SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as Permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Solicitation Material Pursuant to Rule 14a-11(c) or rule 14a-12
Hemispherx Biopharma, Inc.
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(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)and0-11.
1) Title of each class of securities to which transaction applies:
---------
2) Aggregate number of securities to which transaction applies:
---------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
---------------------
5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
(4) Date Filed:
HEMISPHERX BIOPHARMA, INC.
1617 JFK Boulevard
Philadelphia, Pennsylvania 19103
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 24, 2009
To the Stockholders of Hemispherx Biopharma, Inc.:
You are cordially invited to attend the Annual Meeting of Stockholders
of Hemispherx Biopharma, Inc. ("Hemispherx"), a Delaware corporation, to be held
at the Embassy Suites Hotel, 1776 Benjamin Franklin Parkway, Philadelphia
Pennsylvania 19103, on Wednesday, June 24, 2009, at 10:00 a.m. local time, for
the following purposes:
1. To elect five members to the Board of Directors of Hemispherx to serve
until their respective successors are elected and qualified;
2. To ratify the selection by Hemispherx's audit committee of McGladrey &
Pullen, LLP, independent registered public accountants, to audit the
financial statements of Hemispherx for the year ending December 31, 2009;
3. To amend Hemispherx's certificate of incorporation to increase the number
of authorized shares of Hemispherx common stock from 200,000,000 to
350,000,000;
4. To adopt the Hemispherx 2009 Equity Incentive Plan; and
5. To transact such other matters as may properly come before the meeting or
any adjournment thereof.
Only stockholders of record at the close of business on May 8, 2009 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, 2008.
By Order of the Board of Directors
\s\ Thomas K. Equels, Secretary
Philadelphia, Pennsylvania
May __, 2009
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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, June
24, 2009, 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. It is anticipated that this proxy
statement and accompanying proxy are being distributed to stockholders beginning
on or about May 25, 2009. The principal executive offices of Hemispherx are
located at 1617 JFK Boulevard, Philadelphia, Pennsylvania 19103, telephone (215)
988-0080.
Important Notice Regarding the Availability of Proxy Materials for
the 2009 Annual Meeting of Stockholders To Be Held on June 24, 2009
This proxy statement and our 2008 Annual Report on Form 10-K are
available electronically at
http://hemispherx.net/content/investor/annualmeeting.asp.
OUTSTANDING SHARES AND VOTING RIGHTS
RECORD DATE; OUTSTANDING SHARES
Only stockholders of record at the close of business on May 8, 2009,
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 _____________ 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 is
necessary for approval of Proposal No. 2 and Proposal No. 4. The affirmative
vote of at least a majority of the outstanding shares entitled to vote at the
annual meeting at which a quorum is present is necessary for approval of
Proposal No. 3.
ADMISSION TO THE MEETING
Stockholders (or their authorized representatives) and our invited
guest 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 May 8, 2009, the record
date), you will be permitted to attend. Stockholders will be admitted to the
meeting beginning at 9:30 am EST. Seating is limited.
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REVOCABILITY OF PROXIES
If you attend the meeting, you may vote in person, regardless of
whether you have submitted a proxy. Any person giving a proxy in the form
accompanying this proxy statement has the power to revoke it at any time before
it is voted. It may be revoked by filing, with the corporate secretary of
Hemispherx at its principal offices, 1617 JFK Boulevard, Suite 660,
Philadelphia, PA 19103, a written notice of revocation or a duly executed proxy
bearing a later date, or it may be revoked by attending the meeting and voting
in person.
VOTING AND SOLICITATION
Every stockholder of record is entitled, for each share held, to one
vote on each proposal or item that comes before the meeting. There are no
cumulative voting rights. By submitting your proxy, you authorize William A.
Carter and Thomas K. Equels and each of them to represent you and vote your
shares at the meeting in accordance with your instructions. Messrs. Carter and
Equels 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 $______. 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 __________. to assist in the solicitation of
proxies on behalf of the Board of Directors. _________ has agreed to perform
this service for a proposed fee of $______ 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 Continental Stock Transfer
& Trust Company our 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 normally is a majority of the shares of common stock entitled to vote at
the annual meeting, in person or by proxy. However, with a majority of our
shares being held by persons or organizations in Europe, we had to repeatedly
reschedule our 2008 Annual Meeting in an attempt to attain a quorum of voters.
Finally, the Board amended our By-Laws to reduce the quorum for that meeting to
44% in voting power of the outstanding shares of stock and the meeting was held.
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Facing the same issue for the 2009 Annual Meeting, our Board of Directors again
amended our By-Laws to reduce the quorum, solely for the 2009 Annual Meeting,
from a majority to 40% in voting power of the outstanding shares of stock
entitled to vote. With a reduced quorum it is possible that the meeting will be
held but certain resolutions, such as the amendment to our certificate of
incorporation to increase the number of our authorized shares of common stock,
requiring the vote of a majority of the outstanding shares entitled to vote at
the annual meeting may not pass, even if all votes present at the meeting vote
for the proposal. Shares that are voted "FOR," "AGAINST" or "WITHHELD FROM" a
matter are treated as being present at the meeting for purposes of establishing
a quorum and are also treated as shares represented and voting the votes cast at
the annual meeting with respect to such matter.
While there is no definitive statutory or case law authority in
Delaware as to the proper treatment of abstentions, Hemispherx believes that
abstentions should be counted for purposes of determining both: (i) the presence
or absence of a quorum for the transaction of business; and (ii) the total
number of votes cast with respect to a proposal (other than the election of
directors). In the absence of controlling precedent to the contrary, Hemispherx
intends to treat abstentions in this manner. Accordingly, abstentions will have
the same effect as a vote against the proposal (other than the election of
directors).
Under current Delaware case law, while broker non-votes (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 2010 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 25, 2010.
Pursuant to the Company's Restated and Amended Bylaws, all stockholder
proposals may be brought before an annual meeting of stockholders only upon
timely notice thereof in writing having been given the Secretary of the Company.
To be timely, a stockholder's notice, for all stockholder proposals other than
the nomination of candidates for director, shall be delivered to the Secretary
at the principal executive offices of the Company not less than sixty (60) nor
more than ninety (90) days prior to the anniversary date of the immediately
preceding annual meeting of stockholders; provided, however, that in the event
that the annual meeting is called for a date that is not within thirty (30) days
before or after such anniversary date, the stockholder's notice in order to be
timely must be so received not later than the close of business on the tenth
(10th) day following the day on which such notice of the date of the annual
meeting was mailed or public disclosure of the date of the annual meeting was
made, whichever first occurs. To be timely, a stockholder's notice, with respect
to a stockholder proposal for nomination of candidates for director, shall be
delivered to the Secretary at the principal executive offices of the Company not
less than ninety (90) nor more than one hundred twenty (120) days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
provided, however, that in the event that the annual meeting is called for a
date that is not within thirty (30) days before or after such anniversary date,
the stockholder's notice in order to be timely must be so received not later
than the close of business on the tenth (10th) day following the day on which
such notice of the date of the annual meeting was mailed or public disclosure of
the date of the annual meeting was made, whichever first occurs. Provided,
however, in the event that the stockholder proposal relates to the nomination of
candidates for director and the number of directors to be elected to the Board
of Directors of the Company at an annual meeting is increased and there is no
public announcement by the Company naming all of the nominees for director or
specifying the size of the increased Board of Directors at least one hundred
days prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered to the Secretary at the principal executive offices of the Company not
later than the close of business on the tenth day following the day on which
such public announcement is first made by the Company. All stockholder proposals
must contain all of the information required under the Company's Bylaws, a copy
of which is available upon written request, at no charge, from the Secretary.
The Company reserves the right to reject, rule out of order, or take other
appropriate action with respect to any proposal that does not comply with these
and other applicable requirements.
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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 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 2008 and executed fourteen unanimous consents. All Directors
attended these meetings. Directors are expected to attend the Annual Meeting
absent unusual circumstances, although we have no formal policy on the matter.
In 2008, due to the multiple adjournments of the Annual Meeting, only the
Chairman of the Board was able to attend the meeting.
In 2008, 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
Thomas Equels, Secretary and Director. The Executive Committee had two meetings
in 2008. 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 one time in
2008 and all committee members were in attendance. ------------------
Corporate Governance and Nomination Committee.
In 2008, the Corporate Governance and Nomination Committee had two
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 NYSE 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.
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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 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.
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 NYSE
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 NYSE 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
Hemispherx' independent registered public accounting firm concerning
relationships with Hemispherx and the performance of Hemispherx's independent
registered public accounting firm.
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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:
o To appoint, evaluate, and as the Committee may deem appropriate,
terminate and replace the Company's independent registered public
accountants;
o To monitor the independence of the Company's independent registered
public accountants;
o To determine the compensation of the Company's independent registered
public accountants;
o 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;
o To review the Company's risk exposures, the adequacy of related
controls and policies with respect to risk assessment and risk
management;
o To monitor the integrity of the Company's financial reporting processes
and systems of control regarding finance, accounting, legal compliance
and information systems;
o To facilitate and maintain an open avenue of communication among the
Board of Directors, management and the Company's independent registered
public accountants.
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 NYSE Amex Company Guide.
The Committee met two times in 2008. 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
accountants, 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 also discussed with has discussed with McGladrey &
Pullen, LLP during the 2008 fiscal year the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit Committees), as
amended, and other standards of the Public Company Accounting Oversight Board,
rules of the SEC and other applicable regulations.
The Committee received from McGladrey & Pullen, LLP the written
disclosures and the letter required by applicable requirements of the Public
Company Accounting Oversight Board regarding McGladrey & Pullen, LLP 's
communications with the Audit Committee concerning independence and discussed
with McGladrey & Pullen, LLP the independence of their firm.
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, 2008, 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, 2008.
This report is respectfully submitted by the members of the Audit
Committee of the Board of Directors.
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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 Thomas K. Equels. The Committee met two times in 2008
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.
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
Thomas K. Equels, Corporate Secretary, 2601 S. Bayshore Dr., Suite #600, Miami,
FL 33133. All letters received will be categorized and processed by the
Corporate Counsel or Secretary, and then forwarded to the Company's Board or
Directors.
Director Attendance at Annual Meetings of Stockholders
Directors are encouraged, but not required, to attend the Annual
Meeting of Stockholders. Due to the Company's need to repeatedly reschedule the
Annual Meeting in a attempt to attain a minimum quorum, only the Chairman of the
Board was in attendance at the November 11, 2008 meeting.
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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. 71 Chairman, Chief Executive Officer
Thomas K. Equels 58 Corporate Secretary
Charles T. Bernhardt, CPA 47 Chief Financial Officer
David R. Strayer, M.D. 63 Medical Director, Regulatory Affairs
Carol A. Smith, Ph.D. 57 Vice President of Manufacturing Quality and
Process Development
Ransom W. Etheridge 69 General Counsel
Wayne Springate 38 Vice President of Operations
Katalin Ferencz-Biro 62 Senior Vice President of Regulatory Affairs
Russel Lander 58 Vice President of Quality Assurance
For biographical information about William A. Carter, M.D and Thomas K.
Equels, please see the discussion under the heading "Proposal No. 1 Election of
Directors".
CHARLES T. BERNHARDT is a Certified Public Accountant who also has
attained a Masters' Degree in Business Administration. He is a graduate of
Villanova University and West Chester University of Pennsylvania. He has served
as our Chief Financial Officer since January 1, 2009. Most recently he was the
Director of Accounting for Healthcare Division of Thomson Reuters, an overall
company with $12 billion annual revenues and 50,000 total world-wide employees,
where he was responsible for their Healthcare Division's accounting operations,
including the Physicians' Desk Reference business, as well as the shared
financial services for the Healthcare and Scientific Divisions from 2006 to
2008. He was a Regional Controller for Comcast Cable from 1999 to 2002, Director
of Finance for TelAmerica Media from 2003 to 2006 and, earlier in his career, a
member of the Internal Audit management teams American Stores Corporation and
ICI Americas/Zenica (currently AstraZenica Pharmaceuticals). In 1986, he became
a C.P.A. licensed in Pennsylvania and New Jersey while with public accounting's
"Big Four" firm of KPMG.
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.
9
CAROL A. SMITH, Ph.D. is Vice President of Manufacturing Quality and
Process Development who 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(R). Dr. Smith was
Scientist/Quality Assurance Officer for Virotech International, Inc. from 1989
to 1991 and Director of the Reverse Transcriptase and Interferon Laboratories
and a Clinical Monitor for Life Sciences, Inc. from 1983 to 1989. She received
her Ph.D. 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.
RANSOM W. ETHERIDGE presently serves as our General Counsel. He served
as a member of our Board of Directors from October 1997 through November 2008
and as our Secretary from October 1997 to April 2009. 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.
WAYNE S. SPRINGATE is Vice President of Operations and joined
Hemispherx in 2002 as Vice President of Business Development. Mr. Springate came
on board when Hemispherx acquired Alferon N Injection(R) and its New Brunswick,
NJ 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(R)
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.
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(R). Dr. Ferencz-Biro received her Ph.D. in
Chemistry/ Biochemistry in 1972 from the University of Eotvos Lorand, Budapest,
Hungary, and her M.S., in Chemistry and Biology in 1971 from University of
Eotvos Lorand, 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 co-author of several scientific publications, patents and
presentations on the field of biochemistry. Currently she is a member of
Regulatory Affairs Professionals Society.
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(R). 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(R)
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
("SEC") 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
10
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 General Counsel and a former director, 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 $105,400 in
2008. In addition, Mr. Etheridge served on the Board of Directors until November
2008. For his service as a Director in 2008, he received Director's Fees of
$112,500 in cash and stock.
We use the property acquired in late 2004 by Retreat House, LLC, an
entity in which the children of William A. Carter have a beneficial interest. We
paid Retreat House, LLC $41,200 in 2008, for the use of the property at various
times.
Thomas K. Equels was elected to the Board of Directors at the Annual
Stockholders Meeting on November 17, 2008. Mr. Equels has provided legal serves
to us for several years. In 2008, we paid Mr. Equel's law firm $395,000 for
services rendered. Mr. Equel's received $37,500 in our stock for his Board fees
in 2008.
We have continued to utilize The Sage Group, Inc., a health care,
technology oriented, strategy and transaction advisory firm, to assist us in
obtaining a strategic alliance in Japan for the use of Ampligen(R) in treating
Chronic Fatigue Syndrome (CFS) and Avian Flu. We paid The Sage Group
approximately $167,000 in fees for the year ended December 31, 2008.
Kati Kovari, M.D. was paid $13,000 in 2008 for her part-time services
to us as Assistant Medical Director. Dr. Kovari is the spouse of Dr. Carter, our
Chairman and CEO.
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,
2008, 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 2008. Specifically, Dr. Carter filed one form 4 late concerning one
transaction; Mr. Etheridge filed three Forms 4 late concerning three
transactions; Mr. Kiani filed three Forms 4 late concerning three transactions;
Mr. Piani filed three Forms 4 late concerning three transactions; Dr. Mitchell
filed four Forms 4 late concerning four transactions; and Dr. Strayer 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
11
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. In
past years, we had 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. However given the
current harsh economic conditions and our efforts to conserve cash, we did not
undertake an analysis of any compensation nor offer any incremental or
performance salary increases for the year-end 2008. Additionally, the Board did
not approve the award of any bonus for 2008.
Elements of Executive Compensation
Executive compensation consists of the following elements:
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 his employment agreement, our Chief Executive Officer is 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.
The Compensation Committee and the Board of Directors declined to
awarded bonuses for 2008 to any of our executives, senior or non-executive
employees.
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
12
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 2008, 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.
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
shareholder value over the longer term, and (4) the vesting period of stock
options encourages executive retention and the preservation of shareholder
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 shareholder 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.
Options granted under the 2004 plan include 1,345,742 in 2006,
3,232,870 in 2007 (including 2,970,000 issued for expiring options) and 687,000
in 2008 (302,000 issued for unexercised and expired options). Unless sooner
terminated, the Equity Incentive Plan will continue in effect for a period of 10
years from its effective date.
Our 2004 Equity Compensation Plan authorizes us to grant restricted
stock and restricted stock units. In 2008, we issued 755,829 shares to
consultants and vendors for services rendered in lieu of cash.
As of December 31, 2008 we had 18,081 shares for future use under the
2004 plan.
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. This Plan also authorizes us to
grant restricted stock and restricted stock units. 1,450,000 options (all were
issued for expiring and unexercised options) were granted pursuant to the 2007
plan. In addition, we issued 201,010 shares of unrestricted stock and 2,434,177
shares in restricted stock to consultants and other vendors for services
performed in lieu of cash.
13
Other Compensation
Our Chief Executive 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 is 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 we 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. On January 1, 2009, Dr.
Carter's compensation as an employee was changed pursuant to our "Employee Wage
Or Hours Reduction Program" (discussed below) consistent with an employee
earning over $200,000 per annum to receive 50% of his wages in Incentive Rights
on a three-to-one conversion basis.
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 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 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. On
January 1, 2009, Dr. Carter's compensation as a consultant was changed pursuant
to our "Employee Wage Or Hours Reduction Program" consistent with an employee
earning over $200,000 per annum to receive 50% of his fee in Incentive Rights on
a three-to-one conversion basis.
An Engagement Agreement with Charles T. Bernhardt, CPA as Chief
Financial Officer (interim) was finalized on December 1, 2008 and effective
January 1, 2009. The agreement calls for an initial salary of $160,000 per annum
and eligibility for the Goal Achievement Incentive Program. Additionally, the
agreement is based on an employment "at will" basis in which either party may
cancel upon two weeks written notice. Consistent with the Company's "Employee
Wage Or Hours Reduction Program", Mr. Bernhardt has elected to receive 50% of
his wages in Incentive Rights on a three-to-one conversion basis.
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 $105,408 and is annually subject to adjustment based on the average
14
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. Effective January 1, 2009, one-half of the
monthly fee compensation to be paid to Ransom W. Etheridge pursuant to the terms
of his Engagement Agreement with us as our General Counsel will be paid in
shares of the Company's common stock ("Etheridge Share Compensation"). The
number of shares issued as Etheridge Share Compensation shall be calculated
based on a value equal to three times one-half of the monthly fee compensation
to be paid to Mr. Etheridge pursuant to the terms of his Engagement Agreement
with us, with the value of the shares being determined by the average of the
closing share price of our common stock on the NYSE Amex for the month for which
compensation is due.
On December 31, 2008, we entered into a severance/consulting agreement
with retiring Chief Financial Officer, Robert E. Peterson. This agreement
provide a monthly fee of $4,000 plus travel expenses and Options to purchase
20,000 shares of the our common stock at the end of each calendar quarter
through year-end 2011 in return for consulting services. The exercise price of
the Options is to be equal to 120% of the closing price of the our stock on the
NYSE Amex on the last trading day of the calendar quarter for which the Options
are being issued. Mr. Peterson may terminate the Advisory Services at any time
upon giving us 60 days notice in writing of the intention to terminate the
Advisory Services. Mr. Peterson also is entitled to certain change of control
benefits and an incentive fee if and when we execute a financing transaction.
Goal Achievement Incentive Program
On November 17, 2008 the Board of Directors authorized the Goal
Achievement Incentive Program. This program is designed to intensify the efforts
of the parties involved in securing strategic partnering agreements with third
parties. Pursuant to the Goal Achievement Program, we will pay the parties
participating in the Program an incentive bonus for each timely agreement (as
defined below) entered into by us with any and all third parties in which we
receive cash (as defined below) from such third parties as a result of the
execution of such agreements ("Strategic Partnering Agreements"), provided,
however, Strategic Partnering Agreements do not include agreements whereby we
receive cash as a result of (i) only the sale of Ampligen(R) or other of our
products, (ii) we only being reimbursed for expenses, not including expenses for
prior research conducted by us, incurred by us, (iii) an agreement in which the
only economic benefit to us is one or more loans, and (iv) an agreement, other
than an agreement which results in a change of control of the Hemispherx, in
which the only economic benefit to us is the sale of our equity or other
securities. The incentive bonus will be in an amount equal to one percent (1%)
of the amount of all cash received by us pursuant to each such Strategic
Partnering Agreement between the dates of the execution of each such Strategic
Partnering Agreement and the first commercial sale of Ampligen(R) following the
full commercial approval of the sale of Ampligen(R) in each jurisdiction. All
incentive bonus payments will be payable in readily available funds within ten
(10) days following receipt by us of readily available funds as a result of our
receipt of such first cash. For purposes hereof "timely agreements" means all
agreements entered into by us with any and all third parties (a) on or before
June 30, 2009 and (b) on or before March 31, 2010 with third parties with which
we had been in active negotiations on or before June 30, 2009. For purposes of
the Goal Achievement Program "cash" means any asset which is either (a) readily
available funds or (b) capable of being converted into readily available funds
in value equal to the value ascribed to such asset in the Strategic Partnering
Agreement within six months of the receipt of such asset by us. The Goal
Achievement Program presently includes Dr. William Carter, CEO, Dr. Chaunce
Bogard, consultant and acting Senior Vice President, The Sage Group (one of our
strategic advisors) and Anthony Bonelli, our former President and COO, Dr. David
R. Strayer, Medical Director and all of our active employees as of January 1,
2009.
Employee Wage Or Hours Reduction Program
In an effort to conserve Company cash, the Employee Wage Or Hours
Reduction Program (the "Program") was ratified by the Board effective January 1,
2009. In a mandatory program that is estimated to be in effect for up to six
months, compensation of all active full-time employees as of January 1, 2009
("Participants") were reduced through a reduction in their wages for which they
would be eligible to receive shares of our common stock ("Stock") six months
15
after the shares were earned. While all employees were also offered the option
to reduce their work hours with a proportional decease in wages, none elected
this alternative.
On a semi-monthly basis, Participants receive rights to Stock
("Incentive Rights") that cannot be traded. Six months after the date the
Incentive Rights are awarded, we will undertake a process to have Incentive
Rights converted into Stock and issued to each Participant on a monthly basis.
We will establish and maintain a record for the number of Incentive Rights
awarded to each Participant. At the end of each semi-monthly period, we will
determine the number of Incentive Rights by converting the proportionate
incentive award to the value of the Stock by utilizing the closing price of the
Stock on the NYSE Amex based on the average daily closing price for the period.
The Plan is being administered for full-time employees as follows:
o Twenty-three employees earning $90,000 or less per year elected a wage
reduction of 10% per annum and are receiving an incentive of two times
the value in Stock;
o Four employees earning $90,001 to $200,000 per year elected a wage
reduction of 25% per annum are receiving an incentive of two times the
value in Stock;
o Two employees earning over $200,000 per year elected a wage reduction
of 50% per annum and are receiving an incentive of three times the
value in Stock;
o Any employee could elect a 50% per annum wage reduction which would
allow them to be eligible for an incentive award of three times the
value in Stock. This option was elected by three employees.
Prior to the Stock being issued, we will establish a trading account
with an independent brokerage firm for each Participant. Incentive Rights will
constitute income to the Participants and be subject to payroll taxes upon Stock
issuance. At a brokerage firm selected by us, we will bear all expenses related
to selling the Stock (i.e.; broker fees, transaction costs, commissions, etc.)
for payroll withholding taxes purposes. Thereafter, for each Participant during
the period that they remain an active employee, we will continue to bear such
costs from this designated brokerage firm for the maintenance of this account
and all expenses related to selling our Stock. Participants leaving us or
voluntarily separating from the Plan will receive the Stock earned upon the six
month conversion of their Incentive Rights. The Plan benefits for individuals
that are no longer Participants will become fixed and we will not continue to
bear such costs from the designated brokerage firm for the maintenance of an
account nor any expenses related to selling the Stock except for the initial
costs associated to the selling of Stock for payroll withholding taxes purposes.
Employee Bonus Pool Program
An element of the Employee Wage Or Hours Reduction Program was the
establishment of a Bonus Pool (the "Pool") in the case of FDA Approval
("Approval") of Ampligen(R). This bonus is to award to each employee of record
at January 1, 2009 a pretax sum of 30% in wages, calculated on their base per
annum compensation at the time of the Approval, and awarded within three months
of Approval. Participants who terminate their employment prior to the Approval
will not qualify for this bonus.
Key Employee Retention
The Board of Directors, deeming it essential to the best interests of
our shareholders 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 our detriment and our shareholders,
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 Hemispherx and entered into identical agreements regarding change in
control with William A. Carter, our Chief Executive Officer and Chief Scientific
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, 2008 and extend automatically to the third anniversary thereof
unless we give notice to the other party prior to the date of such extension
16
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
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 and/or Ransom W. Etheridge, respectively, for good reason as defined
in the agreement or, (3) by William A. Carter, and 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.
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. Through March
14, 2008, Participants' contributions to the 401(K) plan were 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.
Effective March 15, 2008, we ended our 100% matching of up to 6% of the
401(k) contributions provided to the account for each eligible participant. Our
401(k) Plan contribution cost for the twelve months ended December 31, 2008 is
$20,421 and it is required for payment prior to the final filing of our 2008
Federal Corporate Tax filing. There has not been any additional Company matching
costs since March 15, 2008 and none is projected for calendar year 2009.
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 term of
the agreement if terminated without cause.
We believe that our Executive Officers' severance package is 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
("Directors' fees") of $150,000, which in 2008 was paid two thirds in cash and
one third in our common stock. On September 9, 2003, the Directors approved a 10
17
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 NYSE Amex on the last day of the calendar quarter. Director's fees
are paid quarterly at the end of each calendar quarter.
On November 28, 2009, Thomas K. Equels joined our Board of Directors as
a non-employee Board member in which his compensation of $150,000 for all
director fees were agreed to be paid in the form of our common stock.
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.
Commencing as of January 1, 2009, the ratio of stock to cash being paid
as Director's fees ("Annual Compensation") was changed. The Annual Compensation
for each of the directors then serving, other than Thomas Equels, consists of
$25,000 and shares of common stock having a value of $125,000 ("Share
Compensation"). The Annual Compensation for Thomas Equels consists of shares of
common stock having a value of $150,000 ("Share Compensation").
To the extent that Share Compensation would exceed 1,000,000 shares in
the aggregate for the ten year period commencing January 1, 2003 as previously
approved by Resolution of the Board of September 9, 2003, shares for Share
Compensation shall be issued under the our 2007 Equity Incentive Plan.
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.
Summary Compensation Table - 2006 - 2008
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
Name and Principal Position Year Salary/Fees Bonus Option Award Non-Equity Change in Pension All Other Total
(1), (8) Incentive Value and Compensation
& (14) Plan Nonqualified
CompensationDeferred
and Stock Compensation
Awards Earnings
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
William. A. Carter, 2008 $664,624 $- $316,571(4) $- $- $106,094(2) $1,087,289
Chief Executive Officer 2007 $637,496 $166,156 $1,688,079 $- $- $123,063(9) $2,614,794
2006 $655,686 $166,624 $1,236,367 $- $- $118,087(15)(16) $2,176,764
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
Anthony A. Bonelli, 2008 $- $- $- $- $- $- $-
Chief Operating Officer 2007 $350,000(11)$87,500 $59,684 $- $- $33,375(10) $530,559
2006 $35,000(17) $50,000 $122,601 $- $- $3,000(15) $210,601
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
Robert. E. Peterson, Chief 2008 $259,164 $- $- $- $- $- $259,164
Financial Officer (3) 2007 $259,164 $64,791 $153,055 $- $- $- $477,010
2006 $259,164 $64,791 $373,043 $- $- $- $696,998
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
David. R. Strayer, Medical 2008 $201,389 $- $16,168(4) $- $- $- $217,557
Director 2007 $240,348 $50,347 $79,810 $- $- $- $370,505
2006 $225,144 $- $19,200 $- $- $- $244,344
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
Carol A. Smith, VP 2008 $147,695 $- $600(4) $- $- $23,072(5) $171,367
of Manufacturing Quality & 2007 $147,695 $- $34,235 $- $- $30,088(11) $212,018
Process Dev.. 2006 $143,136 $- $9,600 $- $- $17,227(16) $169,963
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
Mei-June Liao, VP of 2008 $- $- $- $- $- $- $-
Regulatory Affairs & 2007 $- $- $- $- $- $- $-
Quality Control 2006 $158,381 $- $9,600 $- $- $18,246(16) $186,227
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
Katalin Ferencz-Biro, 2008 $145,000 $- $- $- $- $11,461(6) $156,461
Senior VP of Regulatory 2007 $145,000 $- $11,744 $- $- $13,999(12) $170,743
Affairs 2006 $- $- $- $- $- $- $-
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
Wayne Springate, VP of 2008 $150,000 $- $- $- $- $7,354(6) $157,354
Operations 2007 $150,000 $37,500 $36,253 $- $- $13,429(12) $237,182
2006 $- $- $- $- $- $- $-
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
Russel Lander, 2008 $178,000 $- $- $- $- $9,649(7) $187,649
VP of Quality Assurance 2007 $178,000 $- $11,744 $- $- $9,649(13) $199,393
2006 $- $- $- $- $- $- $-
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- - --------------
Robert Hansen, VP of 2008 $- $- $- $- $- $- $-
Manufacturing 2007 $- $- $- $- $- $- $-
2006 $140,311 $- $9,600 $- $- $17,006(16) $166,917
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
R. Douglas Hulse 2008 $- $- $- $- $- $- $-
2007 $- $- $- $- $- $- $-
2006 $105,000 $- $- $- $- $- $105,000
---------------------------- ---- ----------- -------- ------------ ---------- ----------------- ------------- ---------------
19
2008 Notes:
(1) Based on Black Scholes pricing model of valuing options. Total fair of
options granted to Officers in 2007 was $364,648.
(2) Consists of a) Life Insurance premiums totaling $66,411; b) Healthcare
premiums of $28,586; and d) company car expenses of $11,097.
(3) Mr. Peterson retired from Hemispherx effective December 31, 2008.
(4) Issue of options for options previously granted that expired
unexercised.
(5) Consists of Healthcare premiums of $21,226, and 401-K matching funds of
$1,846.
(6) Healthcare premiums and 401-K matching funds.
(7) Healthcare premiums.
2007 Notes:
(8) Based on Black Scholes pricing model of valuing options. Total fair of
options granted to Officers in 2007 was $364,648.
(9) Consists of a) Life Insurance premiums totaling $66,411; b) Healthcare
premiums of $28,586; and d) company car expenses of $11,097.
(10) Mr. Peterson retired from Hemispherx effective December 31, 2008.
(11) Issue of options for options previously granted that expired
unexercised.
(12) Consists of Healthcare premiums of $21,226, and 401-K matching funds of
$1,846.
(13) Healthcare premiums and 401-K matching funds.
2006 Notes:
(14) Based on Black Scholes Pricing Model of valuing options. Total Fair
Value of Option Awards granted to officers in 2006 was $1,780,011.
(15) Consists of Healthcare premiums, life insurance premiums, 401-K
matching funds, qualifying insurance premium, company car and parking
cost.
(16) Consists of healthcare premiums and 401-K matching funds.
(17) Mr. Bonelli joined Hemispherx on November 27, 2006. His annual salary
was $350,000.
20
2008 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, 2008. 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 Expiration Date Closing Price on Grant Date Fair Value
Share Grant of Option (2)
----------------- ---------- ----------------- ------------------ --------------- ----------------- -----------------------
----------------- ---------- ----------------- ------------------ --------------- ----------------- -----------------------
W.A. Carter, CEO 2/18/08 190,000(1) $4.00 2/18/18 $ 0.89 61,437
9/17/08 1,450,000(1) 2.20 9/17/18 0.52 255,134
----------------- ---------- ----------------- ------------------ --------------- ----------------- -----------------------
----------------- ---------- ----------------- ------------------ --------------- ----------------- -----------------------
D. Strayer, 2/18/08 50,000(1) 4.00 2/18/18 0.89 16,168
Medical Director
----------------- ---------- ----------------- ------------------ --------------- ----------------- -----------------------
----------------- ---------- ----------------- ------------------ --------------- ----------------- -----------------------
C. Smith, VP MFG. 2/18/08 5,000(1) 4.00 2/18/18 0.89 600
----------------- ---------- ----------------- ------------------ --------------- ----------------- -----------------------
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 2008 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.
21
Outstanding Equity Awards at Year End - 2008
----------------- -------------------------------------------------------------- -------------------------------------------------
Option/Warrants Awards Stock Awards
----------------- -------------------------------------------------------------- -------------------------------------------------
----------------- ------------ -------------- --------------- -------- --------- --------- --------- -------------- -------------
Name Number of Number of Equity Option Option Number of Market Equity Equity
Securities Securities Incentive Plan Exercise Expiration Shares or Value of Incentive Plan Incentive
Underlying Underlying Awards Number Price Date Units of Shares or Awards: Number Plan Awards:
Unexercised Unexercised of Securities Stock That Unit That of Unearned Market or
Options (#) Options (#) Underlying Have Not Have Not Shares, Units Payout Value
Exercisable Unexercisable Unexercised Vested (#) Vested or Other of Unearned
Unearned Rights That Shares, Units
Options (#) Have Not or Other
Vested (#) Rights That
Have Not
Vested
----------------- ------------ -------------- --------------- -------- ---------- --------- --------- -------------- -------------
----------------- ------------ -------------- --------------- -------- ---------- --------- --------- -------------- -------------
W.A. Carter, CEO 1,450,000 0 0 $2.20 9/17/18 - - - -
1,000,000 0 0 2.00 9/9/17 - - - -
190,000 0 0 4.00 2/18/18 - - - -
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 - - - -
----------------- ------------ -------------- --------------- -------- ---------- --------- --------- -------------- -------------
----------------- ------------ -------------- --------------- -------- ---------- --------- --------- -------------- -------------
C. Bogard, S VP 100,000 0 0 0.68 6/5/13 - - - -
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 - - - --
----------------- ------------ -------------- --------------- -------- ---------- --------- --------- -------------- -------------
22
----------------- ------------ -------------- --------------- -------- ---------- --------- --------- -------------- -------------
D. Strayer, 50,000 0 0 2.00 9/9/17 - - - -
Medical Director 50,000 0 0 4.00 2/28/18 - - - -
10,000 0 0 4.03 1/3/11 - - - -
5,000 15,000 0 3.50 2/23/07 - - - -
10,000 0 0 1.90 12/14/14 - - - -
10,000 0 0 2.61 12/8/15 - - - -
15,000 0 0 2.20 11/20/16 - - - -
16,667 8,333 0 1.30 12/6/17 - - - -
----------------- ------------ -------------- --------------- -------- ---------- --------- --------- -------------- -------------
----------------- ------------ -------------- --------------- -------- ---------- --------- --------- -------------- -------------
C. Smith, VP of 20,000 0 0 2.00 9/9/17 - - - -
MFG 5,000 0 0 4.00 9/17/18 - - - -
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 - - - -
7,500 0 0 2.20 11/20/16 - - - -
10,000 5,000 0 1.30 12/6/17 - - - -
----------------- ------------ -------------- --------------- -------- ---------- --------- --------- -------------- -------------
----------------- ------------ -------------- --------------- -------- ---------- --------- --------- -------------- -------------
W. Springate, VP 1,812 0 0 1.90 12/7/14 - - - -
of Operations 2,088 0 0 2.61 12/8/15 - - - -
5,000 0 0 2.20 11/20/16 - - - -
20,000 0 0 1.78 4/30/17 - - - -
13,333 6,667 0 1.30 12/6/17 - - - -
----------------- ------------ -------------- --------------- -------- ---------- --------- --------- -------------- -------------
----------------- ------------ -------------- --------------- -------- ---------- --------- --------- -------------- -------------
R. Lander, VP of
Quality Assurance 10,000 5,000 0 1.30 12/6/17 - - - -
----------------- ------------ -------------- --------------- -------- ---------- --------- --------- -------------- -------------
----------------- ------------ -------------- --------------- -------- ---------- --------- --------- -------------- -------------
K. Ferencz-Biro,
VP of Reg. Affairs 10,000 5,000 0 1.30 12/6/17 - - - -
----------------- ------------ -------------- --------------- -------- ---------- --------- --------- -------------- -------------
----------------- ------------ -------------- --------------- -------- ---------- --------- --------- -------------- -------------
23
Options Exercised / Stock Vested - 2008
--------------------------- ------------------------------------------- ----------------------------------------------
Option Awards Stock Awards
--------------------------- ------------------------------------------- ----------------------------------------------
--------------------------- ---------------------- -------------------- ---------------------- -----------------------
Name Number of Shares Value Realized on Number of Shares Value of Realized on
Acquired on Exercise Exercise ($) Acquired on Vesting Vesting ($)
(#) (#)
(b) (c) (d) (e)
(a)
--------------------------- ---------------------- -------------------- ---------------------- -----------------------
--------------------------- ---------------------- -------------------- ---------------------- -----------------------
W.A. Carter, CEO
none
--------------------------- ---------------------- -------------------- ---------------------- -----------------------
--------------------------- ---------------------- -------------------- ---------------------- -----------------------
W.C. Bogard,
S VP 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 Quality 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
Richard Piani, the Committee Chairman, William Mitchell, M.D. and Dr. Iraj E.
Kiani, are all independent directors. There are no interlocking relationships.
COMPENSATION COMMITTEE REPORT
Our Compensation Committee has reviewed and discussed the Compensation
Discussion and Analysis contained in this Annual Report with management. Based
on our Compensation Committee's review of and the discussions with management
with respect to the Compensation Discussion and Analysis, our Compensation
Committee recommended to the board of directors that the Compensation Discussion
and Analysis be included in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2008 for filing with the SEC.
COMPENSATION COMMITTEE
Richard Piani, Committee Chairman
William Mitchell, M.D.
Dr. Iraj E. Kiani
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.
24
Director Compensation - 2008
------------------ ------------ ----------- ----------- --------------- ------------------- ----------------- -----------
Name Fees Stock Option Non-Equity Change in Pension All Other Total ($)
Earned or Awards ($) Awards ($) Incentive Value and Compensation ($)
Paid in (2) Plan Nonqualified
Cash ($) Compensation Deferred
($) Compensation
Earnings
------------------ ------------ ----------- ----------- --------------- ------------------- ----------------- -----------
------------------ ------------ ----------- ----------- --------------- ------------------- ----------------- -----------
T. Equels, Director -0- 37,500 0 0 0 395,369 (1) 433,869
------------------ ------------ ----------- ----------- --------------- ------------------- ----------------- -----------
------------------ ------------ ----------- ----------- --------------- ------------------- ----------------- -----------
W. Mitchell, 100,000 50,000 0 0 0 0 150,000
Director
------------------ ------------ ----------- ----------- --------------- ------------------- ----------------- -----------
------------------ ------------ ----------- ----------- --------------- ------------------- ----------------- -----------
R. Piani, 100,000 50,000 0 0 0 0 150,000
Director
------------------ ------------ ----------- ----------- --------------- ------------------- ----------------- -----------
------------------ ------------ ----------- ----------- --------------- ------------------- ----------------- -----------
I. Kiani, 100,000 50,000 0 0 0 0 150,000
Director
------------------ ------------ ----------- ----------- --------------- ------------------- ----------------- -----------
(1) General Counsel fees as per Engagement Agreement.
(2) No options were awarded in 2008.
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.
25
PRINCIPAL STOCKHOLDERS
The following table sets forth as of April 29, 2009, the number and
percentage of outstanding shares of common stock beneficially owned by: o 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;
o each of our directors and the Named Executives; and
o all of our officers and directors as a group.
As of April 29, 2009, there were no other persons, 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
--------------------------------------------- ------------------------------------ -------------------------------
Name and Address of Shares Beneficially Owned % Of Shares
Beneficial Owner Beneficially Owned
--------------------------------------------- ------------------------------------ -------------------------------
--------------------------------------------- ------------------------------------ -------------------------------
William A. Carter, M.D. 6,732,064 (1) 8.1%
--------------------------------------------- ------------------------------------ -------------------------------
--------------------------------------------- ------------------------------------ -------------------------------
Ransom W. Etheridge 722,633 (2) *
1565-1 Old Virginia Beach Rd.
Virginia Beach, VA 23454
--------------------------------------------- ------------------------------------ -------------------------------
--------------------------------------------- ------------------------------------ -------------------------------
Richard C. Piani 631,935 (3) *
97 Rue Jeans-Jaures ,
Levaillois-Perret
France 92300
--------------------------------------------- ------------------------------------ -------------------------------
--------------------------------------------- ------------------------------------ -------------------------------
Warren C. Bogard, Ph.D. 242,815 (4) *
332 Long Ridge Lane
Exton, PA 19341
--------------------------------------------- ------------------------------------ -------------------------------
--------------------------------------------- ------------------------------------ -------------------------------
William M. Mitchell, M.D. 559,207 (5) *
Vanderbilt University
Department of Pathology
Medical Center North, 21st and Garland
Nashville, TN 37232
--------------------------------------------- ------------------------------------ -------------------------------
--------------------------------------------- ------------------------------------ -------------------------------
Thomas K. Equels 1,279,788 (11) 1.5%
2601 S. Bayshore Dr., Suite #600, Miami,
FL 33133
--------------------------------------------- ------------------------------------ -------------------------------
--------------------------------------------- ------------------------------------ -------------------------------
David R. Strayer, M.D. 229,246 (6) *
--------------------------------------------- ------------------------------------ -------------------------------
--------------------------------------------- ------------------------------------ -------------------------------
Carol A. Smith, Ph.D. 64,291 (7) *
--------------------------------------------- ------------------------------------ -------------------------------
--------------------------------------------- ------------------------------------ -------------------------------
Iraj-Eqhbal Kiani, Ph.D. 266,453 (8) *
Orange County Immune Institute
18800 Delaware Street
Huntingdon Beach, CA 92648
--------------------------------------------- ------------------------------------ -------------------------------
--------------------------------------------- ------------------------------------ -------------------------------
W. Springate 48,900 (9) *
--------------------------------------------- ------------------------------------ -------------------------------
--------------------------------------------- ------------------------------------ -------------------------------
R. Lander, Ph.D. 15,000 (10) *
--------------------------------------------- ------------------------------------ -------------------------------
--------------------------------------------- ------------------------------------ -------------------------------
K. Ferencz-Biro, Ph.D. 15,000 (10) *
--------------------------------------------- ------------------------------------ -------------------------------
--------------------------------------------- ------------------------------------ -------------------------------
Charles T. Bernhardt CPA 65,079 *
--------------------------------------------- ------------------------------------ -------------------------------
--------------------------------------------- ------------------------------------ -------------------------------
All directors and executive officers as a
group 10,686,868 12.8%
(11 persons)
--------------------------------------------- ------------------------------------ -------------------------------
* Less than 1%
26
(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 17, 2018, these
options replaced previously issued options that expired unexcercised 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; (xi) 476,490
shares of Common Stock; and (xii) 490,196 warrants to purchase common
stock issued on February 1, 2009 for the Stand-by Financing Agreement.
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 to purchase 73,728
shares of common stock exercisable at $2.71 per share expiring on
December 31, 2019 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 options 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) 252,633 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
November 3, 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) 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
27
stock exercisable at $3.86 per share expiring February 24, 2016; (vi)
230,177 shares of common stock owned by Mr. Piani; (vii) 40,900 shares
of common stock owned jointly by Mr. and Mrs. Piani; (viii) and 5,000
shares of common stock owned by Mrs. Piani; and (ix) 32,250 shares of
common stock issued to Mr. Piani for Board of Director fees.
(4) Consists of (i) 100,000 options exercisable at $0.68 per share expiring
June 5, 2013 and (ii) 142,815 shares of common stock issued to Mr.
Bogard for services rendered.
(5) 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 2007 exercisable at $2.00 per share expiring on
September 9, 2017; (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, 2016; and (vi) 247,207 shares of common stock.
(6) (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) 39,246 shares of
common stock.
(7) Consists of shares issuable upon exercise of(i) 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; (ii) 6,791 stock options issued in 1997
exercisable at $2.37 expiring January 22, 2017; (iii) 10,000 stock
options issued in 2001 exercisable at $4.03 per share expiring January
3, 2011; (iv) 10,000 stock options issued in 2004 exercisable at $1.90
expiring on December 7, 2014; (v) 10,000 stock options issued in 2005
to purchase Common Stock at $2.61 per share expiring December 8, 2015
and (vi) 7,500 stock options issued in 1996 to purchase common stock at
$2.20 per share expiring November 20, 2016.
(8) 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, 2016 and (iv) 189,453 shares of common stock.
(9) 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.
(10) Consists of stock options to purchase 15,000 shares of common stock at
$1.30 per share expiring on December 6, 2017.
(11) Consists of (i) 490,196 warrants to purchase common stock on February
1, 2009 for the Stand-by Financing Agreement and (ii) 789,592 shares of
common stock.
28
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., 71, the co-inventor of Ampligen(R), joined us
in 1978, and has served as: (a) our Chief Scientific Officer since May 1989; (b)
the Chairman of our Board of Directors since January 1992; (c) our Chief
Executive Officer since July 1993; (d) our President from April 1995 to February
2005; and (e) a director since 1987. From 1987 to 1988, Dr. Carter served as our
Chairman. Dr. Carter was a leading innovator in the development of human
interferon for a variety of treatment indications including various viral
diseases and cancer. Dr. Carter received the first FDA approval to initiate
clinical trials on a beta interferon product manufactured in the U.S. under his
supervision. From 1985 to October 1988, Dr. Carter served as our Chief Executive
Officer and Chief Scientist. He received his M.D. degree from Duke University
and underwent his post-doctoral training at the National Institutes of Health
and Johns Hopkins University. Dr. Carter also served as Professor of Neoplastic
Diseases at Hahnemann Medical University, a position he held from 1980 to 1998.
Dr. Carter served as Director of Clinical Research for Hahnemann Medical
University's Institute for Cancer and Blood Diseases, and as a professor at
Johns Hopkins School of Medicine and the State University of New York at
Buffalo. Dr. Carter is a Board certified physician and author of more than 200
scientific articles, including the editing of various textbooks on anti-viral
and immune therapy.
RICHARD C. PIANI, 82, has been a Director since 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 to 2000.
Mr. Piani provided consulting to us in 1993, with respect to general business
strategies for our 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, 57, has served as: (a) a Director since 2008 and (b)
as our Corporate Secretary since April 2009. Mr. Equels is the President and
Managing Director of Equels Law Firm based in Miami Florida. Mr. Equels legal
practice is focused on litigation, with particular emphasis on civil
racketeering for about 25 years Mr. Equels has represented national and state
government and companies in the banking, insurance, aviation, pharmaceutical and
construction industries. Mr. Equels received his law degree from Florida State
University and he is a graduate of Troy State University. He is a member of the
Florida Bar, the American Bar Association and the Academy of Florida Trial
Lawyers. Along with serving as a Board member, he continues to serve as the
Company's litigation lawyer has successfully represented Hemispherx in a number
of complex cases over the past ten years.
WILLIAM M. MITCHELL, M.D., Ph.D., 74, has been a Director since July
1998. Dr. Mitchell is a Professor of Pathology at Vanderbilt University School
of Medicine. Dr. Mitchell earned a M.D. from Vanderbilt and a Ph.D. from Johns
Hopkins University, where he 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, anti-viral drugs and immune
29
responses to HIV infection. Dr. Mitchell has worked for and with many
professional societies, including the International Society for Antiviral
Research, the American Society of Biochemistry and Molecular Biology, the
American Society of Microbiology and government review committees, among them
the National Institutes of Health, AIDS and Related Research Review Group. Dr.
Mitchell previously served as one of our directors from 1987 to 1989.
IRAJ EQHBAL KIANI, M.B.A., Ph.D., 62, was appointed to the Board of
Directors on May 1, 2002. Dr. Kiani is a citizen of the United States and
England that resides in Newport, California. Dr. Kiani served in various local
government positions including the Mayor and Governor of Yasoi, Capital of
Boyerahmand, Iran. In 1980, Dr. Kiani moved to England, where he established and
managed several trading companies over a period of some 20 years. Dr. Kiani is a
planning and logistic specialist who is now applying his knowledge and
experience to build a worldwide immunology network, which will use our
proprietary technology. Dr. Kiani received his Ph.D. degree from the University
of Ferdosi in Iran, ND from American University.
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.
30
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, 2009 subject to ratification by the stockholders. McGladrey has served as
Hemispherx's independent registered public accountant since November 2006.
On November 7, 2006, the Audit Committee of our Board of Directors
approved the appointment of McGladrey as our independent registered public
accounting firm, effective immediately. McGladrey replaced BDO Seidman, LLP
("BDO") as our independent registered public accounting firm.
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 & Pullen, LLP ("McGladrey") for 2007 and
2008 were $280,000 and $315,000, respectively. The following table shows the
aggregate fees for professional services rendered during the year ended December
31, 2008.
------------------------------------------ ----------------------------------------------
Amount ($)
------------------------------------------ ----------------------------------------------
------------------------------------------ ----------------------- ----------------------
Description of Fees 2007 2008
------------------------------------------ ----------------------- ----------------------
------------------------------------------ ----------------------- ----------------------
Audit Fees $280,000 $315,000
------------------------------------------ ----------------------- ----------------------
------------------------------------------ ----------------------- ----------------------
Audit-Related Fees -0- -0-
------------------------------------------ ----------------------- ----------------------
------------------------------------------ ----------------------- ----------------------
Tax Fees -0- -0-
------------------------------------------ ----------------------- ----------------------
------------------------------------------ ----------------------- ----------------------
All Other Fees -0- -0-
--- ---
------------------------------------------ ----------------------- ----------------------
------------------------------------------ ----------------------- ----------------------
------------------------------------------ ----------------------- ----------------------
------------------------------------------ ----------------------- ----------------------
Total $280,000 $315,000
======== ========
------------------------------------------ ----------------------- ----------------------
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.
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 2007 and 2008.
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.
31
Representative(s) 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.
32
PROPOSAL NO. 3
APPROVAL OF THE PROPOSAL TO AMEND OUR
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK
Our Board of Directors is proposing the approval and adoption of an
amendment to our Certificate of Incorporation, which increases the number of
shares of common stock authorized for issuance. The complete text of the
proposed Amendment to the Certificate of Incorporation is attached as Appendix A
to this Proxy Statement.
Our Certificate of Incorporation currently authorizes the issuance of
200,000,000 shares of common stock, $.001 par value and 5,000,000 shares of
preferred stock, $0.01 par value per share. In May 2009, the Board of Directors
adopted a resolution proposing that the Certificate of Incorporation be amended
to increase the authorized number of shares of common stock to 350,0000,000
subject to stockholder approval of such amendment. The Board of Directors has
determined that adoption of the Amendment is in Hemispherx's best interest and
unanimously recommends approval by the stockholders.
As of May 8, 2009, we had __________ shares of common stock outstanding
and __________ shares of common stock reserved for future issuance under our
existing stock option plans, outstanding options, warrants and convertible
debentures, and the Common Stock Purchase Agreement with Fusion Capital Fund II,
LLC leaving ___________ shares of common stock available for future grants.
The Board of Directors believes that the proposed increase in authorized
shares of common stock will benefit Hemispherx by providing flexibility to issue
shares of common stock for a variety of business and financial objectives in the
future without the necessity of delaying such activities for further stockholder
approval, except as may be required in particular cases by our charter
documents, applicable law or the rules of any stock exchange or national
securities association trading system on which our securities may be listed or
quoted. In addition, our Board of Directors could issue large blocks of shares
of common stock to fend off unwanted tender offers or hostile takeovers without
further stockholder approval.
At present and for the near future, we are issuing our shares of Common
Stock under our Employee Wage Or Hours Reduction Program, to certain vendors and
service providers who agree to accept stock in lieu of cash for their services,
and to Fusion Capital Fund II, LLC under the Common Stock Purchase Agreement. We
believe that we have a sufficient number of authorized, but unissued and
unreserved shares of Common Stock for these purposes. We anticipate that, in the
future, we most likely will (i) attempt to raise capital through the sale of
shares of our common stock or securities convertible into or exercisable for
shares of our common stock, (ii) acquire additional assets with our common
stock, and/or (iii) facilitate an agreement with a potential partner regarding
the marketing, distribution or manufacturing of our products Ampligen(R) or
Alfernon(R) in part through the issuance of our common stock. Aside from the
foregoing, we have no current plans to issue any of the shares that would be
authorized should this proposal no. 3 be approved by our stockholders.
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.
33
PROPOSAL NO. 4
APPROVAL OF THE HEMISPHERx 2009 EQUITY INCENTIVE PLAN
We are submitting the Hemispherx 2009 Equity Incentive Plan (the
"Equity Incentive Plan") to our stockholders for approval at the annual meeting.
The Equity Incentive Plan is intended to conserve cash as well as attract and
retain individuals of experience and ability, to provide incentive to our
employees, consultants, non-employee directors and vendors of the Company to
obtain a proprietary interests in the Company, and to encourage employees to
remain in the our employ. The Equity Incentive Plan is conditioned upon
stockholders' approval. The purposes of obtaining stockholder approval include
qualifying the Equity Incentive Plan under the Internal Revenue Code (the
"Code") for the granting of incentive stock options; meeting the requirements
for tax-deductibility of certain compensation items under Section 162(m) of the
Code; and meeting the requirements of the NYSE Amex applicable to the Equity
Incentive Plan.
The following general description of certain features of the Equity
Incentive Plan is qualified in its entirety by reference to the Equity Incentive
Plan, which is attached as Appendix B. Capitalized terms not otherwise defined
herein have the meanings ascribed to them in the Equity Incentive Plan.
The Board of Directors adopted the Equity Incentive Plan effective
April 29, 2009, subject to the approval of the Company's stockholders. The
Equity Incentive Plan authorizes the grant of non-qualified and incentive stock
options, stock appreciation rights, restricted stock and other stock awards. A
maximum of 15,000,000 shares of common stock is reserved for potential issuance
pursuant to awards under the Equity Incentive Plan. Unless sooner terminated,
the Equity Incentive Plan will continue in effect for a period of 10 years from
its effective date.
The Equity Incentive Plan is administered by the Board of Directors.
The Equity Incentive Plan provides for awards to be made to such officers,
employees, non-employee directors, consultants and advisors of the Company and
its subsidiaries as the Board may select. No awards have been granted under the
Equity Incentive Plan.
Stock options awarded under the Equity Incentive Plan may be
exercisable at such times (not later than 10 years after the date of grant) and
at such exercise prices (not less than fair market value at the date of grant)
as the Board may determine. The Board may provide for options to become
immediately exercisable upon a "change in control," which is defined in the
Equity Incentive Plan to occur upon any of the following events: (a) the
acquisition by any person or group, as beneficial owner, of 20% or more of our
outstanding shares or the voting power of our outstanding securities; (b) either
a majority of our directors at the annual stockholders meeting has been
nominated other than by or at the direction of the incumbent directors of the
Board, or the incumbent directors cease to constitute a majority of our Board;
(c) our stockholders approve a merger or other business combination pursuant to
which our outstanding common stock no longer represents more than 50% of the
combined entity after the transaction; (d) our stockholders approve a plan of
complete liquidation or an agreement for the sale or disposition of all or
substantially all of our assets; or (e) any other event or circumstance
determined by our Board to affect control of Hemispherx and designated by
resolution of the Board as a change of control.
The exercise price of an option may be paid with cash, common stock, or
such other consideration as the Board may specify. No options may be granted
under the Equity Incentive Plan after the tenth anniversary of its effective
date. Unless the Board determines otherwise, options will be transferable only
by will or the laws of descent and distribution.
Stock appreciation rights awarded under the Equity Incentive Plan may
be granted as related rights, either in connection with and at the same time as
an option is granted, or by amendment of an outstanding non-qualified option. A
related stock appreciation right may be granted with respect to all or some of
the shares covered by the related option. Related stock appreciation rights
generally become exercisable at the same times as the related options become
exercisable, but may be limited so as to become exercisable only upon certain
events, such as a change in control. Upon exercise of a related right, the
grantee would receive, in lieu of purchasing stock, either stock or cash equal
to the difference between the fair market value on the date of exercise of the
34
underlying shares of common stock subject to the related option and the exercise
price of the option. Stock appreciation rights may also be granted independently
of any option, to become exercisable at such times as the Board may determine.
Upon exercise of such a right, the grantee would receive either stock or cash
equal to the difference between the fair market value on the date of exercise of
the shares of common stock subject to the right and the fair market value of the
shares on the date of grant of the right.
Restricted stock awarded under the Equity Incentive Plan may be granted
on such terms and conditions as the Board may determine, including provisions
that govern the lapse of restrictions and voting dividend, distribution and
other stockholder rights with respect to the restricted stock. If a grantee of
restricted stock terminates service with us for any reason, the grantee will
forfeit to us any restricted stock on which the restrictions have not lapsed or
been removed on or before the date of termination of service.
Other stock awards under the Equity Incentive Plan may provide for
common stock to be issued to grantees in exchange for consideration specified by
the Board that is either the grantee's cash or other direct payment to us or the
grantee's past services rendered to us or a subsidiary on or before issuance. In
this regard, we plan to issue shares to certain vendors and service providers
who agree to accept stock in lieu of cash for their services to us.
The following is a brief summary of certain of the U.S. federal income
tax consequences of certain transactions under the Equity Incentive Plan based
on federal income tax laws in effect on January 1, 2009. This summary applies to
the Equity Incentive Plan as normally operated and is not intended to provide or
supplement tax advice to eligible employees. The summary contains general
statements based on current U.S. federal income tax statutes, regulations and
currently available interpretations thereof. This summary is not intended to be
exhaustive and does not describe state, local or foreign tax consequences or the
effect, if any, of gift, estate and inheritance taxes.
Grants of options or stock appreciation rights are not taxable income
to the grantees or deductible for tax purposes by us at the time of the grant.
In the case of non-qualified stock options, a grantee will be deemed to receive
ordinary income upon exercise of the stock option, and we will be entitled to a
corresponding deduction, in an amount equal to the amount by which the fair
market value of the common stock purchased on the date of exercise exceeds the
exercise price. The exercise of an incentive stock option will not be taxable to
the grantee or deductible by us, but the amount of any income deemed to be
received by a grantee due to premature disposition of common stock acquired upon
the exercise of an incentive stock option will be a deductible expense of
Hemispherx for tax purposes. In the case of stock appreciation rights, a grantee
will be deemed to receive ordinary income upon exercise of the right, and we
will be entitled to a corresponding deduction, in an amount equal to the cash or
fair market value of shares payable to the grantee. Grantees of restricted stock
awards generally will recognize ordinary income in an amount equal to the fair
market value of the shares of common stock granted to them at the time that the
restrictions on the shares lapse and the shares become transferable. At that
time, we will be entitled to a corresponding deduction equal to the amounts
recognized as income by the grantees in the year in which the amounts are
included in the grantees' income. Grantees of stock issued pursuant to other
stock awards will generally receive ordinary income, and we will be entitled to
a corresponding deduction, in an amount equal to the amount by which the fair
market value of the common stock on the date of issuance exceeds the grantee's
cash or other payment to us, if any.
Section 162(m) of the Code generally disallows a publicly held
corporation's tax deduction for certain compensation in excess of $1 million per
year paid to each of the five most highly compensated executive officers,
exclusive of compensation that is "performance-based." We have designed the
Equity Incentive Plan in a manner that is intended to qualify the options and
any stock appreciation rights granted under the Equity Incentive Plan as
performance-based compensation that will not be subject to the deduction
limitation of Section 162(m). Any grant of restricted stock or other stock award
could (but is not required to) be designed to avoid any such deduction
limitation.
35
The Board has the general power to amend the Equity Incentive Plan in
any respect. However, if the Equity Incentive Plan is approved by the
stockholders at the annual meeting, the Board may not, without further approval
of our stockholders, amend the Plan so as to increase the aggregate number of
shares of common stock that may be issued under the Equity Incentive Plan,
modify the requirements as to eligibility to receive awards, or to increase
materially the benefits accruing to participants. In addition, the Board is
permitted to modify, extend or renew outstanding stock options or stock
appreciation rights, and to authorize the granting of new options or stock
appreciation rights in substitution for existing options and rights. However,
existing options or rights may not be repriced, directly or indirectly, so as to
provide for modified or new options or rights with an exercise price lower than
the exercise price provided for the outstanding stock options and stock
appreciation rights. The Board is also authorized to accelerate the lapse of
restrictions on restricted stock awards or to remove any or all restrictions at
any time.
Because Awards under the 2009 Equity Incentive Plan will be granted at the
discretion of the Board, the type, number, recipients, and other terms of such
Awards cannot be determined at this time. However, it is anticipated that Awards
will be made pursuant to our "Employee Wage Or Hour Reduction Program". Under
this program, shares are to be issued six months after the Incentive Rights have
been issued. It is anticipated that a portion of these shares may come from the
2009 Equity Incentive Plan. Please see "Employee Or Hour Reduction Program" in
"Other Compensation" under "Compensation Discussion And Analysis" above.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 4 TO BE IN THE BEST INTERESTS OF
HEMISPHERx AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE FOR THE APPROVAL OF THE
HEMISPHERx 2009 EQUITY INCENTIVE PLAN.
36
GENERAL
Unless contrary instructions are indicated on the Proxy Statement, all
shares of common stock represented by valid proxies received pursuant to this
solicitation (and not revoked before they are voted) will be voted FOR the
election of all Directors nominated and FOR Proposal No. 2, Proposal No. 3 and
Proposal No.4.
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, 2008, 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
www.hemisperx.net or 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.
By Order of the Board of Directors,
Thomas K. Equels, Secretary
Philadelphia, Pennsylvania
May __, 2009
1
Appendix "A"
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
HEMISPHERX BIOPHARMA, INC.
Under Section 242 of the
Corporation Law of the State of Delaware
The above corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware does hereby certify:
FIRST:That the Board of Directors of said corporation, by written consent filed
with the minutes of the Board, adopted the following resolutions proposing and
declaring advisable the following amendment to the Certificate of Incorporation
of said corporation:
"Article 'FOURTH' of the Certificate of Incorporation, which sets forth the
capitalization of the Company, is amended and, as amended, reads as follows:
'FOURTH. The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 355,000,000 of which 350,000,000
shares shall be Common Stock of the par value of $0.001 and 5,000,000 shares
shall be Preferred Stock of the par value of $0.01, with such designations,
rights and preferences as may be determined from time to time by the Board of
Directors.'"
SECOND:That the aforesaid amendment was duly adopted in accordance with the
applicable provisions of section 242 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, the Company has caused this certificate to be signed this __
day of ______, 2009.
---------------------------
William A. Carter, President
1
Appendix "B"
HEMISPHERx BIOPHARMA, INC.
2009 EQUITY INCENTIVE PLAN
Hemispherx Biopharma, Inc. hereby establishes the Hemispherx 2009 Equity
Incentive Plan upon the terms and conditions set forth below.
1. Definitions
In this Plan document, except where the context otherwise indicates, words in
the masculine gender shall be deemed to include males and females, singular
terms also shall refer to the plural, and the following definitions shall apply:
1.1 "Agreement" means a written agreement specifying the terms and
conditions of an Award.
1.2 "Award" means any Option, Right, Restricted Stock or Other Stock
Award granted under the Plan
1.3 "Board" means the Board of Directors of the Corporation.
1.4 "Change in Control" means the occurrence of any of the following:
(i) the acquisition by any "person" or "group" (as defined in or pursuant to
Sections 13(d) and 14(d) of the Exchange Act) (other than the Corporation, any
Subsidiary or any Corporation or Subsidiary's employee benefit plan), directly
or indirectly, as "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of securities of the Corporation representing twenty percent (20%)
or more of either the then outstanding shares or the combined voting power of
the then outstanding securities of the Corporation; (ii) either a majority of
the directors of the Corporation elected at the Corporation's annual
stockholders meeting shall have been nominated for election other than by or at
the direction of the "incumbent directors" of the Corporation, or the "incumbent
directors" shall cease to constitute a majority of the directors of the
Corporation. The term "incumbent director" shall mean any director who was a
director of the Corporation on June 24, 2009 and any individual who becomes a
director of the Corporation subsequent to June 24, 2009 and who is elected or
nominated by or at the direction of at least two-thirds of the then incumbent
directors; (iii) the stockholders of the Corporation approve (a) a merger,
consolidation or other business combination of the Corporation with any other
"person" or "group" (as defined in or pursuant to Sections 13(d) and 14(d) of
the 1934 Act) or affiliate thereof, other than a merger or consolidation that
would result in the outstanding common stock of the Corporation immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into common stock of the surviving entity or a parent or
affiliate thereof) more than fifty percent (50%) of the outstanding common stock
of the Corporation or such surviving entity or a parent or affiliate thereof
outstanding immediately after such merger, consolidation or other business
combination, or (b) a plan of complete liquidation of the Corporation or an
agreement for the sale or disposition by the Corporation of all or substantially
all of the Corporation's assets; or (iv) any other event or circumstance which
is not covered by the foregoing subsections of this Section 1.4 but which the
Board of Directors determines to affect control of the Corporation and with
respect to which the Board of Directors adopts a resolution that the event or
circumstance constitutes a Change in Control for purposes of the Plan. This
definition of "Change in Control" shall not be amended after (i) the occurrence
of a Change in Control; (ii) the public announcement of a proposal for a
transaction that, if consummated, would constitute a Change in Control; or (iii)
the Board of Directors learns of a specific proposal containing the essential
terms of a transaction that, if consummated, would constitute a Change in
Control; provided, however, that in the case of a proposal under (ii) or (iii)
immediately above, if the proposal is finally withdrawn or terminated, this
definition may be amended after the withdrawal or termination. For purposes of
the Plan and all related Agreements, if the employment of any Participant is
terminated by the Corporation and/or any Subsidiary (other than for cause) after
an event causing the definition of "Change in Control" to become nonamendable
under the preceding subsections of this Section 1.4, that Participant's
termination of employment shall be considered to have occurred after a Change in
Control if a Change in Control occurs with respect to and within two (2) years
after the event causing the definition of "Change in Control" to become
nonamendable:
1.5 "Code" means the Internal Revenue Code of 1986, as amended.
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1.6 "Common Stock" means the common stock, par value $.001 per share,
of the Corporation.
1.7 "Corporation" means Hemispherx Biopharma, Inc.
1.8 "Date of Exercise" means the date on which the Corporation receives
notice of the exercise of an Option or Right in accordance with the terms of
Article 8.
1.9 "Date of Grant" means the date on which the grant of an Award is
authorized under the Plan or such later date as may be specified in the
authorization.
1.10 "Effective Date" means June 24, 2009.
1.11 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
1.12 "Fair Market Value" of a share of Common Stock on any relevant
date means the closing selling price per share of Common Stock on the date in
question on the Principal Exchange. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which a closing selling
price exists on the Principal Exchange. If the Common Stock is not listed on a
Principal Exchange, the Fair Market Value shall be determined pursuant to a
reasonable method adopted by the Board in good faith for that purpose.
1.13 "Incentive Stock Option" means an Option granted as such under the
Plan that is intended at the Date of Grant to qualify as an incentive stock
option under Section 422 of the Code.
1.14 "Nonstatutory Stock Option" means an Option granted under the Plan
that is not an Incentive Stock Option.
1.15 "Option" means an option to purchase Shares granted under the Plan
in accordance with the terms of Article 6.
1.16 "Option Period" means the period during which an Option may be
exercised.
1.17 "Option Price" means the price per Share at which an Option may be
exercised.
1.18 "Other Stock Award" means an award of Shares granted under the
Plan in accordance with the terms of Article 10.
1.19 "Participant" means an individual to whom an Award has been
granted.
1.20 "Permanent Disability" means disabled within the meaning of Code
Section 72(m)(7).
1.21 "Plan" means the Hemispherx 2009 Equity Incentive Plan.
1.22 "Principal Exchange" means the NYSE Amex, the New York Stock
Exchange, or such other stock exchange as the Common Stock is then listed for
trading.
1.23 "Related Option" means the Option granted in connection with a
specified Right.
1.24 "Related Right" means the Right granted in connection with a
specified Option.
1.25 "Restricted Stock" means Shares granted in accordance with the
terms of Article 9.
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1.26 "Retirement" means retirement of an officer or other employee from
the Corporation or a Subsidiary at or after age 65, or in the case of a
non-employee director, retirement from the Board at or after age 65, or in the
case of a non-employee consultant or advisor, Termination of Service at or after
age 65.
1.27 "Right" means a stock appreciation right granted under the plan in
accordance with the terms of Article 7.
1.28 "Right Period" means the period during which a Right may be
exercised.
1.29 "Share" means a share of Common Stock that is authorized but
unissued pursuant to the Plan.
1.30 "Subsidiary" means a corporation at least 50% of the total
combined voting power of all classes of stock of which is owned by the
Corporation, either directly or through one or more other Subsidiaries.
1.31 "Termination of Service" means termination of an officer's or
other employee's employment with the Corporation or a Subsidiary, or in the case
of a non-employee director, termination from service as a director on the Board,
or in the case of a non-employee consultant or advisor, cessation of the
performance of services to the Corporation or a Subsidiary.
2. Purpose
The Plan is intended to assist the Corporation in attracting, retaining, and
motivating directors, officers, other key employees, consultants and advisors of
outstanding ability and to promote the identification of their interests with
those of the stockholders of the Corporation. The Plan is also intended as a
means of cash conservation by utilizing Corporation stock as a means of payment
for directors, consultants, agents and vendors as well as an alternative to
salary of officers and employees through the Employee Wages Or Hour Reduction
Program.
3. Administration
3.1 The Board shall have the power to determine in its discretion the directors,
officers, other key employees, consultants, advisors and vendors of the
Corporation or a Subsidiary to whom Awards shall be granted, the number of
Shares to be subject to each Award, and the terms and conditions of each Award.
Without limiting the generality of the foregoing, the Board may provide in its
discretion in an Agreement:
(i) that Options or Rights will not become exercisable until a Change
in Control or other specified event(s) with respect to the Corporation or the
Participant;
(ii) for an agreement by the Participant to render services to the
Corporation or a Subsidiary upon such terms and conditions as may be specified
in the Agreement;
(iii) for restrictions on the transfer, sale or other disposition of
shares of Common Stock issued to the Participant under the Plan, in which case,
the Corporation may place a legend upon the applicable certificates noting the
restrictions on any Shares issued pursuant to an Award.
(iv) for an agreement by the Participant to resell to the Corporation,
under specified conditions, shares of Common Stock issued under the Plan; and
(v) for the payment of all or part of the Option Price upon the
exercise of an Option or purchase of Common Stock pursuant to an Other Stock
Award, subject to Section 9 or Section 10 below, as applicable.
3.2 The Plan shall be administered by the Board. In addition to any
other powers granted to the Board hereunder, it shall have the following powers,
subject to the express provisions of the Plan:
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(i) to construe and interpret the Agreements and the Plan;
(ii) to require, whether or not provided for in the pertinent
Agreement, of any person to whom Shares are to be issued under the Plan, the
making of any representations or agreements which the Board may deem necessary
or advisable in order to comply with the securities laws of the United States or
of any state, including Section 16(b) of the Exchange Act;
(iii) to provide for satisfaction of a Participant's tax liabilities
arising in connection with the Plan under such terms and conditions as the Board
deems appropriate, including requirements in the event of a disqualifying
disposition of shares of Common Stock acquired by a Participant pursuant to
exercise of an Incentive Stock Option; and
(iv) to make all other determinations and take all other actions
necessary or advisable for the administration of the Plan.
3.3 Agreements shall be executed on behalf of the Corporation by the Chairman of
the Board.
3.4 Any determinations or actions made or taken by the Board pursuant to this
Article shall be binding and final.
4. Eligibility
Awards may be granted to those directors, officers, other key employees,
consultants, vendors and advisors of the Corporation or a Subsidiary who are
selected for Awards by the Board. Only individuals who are employees of the
Corporation or a Subsidiary shall be eligible for the grant of Incentive Stock
Options.
5. Stock Subject to the Plan
5.1 15,000,000 Shares is (i) the maximum number of Shares that may be issued
under the Plan; and (ii) 3,000,000 is the maximum number of Shares with respect
to which Awards may be granted to any Participant during the period that the
Plan is in effect. The limitation in clause (ii) of the preceding sentence is
imposed to comply with the requirements for the exception for qualified
performance-based compensation under Section 162(m) of the Code and any
applicable regulations.
5.2 If an Award expires or terminates for any reason (other than termination by
virtue of the exercise of a Related Option or Related Right, as the case may be)
in whole or in part, the shares of Common Stock (or applicable portion thereof)
which had been subject to the Agreement relating thereto shall become Shares
that are available for the grant of other Awards.
5.3 Shares of Common Stock issued upon the exercise of a Right (or if cash is
payable in connection with the exercise, that number of Shares having a Fair
Market Value equal to the cash payable upon exercise) shall be charged against
the number of Shares issuable under the Plan and shall not become available for
the grant of other Awards. If the Right referred to in the preceding sentence is
a Related Right, the Shares subject to the Related Option, to the extent not
charged against the number of Shares subject to the Plan in accordance with this
Section 5.3, shall become available for the grant of other Awards.
5.4 The shares of Common Stock issued under the Plan may be authorized but
unissued shares, treasury shares or shares purchased by the Corporation on the
open market or from private sources for use under the Plan.
6. Options
6.1 All Agreements granting Options shall specify the extent to which the Option
is intended to be either (i) a Nonstatutory Stock Option or (ii) an Incentive
Stock Option.
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6.2 The Option Period shall be determined by the Board and specifically set
forth in the Agreement, provided however, that an Option shall not be
exercisable after ten years from the Date of Grant. 6.3 All Incentive Stock
Options granted under the Plan shall comply with the provisions of the Code
governing incentive stock options and with all other applicable rules and
regulations.
6.4 No Option shall be granted with an Option Price that is less than the Fair
Market Value of the Shares covered by the Option on the Date of Grant.
6.5 Tax obligations of a Participant resulting from the exercise of an Option
shall be withheld or provided for pursuant to any methods approved by the Board.
The amount of taxes paid pursuant to this Section at the time of the exercise of
the Option shall not be less than the statutory minimum withholding obligations
that result from the exercise of the Option and shall not exceed the
Participant's total estimated federal, state and any local tax obligations that
result from the exercise of the Option, except that the Corporation shall not
retain shares of Common Stock otherwise issuable following the exercise of the
Option in excess of the number required to meet the statutory minimum
withholding obligations.
6.6 All other terms of Options granted under the Plan shall be determined by the
Board in its sole discretion.
7. Rights
7.1 A Right may be granted under the Plan:
(i) in connection with, and at the same time as, the grant of an
Option;
(ii) by amendment of an outstanding Nonstatutory Stock Option granted
under the Plan; or
(iii) independently of any Option granted under the Plan.
A Right granted under clause (i) or (ii) of the preceding sentence is a Related
Right. A Related Right may, in the Board's discretion, apply to all or a portion
of the Shares subject to the Related Option.
7.2 A Right may be exercised in whole or in part as provided in the Agreement,
and subject to the provisions of the Agreement, entitles its Participant to
receive, without any payment to the Corporation (other than required tax
withholding amounts) either cash or that number of Shares (equal to the highest
whole number of Shares), or a combination thereof, in an amount or having a Fair
Market Value determined as of the Date of Exercise not to exceed the number of
Shares subject to the portion of the Right exercised multiplied by an amount
equal to the excess of (i) the Fair Market Value per Share on the Date of
Exercise of the Right over (ii) either (A) the Fair Market Value per Share on
the Date of Grant of the Right if it is not a Related Right, or (B) the Option
Price as provided in the Related Option if the Right is a Related Right.
7.3 The Right Period shall be determined by the Board and specifically set forth
in the Agreement, provided, however, that:
(i) a Right will expire no later than the earlier of (A) ten
years from the Date of Grant or (B) in the case of a Related Right, the
expiration of the Related Option;
(ii) a Right may be exercised only when the Fair Market Value
of a Share exceeds either (A) the Fair Market Value per Share on the Date of
Grant of the Right if it is not a Related Right, or (B) the Option Price as
provided in the Related Option if the Right is a Related Right; and
(iii) a Right that is a Related Right to an Incentive Stock
Option may be exercised only when and to the extent the Related Option is
exercisable.
6
7.4 The exercise, in whole or in part, of a Related Right shall reduce the
number of Shares subject to the Related Option by the number of Shares with
respect to which the Related Right is exercised. Similarly, the exercise, in
whole or in part, of a Related Option shall reduce the number of Shares subject
to the Related Right by the number of Shares with respect to which the Related
Option is exercised.
7.5 Tax obligations of a Participant resulting from the exercise of a Right
shall be withheld or provided for pursuant to any methods approved by the Board.
The amount of taxes paid pursuant to this Section at the time of the exercise of
the Option shall not be less than the statutory minimum withholding obligations
that result from the exercise of the Option and shall not exceed the
Participant's total estimated federal, state and any local tax obligations that
result from the exercise of the Option, except that the Corporation shall not
retain shares of Common Stock otherwise issuable following the exercise of the
Option in excess of the number required to meet the statutory minimum
withholding obligations.
8. Exercise
An Option or Right may, subject to the provisions of the Agreement under which
it was granted, be exercised in whole or in part by the delivery to the
Corporation of written notice of the exercise, in such form as the Board may
prescribe, accompanied, in the case of an Option, by full payment for the Shares
with respect to which the Option is exercised. A Participant may pay the
purchase price either (i) in cash; (ii) with previously acquired shares of
Common Stock (valued at Fair Market Value on the Date of Exercise of the Option)
that have either been purchased in open market transactions or issued by the
Corporation pursuant to a plan thereof or of a Subsidiary; (iii) by payment of
such other consideration as the Board may specify; or (iv) a combination
thereof.
9. Restricted Stock
9.1 The Board may cause the Corporation to issue Restricted Stock from time to
time. Whenever the Board deems it appropriate to grant Restricted Stock to a
Participant, notice shall be given to the Participant stating the number of
Shares granted as Restricted Stock and the terms and conditions to which the
Restricted Stock is subject. That notice shall become an Agreement upon written
acceptance by the Participant, and certificates representing the Restricted
Stock shall be issued and delivered to the Participant as soon as practicable
after execution and return of the Agreement. Restricted Stock may be granted
with or without cash consideration.
9.2 Restricted Stock issued pursuant to the Plan shall be subject to the
following restrictions:
(i) No Restricted Stock may be sold, assigned, transferred,
pledged, hypothecated, or otherwise encumbered or disposed of until the
restrictions set forth in the applicable Agreement have lapsed or been removed
pursuant to Section 9..3 or Section 9.4.
(ii) In the case of a Participant's Termination of Service
for any reason (whether voluntarily or involuntarily, with or without cause),
the Participant shall forfeit to the Corporation any Restricted Stock on which
the restrictions have not lapsed or been removed pursuant to Section 9.3 or
Section 9.4 below on the date of the Termination of Service, and the Corporation
shall have no obligation to pay any amounts with respect to such Restricted
Stock, unless the Board determines to the contrary.
9.3 The Board shall establish as to each Award of Restricted Stock (i) the terms
and conditions upon which the restrictions set forth in Section 9.2 above shall
lapse, and (ii) the extent, if any, to which the Participant shall have the
voting, dividend, distribution and other rights of a stockholder with respect to
the Restricted Stock. Certificates representing Restricted Stock shall bear a
legend referring to the restrictions set forth in the Plan and the Participant's
Agreement. Those terms and conditions may include, without limitation, the
lapsing of restrictions as a result of the death, Permanent Disability or
Retirement of the Participant or the occurrence of a Change in Control.
9.4 Notwithstanding Section 9.2(i) and Section 9.2(ii) above, the Board may at
any time, in its sole discretion, accelerate the time at which any or all
restrictions on Restricted Stock will lapse or remove any and all such
restrictions.
7
9.5 Tax obligations of a Participant resulting from the Participant's earning
Restricted Stock hereunder shall be withheld or provided for pursuant to any
methods approved by the Board and set forth in the Agreement. The amount of
taxes so paid shall not be less than the statutory minimum withholding
obligations that result when the Restricted Stock is earned and shall not exceed
the Participant's total estimated federal, state and any local tax obligations
that result when the Restricted Stock is earned, except that the Corporation
shall not retain shares of Common Stock otherwise issuable in excess of the
number required to meet the statutory minimum withholding requirements.
10. Other Stock Awards
The Board may cause the Corporation to issue Common Stock from time to time
pursuant to an Other Stock Award in exchange for consideration from the
Participant specified by the Board that is either the Participant's cash or
other direct payment to the Corporation or the Participant's past services
rendered to the Corporation or a Subsidiary on or before the date of issuance.
Whenever the Board deems it appropriate to grant an Other Stock Award to a
Participant, notice shall be given to the Participant stating the number of
Shares to be issued pursuant to the Other Stock Award and the other terms and
conditions of the Other Stock Award. That notice shall become an Agreement upon
written acceptance by the Participant. Tax obligations of a Participant
resulting from the Participant's Other Stock Award shall be withheld or provided
for pursuant to any methods approved by the Board and set forth in the
Agreement. The amount of taxes so paid shall not be less than the applicable
statutory minimum withholding obligations that result when the Common Stock is
earned and shall not exceed the Participant's total estimated federal, state and
any local tax obligations that relate to the Other Stock Award, except that the
Corporation shall not retain shares of Common Stock otherwise issuable in excess
of the number required to meet the statutory minimum withholding requirements.
11. Nontransferability of Options and Rights
Unless otherwise determined by the Board, Options and Rights granted under the
Plan shall not be transferable other than by will or the laws of descent and
distribution, and an Option or Right may be exercised during the Participant's
lifetime only by him or in the event of his legal disability, by his legal
representative. A Related Right is transferable only when the Related Option is
transferable and only with the Related Option and under the same conditions.
12. Capital Adjustments
The number and class of Shares subject to each outstanding Award, the Option
Price and the aggregate number and class of Shares for which Awards thereafter
may be made shall be adjusted by the Board, as appropriate and equitable, to
reflect such events as stock dividends, dividends payable other than in cash or
other extraordinary dividends, stock splits, recapitalizations, mergers,
consolidations or reorganizations of or by the Corporation.
13. Termination or Amendment
The Board shall have the power to terminate the Plan and to amend it in any
respect, provided that, after the Plan has been approved by the stockholders of
the Corporation, the Board may not, without the approval of the stockholders of
the Corporation, amend the Plan so as to increase the aggregate number of Shares
that may be issued under the Plan (except as provided in Article 12), to modify
the requirements as to eligibility to receive Awards, or to increase materially
the benefits accruing to Participants. Notwithstanding the preceding sentence,
no termination or amendment of the Plan shall, without his or her consent,
adversely affect the rights or obligations of a Participant with respect to any
Award previously granted except as reasonably required for compliance with Rule
16b-3 under the Exchange Act or with the provisions of the Code and other
applicable rules and regulations thereunder governing incentive stock options.
14. Modification, Extension and Renewal of Options and Rights
Subject to the terms and conditions and within the limitations of the Plan, the
Board may modify, extend or renew outstanding Awards; provided, however, that no
Option or Right shall be repriced, whether by the reduction of the Option Price
(or the Fair Market Value per Share on the Date of Grant in the case of a Right
that is not a Related Right) or by the cancellation of an Option or Right and
the issuance of a substitute Option or Right with a lower Exercise Price (or the
Fair Market Value per Share on the Date of Grant in the case of a Right that is
not a Related Right).
8
15. Term of the Plan
Unless sooner terminated by the Board pursuant to Article 13, the Plan shall
terminate on the date ten years after its adoption by the Board, and no Awards
may be granted or awarded after termination. The termination shall not affect
the validity of any Award outstanding on the date of termination.
16. Indemnification of Board
In addition to any other indemnification rights they may have as directors, the
members of the Board shall be indemnified by the Corporation against the
reasonable expenses, including attorneys' fees, actually incurred in connection
with the defense of any action, suit or proceeding, or in connection with any
appeal therein, to which they or any of them may be a party by reason of any
action taken or failure to act under or in connection with the Plan or any Award
granted hereunder, and against all amounts reasonably paid by them in settlement
thereof or paid by them in satisfaction of a judgment in any such action, suit
or proceeding, if such members acted in good faith and in a manner which they
believed to be in, and not opposed to, the best interests of the Corporation.
17. General Provisions
17.1 The establishment of the Plan shall not confer upon any director, officer,
other employee, consultant, vendor or advisor of the Corporation any legal or
equitable right against the Corporation, any Subsidiary or the Board, except as
expressly provided in the Plan.
17.2 The Plan does not constitute inducement or consideration for the employment
of officer or other employee of the Corporation, nor is it a contract between
the Corporation or any Subsidiary and any director, officer, other employee,
consultant or advisor of the Corporation. Participation in the Plan shall not
give a director, officer, other employee, consultant, vendor or advisor of the
Corporation any right to be retained in the service of the Corporation or any
Subsidiary.
17.3 The interests under the Plan of any Participant under the Plan are not
subject to the claims of creditors and may not, in any way, be assigned,
alienated or encumbered.
17.4 The Plan shall be governed, construed and administered in accordance with
the laws of the state of Delaware and the intention of the Corporation that
Incentive Stock Options granted under the Plan qualify under Section 422 of the
Code.
IN TESTIMONY WHEREOF, Hemispherx Biopharma, Inc. has caused this Plan to be
executed in its name by its duly authorized officer effective the ____ day of
May, 2009.
HEMISPHERX BIOPHARMA, INC.
By:______________________________
Its:____________________________
1
HEMISPHERX BIOPHARMA, INC.
ANNUAL MEETING OF STOCKHOLDERS
JUNE 24, 2009
THIS PROXY IS SOLICTED ON BEHALF OF THE BOARD OF DIRECTORS The
undersigned hereby appoints William A. Carter and Thomas K. Equals and each of
them, with full power of substitution, as proxies to represent the undersigned
at the Annual Meeting of Stockholders to be held at the Embassy Suites Hotel,
1776 Benjamin Franklin Parkway, Philadelphia, Pennsylvania 19103, on Wednesday,
June 24, 2009, at 10:00 a.m. local time and at any adjournment thereof, and to
vote all of the shares of common stock of Hemispherx Biopharma, Inc. the
undersigned would be entitled to vote if personally present, upon the following
matters:
Please mark box in blue or black ink.
1. Proposal No.1 - Election of Directors.
Nominees: William A. Carter, Richard C. Piani, Tom K. Equels,
William M. Mitchell and Iraj Eqhbal Kiani.
//For all nominees (except as marked to the contrary below)
//Authority Withheld as to all Nominees
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME)
William A. Carter Richard C. Piani Tom K. Equels
William M. Mitchell Iraj Eqhbal Kiani
2. Proposal No. 2 - Ratification of the selection of McGladrey &
Pullen, LLP, as independent auditors of Hemispherx Biopharma, Inc. for the year
ending December 31, 2009.
// For // Against // Abstain
3. Proposal No. 3 - To amend Hemispherx's certificate of incorporation
to increase the number of authorized shares of Hemispherx common stock from
200,000,000 to 350,000,000.
// For // Against // Abstain
4. Proposal No. 4 - To adopt the Hemispherx 2009 Incentive Plan of 15,000,000
shares.
// For // Against // Abstain
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In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. THE
BOARD RECOMMENDS A VOTE "FOR" ALL DIRECTORS AND "FOR" ITEMS NOS. 2, 3 AND 4. IF
NO CONTRARY INSTRUCTION IS GIVEN, THE SHARES WILL BE VOTED FOR THE ELECTION OF
WILLIAM A. CARTER, RICHARD C. PIANI, TOM K. EQUELS, WILLIAM A. MITCHELL AND IRAJ
EQHBAL KIANI AS DIRECTORS, FOR PROPOSALS NO.S 2, 3 AND 4 AND, IN THE DISCRETION
OF THE PROXIES, ON ALL OTHER MATTERS PROPERLY BROUGHT BEFORE THE ANNUAL MEETING.
Please date, sign as name appears at left, and return promptly. If the stock
is registered in the name of two or more persons, each should sign.
When signing as Corporate Officer, Partner, Executor, Administrator,
Trustee, or Guardian, please give full title. Please note any change in
your address alongside the address as it appears in the Proxy.
Dated:
------------------------
------------------------
Signature
------------------------
(Print Name)
SIGN, DATE AND RETURN PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE