SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
CEL-SCI CORPORATION
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(Name of Registrant as Specified In Its Charter)
William T. Hart - Attorney for Registrant
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
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CEL-SCI CORPORATION
8229 Boone Blvd.
Suite 802
Vienna, Virginia 22l82
(703) 506-9460
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 14, 2009
To the Shareholders:
Notice is hereby given that the annual meeting of the shareholders of
CEL-SCI Corporation ("CEL-SCI") will be held at the Hilton Munich Park, Am
Tucherplatz 7, 80538 Munich, Germany, on September 14, 2009, at 10:30 a.m., for
the following purposes:
(1) to elect the directors who shall constitute CEL-SCI's Board of Directors for
the ensuing year;
(2) to approve the adoption of CEL-SCI's 2009 Incentive Stock Option Plan
which provides that up to 5,000,000 shares of common stock may be issued upon
the exercise of options granted pursuant to the Incentive Stock Option Plan;
(3) to approve the adoption of CEL-SCI's 2009 Non-Qualified Stock Option
Plan which provides that up to 15,000,000 shares of common stock may be issued
upon the exercise of options granted pursuant to the Non-Qualified Stock Option
Plan;
(4) to approve the adoption of CEL-SCI's 2009 Stock Bonus Plan which
provides that up to 2,000,000 shares of common stock may be issued to persons
granted stock bonuses pursuant to the Stock Bonus Plan;
(5) to approve an amendment to CEL-SCI's Stock Compensation Plan to provide
for the issuance of up to 2,000,000 additional restricted shares of common stock
to CEL-SCI's directors, officers, employees and consultants for services
provided to the Company;
(6) to amend CEL-SCI's Articles of Incorporation such that CEL-SCI would be
authorized to issue 450,000,000 shares of common stock;
(7) subject to the determination of CEL-SCI's directors that a reverse
split would be in the best interest of CEL-SCI's shareholders, to approve a
reverse split of CEL-SCI's common stock.
(8) to ratify the appointment of BDO Seidman, LLP as CEL-SCI's independent
registered public accounting firm for the fiscal year ending September 30, 2009.
to transact such other business as may properly come before the meeting.
July 28, 2009 is the record date for the determination of shareholders
entitled to notice of and to vote at such meeting. Shareholders are entitled to
one vote for each share held. As of July 28, 2009, there were 146,901,696 issued
and outstanding shares of CEL-SCI's common stock.
CEL-SCI CORPORATION
July 28, 2009 Geert R. Kersten, Chief Executive Officer
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ATTACHED PROXY CARD,
AND SIGN, DATE AND RETURN THE PROXY CARD,
OR VOTE VIA THE INTERNET OR BY TELEPHONE
TO SAVE THE COST OF FURTHER SOLICITATION,
PLEASE VOTE PROMPTLY
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CEL-SCI CORPORATION
8229 Boone Blvd.
Suite 802
Vienna, Virginia 22l82
(703) 506-9460
PROXY STATEMENT
The accompanying proxy is solicited by CEL-SCI's directors for voting at the
annual meeting of shareholders to be held on September 14, 2009, and at any and
all adjournments of such meeting. If the proxy is executed and returned, it will
be voted at the meeting in accordance with any instructions, and if no
specification is made, the proxy will be voted for the proposals set forth in
the accompanying notice of the annual meeting of shareholders. Shareholders who
execute proxies may revoke them at any time before they are voted, either by
writing to CEL-SCI at the address shown above or in person at the time of the
meeting. Additionally, any later dated proxy will revoke a previous proxy from
the same shareholder. This proxy statement was mailed to shareholders of record
on or about August 5, 2009.
There is one class of capital stock outstanding. Provided a quorum
consisting of one-third of the shares entitled to vote is present at the
meeting, the affirmative vote of a majority of the shares of common stock voting
in person or represented by proxy is required to elect directors. Cumulative
voting in the election of directors is not permitted. The adoption of the other
proposals to come before the meeting will require the approval of a majority of
votes cast at the meeting.
Shares of CEL-SCI's common stock represented by properly executed proxies
that reflect abstentions or "broker non-votes" will be counted as present for
purposes of determining the presence of a quorum at the annual meeting. "Broker
non-votes" represent shares held by brokerage firms in "street-name" with
respect to which the broker has not received instructions from the customer or
otherwise does not have discretionary voting authority. Abstentions and broker
non-votes will not be counted as having voted against the proposals to be
considered at the meeting.
PRINCIPAL SHAREHOLDERS
The following table lists, as of July 28, 2009, the shareholdings of (i)
each person owning beneficially 5% or more of CEL-SCI's common stock (ii) each
officer who received compensation in excess of $100,000 during CEL-SCI's most
recent fiscal year and (iii) all officers and directors as a group. Unless
otherwise indicated, each owner has sole voting and investment powers over his
shares of common stock.
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Name and Address Number of Shares (1) Percent of Class (3)
---------------- ---------------- ----------------
Maximilian de Clara 6,311,866 4.2%
Bergstrasse 79
6078 Lungern,
Obwalden, Switzerland
Geert R. Kersten 9,081,629 (2) 5.9%
8229 Boone Blvd., Suite 802
Vienna, VA 22182
Patricia B. Prichep 2,850,689 1.9%
8229 Boone Blvd., Suite 802
Vienna, VA 22182
Eyal Talor, Ph.D. 1,645,659 1.1%
8229 Boone Blvd., Suite 802
Vienna, VA 22182
Alexander G. Esterhazy 678,333 0.5%
20 Chemin du Pre-Poiset
CH- 1253 Vandoeuvres
Geneve, Switzerland
C. Richard Kinsolving, Ph.D. 907,424 0.6%
P.O. Box 20193
Bradenton, FL 34204-0193
Peter R. Young, Ph.D. 679,601 0.5%
6600 Preston Road, #2322
Plano, TX 75024
BAM Opportunity Fund LP 12,500,000 8.5%
44 Wall Street, Suite 1603
New York, NY 10005
All Officers and Directors 22,155,201 13.9%
as a Group (7 persons)
(1) Includes shares issuable prior to October 31, 2009 upon the exercise of
options or warrants granted to the following persons:
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Options or Warrants Exercisable
Name Prior to October 31, 2009
---- --------------------------------
Maximilian de Clara 2,376,250
Geert R. Kersten 5,746,610
Patricia B. Prichep 2,048,597
Eyal Talor, Ph.D. 1,222,153
Alexander G. Esterhazy 458,333
C. Richard Kinsolving, Ph.D. 618,334
Peter R. Young, Ph.D. 445,000
(2) Amount includes shares held in trust for the benefit of Mr. Kersten's minor
children. Geert R. Kersten is the stepson of Maximilian de Clara.
(3) Amount includes shares referred to in (1) above but excludes shares which
may be issued upon the exercise or conversion of other options, warrants
and other convertible securities previously issued by CEL-SCI.
ELECTION OF DIRECTORS
Unless the proxy contains contrary instructions, it is intended that the
proxies will be voted for the election of the current directors listed below to
serve as members of the board of directors until the next annual meeting of
shareholders and until their successors shall be elected and shall qualify.
All current directors have consented to stand for re-election. In case any
nominee shall be unable or shall fail to act as a director by virtue of an
unexpected occurrence, the proxies may be voted for such other person or persons
as shall be determined by the persons acting under the proxies in their
discretion.
Information concerning CEL-SCI's officers and directors follows:
Name Age Position
Maximilian de Clara 79 Director and President
Geert R. Kersten, Esq. 50 Director, Chief Executive Officer and Treasurer
Patricia B. Prichep 58 Senior Vice President of Operations and
Secretary
Dr. Eyal Talor 53 Senior Vice President of Research and
Manufacturing
Alexander G. Esterhazy 65 Director
Dr. C. Richard Kinsolving 72 Director
Dr. Peter R. Young 64 Director
The directors of CEL-SCI serve in such capacity until the next annual
meeting of CEL-SCI's shareholders and until their successors have been duly
elected and qualified. The officers of CEL-SCI serve at the discretion of
CEL-SCI's directors.
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Mr. Maximilian de Clara, by virtue of his position as an officer and
director of CEL-SCI, may be deemed to be the "parent" and "founder" of CEL-SCI
as those terms are defined under applicable rules and regulations of the SEC.
The principal occupations of CEL-SCI's officers and directors, during the
past several years, are as follows:
Maximilian de Clara has been a Director of CEL-SCI since its inception in
March l983, and has been President of CEL-SCI since July l983. Prior to his
affiliation with CEL-SCI, and since at least l978, Mr. de Clara was involved in
the management of his personal investments and personally funding research in
the fields of biotechnology and biomedicine. Mr. de Clara attended the medical
school of the University of Munich from l949 to l955, but left before he
received a medical degree. During the summers of l954 and l955, he worked as a
research assistant at the University of Istanbul in the field of cancer
research. For his efforts and dedication to research and development in the
fight against cancer and AIDS, Mr. de Clara was awarded the "Pour le Merit"
honorary medal of the Austrian Military Order "Merito Navale" as well as the
honor cross of the Austrian Albert Schweitzer Society.
Geert R. Kersten, Esq. has served in his current leadership role at
CEL-SCI since 1995. Mr. Kersten has been with CEL-SCI from the early days of its
inception since 1987. He has been involved in the pioneering field of cancer
immunotherapy for almost two decades and has successfully steered CEL-SCI
through many challenging cycles in the biotechnology industry. Mr. Kersten also
provides CEL-SCI with significant expertise in the fields of finance and law and
has a unique vision of how the company's Multikine product will change the way
cancer is treated. Prior to CEL-SCI, Mr. Kersten worked at the law firm of
Finley & Kumble and worked at Source Capital, an investment banking firm located
in McLean, VA. He is a native of Germany, graduated from Millfield School in
England, and completed his studies in the US. Mr. Kersten completed his
Undergraduate Degree in Accounting, received an M.B.A. from George Washington
University, and a law degree (J.D.) from American University in Washington, DC.
Patricia B. Prichep joined CEL-SCI in 1992 and has been CEL-SCI's Senior
Vice President of Operations since March 1994. Between December 1992 and March
1994, Ms. Prichep was CEL-SCI's Director of Operations. Ms. Prichep became
CEL-SCI's Corporate Secretary in May 2000. She is responsible for all day-to-day
operations of the Company, including human resources and is the liaison with the
auditing firm for financial reporting. June 1990 to December 1992, Ms. Prichep
was the Manager of Quality and Productivity for the NASD's Management, Systems
and Support Department. She was responsible for the internal auditing and work
flow analysis of operations. Between 1982 and 1990, Ms. Prichep was Vice
President and Operations Manager for Source Capital, Ltd. She handled all
operations and compliance for the company and was licensed as a securities
broker. Ms. Prichep received her B.A. from the University of Bridgeport in
Connecticut.
Eyal Talor, Ph.D. joined CEL-SCI in October 1993 and has been Senior Vice
president of Research and Manufacturing since March of 1994. He is a clinical
immunologist with over 19 years of hands-on management of clinical research and
drug development for immunotherapy application; pre-clinical to Phase III, in
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the biopharmaceutical industry. His expertise includes; biopharmaceutical R&D
and Biologics product development, GMP (Good Manufacturing Practices)
manufacture, Quality Control testing, and the design and building of GMP
manufacturing and testing facilities. He served as Director of Clinical
Laboratories (certified by the State of Maryland) and has experience in the
design of clinical trials (Phase I - III) and GCP (Good Clinical Practices)
requirements. He also has broad experience in the different aspects of
biological assay development, analytical methods validation, raw material
specifications, and QC (Quality Control) tests development under FDA/GMP, USP,
and ICH guidelines. He has extensive experience in the preparation of
documentation for IND and other regulatory submissions. His scientific area of
expertise encompasses immune response assessment. He is the author of over 25
publications and has published a number of reviews on immune regulations in
relation to clinical immunology. Before coming to CEL-SCI, he was Director of
R&D and Clinical Development at CBL, Inc., Principal Scientist - Project
Director, and Clinical Laboratory Director at SRA Technologies, Inc. Prior to
that he was a full time faculty member at The Johns Hopkins University, Medical
Intuitions; School of Public Health. He holds two US patents; one on Multikine's
composition of matter and method of use in cancer, and one on a platform Peptide
technology (`Adapt') for the treatment of autoimmune diseases, asthma, allergy,
and transplantation rejection. He also has numerous product and process
inventions as well as a number of pending US and PCT patent applications. He
received his Ph.D. in Microbiology and Immunology from the University of Ottawa,
Ottawa, Ontario, Canada, and had post-doctoral training in clinical and cellular
immunology at The John Hopkins University, Baltimore, Maryland, USA. He holds an
Adjunct Associate teaching position at the Johns Hopkins University Medical
Institutions.
Alexander G. Esterhazy has been an independent financial advisor since
November 1997. Between July 1991 and October 1997 Mr. Esterhazy was a senior
partner of Corpofina S.A. Geneva, a firm engaged in mergers, acquisitions and
portfolio management. Between January 1988 and July 1991 Mr. Esterhazy was a
managing director of DG Bank in Switzerland. During this period Mr. Esterhazy
was in charge of the Geneva, Switzerland branch of the DG Bank, founded and
served as vice president of DG Finance (Paris) and was the President and Chief
Executive officer of DG-Bourse, a securities brokerage firm.
C. Richard Kinsolving, Ph.D. has been a Director of CEL-SCI since April
2001. Since February 1999 Dr. Kinsolving has been the Chief Executive Officer of
BioPharmacon, a pharmaceutical development company. Between December 1992 and
February 1999 Dr. Kinsolving was the President of Immuno-Rx, Inc., a company
engaged in immuno-pharmaceutical development. Between December 1991 and
September 1995 Dr. Kinsolving was President of Bestechnology, Inc. a nonmedical
research and development company producing bacterial preparations for industrial
use. Dr. Kinsolving received his Ph.D. in Pharmacology from Emory University
(1970), his Masters degree in Physiology/Chemistry from Vanderbilt University
(1962), and his Bachelor's degree in Chemistry from Tennessee Tech. University
(1957).
Peter R. Young, Ph.D. has been a Director of CEL-SCI since August 2002. Dr.
Young has been a senior executive within the pharmaceutical industry in the
United States and Canada for most of his career. Over the last 20 years he has
primarily held positions of Chief Executive Officer or Chief Financial Officer
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and has extensive experience with acquisitions and equity financings. Since
November 2001 Dr. Young has been the President of Agnus Dei, LLC, which acts as
a partner in an organization managing immune system clinics which treat patients
with diseases such as cancer, multiple sclerosis and hepatitis. Since January
2003 Dr. Young has been the President and Chief Executive Officer of SRL
Technology, Inc., a company involved in the development of pharmaceutical (drug)
delivery systems. Between 1998 and 2001 Dr. Young was the Chief Financial
Officer of Adams Laboratories, Inc. Dr. Young received his Ph.D. in Organic
Chemistry from the University of Bristol, England (1969), and his Bachelor's
degree in Honors Chemistry, Mathematics and Economics also from the University
of Bristol, England (1966).
All of CEL-SCI's officers devote substantially all of their time to
CEL-SCI's business.
Alexander G. Esterhazy, Dr. C. Richard Kinsolving and Dr. Peter R. Young
are independent directors as that term is defined in section 803 of the listing
standards of the NYSE Amex.
CEL-SCI has adopted a Code of Ethics which is applicable to CEL-SCI'S
principal executive, financial, and accounting officers and persons performing
similar functions. The Code of Ethics is available on CEL-SCI's website, located
at www.cel-sci.com.
If a violation of this code of ethics act is discovered or suspected, the
Senior Officer must (anonymously, if desired) send a detailed note, with
relevant documents, to CEL-SCI's Audit Committee, c/o Dr. Peter Young, 6600
Preston Road, #2322, Plano, Texas 75024.
CEL-SCI's Board of Directors met 6 times during the year ended September
30, 2008. All of the Directors attended each of these meetings either in person
or by telephone conference call.
For purposes of electing directors at its annual meeting CEL-SCI does not
have a nominating committee or a committee performing similar functions.
CEL-SCI's board of directors does not believe a nominating committee is
necessary since CEL-SCI's board of directors is small and the board of directors
as a whole performs this function. The current nominees to the Board of
Directors were selected by a majority vote of CEL-SCI's independent directors.
CEL-SCI does not have any policy regarding the consideration of director
candidates recommended by shareholders since a shareholder has never recommended
a nominee to the board of directors. However, CEL-SCI's board of directors will
consider candidates recommended by shareholders. To submit a candidate for the
board of directors the shareholder should send the name, address and telephone
number of the candidate, together with any relevant background or biographical
information, to CEL-SCI's Chief Executive Officer, at the address shown on the
cover page of this proxy statement. The board has not established any specific
qualifications or skills a nominee must meet to serve as a director. Although
the board does not have any process for identifying and evaluating director
nominees, the board does not believe there would be any differences in the
manner in which the board evaluates nominees submitted by shareholders as
opposed to nominees submitted by any other person.
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CEL-SCI does not have a policy with regard to board member's attendance at
annual meetings. All board members, with the exception of Maximilian de Clara
and Alexander Esterhazy, attended the last annual shareholder's meeting held on
March 3, 2008.
Holders of CEL-SCI's common stock can send written communications to
CEL-SCI's entire board of directors, or to one or more board members, by
addressing the communication to "the Board of Directors" or to one or more
directors, specifying the director or directors by name, and sending the
communication to CEL-SCI's offices in Vienna, Virginia. Communications addressed
to the Board of Directors as whole will be delivered to each board member.
Communications addressed to a specific director (or directors) will be delivered
to the director (or directors) specified.
Security holder communications not sent to the board of directors as a
whole or to specified board members are not relayed to board members.
Executive Compensation
Compensation Discussion and Analysis
CEL-SCI's Compensation Committee is empowered to review and approve the
annual compensation and compensation procedures for its executive officers and
annually determines the total compensation level for its President and Chief
Executive Officer. The total proposed compensation of CEL-SCI's named executive
officers is formulated and evaluated by its Chief Executive Officer and
submitted to CEL-SCI's Compensation Committee for consideration.
The key components of CEL-SCI's executive compensation program include
annual base salaries and long-term incentive compensation consisting of stock
options. It is CEL-SCI's policy to target compensation (i.e., base salary, stock
option grants and other benefits) at approximately the median of comparable
companies in the biotechnology field. Accordingly, data on compensation
practices followed by other companies in the biotechnology industry is
considered.
Objectives and Components of the Compensation Program
The primary objective of CEL-SCI's compensation program is to attract,
motivate and retain talented executives who are enthusiastic about CEL-SCI's
mission. The components of CEL-SCI's compensation program are:
o CEL-SCI's base salary levels are commensurate with those of comparable
positions at other biotechnology companies given the level of seniority and
skills possessed by the executive officer and which reflect the
individual's performance with us over time. The base salary of the
President, CEO and our other named executive officers is reviewed annually.
Current employment agreements with Maximilian de Clara and Geert Kersten
set minimums for their base salary rates.
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o CEL-SCI's long-term stock option incentive program consists exclusively of
periodic grants of stock options with an exercise price equal to the fair
market value of CEL-SCI's common stock on the date of grant. To encourage
retention, the ability to exercise options granted under the program is
subject to vesting restrictions. Decisions made regarding the timing and
size of option grants take into account the performance of both CEL-SCI and
the employee, "competitive market" practices, and the size of the option
grants made in prior years. The weighting of these factors varies and is
subjective. Current option holdings are not considered when granting
options.
o CEL-SCI's stock-based incentive awards are intended to strengthen the
mutuality of interests between the executive officers and our stockholders.
o CEL-SCI has a defined contribution retirement plan, qualifying under
Section 401(k) of the Internal Revenue Code and covering substantially all
CEL-SCI's employees. CEL-SCI's contribution to the plan is made in shares
of CEL-SCI's common stock. Each participant's contribution is matched by
CEL-SCI with shares of common stock which have a value equal to 100% of the
participant's contribution, not to exceed 6% of the participant's total
compensation.
The following table shows, in summary form, the compensation received by
(i) the Chief Executive Officer of CEL-SCI and (ii) by each other executive
officer of CEL-SCI who received in excess of $100,000 during the two fiscal
years ended September 30, 2008.
All
Other
Restric- Annual
ted Stock Option Compen-
Name and Princi- Fiscal Salary Bonus Awards Awards sation Total
pal Position Year (1) (2) (3) (4) (5)
---------------- ----- ------ ----- ------- ----- ------ -------
Maximilian de Clara, 2008 $363,000 -- $543,174 $103,320 $89,268 $1,098,762
President 2007 363,000 -- 418,327 105,460 64,693 951,480
Geert R. Kersten, 2008 404,900 -- 156,674 103,320 39,901 704,795
Chief Executive 2007 389,637 -- 31,752 105,460 16,114 542,963
Officer and
Treasurer
Patricia B. Prichep 2008 185,780 -- 82,558 51,660 4,225 324,223
Senior Vice 2007 179,574 -- 19,520 52,730 4,225 256,049
President of
Operations and
Secretary
Eyal Talor, Ph.D. 2008 229,353 -- 81,187 51,660 4,225 366,425
Senior Vice 2007 218,587 -- 18,764 52,730 4,225 294,306
President of
Research and
Manufacturing
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(1) The dollar value of base salary (cash and non-cash) earned. During the
years ended September 30, 2008 and 2007, $18,730 and $28,429, respectively,
of the total salaries paid to the persons shown in the table were paid in
restricted shares of CEL-SCI's common stock.
Information concerning the issuance of these restricted shares is shown in
the following table:
Date Shares Number of Price
Issued Shares Issued Per Share
09/20/2006 49,016 $0.52
01/15/2008 36,020 $0.52
On each date the amount of compensation satisfied through the issuance of
shares was determined by multiplying the number of shares issued by the price
per share. The price per share was equal to the closing price of CEL-SCI's
common stock on the date prior to the date the shares were issued.
(2) The dollar value of bonus (cash and non-cash) earned.
(3) During the periods covered by the table, the value of the shares of
restricted stock issued as compensation for services to the persons listed
in the table. In the case of Mr. de Clara, during the years ended September
30, 2008 and 2007 $400,000 and $400,000, respectively, were paid in
restricted shares of CEL-SCI's common stock which cannot be sold in the
public market for a period of three years after the date of issuance. In
the case of all other persons listed in the table, the shares were issued
as CEL-SCI's contribution on behalf of the named officer to CEL-SCI's
401(k) retirement plan and restricted shares issued from the Stock
Compensation Plan.
(4) The value of all stock options granted during the periods covered by the
table are calculated according to SFAS 123R requirements.
(5) All other compensation received that CEL-SCI could not properly report in
any other column of the table including annual contributions to vested
defined contribution plans. Includes board of directors' fees for Mr. de
Clara and Mr. Kersten.
Employee Pension, Profit Sharing or Other Retirement Plans
CEL-SCI has a defined contribution retirement plan, qualifying under
Section 401(k) of the Internal Revenue Code and covering substantially all
CEL-SCI's employees. CEL-SCI's contribution to the plan is made in shares of
CEL-SCI's common stock. Each participant's contribution is matched by CEL-SCI
with shares of common stock which have a value equal to 100% of the
participant's contribution, not to exceed the lesser of $1,000 or 6% of the
participant's total compensation. CEL-SCI's contribution of common stock is
valued each quarter based upon the closing price of its common stock. The fiscal
2008 expenses for this plan were $110,024. Other than the 401(k) Plan, CEL-SCI
does not have a defined benefit, pension plan, profit sharing or other
retirement plan.
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Compensation of Directors During Year Ended September 30, 2008
Stock Option
Name Paid in Cash Awards (1) Awards (2) Total
---- ------------ ---------- ---------- -----------
Maximilian de Clara $20,000 $124,000 $103,320 $247,320
Geert Kersten $20,000 $124,000 $103,320 $247,320
Alexander Esterhazy $20,000 $ 62,000 $ 51,660 $133,660
C. Richard Kinsolving $20,000 $ 62,000 $ 51,660 $133,660
Peter R. Young $20,000 $ 62,000 $ 51,660 $133,660
(1) The fair value of stock issued for services.
(2) The fair value of options granted computed in accordance with FAS 123R on
the date of grant.
Directors' fees paid to Maximilian de Clara and Geert Kersten are included
in the Executive Compensation table.
Employment Contracts.
In April 2005, CEL-SCI entered into a three-year employment agreement with
Mr. de Clara. The employment agreement provided that CEL-SCI will pay Mr. de
Clara an annual salary of $363,000 during the term of the agreement. On
September 8, 2006 Mr. de Clara's Employment Agreement was amended and extended
to April 30, 2010. The terms of the amendment to Mr. de Clara's employment
agreement are referenced in a report on Form 8-K filed with the Securities and
Exchange Commission on September 8, 2006. In the event that there is a material
reduction in Mr. de Clara's authority, duties or activities, or in the event
there is a change in the control of CEL-SCI, then the agreement allows Mr. de
Clara to resign from his position at CEL-SCI and receive a lump-sum payment from
CEL-SCI equal to 18 months salary ($544,500), the remaining stock payments per
the amendment to Mr. de Clara's employment agreement (valued at $200,000) and
the unvested portion of any stock options would vest immediately ($227,333). For
purposes of the employment agreement, a change in the control of CEL-SCI means
the sale of more than 50% of the outstanding shares of CEL-SCI's Common Stock,
or a change in a majority of CEL-SCI's directors.
The Employment Agreement will also terminate upon the death of Mr. de
Clara, Mr. de Clara's physical or mental disability, the conviction of Mr. de
Clara for any crime involving fraud, moral turpitude, or CEL-SCI's property, or
a breach of the Employment Agreement by Mr. de Clara. If the Employment
Agreement is terminated for any of these reasons, Mr. de Clara, or his legal
representatives, as the case may be, will be paid the salary provided by the
Employment Agreement through the date of termination.
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Effective September 1, 2003, CEL-SCI entered into a three-year employment
agreement with Mr. Kersten. The employment agreement provides that during the
term of the employment agreement CEL-SCI will pay Mr. Kersten an annual salary
of $370,585 plus any increases approved by the Board of Directors during the
period of the employment agreement. In the event there is a change in the
control of CEL-SCI, the agreement allows Mr. Kersten to resign from his position
at CEL-SCI and receive a lump-sum payment from CEL-SCI equal to 24 months salary
($809,800) and the unvested portion of any stock options would vest immediately
($246,666). For purposes of the employment agreement a change in the control of
CEL-SCI means: (1) the merger of CEL-SCI with another entity if after such
merger the shareholders of CEL-SCI do not own at least 50% of voting capital
stock of the surviving corporation; (2) the sale of substantially all of the
assets of CEL-SCI; (3) the acquisition by any person of more than 50% of
CEL-SCI's common stock; or (4) a change in a majority of CEL-SCI's directors
which has not been approved by the incumbent directors. Effective September 1,
2006 Mr. Kersten's employment agreement was extended to September 1, 2011.
The Employment Agreement will also terminate upon the death of Mr.
Kersten, Mr. Kersten's physical or mental disability, willful misconduct, an act
of fraud against CEL-SCI, or a breach of the Employment Agreement by Mr.
Kersten. If the Employment Agreement is terminated for any of these reasons Mr.
Kersten, or his legal representatives, as the case may be, will be paid the
salary provided by the Employment Agreement through the date of termination.
Compensation Committee Interlocks and Insider Participation
CEL-SCI has a compensation committee comprised of all of CEL-SCI's
directors, with the exception of Mr. Kersten. During the year ended September
30, 2008, Mr. de Clara was the only officer participating in deliberations of
CEL-SCI's compensation committee concerning executive officer compensation.
During the year ended September 30, 2008, no director of CEL-SCI was also
an executive officer of another entity, which had an executive officer of
CEL-SCI serving as a director of such entity or as a member of the compensation
committee of such entity.
Loan from Officer and Director
Between December 2008 and June 2009 Maximilian de Clara, CEL-SCI's
President and a director, loaned CEL-SCI $1,104,057. The loan was initially
payable at the end of March, 2009, but was extended to the end of June, 2009. At
the time the loan was due, and in accordance with the loan agreement, CEL-SCI
issued Mr. de Clara a warrant which entitles Mr. de Clara to purchase 1,648,244
shares of CEL-SCI's common stock at a price of $0.40 per share. The warrant is
exercisable at any time prior to June 27, 2014. Although the loan was to be
repaid from the proceeds of CEL-SCI's recent financing, CEL-SCI's Directors
deemed it beneficial not to repay the loan and negotiated a second extension of
the loan with Mr. de Clara on terms similar to the June 2009 financing. Pursuant
to the terms of the second extension the note is now due on July 6, 2014, but,
at Mr. de Clara's option, the loan can be converted into shares of CEL-SCI's
common stock. The number of shares which will be issued upon any conversion will
13
be determined by dividing the amount to be converted by $0.40. As further
consideration for the second extension, Mr. de Clara received warrants which
allow Mr. de Clara to purchase 1,849,295 shares of CEL-SCI's common stock at a
price of $0.50 per share at any time prior to July 6, 2014. The loan from Mr. de
Clara bears interest at 15% per year and is secured by a second lien on
substantially all of CEL-SCI's assets. CEL-SCI does not have the right to prepay
the loan without Mr. de Clara's consent.
Stock Options
The following tables show information concerning the options granted
during the fiscal year ended September 30, 2008 and the period ended July 15,
2009 to the persons named below. Except as indicated, all of the options listed
below were granted pursuant to CEL-SCI's Non-Qualified Stock Option Plan.
Options Granted
Exercise
Grant Options Price Per Expiration
Name Date Granted (#) Share Date
Maximilian de Clara 03/05/2008 200,000 $0.62 03/04/2018
Geert Kersten 03/05/2008 200,000 $0.62 03/04/2018
Patricia B. Prichep 03/05/2008 100,000 $0.62 03/04/2018
Eyal Talor, Ph.D. 03/05/2008 100,000 $0.62 03/04/2018
Maximilian de Clara 04/24/2009 1,436,250 (1) $0.25 04/23/2019
Geert Kersten 04/24/2009 1,838,609 (1) $0.25 04/23/2019
Patricia B. Prichep 04/24/2009 717,096 (1) $0.25 04/23/2019
Eyal Talor, Ph.D. 04/24/2009 240,820 (1) $0.25 04/23/2019
Maximilian de Clara 07/06/2009 500,000 (2) $0.38 07/06/2019
Geert Kersten 07/06/2009 4,000,000 (2) $0.38 07/06/2019
Patricia B. Prichep 07/06/2009 3,000,000 (2) $0.38 07/06/2019
Eyal Talor, Ph.D. 07/06/2009 3,000,000 (2) $0.38 07/06/2019
(1) Options awarded to employees who did not collect a salary, reduced or
deferred their salary between the period of September 15, 2008 and June
30, 2009. For example, Mr. de Clara, Mr. Kersten and Ms. Prichep did not
collect any salary between September 30, 2008 and June 30, 2009. These
options were granted pursuant to CEL-SCI's Incentive Stock Option Plan.
(2) Very long-term performance options: The Board of Directors has identified
the successful Phase III clinical trial for Multikine to be the most
important corporate event to create shareholder value. Therefore, one
third of the options can be exercised when the first 400 patients are
enrolled in CEL-SCI's Phase III head and neck cancer clinical trial. One
third of the options can be exercised when all of the patients have been
enrolled in the Phase III clinical trial. One third of the options can be
exercised when the Phase III trial is completed.
14
Options Exercised
Shares
Date of Acquired On Value
Exercise Exercise Realized
None
Shares underlying unexercised
Options which are: Exercise Expiration
Name Exercisable Unexercisable Price Date
---- ----------- ------------- --------- ----------
Maximilian de Clara 23,333 2.87 07/31/13
95,000 (1) 1.94 08/31/13
70,000 1.05 09/25/09
56,666 1.05 05/01/10
50,000 1.05 05/01/13
50,000 1.05 04/12/09
60,000 1.05 04/19/10
60,000 1.38 03/22/11
75,000 0.54 03/14/12
50,000 0.61 09/02/14
50,000 0.48 09/21/15
66,667 0.58 09/12/16
66,667 0.63 09/13/17
66,667 0.62 03/04/18
1,436,250 (2) 0.25 04/23/19
----------
2,276,250
33,333 0.58 09/12/16
133,333 0.63 09/13/17
133,333 0.62 03/04/18
500,000 0.38 07/06/19
-------
799,999
Geert R. Kersten 50,000 1.05 11/01/13
14,000 1.05 10/31/13
50,000 1.05 07/31/13
224,000 (1) 1.05 06/10/13
50,000 1.05 09/25/09
150,000 1.05 05/01/10
50,000 1.05 05/01/13
50,000 1.05 04/12/09
95,000 (1) 1.94 08/31/13
60,000 1.05 04/19/10
60,000 1.38 03/22/11
560,000 (1) 1.05 10/16/13
105,000 0.54 03/14/12
1,890,000 0.22 04/01/13
15
Shares underlying unexercised
Options which are: Exercise Expiration
Name Exercisable Unexercisable Price Date
---- ----------- ------------- --------- ----------
Geert Kersten (cont'd) 50,000 0.61 09/02/14
50,000 0.48 09/21/15
133,334 0.58 09/12/16
66,667 0.63 09/13/17
66,667 0.62 03/04/18
1,839,609 (2) 0.25 04/23/19
---------
5,613,277
66,666 0.58 09/12/16
133,333 0.63 09/13/17
133,333 0.62 03/04/18
4,000,000 0.38 07/06/19
---------
4,333,332
Shares underlying unexercised
Options which are: Exercise Expiration
Name Exercisable Unexercisable Price Date
---- ----------- ------------- --------- ----------
Patricia B. Prichep 6,000 1.05 12/01/13
10,000 1.05 11/30/13
9,500 1.05 07/31/13
3,000 1.05 12/31/09
35,000 1.05 03/01/10
17,000 1.05 12/01/13
15,000 1.05 04/12/09
47,500 (1) 1.94 08/31/13
23,000 1.05 02/02/10
25,000 1.18 12/08/10
30,000 1.00 12/03/11
200,000 (1) 1.05 10/16/13
10,500 0.54 03/14/12
50,000 0.33 04/26/12
243,000 0.22 04/01/13
337,000 0.22 04/01/13
50,000 0.61 09/02/14
30,000 0.48 09/21/15
60,000 0.58 09/12/16
33,334 0.63 09/13/17
33,334 0.62 03/04/09
717,096 (2) 0.25 04/23/19
--------
1,985,264
30,000 0.58 09/12/16
66,666 0.63 09/13/17
66,666 0.62 03/04/18
3,000,000 0.38 07/06/19
---------
3,163,332
16
Shares underlying unexercised
Options which are: Exercise Expiration
Name Exercisable Unexercisable Price Date
---- ----------- ------------- --------- ----------
Eyal Talor, Ph.D. 15,500 1.05 07/31/13
16,666 1.05 03/16/10
15,000 1.05 08/03/13
10,000 (1) 1.94 08/31/13
20,000 1.05 08/02/09
25,000 1.76 11/10/10
35,000 1.00 12/03/11
160,000 (1) 1.05 10/16/13
50,000 0.33 04/26/12
374,166 0.22 04/01/13
50,000 0.61 09/02/14
30,000 0.48 09/21/15
53,334 0.58 09/12/16
33,334 0.63 09/13/17
33,334 0.62 03/04/18
240,820 (2) 0.25 04/23/19
---------
1,162,154
26,666 0.58 09/12/16
66,666 0.63 09/13/17
66,666 0.62 03/04/18
3,000,000 0.38 07/06/19
---------
3,159,998
(1) Options were purchased through CEL-SCI's Salary Reduction Plan.
(2) Options awarded to employees who did not collect a salary, reduced or
deferred their salary between the period of September 15, 2008 and June 30,
2009. For example, Mr. de Clara, Mr. Kersten and Ms. Prichep did not
collect any salary between September 30, 2008 and June 30, 2009.
Stock Option, Bonus Plans and Compensation Plans
CEL-SCI has Incentive Stock Option Plans, Non-Qualified Stock Option
Plans, Stock Bonus Plans and a Stock Compensation Plan. The Stock Option, Bonus
and Compensation Plans have been approved by CEL-SCI's stockholders. A summary
description of these Plans follows. In some cases these Plans are collectively
referred to as the "Plans".
Incentive Stock Option Plans. The Incentive Stock Option Plans authorize
the issuance of shares of CEL-SCI's common stock to persons who exercise options
granted pursuant to the Plan. Only CEL-SCI's employees may be granted options
pursuant to the Incentive Stock Option Plan.
To be classified as incentive stock options under the Internal Revenue
Code, options granted pursuant to the Plans must be exercised prior to the
following dates:
17
(a) The expiration of three months after the date on which an option
holder's employment by CEL-SCI is terminated (except if such
termination is due to death or permanent and total disability);
(b) The expiration of 12 months after the date on which an option holder's
employment by CEL-SCI is terminated, if such termination is due to the
Employee's permanent and total disability;
(c) In the event of an option holder's death while in the employ of
CEL-SCI, his executors or administrators may exercise, within three
months following the date of his death, the option as to any of the
shares not previously exercised;
The total fair market value of the shares of Common Stock (determined at
the time of the grant of the option) for which any employee may be granted
options which are first exercisable in any calendar year may not exceed
$100,000.
Options may not be exercised until one year following the date of grant.
Options granted to an employee then owning more than 10% of the Common Stock of
CEL-SCI may not be exercisable by its terms after five years from the date of
grant. Any other option granted pursuant to the Plan may not be exercisable by
its terms after ten years from the date of grant.
The purchase price per share of Common Stock purchasable under an option
is determined by the Committee but cannot be less than the fair market value of
the Common Stock on the date of the grant of the option (or 110% of the fair
market value in the case of a person owning more than 10% of CEL-SCI's
outstanding shares).
Non-Qualified Stock Option Plans. The Non-Qualified Stock Option Plans
authorize the issuance of shares of CEL-SCI's common stock to persons that
exercise options granted pursuant to the Plans. CEL-SCI's employees, directors,
officers, consultants and advisors are eligible to be granted options pursuant
to the Plans, provided however that bona fide services must be rendered by such
consultants or advisors and such services must not be in connection with the
offer or sale of securities in a capital-raising transaction. The option
exercise price is determined by the Committee.
Stock Bonus Plan. Under the Stock Bonus Plans shares of CEL-SCI's common
stock may be issued to CEL-SCI's employees, directors, officers, consultants and
advisors, provided however that bona fide services must be rendered by
consultants or advisors and such services must not be in connection with the
offer or sale of securities in a capital-raising transaction.
Stock Compensation Plan. Under the Stock Compensation Plan shares of
CEL-SCI's common stock may be issued to CEL-SCI's employees, directors,
officers, consultants and advisors, provided however that bona fide services
must be rendered by consultants or advisors and such services must not be in
connection with the offer or sale of securities in a capital-raising
transaction.
18
Other Information Regarding the Plans. The Plans are administered by
CEL-SCI's Compensation Committee ("the Committee"), each member of which is a
director of CEL-SCI. The members of the Committee were selected by CEL-SCI's
Board of Directors and serve for a one year tenure and until their successors
are elected. A member of the Committee may be removed at any time by action of
the Board of Directors. Any vacancies which may occur on the Committee will be
filled by the Board of Directors. The Committee is vested with the authority to
interpret the provisions of the Plans and supervise the administration of the
Plans. In addition, the Committee is empowered to select those persons to whom
shares or options are to be granted, to determine the number of shares subject
to each grant of a stock bonus or an option and to determine when, and upon what
conditions, shares or options granted under the Plans will vest or otherwise be
subject to forfeiture and cancellation.
In the discretion of the Committee, any option granted pursuant to the
Plans may include installment exercise terms such that the option becomes fully
exercisable in a series of cumulating portions. The Committee may also
accelerate the date upon which any option (or any part of any options) is first
exercisable. Any shares issued pursuant to the Stock Bonus Plan and any options
granted pursuant to the Incentive Stock Option Plan or the Non-Qualified Stock
Option Plan will be forfeited if the "vesting" schedule established by the
Committee administering the Plan at the time of the grant is not met. For this
purpose, vesting means the period during which the employee must remain an
employee of CEL-SCI or the period of time a non-employee must provide services
to CEL-SCI. At the time an employee ceases working for CEL-SCI (or at the time a
non-employee ceases to perform services for CEL-SCI), any shares or options not
fully vested will be forfeited and cancelled. At the discretion of the Committee
payment for the shares of Common Stock underlying options may be paid through
the delivery of shares of CEL-SCI's Common Stock having an aggregate fair market
value equal to the option price, provided such shares have been owned by the
option holder for at least one year prior to such exercise. A combination of
cash and shares of Common Stock may also be permitted at the discretion of the
Committee.
Options are generally non-transferable except upon death of the option
holder. Shares issued pursuant to the Stock Bonus Plan will generally not be
transferable until the person receiving the shares satisfies the vesting
requirements imposed by the Committee when the shares were issued.
The Board of Directors of CEL-SCI may at any time, and from time to time,
amend, terminate, or suspend one or more of the Plans in any manner they deem
appropriate, provided that such amendment, termination or suspension will not
adversely affect rights or obligations with respect to shares or options
previously granted. The Board of Directors may not, without shareholder
approval: make any amendment which would materially modify the eligibility
requirements for the Plans; increase or decrease the total number of shares of
Common Stock which may be issued pursuant to the Plans except in the case of a
reclassification of CEL-SCI's capital stock or a consolidation or merger of
CEL-SCI; reduce the minimum option price per share; extend the period for
granting options; or materially increase in any other way the benefits accruing
to employees who are eligible to participate in the Plans.
19
Summary. The following shows certain information as of July 15, 2009
concerning the stock options and stock bonuses granted by CEL-SCI. Each option
represents the right to purchase one share of CEL-SCI's common stock.
Total Shares
Shares Reserved for Shares Remaining
Reserved Outstanding Issued as Options/Shares
Name of Plan Under Plans(1) Options Stock Bonus Under Plans
------------- ------------- ------------ ----------- --------------
Incentive Stock Option Plans 10,100,000 8,951,041 N/A 770,225
Non-Qualified Stock Option Plans 13,760,000 9,106,345 N/A 1,299,386
Stock Bonus Plans 7,940,000 N/A 5,930,186 2,008,055
Stock Compensation Plan 5,500,000 N/A 5,105,746 394,254
(1) Does not include shares which may be granted under plans which are referred
to in Notice of the current Annual Meeting of Shareholders.
Of the shares issued pursuant to CEL-SCI's Stock Bonus Plans 1,180,544
shares were issued as part of CEL-SCI's contribution to its 401(k) plan.
The following table shows the weighted average exercise price of the
outstanding options granted pursuant to CEL-SCI's Incentive and Non-Qualified
Stock Option Plans as of September 30, 2008, CEL-SCI's most recent fiscal year
end. CEL-SCI's Incentive and Non-Qualified Stock Option Plans have been approved
by CEL-SCI's shareholders.
Number of Securities
Number Remaining Available
of Securities For Future Issuance
to be Issued Weighted-Average Under Equity
Upon Exercise Exercise Price of Compensation Plans,
of Outstanding of Outstanding Excluding Securities
Plan category Options (a) Options Reflected in Column (a)
-----------------------------------------------------------------------------------------
Incentive Stock Option Plans 4,745,266 $0.53 5,003,000
Non-Qualified Stock Option Plans 8,406,265 $0.68 2,028,000
Compensation Committee
During the year ending September 30, 2008 CEL-SCI had a Compensation
Committee which was comprised of Maximilian de Clara, Alexander Esterhazy and C.
Richard Kinsolving. During the year ended September 30, 2008 the Compensation
Committee did not formerly meet as a separate committee, but rather held its
meetings in conjunction with CEL-SCI's Board of Director's meetings.
During the year ended September 30, 2008, Mr. de Clara was the only officer
participating in deliberations of CEL-SCI's compensation committee concerning
executive officer compensation. During the year ended September 30, 2008, no
20
director of CEL-SCI was also an executive officer of another entity, which had
an executive officer of CEL-SCI serving as a director of such entity or as a
member of the compensation committee of such entity.
The following is the report of the Compensation Committee:
The key components of CEL-SCI's executive compensation program include
annual base salaries and long-term incentive compensation consisting of stock
options. It is CEL-SCI's policy to target compensation (i.e., base salary, stock
option grants and other benefits) at approximately the median of comparable
companies in the biotechnology field. Accordingly, data on compensation
practices followed by other companies in the biotechnology industry is
considered.
CEL-SCI's long-term incentive program consists exclusively of periodic
grants of stock options with an exercise price equal to the fair market value of
CEL-SCI's common stock on the date of grant. To encourage retention, the ability
to exercise options granted under the program is subject to vesting
restrictions. Decisions made regarding the timing and size of option grants take
into account the performance of both CEL-SCI and the employee, "competitive
market" practices, and the size of the option grants made in prior years. The
weighting of these factors varies and is subjective. Current option holdings are
not considered when granting options.
In April 2005 CEL-SCI entered into a three-year employment agreement with
Maximilian de Clara, CEL-SCI's President. The April 2005 employment agreement,
which is essentially the same as Mr. de Clara's two prior employment agreements,
provides that during the employment term CEL-SCI will pay Mr. de Clara a salary
of $363,000.
On September 8, 2006 Mr. de Clara's Employment Agreement was amended and
extended to April 30, 2010. The terms of the amendment to Mr. de Clara's
employment agreement are referenced in a report on Form 8-K filed with the
Securities and Exchange Commission on September 8, 2006. In amending and
renewing Mr. de Clara's employment contract CEL-SCI's Compensation Committee
considered various factors, including Mr. de Clara's performance in his area of
responsibility, Mr. de Clara's experience in his position, and Mr. de Clara's
length of service with the Company. During the fiscal year ending September 30,
2008 the compensation paid to Mr. de Clara was based on his employment contract.
In August 2003, CEL-SCI entered into a three-year employment agreement
with Geert R. Kersten. The employment agreement, which is essentially the same
as Mr. Kersten's prior employment agreement, provides that during the term of
the agreement CEL-SCI will pay Mr. Kersten an annual salary of $370,585.
Effective September 1, 2006 Mr. Kersten's employment agreement was extended to
September 1, 2011. In renewing Mr. Kersten's employment contract CEL-SCI's
Compensation Committee considered various factors, including Mr. Kersten's
performance in his area of responsibility, Mr. Kersten's experience in his
position, and Mr. Kersten's length of service with CEL-SCI. During the fiscal
year ending September 30, 2008 the compensation paid to Mr. Kersten was based on
his employment contract.
21
During the year ending September 30, 2008, the compensation paid to
CEL-SCI's other executive officers was based on a variety of factors, including
the performance in the executive's area of responsibility, the executive's
individual performance, the executive's experience in his or her role, the
executive's length of service with CEL-SCI, the achievement of specific goals
established for CEL-SCI and its business, and, in certain instances, to the
achievement of individual goals.
Financial or stockholder value performance comparisons were not used to
determine the compensation of CEL-SCI' other executive officers since CEL-SCI's
financial performance and stockholder value are influenced to a substantial
degree by external factors and as a result comparing the compensation payable to
the other executive officers to CEL-SCI's financial or stock price performance
can be misleading.
During the year ended September 30, 2008 CEL-SCI granted options for the
purchase of 900,000 shares of CEL-SCI's common stock to CEL-SCI's executive
officers. In granting the options to CEL-SCI's executive officers, the Board of
Directors considered the same factors which were used to determine the cash
compensation paid to such officers. Additional options were granted to CEL-SCI's
officers as some of them did not receive any salary between September 2008 and
June 2009, and others received reduced salaries during the same period.
Except as otherwise disclosed in this proxy statement, during the year
ended September 30, 2008 CEL-SCI did not issue any shares of its common stock to
CEL-SCI's officers or directors in return for services provided to CEL-SCI.
The foregoing report has been approved by the members of the Compensation
Committee:
Maximilian de Clara
Alexander Esterhazy
C. Richard Kinsolving
Audit Committee
During the year ended September 30, 2008 CEL-SCI had an Audit Committee
comprised of Alexander Esterhazy, C. Richard Kinsolving and Peter Young. All
members of the Audit Committee are independent as independence is defined by
Section 803 of the NYSE Amex's Listing Standards. Dr. Peter Young serves as the
audit committee's financial expert. The purpose of the Audit Committee is to
review and approve the selection of CEL-SCI's auditors and review CEL-SCI's
financial statements with CEL-SCI's independent registered public accounting
firm.
During the fiscal year ended September 30, 2008, the Audit Committee met 5
times. All members of the Audit Committee attended these meetings.
22
The following is the report of the Audit Committee:
(1) The Audit Committee reviewed and discussed CEL-SCI's audited financial
statements for the year ended September 30, 2008 with CEL-SCI's
management.
(2) The Audit Committee discussed with CEL-SCI's independent registered
public accounting firm the matters required to be discussed by
Statement on Accounting Standards (SAS) No. 61 "Communications with
Audit Committee" as amended by SASs 89 and 90.
(3) The Audit Committee has received the written disclosures and the
letter from CEL-SCI's independent registered public accounting firm
required by PCAOB (Public Company Accounting Oversight Board)
standards, and had discussed with CEL-SCI's independent registered
public accounting firm the independent registered public accounting
firm's independence; and
(4) Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited
financial statements be included in CEL-SCI's Annual Report on Form
10-K for the year ended September 30, 2008 for filing with the
Securities and Exchange Commission.
(5) During the year ended September 30, 2008 CEL-SCI paid BDO Seidman LLP,
CEL-SCI's independent registered public accounting firm, audit fees of
$173,052 for professional services rendered for the audit of CEL-SCI's
annual financial statements and the reviews of the financial
statements included in CEL-SCI's 10-Q reports for the fiscal year and
all regulatory filings. The Audit Committee is of the opinion that
these fees are consistent with maintaining its independence from
CEL-SCI.
The foregoing report has been approved by the members of the Audit
Committee:
Alexander G. Esterhazy
C. Richard Kinsolving
Peter Young
CEL-SCI's Board of Directors has adopted a written charter for the Audit
Committee, a copy of which is attached to this proxy statement.
PROPOSAL TO ADOPT 2009 INCENTIVE STOCK OPTION PLAN
Shareholders are being requested to vote on the adoption of CEL-SCI's 2009
Incentive Stock Option Plan. The purpose of the 2009 Incentive Stock Option Plan
is to furnish additional compensation and incentives to CEL-SCI's officers and
employees.
The 2009 Incentive Stock Option Plan, if adopted, will authorize the
issuance of up to 5,000,000 shares of CEL-SCI's common stock to persons that
exercise options granted pursuant to the plan. As of the date of this Proxy
Statement CEL-SCI had not granted any options pursuant to this plan.
23
Any options under the 2009 Incentive Stock Option Plan must be granted
before July 15, 2019. If adopted, the 2009 Incentive Stock Option Plan will
function and be administered in the same manner as CEL-SCI's other Incentive
Stock Option Plans. The Board of Directors recommends that the shareholders of
CEL-SCI approve the adoption of the 2009 Incentive Stock Option Plan.
PROPOSAL TO ADOPT 2009 NON-QUALIFIED STOCK OPTION PLAN
Shareholders are being requested to vote on the adoption of CEL-SCI's 2009
Non-Qualified Stock Option Plan. CEL-SCI's employees, directors and officers,
and consultants or advisors to CEL-SCI are eligible to be granted options
pursuant to the 2009 Non-Qualified Plan as may be determined by CEL-SCI's Board
of Directors, provided however that bona fide services must be rendered by such
consultants or advisors and such services must not be in connection with the
offer or sale of securities in a capital-raising transaction.
The 2009 Non-Qualified Plan, if adopted, will authorize the issuance of up
to 15,000,000 shares of CEL-SCI's common stock to persons that exercise options
granted pursuant to the Plan. As of the date of this Proxy Statement CEL-SCI has
granted 10,500,000 options under the 2009 Non-Qualified Plan.
The 2009 Non-Qualified Plan will function and be administered in the same
manner as CEL-SCI's other Non-Qualified Plans. The Board of Directors recommends
that the shareholders of CEL-SCI approve the adoption of the 2009 Non-Qualified
Plan.
PROPOSAL TO ADOPT 2009 STOCK BONUS PLAN
Shareholders are being requested to vote on the adoption of CEL-SCI's 2009
Stock Bonus Plan. The purpose of the 2009 Stock Bonus Plan is to furnish
additional compensation and incentives to CEL-SCI's employees, directors,
officers, consultants and advisors and to allow CEL-SCI to continue to make
contributions to its 401(k) plan with shares of its common stock instead of
cash.
Since 1993 CEL-SCI has maintained a defined contribution retirement plan
(also known as a 401(k) Plan) covering substantially all CEL-SCI's employees.
Since 1998 CEL-SCI's contribution to the plan has been made in shares of
CEL-SCI's common stock as opposed to cash. CEL-SCI's contribution of common
stock is made quarterly and is valued based upon the price of CEL-SCI's common
stock on the American Stock Exchange. The Board of Directors is of the opinion
that contributions to the 401(k) plan with shares of CEL-SCI's common stock
serves to further align the shareholder's interest with that of CEL-SCI's
employees.
The 2009 Stock Bonus Plan, if adopted, will authorize the issuance of up
to 2,000,000 shares of CEL-SCI's common stock to persons granted stock bonuses
pursuant to the plan. As of the date of this Proxy Statement CEL-SCI had not
granted any stock bonuses pursuant to the 2009 Stock Bonus Plan.
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The 2009 Stock Bonus Plan will function and be administered in the same
manner as CEL-SCI's existing Stock Bonus Plans. The Board of Directors
recommends that the shareholders of CEL-SCI approve the adoption of the 2009
Stock Bonus Plans.
PROPOSAL TO AMEND CEL-SCI'S STOCK COMPENSATION PLAN
During the two years ended September 30, 2008 CEL-SCI issued 1,341,355
shares of its common stock to its officers, directors and employees in payment
of $831,736 in salaries, fees and other compensation owed to these persons. To
conserve cash, CEL-SCI expects that it may continue to offer its officers,
directors and employees the opportunity to receive shares of CEL-SCI's common
stock in payment of amounts owed by CEL-SCI for services rendered.
CEL-SCI's common stock trades on the NYSE Amex. NYSE Amex-listed
corporations must obtain shareholder approval for arrangements which permit
officers, directors, employees or consultants to receive a listed corporation's
shares in payment of compensation.
To comply with the NYSE Amex requirements in this regard CEL-SCI adopted a
Stock Compensation Plan, which was approved by CEL-SCI's shareholders at the May
6, 2004 annual meeting, and which provided that shares of CEL-SCI'S common stock
would be available for issuance under the Plan. Shareholders subsequently
approved amendments to the Stock Compensation Plan which provided up to
5,500,000 shares would be available for issuance under the plan.
So that CEL-SCI may continue to offer shares of its common stock in
payment of compensation owed, CEL-SCI's Board of Directors, subject to
shareholder approval, has approved an amendment to the Stock Compensation Plan
so that an additional 2,000,000 shares of restricted common stock would be
available for issuance under the Plan. The Board of Directors recommends that
the shareholders of CEL-SCI approve the amendment to the Stock Compensation
Plan.
PROPOSAL TO AMEND CEL-SCI'S ARTICLES OF INCORPORATION SUCH THAT CEL-SCI WOULD BE
AUTHORIZED TO ISSUE 450,000,000 SHARES OF COMMON STOCK
CEL-SCI is presently authorized to issue 300,000,000 shares of common
stock. As of July 28, 2009, CEL-SCI had 146,901,696 outstanding shares of common
stock. Approximately 84,900,000 additional shares could be issued upon the
conversion of outstanding promissory notes, the payment of interest or principal
on the promissory notes, or the exercise of outstanding options and warrants.
Due to the lack of any significant revenues, CEL-SCI has relied upon
proceeds from the private sales of its common stock, as well as securities
convertible into common stock, to meet its funding requirements.
25
CEL-SCI needs to increase its authorized shares of common stock to
accommodate the additional shares which may be issued if all outstanding
options, warrants and convertible securities were exercised or converted and to
allow CEL-SCI to raise additional capital through the sale of common stock or
securities convertible into common stock.
Although CEL-SCI will be required to fund its operations through the sale
of its securities until significant revenues are generated from the commercial
sale of its products, as of the date of this proxy statement CEL-SCI did not
have any definitive agreements or arrangements with any person to sell any
additional shares of its common stock, except for CEL-SCI's obligation to issue
common stock upon the exercise of outstanding options and warrants or the
conversion of.
If this proposal is not adopted, it may not be possible to raise the funds
needed to start the Phase III trial for Multikine.
APPROVAL OF A REVERSE SPLIT OF CEL-SCI'S COMMON STOCK, SUBJECT TO THE
DETERMINATION OF CEL-SCI'S DIRECTORS THAT A REVERSE SPLIT WOULD BE IN THE BEST
INTEREST OF CEL-SCI'S SHAREHOLDERS.
CEL-SCI's Board of Directors is seeking approval to adopt a reverse split
of its outstanding common stock in a ratio no less than 1-for-2 and no greater
than 1-for-10 at any time before its next Annual Meeting of Stockholders in
2010. CEL-SCI's Board of Directors has not made any determination of whether it
wants to actually proceed with a reverse split of the Company's common stock; it
is only seeking the shareholders' approval for such a step at this time.
CEL-SCI's Directors asked for and received this approval from the shareholders
last year, but did not use it. CEL-SCI's Directors believe that, because it is
not possible to predict future market conditions, it would be in the best
interests of the stockholders if the Board was able to determine, at any time
prior to the next Annual Meeting of Stockholders in 2010, whether to adopt a
reverse split of CEL-SCI's outstanding common stock and, if the Board should
decide to proceed that way, the appropriate reverse stock split ratio. The
proposed reverse stock split would combine a whole number of outstanding shares
of CEL-SCI's common stock into one share of common stock, thus reducing the
number of outstanding shares without any corresponding change in CEL-SCI's par
value or market capitalization. As a result, the number of shares of CEL-SCI's
common stock owned by each stockholder would be reduced in the same proportion
as the reduction in the total number of shares outstanding, so that the
percentage of the outstanding shares owned by each stockholder would remain
unchanged.
If this proposal is approved, CEL-SCI'S Directors will subsequently have
the authority, in their sole discretion, to determine whether or not to proceed
with a reverse stock split. If the Board of Directors determines, based on
factors such as the trading prices of CEL-SCI's common stock and other relevant
circumstances that a reverse stock split is in CEL-SCI's best interests and in
the best interests of CEL-SCI's stockholders, it may, at such time as it deems
appropriate, determine the exact ratio of the reverse stock split and effect the
reverse split without further approval or authorization of CEL-SCI's
stockholders. The text of the proposed amendment to CEL-SCI's certificate of
incorporation is provided in Exhibit A to this proxy statement. The text of the
26
proposed amendment is subject to modification to include such changes as may be
required by the Colorado Secretary of State or as the Board of Directors deems
necessary and advisable to effect the reverse stock split.
CEL-SCI's Board of Directors reserves the right, even after stockholder
approval, to forego or postpone the reverse stock split if it determines such
action is not in CEL-SCI's best interests or the best interests of CEL-SCI's
stockholders. If the reverse stock split adopted by the stockholders is not
subsequently implemented by CEL-SCI's Board of Directors by the 2010 Annual
Meeting of Stockholders, this proposal will be deemed abandoned. In such case,
the Board of Directors may again seek stockholder approval at a future date for
a reverse stock split if it deems a reverse stock split to be advisable at that
time. If the reverse stock split is adopted, there will be no change in the
number of authorized shares of CEL-SCI's common stock.
The primary reason for the reverse split stock is to increase the trading
price of CEL-SCI's common stock by reducing the number of CEL-SCI's outstanding
shares.
The Board of Directors believes that, with the manufacturing facility now
completed, the most important step it can take is to conduct the Phase III
clinical trial with Multikine. CEL-SCI is now a Phase III cancer company with
very promising human survival data, yet the low share price prevents many
investors from investing in CEL-SCI. CEL-SCI's Board of Directors believes that
the current low market price for CEL-SCI's common stock has had a negative
effect on the marketability of CEL-SCI's outstanding shares for several reasons.
First, many institutional investors have internal policies preventing the
purchase of low-priced stocks. Second, analysts and brokers at many brokerage
firms are prohibited from recommending, or are reluctant to recommend,
lower-priced stocks to their clients. Also, since a broker's commissions on
low-priced stocks generally represent a higher percentage of the stock price
than commissions on higher priced stocks, the current low price of CEL-SCI's
common stock can result in investors paying transaction costs (commissions,
markups or markdowns) that are a higher percentage of the total share value than
would be the case if the price of CEL-SCI's common stock was substantially
higher. Third, CEL-SCI's low share price creates the impression that CEL-SCI is
not a credible company while in reality it is an established biotechnology
company with a potentially very important cancer drug going into a global Phase
III clinical trial.
CEL-SCI's Board of Directors believes that increasing the per share market
price of its common stock may encourage greater interest in CEL-SCI's common
stock and enhance the acceptability and marketability of CEL-SCI's common stock
to the financial community and investing public. As of July 28, 2009, CEL-SCI
had 146,901,696 outstanding shares of common stock, which is more than many
other biotechnology and life science companies that are comparable in size. A
reverse stock split would reduce the number of shares outstanding to a number
that is more comparable with those of similar biotechnology and life science
companies and more appropriate to the size and scope of CEL-SCI's current
business.
While CEL-SCI expects that the reverse stock split will increase the market
price of its common stock CEL-SCI cannot guarantee that the reverse stock split
will increase the market price of its common stock by a multiple equal to the
reverse split ratio, or result in any permanent increase in the market price,
which can be dependent upon many factors, including CEL-SCI's business and
27
financial performance and prospects. Should the market price decline after the
reverse stock split, the percentage decline may be greater, due to the smaller
number of shares outstanding, than it would have been prior to the reverse stock
split. In some cases the stock price of companies that have adopted reverse
stock splits has subsequently declined to pre-reverse split levels. Accordingly,
CEL-SCI cannot assure its shareholders that the market price of its common stock
immediately after the effective date of the reverse stock split will be
maintained for any period of time, or that the reverse stock split will not have
an adverse effect on CEL-SCI's stock price. A reverse stock split is often
viewed negatively by the market and, consequently, can lead to a decrease in
CEL-SCI's overall market capitalization. If the per share price does not
increase proportionately as a result of the reverse stock split, then CEL-SCI's
overall market capitalization will be reduced. However, CEL-SCI believes that
evidence suggests that if a reverse split is done from a position of strength
and by a real and established company as opposed to one that is simply trying,
for example, to save its listing on the NASDAQ stock exchange when its stock is
below $1, then the reverse split can be very beneficial for the Company's
overall market capitalization.
The reverse stock split would only eliminate 40 shareholders since,
according to the records of CEL-SCI's transfer agent, only 40 shareholders own
less than ten shares.
CEL-SCI would still have approximately 1,060 shareholders of record after
the reverse stock split and would continue to be registered under Section 12 of
the Securities Exchange Act of 1934.
Any fractional shares resulting from the reverse stock split are rounded
to the nearest whole share.
CEL-SCI's Articles of Incorporation provide that CEL-SCI is presently
authorized to issue 300,000,000 shares of common stock. The reverse split, if
adopted, would not change the number of shares of common stock which CEL-SCI is
authorized to issue. However, a reverse split would reduce the number of
CEL-SCI's outstanding shares, which would enable CEL-SCI to issue more shares
that it would be able to issue if the reverse split was not adopted. CEL-SCI
does not have any plans to issue any additional shares of its common stock,
other than shares which it would be required to issue in connection with
outstanding options or warrants, or shares which have customarily been issued
pursuant to CEL-SCI's stock bonus or compensation plans.
If approved by CEL-SCI's shareholders the, reverse stock split would be
contingent upon CEL-SCI's directors adopting a reverse stock split with a ratio
no less than 1-for-2 and no greater than 1-for-10.
At the last annual meeting CEL-SCI's shareholders approved a resolution
similar to the foregoing. However, CEL-SCI's directors did not take any action
with respect to a reverse stock split.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors has selected BDO Seidman, LLP, an independent
registered public accounting firm, to audit the books and records of CEL-SCI for
the fiscal year ending September 30, 2009. BDO Seidman served as CEL-SCI's
28
independent registered public accounting firm for the fiscal year ended
September 30, 2008. A representative of BDO Seidman is expected to be present at
the shareholders' meeting.
BDO Seidman, LLP served as CEL-SCI's auditors for the years ended
September 30, 2008 and 2007. The following table shows the aggregate fees billed
to CEL-SCI during these year by BDO Seidman, LLP:
Year Ended September 30,
2008 2007
---- ----
Audit Fees $173,052 $142,704
Audit-Related Fees -- --
Tax Fees -- --
All Other Fees -- --
Audit fees represent amounts billed for professional services rendered for
the audit of CEL-SCI's annual financial statements and the reviews of the
financial statements included in CEL-SCI's 10-Q reports for the fiscal year and
all regulatory filings. Before BDO Seidman, LLP was engaged by CEL-SCI to render
audit or non-audit services, the engagement was approved by CEL-SCI's audit
committee. CEL-SCI's Board of Directors is of the opinion that the Audit Fees
charged by BDO Seidman, LLP are consistent with BDO Seidman, LLP maintaining its
independence from CEL-SCI.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
CEL-SCI's Annual Report on Form 10-K for the year ending September 30,
2008 will be sent to any shareholder of CEL-SCI upon request. Requests for a
copy of this report should be addressed to the Secretary of CEL-SCI at the
address provided on the first page of this proxy statement.
SHAREHOLDER PROPOSALS
Any shareholder proposal which may properly be included in the proxy
solicitation material for the annual meeting of shareholders following CEL-SCI's
year ending September 30, 2008 must be received by the Secretary of CEL-SCI no
later than December 31, 2009.
GENERAL
The cost of preparing, printing and mailing the enclosed proxy,
accompanying notice and proxy statement, and all other costs in connection with
solicitation of proxies will be paid by CEL-SCI including any additional
solicitation made by letter, telephone or telegraph. Failure of a quorum to be
present at the meeting will necessitate adjournment and will subject CEL-SCI to
additional expense. CEL-SCI's annual report, including financial statements for
the 2008 fiscal year, is included in this mailing.
29
CEL-SCI's Board of Directors does not intend to present and does not have
reason to believe that others will present any other items of business at the
annual meeting. However, if other matters are properly presented to the meeting
for a vote, the proxies will be voted upon such matters in accordance with the
judgment of the persons acting under the proxies.
Please complete, sign and return the attached proxy promptly.
30
CEL-SCI CORPORATION PROXY
This Proxy is solicited by CEL-SCI's Board of Directors
The undersigned stockholder of CEL-SCI acknowledges receipt of the Notice of
the Annual Meeting of Stockholders to be held September 14, 2009, 10:30 a.m.
local time, at the Hilton Munich Park, Am Tucherplatz 7, 80538 Munich, Germany
and hereby appoints Maximilian de Clara and Geert R. Kersten with the power of
substitution, as Attorneys and Proxies to vote all the shares of the
undersigned at said annual meeting of stockholders and at all adjournments
thereof, hereby ratifying and confirming all that said Attorneys and Proxies
may do or cause to be done by virtue hereof. The above named Attorneys and
Proxies are instructed to vote all of the undersigned's shares as follows:
(1) To elect the persons who shall constitute CEL-SCI's Board of Directors for
the ensuing year.
[ ] FOR all nominees listed below (except as marked to the contrary
below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW)
Nominees: Maximilian de Clara Geert R. Kersten Alexander G. Esterhazy
C. Richard Kinsolving Peter R. Young
(2) To approve the adoption of CEL-SCI's 2009 Incentive Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) To approve the adoption of CEL-SCI's 2009 Non-Qualified Stock Option
Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) To approve the adoption of CEL-SCI's 2009 Stock Bonus Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(5) To approve an amendment to CEL-SCI's Stock Compensation Plan so that an
additional 2,000,000 restricted shares of CEL-SCI's common stock are
available for issuance under the Plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(6) To amend CEL-SCI's Articles of Incorporation such that CEL-SCI would be
authorized to issue 450,000,000 shares of common stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(7) Subject to the determination of CEL-SCI's directors that a reverse split
would be in the best interest of CEL-SCI's shareholders, to approve a
reverse split of CEL-SCI's common stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(8) To ratify the appointment of BDO Seidman, LLP as CEL-SCI's independent
registered public accounting firm for the fiscal year ending September 30,
2009.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
To transact such other business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DISCRETION IS INDICATED, THIS PROXY WILL BE VOTED
IN FAVOR OF ITEMS 1 THROUGH 8.
Dated this _____ day of ________________ 2009.
-----------------------------------------------
(Signature)
-----------------------------------------------
(Signature)
Please sign your name exactly as it appears on your stock certificate. If shares
are held jointly, each holder should sign. Executors, trustees, and other
fiduciaries should so indicate when signing.
Please Sign, Date and Return this Proxy so that your shares may be voted at the
meeting.
Send the proxy statement by regular mail, email, or fax to:
CEL-SCI Corporation
Attn: Gavin de Windt
8229 Boone Blvd., #802
Vienna, VA 22182
Phone: 703-506-9460
Fax: 703-506-9471
Email: gdewindt@cel-sci.com