
56
|
President,
Chief Operating Officer
|
|
Robert
E. Peterson
|
71
|
Chief
Financial Officer
|
|
David
R. Strayer, M.D.
|
62
|
Medical
Director, Regulatory Affairs
|
|
Carol
A. Smith, Ph.D.
|
56
|
Vice
President of Manufacturing
|
|
Katalin
Ferencz-Biro
|
61
|
Senior
Vice President of Regulatory Affairs
|
|
Ransom
W. Etheridge
|
69
|
Secretary
and General Counsel
|
|
Wayne
Springate
|
37
|
Vice
President of Operations
|
|
Russell
Lander
|
57
|
Vice
President of Quality Assurance
|
7
For
biographical information about William A. Carter, M.D., please see the
discussion under the heading “Proposal No. 1 Election of Directors”
below.
ANTHONY
A. BONELLI
was
appointed as President and Chief Operating Officer in November 2006. Mr. Bonelli
is a graduate of Harvard University with a degree in Biological Sciences as
well
as an MBA from Rutgers University Graduate School of Business and JD from the
University of San Francisco. Mr. Bonelli has
over
twenty-five years of diversified healthcare industry experience. Most recently,
he served as President and CEO of Optigenex, an applied DNA sciences company,
since October 2005, having joined that company in September 2004 as President
and Chief Operating Officer. As principal of Anthony Bonelli Associates between
1999 and 2004, some of the firms he has advised include Parke-Davis,
Schering-Plough Company, Aventis, Pharmacia and Pfizer. From 1998 to 1999,
he
was President and COO of Vitaquest International, a custom developer and
manufacturer of vitamins and nutritional supplements.
ROBERT
E. PETERSON has
served as our Chief Financial Officer since April, 1993 and served as an
Independent Financial Advisor to us 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 our Medical Director 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.
is
VP
of
Manufacturing
and has
served as our Director of Manufacturing and Process Development from 1995 to
2003, as Director of Operations from 1993 to 1995 and as the Manager of Quality
Control from 1991 to 1993, with responsibility for the manufacture, quality
control, process development, technology transfer to contract manufacturers
and
the chemistry of Ampligen®. 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. in Medical Sciences
with a concentration on Virology from the University of South Florida, College
of Medicine in 1980 and was an NIH post-doctoral fellow in the Department of
Microbiology and Virology at the Pennsylvania State University College of
Medicine from 1980 to 1983.
KATALIN
FERENCZ-BIRO, Ph.D.
has
served as the Company’s Senior Vice President of Regulatory Affairs and Quality
Assurance Departments since January 2007. She served as the Director of
Regulatory Affairs and Quality Assurance from 2006 to 2007. Previously from
1987
to 2003, she served Interferon Sciences Inc, in various positions including
Senior Director of Regulatory Affairs, Quality Control and Quality Assurance
Departments, and FDA official for our FDA approved product, Alferon N Injection.
Dr. Ferencz-Biro received her Ph.D. in Chemistry/ Biochemistry in 1972 from
the
University of Eötvös Lóránd, Budapest, Hungary, and her M.S., in Chemistry and
Biology in 1971 from University of Eötvös Lóránd, Budapest, Hungary. She was a
postdoctoral fellow from 1981-1984 in Rutgers University, Center for Alcohol
Studies, Piscataway, New Jersey. She is an author and coauthor of several
scientific publications, patents and presentations on the field of biochemistry.
Currently she is a member of Regulatory Affairs Professionals Society.
RANSOM
W. ETHERIDGE has
been a
director since October 1997, and presently serves as our secretary and general
counsel. Mr. Etheridge first became associated with us in 1980 when he provided
consulting services to us and participated in negotiations with respect to
our
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, and received his Law degree from the University of Richmond
School of Law. Mr. Etheridge declined to stand for re-election as a director
at
the upcoming 2008 Annual Stockholders’ Meeting.
8
WAYNE
S. SPRINGATE
is Vice
President of Operations; Mr. Springate joined Hemispherx in 2002 as Vice
President of Business Development. Mr. Springate came on board when Hemispherx
acquired Alferon N Injection and its New Brunswick manufacturing facilities.
He
led the consolidation of our Rockville facility to our New Brunswick location
as
well as coordinated the relocation of manufacturing polymers from South Africa
to our production facility in New Brunswick. He is responsible for preparing
our
Manufacturing plant for a Pre Approval Inspection by the FDA in connection
with
the filing of our Ampligen NDA. Previously, Mr. Springate acted as President
for
World Fashion Concepts. He oversaw operations at several locations in the United
States and overseas. Mr. Springate assisted the CEO in details of operations
on
a daily basis and was involved in all aspects of manufacturing, warehouse
management, distribution and logistics.
RUSSEL
J. LANDER, Ph.D.
is Vice
President Quality Assurance. Dr. Lander joined Hemispherx in 2005, assuming
responsibility for CMC writing for the NDA filing of Ampligen®. He has
subsequently served at the New Brunswick site as Director of Quality Control
and
has provided guidance to the efforts to improve and validate the manufacturing
process for the synthesis of Ampligen® polynucleotide raw materials, Poly I and
Poly C12U.
Dr.
Lander was formerly employed at Merck and Co., Inc. in the process development
groups for drug development (1977-1991) and vaccines (1991-2005). Dr. Lander
received his Ph.D. in Chemical/Biochemical Engineering from the University
of
Pennsylvania. He has authored numerous scientific publications and invention
disclosures.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Review,
Approval or Ratification of Transactions with Related
Persons
Our
policy is to require that any transaction with a related party required to
be
reported under applicable Securities and Exchange Commission rules, other than
compensation related matters and waivers of our code of business conduct and
ethics, be reviewed and approved or ratified by a majority of independent,
disinterested directors. We have not adopted procedures for review of, or
standards for approval of, these transactions, but instead review such
transactions on a case by case basis. Our policy is to require that all
compensation related matters be recommended for board approval by the
Compensation Committee and that any waiver of our code of business conduct
and
ethics be reviewed and approved by the Corporate Governance and Nominating
Committee and be reported under applicable SEC rules.
We
have
employment agreements with certain of our executive officers and have granted
such officers and directors options and warrants to purchase our common stock,
as discussed below under the heading, “Compensation of Executive Officers and
Directors”.
Ransom
W.
Etheridge, our Secretary and General Counsel and one of our directors, is an
attorney in private practice, who renders corporate legal services to us from
time to time, for which he has received fees totaling approximately $117,000
in
2007. In addition, Mr. Etheridge served on the Board of Directors for which
he
received Director’s Fees of cash and stock valued at $150,000 in 2007. Mr.
Etheridge has elected not to stand for re-election to the Board at the 2008
Annual Meeting of Stockholders.
We
paid
Retreat House, LLC, an entity in which the children of William A. Carter have
a
beneficial interest, $153,000 for the use of its property at various times
in
2007.
Katalin
Kovari, M.D. was paid $13,000 in 2007 for her part-time services to us as
Assistant Medical Director. Dr. Kovari is the spouse of Dr. William A. Carter,
our Chairman and CEO.
9
We
retained Equels Law Firm in 2007 to assist us in various foreign litigations.
The firm was paid $215,000 in 2007 for their services. Thomas Equels, a nominee
to be one of our directors, is the Principal owner of the firm.
COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Section
16(a) of the Exchange Act requires our officers and directors, and persons
who
own more than ten percent of a registered class of 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 us, we found
that, during the fiscal year ended December 31, 2007, certain of our officers
and directors had not complied with all applicable Section 16(a) filing
requirements on a timely basis with regard to transactions occurring in 2007.
Specifically, Dr. Carter filed three forms 4 late concerning five transactions;
Mr. Peterson filed one form 5 late concerning two transactions; Mr. Etheridge
filed three forms 4 late concerning five transactions; Mr. Bonelli filed one
form 4 late concerning one transaction; Mr. Kiani filed two forms 4 late
concerning four transactions; Mr. Piani filed three forms 4 late concerning
five
transactions; Dr. Mitchell filed three forms 4 late concerning five
transactions; Dr. Strayer filed two forms 4 late concerning two transactions;
and Mr. Spence filed one form 4 late concerning one transaction.
COMPENSATION
OF EXECUTIVE OFFICERS AND DIRECTORS
Compensation
Discussion and Analysis
Objectives
and Philosophy of Executive Compensation
The
primary objectives of the compensation committee of our board of directors
with
respect to executive compensation are to attract and retain the most talented
and dedicated executives possible, to tie annual and long-term cash and stock
incentives to achievement of measurable performance objectives, and to align
executives' incentives with stockholder value creation. To achieve these
objectives, the compensation committee expects to implement and maintain
compensation plans that tie a substantial portion of executives' overall
compensation to key strategic financial and operational goals such as the
establishment and maintenance of key strategic relationships, the development
of
our products, the identification and advancement of additional product and
the
performance of our common stock price. The compensation committee evaluates
individual executive performance with the goal of setting compensation at levels
the committee believes are comparable with executives in other companies of
similar size and stage of development operating in the biotechnology industry
while taking into account our relative performance and our own strategic
goals.
Our
compensation plans are developed by utilizing publicly available compensation
data and subscription compensation survey data for national and regional
companies in the biopharmaceutical industry. We believe that the practices
of
this group of companies provide us with appropriate compensation benchmarks,
because these companies have similar organizational structures and tend to
compete with us for executives and other employees. For benchmarking executive
compensation, we typically review the compensation data we have collected from
the complete group of companies, as well as a subset of the data from those
companies that have a similar number of employees as our company. We have also
engaged independent outside consultants to help us analyze this data and to
compare our compensation programs with the practices of the companies
represented in the compensation data we review.
Elements
of Executive Compensation
Executive
compensation consists of the following elements:
10
Base
Salary
Base
salaries for our executives are established based on the scope of their
responsibilities, taking into account competitive market compensation paid
by
other companies for similar positions. Generally, we believe that executive
base
salaries should be targeted near the median of the range of salaries for
executives in similar positions with similar responsibilities at comparable
companies, in line with our compensation philosophy. Base salaries are reviewed
annually, and adjusted from time to time to realign salaries with market levels
after taking into account individual responsibilities, performance and
experience. This review normally occurs in the fourth quarter of each year.
Annual
Bonus
Our
compensation program includes eligibility for an annual performance-based cash
bonus in the case of all executives and certain senior, non-executive employees.
The amount of the cash bonus depends on the level of achievement of the stated
corporate, department, and individual performance goals, with a target bonus
generally set as a percentage of base salary. As provided in their employment
agreements, our Chief Executive Officer and Chief Financial Officer are eligible
for an annual performance-based bonus up to 25% of their salaries, the amount
of
which, if any, is determined by the board of directors in its sole discretion
based on the recommendation of the Compensation Committee.
The
Compensation Committee utilizes annual incentive bonuses to compensate officers
for achieving financial and operational goals and for achieving individual
annual performance objectives. These objectives will vary depending on the
individual executive, but will relate generally to strategic factors such as
establishment and maintenance of key strategic relationships, development of
our
product, identification and research
and development of additional products, and to financial factors such as raising
capital and improving our results of operations.
In
December 2007, the Compensation Committee recommended and the Board of Directors
awarded bonuses to certain executives of 25% of base salaries for performance
in
relation to accomplishing certain 2007 corporate goals. Bonuses were awarded
to
William a. Carter, M.D., CEO and Chairman of the Board; Anthony Bonelli,
President and COO; Robert E. Peterson, CFO; David Strayer, M.D., Chief Medical
Officer and Wayne Springate, VP of Operations. The Compensation Committee and
Board of Directors reviewed corporate goals established in February 2007 and
determined that significant progress had been made with respect to 1) preparing
and filing the Ampligen NDA; 2) contacting and establishing strategic partners;
3) developing and implementing a global marketing strategy; 4) finalizing an
agreement with a vaccine manufacturer and 5) developing Alferon LDO potential.
Long-Term
Incentive Program
We
believe that long-term performance is achieved through an ownership culture
that
encourages such performance by our executive officers through the use of stock
and stock-based awards. Our stock plans have been established to provide our
employees, including our executive officers, with incentives to help align
those
employees' interests with the interests of stockholders. The compensation
committee believes that the use of stock and stock-based awards offers the
best
approach to achieving our compensation goals. We have historically elected
to
use stock options as the primary long-term equity incentive vehicle. We have
adopted stock ownership guidelines and our stock compensation plans have
provided the principal method, other than through direct investment for our
executive officers to acquire equity in our company. We believe that the annual
aggregate value of these awards should be set near competitive median levels
for
comparable companies. However, in the early stage of our business, we provided
a
greater portion of total compensation to our executives through our stock
compensation plans than through cash-based compensation.
Stock
Options
Our
stock
plans authorize us to grant options to purchase shares of common stock to our
employees, directors and consultants. Our compensation committee oversees the
administration of our stock option plan. The compensation committee reviews
and
recommends approval by our Board of Directors of stock option awards to
executive officers based upon a review of competitive compensation data, its
assessment of individual performance, a review of each executive's existing
long-term incentives, and retention considerations. Periodic stock option grants
are made at the discretion of the Board of Directors upon recommendation of
the
compensation committee to eligible employees and, in appropriate circumstances,
the compensation committee considers the recommendations of members of
management. In 2007, the Compensation Committee and the Board authorized the
renewal of expiring options for certain named executives in the amounts
indicated in the section entitled "Stock Option Grants to Executive Officers."
Grants were made to certain of our employees based on past performance,
particularly, those who worked hard and diligently on the preparation of our
NDA. Stock options granted by us have an exercise price equal to the fair market
value of our common stock on the day of grant and typically vest over a period
of years based upon continued employment, and generally expire ten years after
the date of grant. Incentive stock options also include certain other terms
necessary to assure compliance with the Internal Revenue Code of 1986, as
amended, or Internal Revenue Code.
11
We
expect
to continue to use stock options as a long-term incentive vehicle because;
(1)
Stock options align the interests of executives with those of the stockholders,
support a pay-for-performance culture, foster employee stock ownership, and
focus the management team on increasing value for the stockholders, (2) Stock
options are performance based. All the value received by the recipient of a
stock option is based on the growth of the stock price, (3)
Stock
options help to provide a balance to the overall executive compensation program
as base salary and our discretionary annual bonus program focus on short-term
compensation, while the vesting of stock options increases stockholder value
over the longer term, and (4) The vesting period of stock options encourages
executive retention and the preservation of stockholder value.
In
determining the number of stock options to be granted to executives, we take
into account the individual's position, scope of responsibility, ability to
affect profits and stockholder value and the individual's historic and recent
performance and the value of stock options in relation to other elements of
the
individual executive's total compensation.
As
of
December 31, 2007, 1,433,524 shares were available for future grants under
the
2004 Plan. Options granted pursuant to this plan totals 6,556,476 shares. The
plan authorizes up to 8,000,000 shares. Unless terminated sooner, the equity
compensation plan will continue in effect for a period of 10 years from its
effective date.
On
June
30, 2007, the stockholders adopted the 2007 Equity Incentive Plan which
authorizes the issuance of up to 8,000,000 stock options to acquire common
stock
pursuant to the terms of the plan. No options have been issued under this
plan.
Restricted
Stock and Restricted Stock Units
Our
2004
Equity Compensation Plan authorizes us to grant restricted stock and restricted
stock units. To date, we have not granted any restricted stock or restricted
stock units under our 2004 Equity Compensation Plan. We anticipate that in
order
to implement the long-term incentive goals of the Compensation Committee we
may
grant restricted stock units in the future.
Other
Compensation
Our
Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer and General
Counsel have employment, and/or engagement contracts that will remain in effect
until they are terminated, expire, or are renegotiated. Each contract is
different with respect to specific benefits or other compensation. We maintain
a
broad-based benefits program that is provided to all employees including
vacation, sick leave and health insurance. Details of these agreements are
as
follows:
Dr.
Carter’s employment as our Chief Executive Officer and Chief Scientific Officer
expires December 31, 2010 unless sooner terminated for cause or disability.
The
agreement automatically renews for successive one year periods after the initial
termination date unless the Company or Dr. Carter give written notice otherwise
at least ninety days prior to the termination date or any renewal period. Dr.
Carter has the right to terminate the agreement on 30 days’ prior written
notice. The base salary is subject to adjustments and the average increase
or
decrease in the Consumer Price Index for the prior year. In addition, Dr. Carter
could receive an annual performance bonus of up to 25% of his base salary,
at
the sole discretion of the Compensation Committee of the board of directors,
based on his performance or our operating results. 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 us from any joint venture or corporate partnering arrangement.
Dr.
Carter’s agreement also provides that he be paid a base salary and benefits
through the last day of the then term of the agreement if he is terminated
without “cause”, as that term is defined in agreement. In addition, should Dr.
Carter terminate the agreement or the agreement be terminated due to his death
or disability, the agreement provides that Dr Carter be paid a base salary
and
benefits through the last day of the month in which the termination occurred
and
for an additional twelve month period.
12
Our
engagement of Dr. Carter as a consultant related to patent development, as
one
of our directors and as chairman of the Executive Committee of our board of
directors until December 31, 2010 unless sooner terminated for cause or
disability. The agreement automatically renews for successive one year periods
after the initial termination date or any renewal period. Dr. Carter has the
right to terminate the agreement on 30 days’ prior written notice. The base fee
is subject to annual adjustments equal to the percentage increase or decrease
of
annual dollar value of directors’ fees provided to our directors during the
prior year. The annual fee is further subject to adjustment based on the average
increase or decrease in the Consumer Price Index for the prior year. In
addition, Dr. Carter could receive an annual performance bonus of up to 25%
of
his base fee, at the sole direction of the Compensation Committee of the board
of directors, based on his performance. Dr. Carter will not participate in
any
discussions concerning the determination of this annual bonus. Dr. Carter’s
agreement also provides that he be paid his base fee through the last day of
the
then term of the agreement if he is terminated without “cause”, as that term is
defined in the agreement. In addition, should Dr. Carter terminate the agreement
or the agreement be terminated due to his death or disability, the agreement
provides that Dr. Carter be paid fees due him through the last day of the month
in which the termination occurred and for an additional twelve month
period.
Our
agreement with Ransom W. Etheridge provides for Mr. Etheridge’s engagement as
our
General
Counsel until December 31, 2009 unless sooner terminated for cause or
disability. The agreement automatically renews for successive one year periods
after the initial termination date unless we or Mr. Etheridge give written
notice otherwise at least ninety days prior to the termination date or any
renewal period. Mr. Etheridge has the right to terminate the agreement on 30
days’ prior written notice. The initial annual fee for services is $96,000 and
is annually subject to adjustment based on the average increase or decrease
in
the Consumer Price Index for the prior year. Mr. Etheridge’s agreement also
provides that he be paid all fees through the last day of then current term
of
the agreement if he is terminated without “cause” as that term is defined in the
agreement. In
addition, should Mr. Etheridge terminate the agreement or the agreement be
terminated due to his death or disability, the agreement provides that Mr.
Etheridge be paid the fees due him through the last day of the month in which
the termination occurred and for an additional twelve month period. Mr.
Etheridge will devote approximately 85% of his business time to our
business.
Our
engagement agreement with Robert E. Peterson provides for Mr. Peterson’s
engagement as our
Chief
Financial Officer until December 31, 2010 unless sooner terminated for cause
or
disability. Mr. Peterson has the right to terminate the agreement on 30 days’
prior written notice. The annual fee for services of $259,164 is subject to
increases based on the average increase in the cost of inflation index for
the
prior year. Mr. Peterson shall receive an annual bonus in each year that
our
Chief
Executive Officer is granted a bonus. The bonus shall equal a percentage of
Mr.
Peterson’s base annual compensation comparable to the percentage bonus received
by the Chief Executive Officer. In addition, Mr. Peterson shall receive bonus
compensation upon Federal Drug Administration approval of commercial application
of Ampligen®. Mr. Peterson’s agreement also provides that he be paid all fees
through the last day of then current term of the agreement if he is terminated
without “cause” as that term is defined in the agreement. In
addition, should Mr. Peterson terminate the agreement or the agreement be
terminated due to his death or disability, the agreement provides that Mr.
Peterson be paid the fees due him through the last day of the month in which
the
termination occurred and for an additional twelve month period. Mr. Peterson
will devote approximately 85% of his business time to our business.
On
November 27, 2006, we engaged Anthony A. Bonelli to serve as our full time
President and Chief Operating Officer. Pursuant to this agreement, the President
and Chief Operating Officer is employed for an initial term of two years. The
employment automatically renews thereafter for successive one year periods
unless either party gives written notice not to renew within 90 days of the
termination date.
Mr.
Bonelli receives an annual salary at the rate of $350,000 per year through
December 31, 2007 and, thereafter, at the annual rate of $400,000. His salary
is
subject to cost of living increases. He is entitled to annual bonuses in the
discretion of our Chairman and Board of Directors. A $50,000 cash bonus and
100,000 options were given upon the execution of the employment agreement and
a
minimum cash bonus for the year ended December 31, 2007 was $75,000. He was
entitled to and received an additional 50,000 options upon his successful
completion of three months of employment and an aggregate of up to an additional
950,000 options upon the happening of specific business milestones. We have
the
right, at our discretion, to modify the time periods within which the milestones
must be met. Each option vests upon award, expires in ten years and has an
exercise price equal to 110% of the closing price of our common stock on the
American Stock Exchange on the date of the award. Upon the happening of certain
events, such as our merger with and in to another entity or our sale or transfer
of assets or earning power aggregating 50% or more of our assets or earning
capacity, provided he is still employed by us, any of the foregoing options
not
granted to him will be granted. He is also entitled to receive fringe benefits
generally available to our executive officers and we have agreed, during his
employment period, to pay premiums on a term life insurance policy in the face
amount of $1,500,000 with a beneficiary of his choosing.
13
The
employment agreement terminates upon his death or disability and is terminable
by us for "cause" as defined in the agreement, or without cause. He has the
right to terminate the agreement upon not less than 60 day's prior notice.
In
the event that the agreement terminates due to his death or disability, or
by
him, he will be entitled to fees due and payable through the last day of the
month in which the termination occurs. If it is terminated by us for cause,
he
will be entitled to fees due and payable to him through the date of termination.
If we terminate the agreement without cause, he is entitled to fees depending
upon the amount of time he has been employed by us ranging from 12 months'
of
fees if he is terminated within the first 12 months of employment to three
months' of fees if he is terminated in the 21st month of employment. He is
subject to confidentiality and non-compete covenants.
The
Board
of Directors, deeming it essential to the best interests of our
stockholders to foster the continuous engagement of key management personnel
and
recognizing that, as is the case with many publicly held corporations, a change
of control might occur and that such possibility, and the uncertainty and
questions which it might raise among management, might result in the departure
or distraction of management personnel to the detriment of us and our
stockholders, determined to reinforce and encourage the continued attention
and
dedication of members of our
management to their engagement without distraction in the face of potentially
disturbing circumstances arising from the possibility of a change in control
of
the
Company
and
entered into identical agreements regarding change in control with William
A.
Carter, our
Chief
Executive Officer and Chief Scientific Officer, Robert E. Peterson, our
Chief
Financial Officer and Ransom W. Etheridge, our
General
Counsel. Each of the agreements regarding change in control became effective
March 11, 2005 and continue through December 31, 2007 and shall extend
automatically to the third anniversary thereof unless we give notice to the
other party prior to the date of such extension that the agreement term will
not
be extended. Notwithstanding the foregoing, if a change in control occurs during
the term of the agreements, the term of the agreements will continue through
the
second anniversary of the date on which the change in control occurred. Each
of
the agreements entitles William A. Carter, Robert E. Peterson and Ransom W.
Etheridge, respectively, to change of control benefits, as defined in the
agreements and summarized below, upon their respective termination of
employment/engagement with us during a potential change in control, as defined
in the agreements or after a change in control, as defined in the agreements,
when their respective terminations are caused (1) by us for any reason other
than permanent disability or cause, as defined in the agreement (2) by William
A. Carter, Robert E. Peterson and/or Ransom W. Etheridge, respectively, for
good
reason as defined in the agreement or, (3) by William A. Carter, Robert E.
Peterson and/or Ransom W. Etheridge, respectively for any reason during the
30
day period commencing on the first date which is six months after the date
of
the change in control.
The
benefits for each of the foregoing executives would be as follows:
|
o
|
A
lump sum cash payment of three times his base salary and annual bonus
amounts; and
|
|
o
|
Outplacement
benefits.
|
Each
agreement also provides that the executive is entitled to a “gross-up” payment
to make him whole for any federal excise tax imposed on change of control or
severance payments received by him.
14
Dr.
Carter’s agreement also provides for the following benefits:
|
o
|
Continued
insurance coverage through the third anniversary of his termination;
and
|
|
o
|
Retirement
benefits computed as if he had continued to work for the above period.
|
401(K)
Plan
In
December 1995, we established a defined contribution plan, effective January
1,
1995, entitled the Hemispherx Biopharma employees 401(K) Plan and Trust
Agreement. All of our full time employees 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 our contributions
will
vest over one year.
Severance
Upon
termination of employment, most executive officers are entitled to receive
severance payments under their employment and/or engagement agreements. In
determining whether to approve and setting the terms of such severance
arrangements, the compensation committee recognizes that executives, especially
highly ranked executives, often face challenges securing new employment
following termination. The employment agreement with our CEO, which expires
on
December 31, 2010, provides that we pay him an annual salary through the terms
of the agreement if terminated without cause. The engagement agreement with
our
CFO, which expires on December 31, 2010, provides that we pay him one year’s
salary. The employment agreement of our COO, which expires in November 2008,
provides that he is entitled to severance pay up to 12 months depending on
the
time employed, if terminated without cause.
We
believe that our Executive Officers’ severance packages are generally in line
with severance packages offered to chief executive officers of the companies
of
similar size to us represented in the compensation data we
reviewed.
Compensation
of Directors
Non-employee
Board member compensation consists of an annual retainer of $150,000 to be
paid
two thirds in cash and one third in our common stock. On September 9, 2003,
the
Directors approved a 10 year plan which authorizes up to 1,000,000 shares for
use in supporting this compensation plan. The number of shares paid shall have
a
value of $12,500 with the value of the shares being determined by the closing
price of our common stock on the American Stock Exchange on the last day of
the
calendar quarter. All directors have been granted options to purchase common
stock under our Stock Option Plans and/or Warrants to purchase common stock.
We
believe such compensation and payments are necessary in order for us to attract
and retain qualified outside directors.
Conclusion
Our
compensation policies are designed to retain and motivate our senior executive
officers and to ultimately reward them for outstanding individual and corporate
performance.
15
Summary
Compensation Table - 2006
|
Name
and Principal Position
|
Salary
|
Bonus
|
Stock
Award
|
Option
Award (1)
|
Non-Equity
Incentive Plan Compensation
|
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
|
All
Other Compensation
|
Total
|
|
W.
A. Carter, CEO
|
$655,686
|
$166,624
|
-
|
$1,236,367
|
-
|
-
|
$118,087(2)
|
$2,186,764
|
|
A.
Bonelli, COO
|
35,000(4)
|
50,000
|
-
|
122,601
|
-
|
-
|
3,000(2)
|
210,601
|
|
R.
E. Peterson, CFO
|
259,164
|
64,791
|
-
|
373,043
|
-
|
-
|
-
|
696,998
|
|
D.
Strayer, Medical Director
|
225,144
|
-
|
-
|
19,200
|
-
|
-
|
-
|
244,344
|
|
M.
J. Liao, Director - QC
|
158,381
|
-
|
-
|
9,600
|
-
|
-
|
18,246(3)
|
186,406
|
|
C.
Smith, VP
of MFG
|
143,136
|
-
|
-
|
9,600
|
-
|
-
|
17,227(3)
|
169,963
|
|
R.
Hansen, VP
of Manufact.
|
140,311
|
-
|
-
|
9,600
|
-
|
-
|
17,006(3)
|
166,917
|
|
R.
D. Hulse
|
105,000
|
-
|
-
|
-
|
-
|
-
|
-
|
105,000
|
Notes:
|
(1)
|
Based
on Black Scholes Pricing Model of valuing options. Total Fair Value
of
Option Awards granted to officers in 2006 was
$1,780,011.
|
|
(2)
|
Consists
of Healthcare premiums, life insurance premiums, 401-K matching funds,
qualifying insurance premium, company car and parking
cost.
|
|
(3)
|
Consists
of healthcare premiums and 401-K matching
funds.
|
|
(4)
|
Mr.
Bonelli joined the Company on November 27, 2006. His annual salary
is
$350,000.
|
16
Summary
Compensation Table - 2007
|
Name
and Principal Position
|
Salary
|
Bonus
|
Stock
Award
|
Option
Award (1)
|
Non-Equity
Incentive Plan Compensation
|
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
|
All
Other Compensation
|
Total
|
|
W.
A. Carter, CEO
|
$637,496
|
$166,156
|
-
|
$1,688,079
|
-
|
-
|
$123,063(2)
|
$2,664,794
|
|
A.
Bonelli, COO
|
350,000
|
87,500
|
-
|
59,684
|
-
|
-
|
33,375(3)
|
530,504
|
|
R.
E. Peterson, CFO
|
259,164
|
64,791
|
-
|
153,055
|
-
|
-
|
-
|
477,010
|
|
D.
Strayer, Medical Director
|
240,348
|
50,347
|
-
|
79,810
|
-
|
-
|
-
|
370,505
|
|
C.
Smith, VP
of MFG.
|
147,695
|
-
|
-
|
34,235
|
-
|
-
|
30,088(4)
|
212,018
|
|
K.
Ferencz-Biro, VP of Reg. Affairs
|
145,000
|
-
|
-
|
11,744
|
-
|
-
|
13,999(5)
|
170,743
|
|
W.
Springate, VP of Operations
|
150,000
|
37,500
|
-
|
36,253
|
-
|
-
|
13,429(5)
|
237,182
|
|
R.
Lander, VP
of Qual. Assurance
|
178,000
|
-
|
-
|
11,744
|
-
|
-
|
9,649(6)
|
199,393
|
Notes:
|
(1)
|
Based
on Black Scholes pricing model of valuing options. Total fair of
options
granted to Officers in 2007 was
$2,241,028.
|
|
(2)
|
Consists
of a) Life Insurance premiums totaling $63,627; b) 401-K matching
funds of
$18,833; c) Healthcare premiums of $28,586; and d) Company car expenses
of
$12,017.
|
|
(3)
|
Healthcare
premiums of $9,649, car allowance expense of $9,276, and life insurance
premiums totaling $14,400.
|
|
(4)
|
Consists
of Healthcare premiums of $21,266, and 401-K matching funds of
$8,862.
|
|
(5)
|
Healthcare
premiums and 401-K matching funds
|
|
(6)
|
Healthcare
premiums
|
17
2007
Stock Option Grants to Executive Officers
The
following table provides additional information about option awards granted
to
our Named Executive Officers during the year ended December 31, 2007. The
compensation plan under which the grants in the following tables were made
are
described in the Compensation Discussion and Analysis section headed “Long-Term
Equity Incentive Awards”.
|
Name
|
Grant
Date
|
No.
of Options
|
Exercise
Price per Share
|
Expiration
Date
|
Closing
Price on Grant
|
Grant
Date Fair Value of Option (2)
|
|
W.A.
Carter, CEO
|
9/10/07
|
1,000,000(1)
|
$2.00
|
9/9/17
|
1.24
|
674,063
|
|
10/1/07
|
1,400,000(1)
|
3.50
|
9/30/17
|
1.60
|
1,014,016
|
|
|
A.
Bonelli, COO
|
2/22/07
|
50,000
|
2.07
|
2/27/17
|
1.88
|
59,684
|
|
R.E.
Peterson, CFO
|
1/23/07
|
13,750(1)
|
2.37
|
1/23/17
|
2.10
|
18,242
|
|
9/10/07
|
200,000(1)
|
2.00
|
9/9/17
|
1.24
|
134,813
|
|
|
D.
Strayer,
Medical
Director
|
1/23/07
|
20,000(1)
|
2.37
|
1/23/17
|
2.10
|
26,534
|
|
9/10/07
|
50,000(1)
|
2.00
|
9/9/17
|
1.24
|
33,703
|
|
|
12/6/07
|
25,000
|
1.30
|
12/6/17
|
1.30
|
19,573
|
|
|
C.
Smith,
VP
of MFG.
|
1/23/07
|
6,791(1)
|
2.37
|
1/23/17
|
2.10
|
9,010
|
|
9/10/07
|
20,000(1)
|
2.00
|
9/9/17
|
1.24
|
13,481
|
|
|
12/6/07
|
15,000
|
1.30
|
12/6/17
|
1.30
|
11,744
|
|
|
W.
Springate,
VP
of Operations
|
5/1/07
|
20,000
|
1.78
|
4/30/17
|
1.63
|
20,595
|
|
12/6/07
|
20,000
|
1.30
|
12/6/17
|
1.30
|
15,658
|
|
|
K.
Ferencz-Biro,
VP
of Reg. Affairs
|
12/6/07
|
15,000
|
1.30
|
12/6/17
|
1.30
|
11,744
|
|
R.
Lander, VP of Qual. Assurance
|
12/6/07
|
15,000
|
1.30
|
12/6/17
|
1.30
|
11,744
|
|
1)
|
Renewal
of previously issued options that expired
unexercised.
|
|
2)
|
These
amounts shown represent the approximate amount we recognize for financial
statement reporting purposes in fiscal year 2007 for the fair value
of
equity awards granted to the named executive officers. As a result,
these
amounts do not reflect the amount of compensation actually received
by the
named executive officer during the fiscal year. For a description
of the
assumptions used in calculating the fair value of equity awards under
SFAS
No. 123(R), see Note 2(m) of our financial
statements.
|
18
Outstanding
Equity Awards at Year End - 2007
|
Option/Warrants
Awards
|
Stock
Awards
|
||||||||
|
Name
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Equity
Incentive Plan Awards Number of Securities Underlying Unexercised
Unearned
Options (#)
|
Option
Exercise Price
|
Option
Expiration Date
|
Number
of Shares or Units of Stock That Have Not Vested
(#)
|
Market
Value of Shares or Unit That Have Not Vested
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other
Rights
That Have Not Vested (#)
|
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares,
Units or
Other Rights That Have Not Vested
|
|
W.A.
Carter, CEO
|
1,450,000
|
0
|
0
|
$2.20
|
9/8/08
|
-
|
-
|
-
|
-
|
|
1,000,000
|
0
|
0
|
2.00
|
9/9/17
|
-
|
-
|
-
|
-
|
|
|
190,000
|
0
|
0
|
4.00
|
1/1/08
|
-
|
-
|
-
|
-
|
|
|
73,728
|
0
|
0
|
2.71
|
12/31/10
|
-
|
-
|
-
|
-
|
|
|
10,000
|
0
|
0
|
4.03
|
1/3/11
|
-
|
-
|
-
|
-
|
|
|
167,000
|
0
|
0
|
2.60
|
9/7/14
|
-
|
-
|
-
|
-
|
|
|
153,000
|
0
|
0
|
2.60
|
12/7/14
|
-
|
-
|
-
|
-
|
|
|
100,000
|
0
|
0
|
1.75
|
4/26/15
|
-
|
-
|
-
|
-
|
|
|
465,000
|
0
|
0
|
1.86
|
6/30/15
|
-
|
-
|
-
|
-
|
|
|
70,000
|
0
|
0
|
2.87
|
12/9/15
|
-
|
-
|
-
|
-
|
|
|
300,000
|
0
|
0
|
2.38
|
1/1/16
|
-
|
-
|
-
|
-
|
|
|
10,000
|
0
|
0
|
2.61
|
12/9/15
|
-
|
-
|
-
|
-
|
|
|
376,650
|
0
|
0
|
3.78
|
2/22/16
|
-
|
-
|
-
|
-
|
|
|
1,400,000
|
0
|
0
|
3.50
|
9/30/17
|
-
|
-
|
-
|
-
|
|
|
A.
Bonelli, COO
|
100,000
|
0
|
0
|
2.11
|
11/26/16
|
-
|
-
|
-
|
-
|
|
50,000
|
0
|
0
|
2.07
|
2/27/17
|
-
|
-
|
-
|
-
|
|
|
R.
Peterson, CFO
|
200,000
|
0
|
0
|
2.00
|
9/9/17
|
-
|
-
|
-
|
-
|
|
50,000
|
0
|
0
|
3.44
|
6/22/14
|
-
|
-
|
-
|
-
|
|
|
13,824
|
0
|
0
|
2.60
|
9/7/14
|
-
|
-
|
-
|
-
|
|
|
55,000
|
0
|
0
|
1.75
|
4/26/15
|
-
|
-
|
-
|
-
|
|
|
10,000
|
0
|
0
|
2.61
|
12/8/15
|
-
|
-
|
-
|
-
|
|
|
50,000
|
0
|
0
|
3.85
|
2/28/16
|
-
|
-
|
-
|
-
|
|
|
100,000
|
0
|
0
|
3.48
|
4/14/16
|
-
|
-
|
-
|
-
|
|
|
30,000
|
0
|
0
|
3.55
|
4/30/16
|
-
|
-
|
-
|
-
|
|
|
13,750
|
0
|
0
|
2.37
|
1/22/17
|
-
|
-
|
-
|
-
|
|
|
10,000
|
0
|
0
|
4.03
|
1/3/11
|
-
|
-
|
-
|
-
|
|
|
D.
Strayer, Medical Director
|
50,000
|
0
|
0
|
2.00
|
9/9/17
|
-
|
-
|
-
|
-
|
|
50,000
|
0
|
0
|
4.00
|
2/28/08
|
-
|
-
|
-
|
-
|
|
|
10,000
|
0
|
0
|
4.03
|
1/3/11
|
-
|
-
|
-
|
-
|
|
|
20,000
|
0
|
0
|
3.50
|
2/23/07
|
-
|
-
|
-
|
-
|
|
|
10,000
|
0
|
0
|
1.90
|
12/14/14
|
-
|
-
|
-
|
-
|
|
|
10,000
|
0
|
0
|
2.61
|
12/8/15
|
-
|
-
|
-
|
-
|
|
|
10,000
|
5,000
|
0
|
2.20
|
11/20/16
|
-
|
-
|
-
|
-
|
|
|
25,000
|
0
|
0
|
1.30
|
12/6/17
|
-
|
-
|
-
|
-
|
|
|
C.
Smith, VP
of MFG
|
20,000
|
0
|
0
|
2.00
|
9/9/17
|
-
|
-
|
-
|
-
|
|
5,000
|
0
|
0
|
4.00
|
6/7/08
|
-
|
-
|
-
|
-
|
|
|
10,000
|
0
|
0
|
4.03
|
1/3/11
|
-
|
-
|
-
|
-
|
|
|
10,000
|
0
|
0
|
2.61
|
12/8/15
|
-
|
-
|
-
|
-
|
|
|
6,791
|
0
|
0
|
2.37
|
1/23/17
|
-
|
-
|
-
|
-
|
|
|
10,000
|
0
|
0
|
1.90
|
12/7/14
|
-
|
-
|
-
|
-
|
|
|
5,000
|
2,500
|
0
|
2.20
|
11/20/16
|
-
|
-
|
-
|
-
|
|
|
W.
Springate, VP of Operations
|
1,812
|
0
|
0
|
1.90
|
12/7/14
|
-
|
-
|
-
|
-
|
|
2,088
|
0
|
0
|
2.61
|
12/8/05
|
-
|
-
|
-
|
-
|
|
|
5,000
|
0
|
0
|
2.20
|
11/20/16
|
-
|
-
|
-
|
-
|
|
|
20,200
|
0
|
0
|
1.78
|
4/30/17
|
-
|
-
|
-
|
-
|
|
|
6,067
|
13,333
|
0
|
1.30
|
12/6/17
|
-
|
-
|
-
|
-
|
|
|
R.
Lander, VP of Quality
Assurance
|
5,000
|
10,000
|
0
|
1.30
|
12/6/17
|
-
|
-
|
-
|
-
|
|
K.
Ferencz-Biro, VP
of Reg. Affairs
|
5,000
|
10,000
|
0
|
1.30
|
12/6/17
|
-
|
-
|
-
|
-
|
19
Options
Exercised / Stock Vested - 2007
|
Option
Awards
|
Stock
Awards
|
|||
|
Name
|
Number
of Shares Acquired on Exercise (#)
|
Value
Realized on Exercise ($)
|
Number
of Shares Acquired on Vesting (#)
|
Value
of Realized on Vesting ($)
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
|
W.A.
Carter, CEO
|
none
|
|||
|
A.
Bonelli, COO
|
none
|
|||
|
R.
Peterson, CFO
|
none
|
|||
|
D.
Strayer, Medical Director
|
none
|
|||
|
C.
Smith, VP
MFG.
|
none
|
|||
|
W.
Springate, VP of Operations
|
none
|
|||
|
R.
Lander, VP
of Qual. Assurance
|
none
|
|||
|
K.
Ferencz-Biro, VP
of Reg. Affairs
|
none
|
|||
Compensation
Committee Interlocks and Insider Participation
Our
Compensation Committee of the Board of Directors, consisting of William
Mitchell, M.D, the Committee Chairman, Richard Piani and Dr. Iraj E. Kiani,
are
all independent directors. There are no interlocking relationships.
COMPENSATION
COMMITTEE REPORT
Our
Committee has reviewed and discussed the Compensation Discussion and Analysis
contained in this Annual Report with management. Based on our Committee’s review
of and the discussions with management with respect to the Compensation
Discussion and Analysis, our Committee recommended to the board of directors
that the Compensation Discussion and Analysis be included in the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2007 for
filing with the SEC.
COMPENSATION
COMMITTEE
William
Mitchell, M.D., Committee Chairman
Dr.
Iraj
E. Kiani
Richard
Piani
The
foregoing Compensation Committee report shall not be deemed incorporated by
reference into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, and shall not otherwise be deemed filed under these acts,
except to the extent we incorporate by reference into such
filings.
20
Director
Compensation - 2007
|
Name
|
Fees
Earned or Paid in Cash ($)
|
Stock
Awards ($)
|
Option
Awards ($)
(2)
|
Non-Equity
Incentive Plan Compensation ($)
|
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
|
All
Other Compensation ($)
|
Total
($)
|
|
R.
Etheridge, Director, General Counsel (3)
|
100,000
|
50,000
|
67,406
|
0
|
0
|
117,179(1)
|
334,585
|
|
W.
Mitchell, Director
|
100,000
|
50,000
|
67,406
|
0
|
0
|
0
|
217,406
|
|
R.
Piani, Director
|
100,000
|
50,000
|
67,406
|
0
|
0
|
0
|
217,406
|
|
I.
Kiani, Director
|
100,000
|
50,000
|
0
|
0
|
0
|
0
|
150,000
|
|
(1)
|
General
Counsel fees as per Engagement
Agreement.
|
|
(2)
|
The
total Fair Value of Stock Options granted in 2007 to Directors was
$202,218. The options were the renewal of previously issued options
that
expired unexercised.
|
|
(3)
|
Will
not stand for re-election to the Board at the 2008 Annual Stockholders’
Meeting.
|
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.
21
PRINCIPAL
STOCKHOLDERS
The
following table sets forth as of July 21, 2008, the number and percentage of
outstanding shares of common stock beneficially owned by:
|
·
|
Each
person, individually or as a group, known to us to be deemed the
beneficial owners of five percent or more of our issued and outstanding
common stock;
|
|
·
|
each
of our directors, director nominees and the Named Executives;
and
|
|
·
|
all
of our officers and directors as a group.
|
As
of
July 21, 2008, there were no other persons, individually or as a group, known
to
the Hemispherx to be deemed the beneficial owners of five percent or more of
the
issued and outstanding common stock.
|
Name
and Address of
Beneficial
Owner
|
Shares
Beneficially Owned
|
%
Of Shares
Beneficially
Owned
|
|
William
A. Carter, M.D.
|
6,241,868
(1)
|
7.8%
|
|
Ransom
W. Etheridge
2610
Potters Rd.
Virginia
Beach, VA 23452
|
721,296
(2)
|
*
|
|
Robert
E. Peterson
|
540,574
(3)
|
*
|
|
Richard
C. Piani
97
Rue Jeans-Jaures
Levaillois-Perret
France
92300
|
549,346
(4)
|
*
|
|
Anthony
Bonelli
783
Jersey Avenue
New
Brunswick, NJ 08901
|
152,500
(5)
|
*
|
|
Tom
Equels
2601
South Bay Shore Drive
Suite
600
Miami,
FL 33133
|
213,367
|
*
|
|
William
M. Mitchell, M.D.
Vanderbilt
University
Department
of Pathology
Medical
Center North
21st
and Garland
Nashville,
TN 37232
|
476,618
(6)
|
*
|
|
David
R. Strayer, M.D.
|
200,746
(7)
|
*
|
|
Carol
A. Smith, Ph.D.
|
69,291
(8)
|
*
|
|
Iraj-Eqhbal
Kiani, Ph.D.
Orange
County Immune Institute
18800
Delaware Street
Huntingdon
Beach, CA 92648
|
183,874
(9)
|
*
|
|
W.
Springate
|
48,900
(10)
|
*
|
|
R.
Lander, Ph.D.
|
15,000
(11)
|
*
|
|
K.
Ferencz-Biro, Ph.D.
|
15,000
(11)
|
*
|
|
All
directors and executive officers as a group
(11
persons)
|
9,428,380
|
11.5%
|
*
Less
than 1%
22
|
(1)
|
Includes
shares issuable upon the exercise of (i) replacement options issued
in
2006 to purchase 376,650 shares of common stock exercisable at $3.78
per
share expiring on February 22, 2016; (ii) stock options issued in
2001 to
purchase 10,000 shares of common stock at $4.03 per share expiring
January
3, 2011; (iii) options issued in 2007 to purchase 1,000,000 shares
of
common stock exercisable at $2.00 per share expiring on September
9, 2017,
these options replaced previously issued options that expired unexercised
on August 13, 2007; (iv) warrants issued in 2003 to purchase 1,450,000
shares of common stock exercisable at $2.20 per share expiring on
September 8, 2008; (v) stock options issued in 2004 to purchase 320,000
shares of common stock at $2.60 per share expiring on September 7,
2014;
(vi) Stock Options issued in 2005 to purchase 100,000 shares of common
stock at $1.75 per share expiring on April 26, 2015; (vii) Stock
options
issued in 2005 to purchase 465,000 shares of common stock at $1.86
per
share expiring June 30, 2015; and (viii) stock options issued in
2005 to
purchase 70,000 shares of Common Stock at $2.87 per share expiring
December 9, 2015; (ix) stock options issued in 2005 to purchase 10,000
shares of Common Stock at $2.61 per share expiring December 8, 2015;
(x)
300,000 options issued in 2006 to purchase common stock at $2.38
per share
and expiring on January 1, 2016; and (xi) 476,490 shares of Common
Stock.
Also includes 1,663,728 warrants and options originally issued to
William
A. Carter and subsequently transferred to Carter Investments of which
Dr.
Carter is the beneficial owner. These securities consist of (a) warrants
issued in 2008 to purchase 190,000 shares of common stock at $4.00
per
share expiring on February 17, 2018, these options replace previously
issued warrants that expired unexercised on February 18, 2007, (b)
stock
options granted in 1991 and extended in 1998 to purchase 73,728 shares
of
common stock exercisable at $2.71 per share expiring on August 8,
2008 and
(c)options issued in 2007 to purchase 1,400,000 shares of common
stock at
$3.50 per share expiring on September 30, 2017. These options replaced
previously issued options that expired unexercised on September 30,
2007.
|
|
(2)
|
Includes
shares issuable upon exercise of (i) 20,000 options issued in to
purchase
common stock at $4.00 per share expiring on February 17, 2018, these
options replace previously issued warrants that expired unexercised
on
February 18, 2007; (ii) 100,000 warrants issued in 2002 exercisable
$2.00
per share expiring on August 17, 2017, these options replaced previously
issued options that expired unexercised on August 13, 2007; (iii)
stock
options issued in 2005 to purchase 100,000 shares of common stock
exercisable at $1.75 per share expiring on April 26, 2015; and(iv)
stock
options issued in 2004 to purchase 50,000 shares of common stock
exercisable at $2.60 per share expiring on September 7, 2014; (and
(vi)
201,296 shares of common stock of which 40,900 are subject to security
interest. Also includes 200,000 stock options originally granted
to Ransom
Etheridge in 2003 and 50,000 stock options originally granted to
Ransom
Etheridge in 2006, all of which were subsequently transferred to
relatives
and family trusts. 200,000 of these stock options are exercisable
at $2.75
per share and expire on December 4, 2013. 37,500 of these options
were
transferred to Julianne Inglima; 37,500 of these options were transferred
to Thomas Inglima; 37,500 of these options were transferred to R.
Etheridge-BMI Trust; 37,500 options were transferred to R. Etheridge-TCI
Trust and 50,000 of these options were transferred to the Etheridge
Family
Trust. 50,000 of these stock options are exercisable at $3.86 per
share
and expire on February 24, 2016. 12,500 of these shares were transferred
to Julianne Inglima; 12,500 of these options were transferred to
Thomas
Inglima; 12,500 of these options were transferred to R. Etheridge
- BMI
Trust; and 12,500 of these options were transferred to R. Etheridge-TCI
Trust. Julianne and Thomas are Mr. Etheridge’s daughter and son-in-law.
|
|
(3)
|
Includes
shares issuable upon exercise of (i) replacement options issued in
2007 to
purchase 13,750 shares of common stock at $2.37 per share and expiring
on
January 22, 2017; (ii) options issued in 2001 to purchase 10,000
shares of
common stock at $4.03 per share and expiring on January 3, 2011;
(iii)
options issued in 2005 to purchase 10,000 shares of Common Stock
at $2.61
per share expiring December 8, 2015; and (iv) 8,000 shares of Common
Stock. Also includes 498,824 warrants/options originally issued to
Robert
E. Peterson and subsequently transferred to the Robert E. Peterson
Trust
of which Robert E. Peterson is owner and Trustee and to Mr. Peterson’s
spouse, Leslie Peterson. The trust securities include options issued
in
2007 to purchase 200,000 shares at $2.00 per share expiring September
17,
2017, these options replaced previously issued options that expired
unexercised on August 13, 2007; options issued in 2006 to purchase
50,000
shares of common stock exercisable at $3.85 per share expiring on
February
28, 2016; replacement options issued in 2006 to purchase 100,000
shares of
common stock at $3.48 per share expiring on April 14, 2016; replacement
options issued in 2006 to purchase 30,000 shares of common stock
exercisable at $3.55 per share expiring on April 30, 2016 and 63,824
stock
options issued in 2004 consisting of 50,000 options to acquire common
stock at $3.44 per share expiring on June 22, 2014 and 13,824 options
to
acquire common stock at $2.60 per share expiring on September 7,
2014.
55,000 options to purchase common stock at $1.75 per share expiring
on
April 16, 2015 were transferred to Mrs. Peterson of which Mr. Peterson
is
still considered the beneficial owner.
|
23
|
(4)
|
Includes
shares issuable upon exercise of (i) 20,000 warrants issued in 1998
to
purchase common stock at $4.00 per share expiring on February 17,
2018,
these options replace previously issued warrants that expired unexercised
on February 18, 2007; (ii) 100,000 warrants issued in 2007 exercisable
at
$2.00 per share expiring on September 17, 2017, these options replaced
previously issued options that expired unexercised on August 13,
2007;
(iii)options granted in 2004 to purchase 54,608 shares of common
stock
exercisable at $2.60 per share expiring on September 17, 2014; (iv)
options granted in 2005 to purchase 100,000 shares of common stock
exercisable at $1.75 per share expiring on April 26, 2015; (v) stock
options issued in 2006 to purchase 50,000 shares of common stock
exercisable at $3.86 per share expiring February 24, 2006; (vi) 178,838
shares of common stock owned by Mr. Piani; vii) 40,900 shares of
common
stock owned jointly by Mr. and Mrs. Piani; and (viii) and 5,000 shares
of
common stock owned by Mrs. Piani.
|
|
(5)
|
Consists
of (i) 100,000 options exercisable at $2.11 per share expiring November
27, 2016 (ii) 50,000 options exercisable at $2.08 per share expiring
February 26, 2017 and (iii) 2,500 shares of common
stock.
|
|
(6)
|
Includes
shares issuable upon exercise of (i) options issued in to purchase
12,000
shares of common stock at $6.00 per share; (ii) 100,000 warrants
issued in
2002 exercisable at $2.00 per share expiring on August 13, 2007;
(iii)
50,000 stock options issued in 2004 exercisable at $2.60 per share
expiring on September 7, 2014; (iv) 100,000 stock options issued
in 2005
exercisable at $1.75 per share expiring on April 26, 2015; (v) stock
options issued in 2006 to purchase 50,000 shares of common stock
exercisable at $3.86 per share expiring February 24, 2006; and (vi)
164,618 shares of common stock.
|
|
(7)
|
(i)
stock options issued in 2007 to purchase 20,000 shares of common
stock at
$2.37 per share expiring on February 22, 2017; (ii) warrants issued
in
1998 to purchase 50,000 shares of common stock exercisable at $4.00
per
share expiring on February 17, 2018. These options replace previously
issued warrants that expired unexercised on February 18, 2007; (iii)
stock
options granted in 2001 to purchase 10,000 shares of common stock
exercisable at $4.03 per share expiring on January 3, 2011; (iv)
warrants
issued in 2007 to purchase 50,000 shares of common stock exercisable
at
$2.00 per share expiring on September 17, 2017, these options replaced
previously issued options that expired unexercised on August 13,
2007; (v)
stock options issued in 2004 to purchase 10,000 shares of common
stock
exercisable at $1.90 per share expiring on December 7, 2014; (vi)
stock
options issued in 2005 to purchase 10,000 shares of Common Stock
at $2.61
per share expiring December 8, 2015; (vii) stock options to purchase
15,000 shares of common stock at $2.20 per share expiring November
20,
2016; (viii)stock options issued in 2007 to purchase 25,000 shares
of
common stock at $1.30 per share expiring December 6, 2017 and (ix)
10,746
shares of common stock.
|
|
(8)
|
Consists
of shares issuable upon exercise of(i) 5,000 warrants issued in 1998
to
purchase common stock at $4.00 per share expiring June 7, 2008; (ii)
20,000 options issued in 2007 exercisable at $2.00 per share expiring
in
September 17, 2017, these options replaced previously issued options
that
expired unexercised on August 13, 2007; (iii) 6,791 stock options
issued
in 1997 exercisable at $2.37 expiring January 22, 2017; (iv) 10,000
stock
options issued in 2001 exercisable at $4.03 per share expiring January
3,
2011; (v) 10,000 stock options issued in 2004 exercisable at $1.90
expiring on December 7, 2014; (vi) 10,000 stock options issued in
2005 to
purchase Common Stock at $2.61 per share expiring December 8, 2015
and
(vii) 7,500 stock options issued in 1996 to purchase common stock
at $2.20
per share expiring November 20,
2016.
|
|
(9)
|
Consists
of shares issuable upon exercise of (i) 12,000 options issued in
2005
exercisable at $1.63 per share expiring on June 2, 2015; (ii) 15,000
options issued in 2005 exercisable at $1.75 per share expiring on
April
26, 2015; (iii) stock options issued in 2006 to purchase 50,000 shares
of
common stock exercisable at $3.86 per share expiring February 24,
2006;
and (iv) 106,874 shares of common stock.
|
|
(10)
|
Consists
of (i) stock options to acquire 1,812 shares of common stock at $1.90
per
share expiring December 7, 2014; (ii) stock options to acquire 2,088
shares of common stock at $2.61 per share expiring December 8, 2015;
(iii)
5,000 stock options at $2.20 per share expiring November 20, 2016;
(iv)
stock options to acquire 20,000 shares of common stock at $1.78 per
share
expiring April 30, 2017 and (v) stock options to acquire 20,000 shares
at
$1.30 per share expiring December 6,
2017.
|
|
(11)
|
Consists
of stock options to purchase 15,000 shares of common stock at $1.30
per
share expiring on December 6,
2017.
|
24
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, Tom Equels, 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.,
70, 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 from April 1995 to
February 2005; 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, 81,
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.
THOMAS
K. EQUELS, 56, is
the
President and Managing Director of the Equels Law Firm. Prior to that he was
Managing Director of Holtzman Equels, P.A., also a law firm. His practice is
devoted to complex litigation, with particular emphasis on civil racketeering,
business torts and commercial matters. For more than 25 years Tom has
represented national and state governments, banks, insurance companies, aviation
companies, construction and development companies. He has extensive experience
in international matters and has served as counsel for the Republic of Panama,
Chinese National Petroleum Corp., and has worked extensively in Europe as well
as in South America, Asia and Africa. Mr. Equels received his law degree from
Florida State University. He has served as litigation counsel for Hemispherx
Biopharma in a number of complex cases over the past ten years.
25
WILLIAM
M. MITCHELL, M.D., 72, has
been
a director since July 1998. Dr. 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.,
61, 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 an international planning and logistic specialist. 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.
26
PROPOSAL
NO. 2
RATIFICATION
OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
The
Board
of Directors, upon the recommendation of the Audit Committee, has appointed
the
firm of McGladrey & Pullen, LLP (“McGladrey”) as independent registered
public accountants of Hemispherx for the fiscal year ending December 31, 2008
subject to ratification by the stockholders. McGladrey has served as
Hemispherx’s independent registered public accountant since November
2006.
On
November 9, 2006, the Audit Committee of our Board of Directors approved the
appointment of and engaged McGladrey as our independent registered public
accounting firm, effective immediately. McGladrey replaced BDO Seidman, LLP
(“BDO”) as our independent registered public accounting firm.
As
noted
in our Current Report on Form 8-K/A filed with the Commission on September
22,
2006, BDO informed us that it would resign from the client-auditor relationship
with us no later than the date of our filing of our Form 10-Q report for the
period ending September 30, 2006. BDO's decision to resign was not recommended
or approved by our Audit Committee. On November 7, 2006, we filed our Form
10-Q
report for the period ended September 30, 2006 and BDO resigned from the
client-auditor relationship with us.
BDO's
reports on our financial statements for the fiscal years ended December 31,
2004
and December 31, 2005 did not contain any adverse opinion or any disclaimer
of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principles.
During
the fiscal years ended December 31, 2004 and December 31, 2005,and the
subsequent interim period preceding the date of BDO's resignation, there were
no
disagreements between us and BDO on any matter of accounting principles or
practice, financial statement disclosure or auditing scope of procedure which,
if not resolved to the satisfaction of BDO, would have caused BDO to make a
reference to the subject matter thereof in connection with its reports and,
during the same period, there were no reportable events as defined in item
304(a)(1)(v) of Regulation S-K, except as previously reported in Item 9A of
our
2005 Form 10-K/A2.
All
audit
and professional services are approved in advance by the Audit Committee to
assure such services do not impair the auditor’s independence from us. The total
fees by McGladrey
for 2006 and 2007 were $205,000 and $280,000, respectively.
The
following table shows the aggregate fees for professional services rendered
during the year ended December 31, 2007.
|
Amount
($)
|
|||||||
|
Description
of Fees
|
2006
|
2007
|
|||||
|
Audit
Fees
|
$
|
205,000
|
$
|
220,000
|
|||
|
Audit-Related
Fees
|
-
|
60,000
|
|||||
|
Tax
Fees
|
-
|
-
|
|||||
|
All
Other Fees
|
-
|
-
|
|||||
|
Total
|
$
|
205,000
|
$
|
280,000
|
|||
Audit
Fees
Represents
fees for professional services provided for the audit of our annual financial
statements, audit of the effectiveness of internal control over financial
reporting, services that are performed to comply with generally accepted
auditing standards, and review of our financial statements included in our
quarterly reports and services in connection with statutory and regulatory
filings.
27
Audit-Related
Fees
Represents
the fees for assurance and related services that were reasonably related to
the
performance of the audit or review of our financial statements.
The
Audit
Committee has determined that McGladrey’s rendering of these audit-related
services was compatible with maintaining auditor’s independence. The Board of
Directors considered McGladrey to be well qualified to serve as our independent
public accountants. The committee also pre-approved the charges for services
performed in 2006 and 2007.
The
Audit
Committee pre-approves all auditing services and the terms thereof (which may
include providing comfort letters in connection with securities underwriting)
and non-audit services (other than non-audit services prohibited under Section
10A(g) of the Exchange Act or the applicable rules of the SEC or the Public
Company Accounting Oversight Board) to be provided to us by the independent
auditor; provided, however, the pre-approval requirement is waived with respect
to the provisions of non-audit services for us if the “de minimus” provisions of
Section 10A (i)(1)(B) of the Exchange Act are satisfied. This authority to
pre-approve non-audit services may be delegated to one or more members of the
Audit Committee, who shall present all decisions to pre-approve an activity
to
the full Audit Committee at its first meeting following such
decision.
Representatives
of McGladrey & Pullen, LLP will be present at the annual meeting, will have
the opportunity to make a statement if they desire to do so and are expected
to
be available to respond to appropriate questions.
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.
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PROPOSAL
NO. 3
APPROVAL
OF THE ISSUANCE OF COMMON STOCK TO
COMPLY
WITH AMEX COMPANY GUIDE SECTION 713
In
connection with the transaction described below with Fusion
Capital Fund II, LLC ("Fusion Capital"),
we are
seeking approval of the issuance of Common Stock that could exceed 14,823,651
shares, or 19.99% of the outstanding shares of Common Stock. Section 713 of
the
American Stock Exchange ("AMEX") Company Guide provides that we must obtain
stockholder approval before issuance, at a price per share below market value,
of common stock, or securities convertible into common stock, equal to 20.0%
or
more of our outstanding common stock (the "Exchange Cap"). The Purchase
Agreement described below provides that no sales can be made if they would
cause
us to violate the Exchange Cap.
Fusion
Transaction
On
July
2, 2008, we entered into a Common Stock Purchase Agreement with Fusion Capital,
an Illinois limited liability company, as amended on July 23, 2008 solely to
correct the number of outstanding shares as of July 2, 2008 (“Purchase
Agreement”). Under the Purchase Agreement, Fusion Capital is obligated, under
certain conditions, to purchase shares from us in an aggregate amount of up
to
$30 million from time to time over a twenty-five (25) month period. Under the
terms of the Purchase Agreement, Fusion Capital has received a commitment fee
consisting of 650,000 shares of our common stock. Also, we will issue to Fusion
Capital up to an additional 650,000 shares as a commitment fee pro rata as
we
receive the $30 million of future funding.
Under
the
Purchase Agreement and a related Registration Rights Agreement with Fusion
Capital we are required to file a registration statement with the Securities
and
Exchange Commission (“SEC”) and register under the Securities Act of 1933 (1)
650,000 shares which have already been issued as a commitment fee, (2) an
additional 650,000 shares which we may issue in the future as a commitment
fee
pro rata as we receive up to the $30 million of future funding and (3) at least
13,523,651 shares which we may sell to Fusion Capital after the registration
statement is declared effective.
We
do not
have the right to commence any sales of our shares to Fusion Capital until
the
SEC has declared effective the registration statement. After the SEC has
declared effective such registration statement, generally we have the right
but
not the obligation from time to time to sell our shares to Fusion Capital in
amounts between $120,000 and $1.0 million depending on certain conditions.
We
have the right to control the timing and amount of any sales of our shares
to
Fusion Capital. The purchase price of the shares will be determined based upon
the market price of our shares without any fixed discount at the time of each
sale. Fusion Capital does not have the right nor the obligation to purchase
any
shares of our common stock on any business day that the price of our common
stock is below $0.40. There are no negative covenants, restrictions on future
fundings, penalties or liquidated damages in the Purchase Agreement or the
Registration Rights Agreement. The Purchase Agreement may be terminated by
us at
any time at our discretion without any cost to us.
Purchase
Of Shares Under The Common Stock Purchase Agreement
Under
the
common stock purchase agreement, on any business day selected by us, we may
direct Fusion Capital to purchase up to $120,000 of our common stock. The
purchase price per share is equal to the lesser of:
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the
lowest sale price of our common stock on the purchase date;
or
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•
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the
average of the three lowest closing sale prices of our common stock
during
the twelve consecutive business days prior to the date of a purchase
by
Fusion Capital.
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The
purchase price will be equitably adjusted for any reorganization,
recapitalization, non-cash dividend, stock split, or other similar transaction
occurring during the business days used to compute the purchase price. We may
direct Fusion Capital to make multiple purchases from time to time in our sole
discretion; no sooner then every two business days.
29
Our
Right To Increase the Amount to be Purchased
In
addition to purchases of up to $120,000 from time to time, we may also from
time
to time elect on any single business day selected by us to require Fusion
Capital to purchase our shares in an amount up to $150,000 provided that our
share price is not below $0.80 during the two business days prior to and on
the
purchase date. We may increase this amount to up to $250,000 if our share price
is not below $1.25 during the two business days prior to and on the purchase
date. This amount may also be increased to up to $500,000 if our share price
is
not below $1.75 during the two business days prior to and on the purchase date.
This amount may also be increased to up to $1,000,000 if our share price is
not
below $4.00 during the two business days prior to and on the purchase date.
We
may direct Fusion Capital to make multiple large purchases from time to time
in
our sole discretion; however, at least two business days must have passed since
the most recent large purchase was completed. The price at which our common
stock would be purchased in this type of larger purchases will be the lesser
of
(i) the lowest sale price of our common stock on the purchase date and (ii)
the
lowest purchase price (as described above) during the previous ten business
days
prior to the purchase date.
Minimum
Purchase Price
Under
the
common stock purchase agreement, we have set a minimum purchase price (“floor
price”) of $0.40. However, Fusion Capital does not have the right nor the
obligation to purchase any shares of our common stock in the event that the
purchase price would be less the floor price. Specifically, Fusion Capital
does
not have the right or the obligation to purchase shares of our common stock
on
any business day that the market price of our common stock is below
$0.40.
Events
of Default
Generally,
Fusion Capital may terminate the common stock purchase agreement without any
liability or payment to us upon the occurrence of any of the following events
of
default:
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the
effectiveness of the registration statement lapses for any reason
(including, without limitation, the issuance of a stop order) or
is
unavailable to Fusion Capital for sale of our common stock offered
hereby
and such lapse or unavailability continues for a period of ten consecutive
business days or for more than an aggregate of 30 business days in
any
365-day period;
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•
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suspension
by the AMEX of our common stock from trading for a period of three
consecutive business days;
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•
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the
de-listing of our common stock from the AMEX provided our common
stock is
not immediately thereafter trading on the Nasdaq OTC Bulletin Board
Market, the Nasdaq Global Market, the Nasdaq Capital Market, or the
New
York Stock Exchange;
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•
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the
transfer agent‘s failure for five business days to issue to Fusion Capital
shares of our common stock which Fusion Capital is entitled to under
the
common stock purchase agreement;
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any
material breach of the representations or warranties or covenants
contained in the common stock purchase agreement or any related agreements
which has or which could have a material adverse effect on us subject
to a
cure period of five business days;
or
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•
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any
participation or threatened participation in insolvency or bankruptcy
proceedings by or against us; or
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30
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•
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the
issuance of an aggregate of 14,823,651 shares to Fusion Capital under
our
agreement if we fail to obtain the requisite stockholder
approval.
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Our
Termination Rights
We
have
the unconditional right at any time for any reason to give notice to Fusion
Capital terminating the Purchase Agreement without any cost to us.
No
Short-Selling or Hedging by Fusion Capital
Fusion
Capital has agreed that neither it nor any of its affiliates shall engage in
any
direct or indirect short-selling or hedging of our common stock during any
time
prior to the termination of the common stock purchase agreement.
Use
of Proceeds
We
anticipate using the proceeds from this financing to fund infrastructure growth
including manufacturing, regulatory compliance and market development, as well
as to prospectively fund market opportunities and strategic partnerships.
As
of
July 8, 2008, the closing bid price for our common stock on the American Stock
Exchange was $1.07 per share. Assuming a purchase price of $1.07 per share,
approximately 28,037,383 shares of common stock (exclusive of the shares
issuable as a commitment fee “Commitment Shares”) would be issued under the
Purchase Agreement to realize the entire $30,000,000.
On
July
2, 2008, we had 74,155,334
outstanding shares of Common Stock. Accordingly, we cannot issue more than
14,823,651 shares (the “Exchange Cap”) under the Purchase Agreement (inclusive
of the Commitment Shares) without obtaining stockholder approval.
To
assure
that we are in compliance with Company Guide Section 713 and to permit us to
sell shares under the Purchase Agreement in excess of the Exchange Cap, we
are
requesting your approval of the issuance of Common Stock that could exceed
19.99% of the outstanding shares of Common Stock (inclusive of the Commitment
Shares).
Copies
of
the Purchase Agreement and the Registration Rights Agreement have been filed
as
exhibits to our Current Report on Form 8-K dated and filed on July 8,
2008.
Previous
transactions with Fusion Capital
In
July
2005 we entered into a prior common stock purchase agreement with Fusion
Capital, pursuant to which we sold an aggregate of 8,791,838 shares for total
gross proceeds of $20,000,000.
In
April
2006 we entered into a prior common stock purchase agreement with Fusion
Capital, pursuant to which we sold an aggregate of 10,682,032 shares for total
gross proceeds of $19,739,131 through November, 2007.
Effects
of issuance of the shares
A
significant number of shares will be issuable pursuant to the Purchase
Agreement. To the extent that a significant number of these shares are issued,
there will be a substantial pro rata dilution to our current stockholders.
In
addition, because these shares will be registered for public sale, such sales,
or the anticipation of the possibility of such sales, represents an overhang
on
the market and could depress the market price of our common stock.
31
If
issuance of these shares is not approved by stockholders, we most likely will
not be able to realize the entire $30,000,000 under the Purchase
Agreement.
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 Proposals No. 2, and No. 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.
Annual
Report on Form 10-K
Copies
of
the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2007, including financial statements, exhibits and any amendments thereto,
as
filed with the SEC may be obtained without charge upon written request to:
Corporate Secretary, Hemispherx Biopharma, Inc., 1617 JFK Boulevard,
Philadelphia, Pennsylvania 19103. You can also get copies of our filings made
with the SEC, including the Annual Report on Form 10-K, by visiting the SEC’s
web site at www.sec.gov.
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.
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By
Order of the Board of Directors,
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Ransom
W. Etheridge, Secretary
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Philadelphia,
Pennsylvania
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August
1, 2008
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