SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Amendment No. 3
Filed by the Registrant [X]
Filed by 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
[] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
CEL-SCI CORPORATION
(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 May 20, 2013
To the Shareholders:
Notice is hereby given that the annual meeting of the shareholders of
CEL-SCI Corporation ("CEL-SCI") will be held at 4820-C Seton Drive, Baltimore,
MD 21215, on May 20, 2013 at 10:30 a.m. local time, 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 2013 Non-Qualified Stock Option
Plan which provides that up to 20,000,000 shares of common stock may be issued
upon the exercise of options granted pursuant to the Non-Qualified Stock Option
Plan;
(3) to approve the adoption of CEL-SCI's Amended and Restated Articles of
Incorporation.
(4) 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. A condition of the reverse stock split
is that the ratio of the reverse split will be determined by CEL-SCI's Board of
Directors. The Board of Directors may elect not to proceed with a stock split
without further action by the shareholders.
(5) to ratify the appointment of BDO USA, LLP as CEL-SCI's independent
registered public accounting firm for the fiscal year ending September 30, 2013;
to transact such other business as may properly come before the meeting.
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March 26, 2013 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 March 26, 2013 there were _______
outstanding shares of CEL-SCI's common stock.
CEL-SCI CORPORATION
_________, 2013 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 May 20, 2013, 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 posted on the CEL-SCI's website
on or about ___________.
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 the holders of
a majority of CEL-SCI's outstanding shares.
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 January 18, 2013, 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 6,998,689 2.2%
Bergstrasse 79
6078 Lungern,
Obwalden, Switzerland
Geert R. Kersten 10,041,991(2) 3.2%
8229 Boone Blvd.,
Suite 802
Vienna, VA 22182
Patricia B. Prichep 3,451,113 1.1%
8229 Boone Blvd.,
Suite 802
Vienna, VA 22182
Eyal Talor, Ph.D. 2,254,716 0.7%
8229 Boone Blvd., Suite 802
Vienna, VA 22182
Daniel H. Zimmerman, Ph.D. 1,861,804 0.6%
8229 Boone Blvd., Suite 802
Vienna, VA 22182
John Cipriano 681,000 0.2%
8229 Boone Blvd., Suite 802
Vienna, VA 22182
Alexander G. Esterhazy 1,245,489 0.4%
20 Chemin du Pre-Poiset
CH- 1253 Vandoeuvres
Geneve, Switzerland
C. Richard Kinsolving, Ph.D. 1,421,247 0.45%
P.O. Box 20193
Bradenton, FL 34204-0193
Peter R. Young, Ph.D. 1,262,757 0.4%
5458 Beacon Hill Drive
Frisco, TX 75034
All Officers and Directors 29,218473 8.8%
as a Group (9 persons)
(1) Includes shares issuable prior to July 31, 2013 upon the exercise of
options or warrants granted to the following persons:
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Options or Warrants Exercisable
Name Prior to July 31, 2013
Maximilian de Clara 6,747,555
Geert R. Kersten 6,583,009
Patricia B. Prichep 2,552,296
Eyal Talor, Ph.D. 1,752,719
Daniel Zimmerman, Ph.D. 1,459,000
John Cipriano 681,000
Alexander G. Esterhazy 1,012,332
C. Richard Kinsolving, Ph.D. 1,119,000
Peter R. Young, Ph.D. 1,014,999
(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 82 Director and President
Geert R. Kersten, Esq. 54 Director, Chief Executive Officer and Treasurer
Patricia B. Prichep 61 Senior Vice President of Operations and Secretary
Dr. Eyal Talor 56 Chief Scientific Officer
Dr. Daniel H. Zimmerman 71 Senior Vice President of Research, Cellular
Immunology
John Cipriano 70 Senior Vice President of Regulatory Affairs
Alexander G. Esterhazy 70 Director
Dr. C. Richard Kinsolving 76 Director
Dr. Peter R. Young 67 Director
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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.
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.
All of CEL-SCI's directors have served as directors for a significant
period of time. Consequently, their long-standing experience with CEL-SCI
benefits both CEL-SCI and its shareholders.
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. Based on Mr. de Clara's
background and more than 30 years of experience serving as the President of
CEL-SCI, CEL-SCI believes that he has the expertise necessary to continue to
serve on the board of directors.
Geert Kersten 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 over 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 CEL-SCI's Multikine product could potentially 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 received his
Undergraduate Degree in Accounting and an M.B.A. from George Washington
University, and a law degree (J.D.) from American University in Washington, DC.
Mr. Kersten's experience overseeing the financing and research and development
of CEL-SCI for over 25 years qualifies him to continue to serve on CEL-SCI's
board of directors.
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 CEL-SCI, including human resources and is the liaison with
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CEL-SCI's independent registered public accounting firm for financial reporting.
From 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 Source
Capital 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. In October 2009, Dr.
Talor was promoted to Chief Scientific Officer. Between this promotion and March
of 1994 he was the Senior Vice President of Research and Manufacturing. 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 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 has invented technologies which are
covered by 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 is responsible for 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.
Daniel H. Zimmerman, Ph.D. was CEL-SCI's Senior Vice President of Cellular
Immunology between 1996 and December 2008 and again since November 2009. He
joined CEL-SCI in January 1996 as the Vice President of Research, Cellular
Immunology. Dr. Zimmerman founded CELL-MED, Inc. and was its president from
1987-1995. From 1973-1987, Dr. Zimmerman served in various positions at
Electronucleonics, Inc. His positions included: Scientist, Senior Scientist,
Technical Director and Program Manager. Dr Zimmerman held various teaching
positions at Montgomery College between 1987 and 1995. Dr. Zimmerman has
invented technologies which are covered by over a dozen US patents as well as
many foreign equivalent patents. He is the author of over 40 scientific
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publications in the area of immunology and infectious diseases. He has been
awarded numerous grants from NIH and DOD. From 1969-1973, Dr. Zimmerman was a
Senior Staff Fellow at NIH. For the following 25 years, he continued on at NIH
as a guest worker. Dr. Zimmerman received a Ph.D. in Biochemistry in 1969, and a
Masters in Zoology in 1966 from the University of Florida as well as a B.S. in
Biology from Emory and Henry College in 1963.
John Cipriano was CEL-SCI's Senior Vice President of Regulatory Affairs
between March 2004 and December 2008 and again since October 2009. Mr. Cipriano
brings to CEL-SCI over 30 years of experience with both biotech and
pharmaceutical companies. In addition, he held positions at the United States
Food and Drug Administration (FDA) as Deputy Director, Division of Biologics
Investigational New Drugs, Office of Biologics Research and Review and was the
Deputy Director, IND Branch, Division of Biologics Evaluation, Office of
Biologics. Mr. Cipriano completed his B.S. in Pharmacy from the Massachusetts
College of Pharmacy in Boston, Massachusetts and his M.S. in Pharmaceutical
Chemistry from Purdue University in West Lafayette, Indiana.
Alexander G. Esterhazy has been a Director of CEL-SCI since December 1999
and 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. Mr. Esterhazy brings extensive financial
expertise that is valuable to CEL-SCI. His knowledge and experience with respect
to finance matters gives him the necessary qualifications to continue to serve
on the board of directors.
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). Dr. Kinsolving has extensive research and drug development experience,
oncology expertise, and broad scientific knowledge as well business experience.
His knowledge and experience with respect to the biotechnology, pharmaceutical
and healthcare industries qualifies him to continue to serve on CEL-SCI's board
of directors, audit committee and compensation committee.
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
and has extensive experience with acquisitions and equity financings. Since
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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). CEL-SCI believes Dr. Young's extensive knowledge of
the life sciences industry, coupled with his business acumen and financial
expertise, gives him the qualifications and skills to serve as a director, the
chair of the audit committee and a member of CEL-SCI's compensation committee.
All of CEL-SCI's officers devote substantially all of their time to
CEL-SCI's business.
CEL-SCI's Board of Directors does not have a "leadership structure", as
such, since each director is entitled to introduce resolutions to be considered
by the Board and each director is entitled to one vote on any resolution
considered by the Board. CEL-SCI's Chief Executive Officer is not the Chairman
of CEL-SCI's Board of Directors.
CEL-SCI's Board of Directors has the ultimate responsibility to evaluate
and respond to risks facing CEL-SCI. CEL-SCI's Board of Directors fulfills its
obligations in this regard by meeting on a regular basis and communicating, when
necessary, with CEL-SCI's officers.
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 MKT.
CEL-SCI's Board of Directors met four times during the fiscal year ended
September 30, 2012. All of the Directors attended these meetings, either in
person or by telephone conference call, with the exception of Mr. de Clara who
was in attendance for three of these meetings. In addition, the Board of
Directors had a number of informal telephonic meetings during the course of the
year.
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, 2500
Marketplace Drive, Unit 431, Waco, TX 76711.
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 nominees to the Board of Directors are
selected by a majority vote of CEL-SCI's independent directors.
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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 and under Colorado law, any shareholder can
nominate a person for election as a director at the annual shareholders'
meeting. 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.
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
May 18, 2012.
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 sent specified Board members or not sent to
the Board of Directors as a whole are not relayed to Board members.
Executive Compensation
Compensation Discussion and Analysis
This Compensation Discussion and Analysis (CD&A) outlines CEL-SCI's
compensation philosophy, objectives and process for its executive officers. This
CD&A includes information on how compensation decisions are made, the overall
objectives of CEL-SCI's compensation program, a description of the various
components of compensation that are provided, and additional information
pertinent to understanding CEL-SCI's executive officer compensation program.
The Compensation Committee determines the compensation of CEL-SCI's Chief
Executive Officer and President and delegates to the Chief Executive Officer the
responsibility to determine the base salaries of all other officers, other than
himself, under the constraints of an overall limitation on the total amount of
compensation to be paid to them.
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Compensation Philosophy
CEL-SCI's compensation philosophy extends to all employees, including
executive officers, and is designed to align employee and shareholder interests.
The philosophy's objective is to pay fairly based upon the employee's position,
experience and individual performance. Employees may be rewarded through
additional compensation when CEL-SCI meets or exceeds targeted business
objectives. Generally, under CEL-SCI's compensation philosophy, as an employee's
level of responsibility increases, a greater portion of his or her total
potential compensation becomes contingent upon annual performance.
A substantial portion of an executive's compensation incorporates
performance criteria that support and reward achievement of CEL-SCI's long term
business goals.
The fundamental principles of CEL-SCI's compensation philosophy are
described below:
o Market-driven. Compensation programs are structured to be competitive
both in their design and in the total compensation that they offer.
o Performance-based. Certain officers have some portion of their
incentive compensation linked to CEL-SCI's performance. The
application of performance measures as well as the form of the reward
may vary depending on the employee's position and responsibilities.
Based on a review of its compensation programs, CEL-SCI does not believe
that such programs encourage any of its employees to take risks that would be
likely to have a material adverse effect on CEL-SCI. CEL-SCI reached this
conclusion based on the following:
o The salaries paid to employees are consistent with the employees'
duties and responsibilities.
o Employees who have high impact relative to the expectations of their
job duties and functions are rewarded.
o CEL-SCI retains employees who have skills critical to its long term
success.
Review of Executive Officer Compensation
CEL-SCI's current policy is that the various elements of the compensation
package are not interrelated in that gains or losses from past equity incentives
are not factored into the determination of other compensation. For instance, if
options that are granted in a previous year have an exercise price which is
below the market price of CEL-SCI's common stock, the Committee does not take
that circumstance into consideration in determining the amount of the options or
restricted stock to be granted the next year. Similarly, if the options or
restricted shares granted in a previous year become extremely valuable, the
Committee does not take that into consideration in determining the options or
restricted stock to be awarded for the next year.
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CEL-SCI does not have a policy with regard to the adjustment or recovery of
awards or payments if relevant performance measures upon which they are based
are restated or otherwise adjusted in a manner that would reduce the size of an
award or payment.
Components of Compensation--Executive Officers
CEL-SCI's executive officers are compensated through the following three
components:
o Base Salary
o Long-Term Incentives (stock options and/or grants of stock)
o Benefits
These components provide a balanced mix of base compensation and
compensation that is contingent upon each executive officer's individual
performance. A goal of the compensation program is to provide executive officers
with a reasonable level of security through base salary and benefits. CEL-SCI
wants to ensure that the compensation programs are appropriately designed to
encourage executive officer retention and motivation to create shareholder
value. The Compensation Committee believes that CEL-SCI's stockholders are best
served when CEL-SCI can attract and retain talented executives by providing
compensation packages that are competitive but fair.
In past years, base salaries, benefits and incentive compensation
opportunities were generally targeted near the median of general survey market
data derived from indices covering similar biotech/pharmaceutical companies. The
companies included Achillion Pharmaceuticals, Inc., Acura Pharmaceutical, Inc.,
Alimera Sciences, Inc., Agenus Inc., ARCA biopharma (ARCA Discovery), Cadence
Pharmaceuticals, Inc., Chelsea Therapeutics, Inc., Cortex Pharmaceuticals, Inc.,
EpiCept Corp., IGI Laboratories Inc., NeurogesX, Inc., Orexigen Therapeutics
Inc., Pharmacyclics, Inc., SCOLR Pharma, Inc., StemCells, Inc., Psychemedics
Corporation, Nabi Biopharmaceuticals, NuPathe Inc., POZEN, Inc., Synta
Pharmaceuticals, Sunesis Pharmaceuticals, CytRx Corporation, Novavax, and
Ziopharm Oncology. CEL-SCI has not used third party consultants to provide it
with recommendations or reports.
Base Salaries
Base salaries generally have been targeted to be competitive when compared
to the salary levels of persons holding similar positions in other
pharmaceutical companies and other publicly traded companies of comparable size.
Each executive officer's respective responsibilities, experience, expertise and
individual performance are considered.
A further consideration in establishing compensation for the senior
employees is their long term history with CEL-SCI. Taken into consideration are
factors that have helped CEL-SCI survive in times when it was financially
extremely weak, such as: willingness to accept salary cuts, willingness not to
be paid at all for extended time periods, and in general an attitude that helped
CEL-SCI survive during financially difficult times. For example, Geert Kersten,
Maximilian de Clara and Patricia Prichep were without any salary between
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September 2008 and June 2009. Other senior members took substantial salary cuts,
all geared towards helping CEL-SCI survive. In all of these cases the officers
continued to work without any guarantee of payment.
Long-Term Incentives
Stock grants and option grants help to align the interests of CEL-SCI's
employees with those of its shareholders. Options and stock grants are made
under CEL-SCI's Stock Option, Stock Bonus and Stock Compensation Plans. Options
are granted with exercise prices equal to the closing price of CEL-SCI's common
stock on the day immediately preceding the date of grant, with pro rata vesting
at the end of each of the following three years.
CEL-SCI believes that grants of equity-based compensation:
o Enhance the link between the creation of shareholder value and
long-term executive incentive compensation;
o Provide focus, motivation and retention incentive; and
o Provide competitive levels of total compensation.
CEL-SCI's management believes that the pricing for biotechnology stocks is
highly inefficient until the time of product sales. As such any long term
compensation tied to progress as measured by share price is not as efficient as
it should be. However, CEL-SCI's Compensation Committee has not been able to
substitute a better measurement and therefore continues to believe that stock
grants and option grants best align the needs of the corporation and the
employee with those of the shareholders.
Benefits
In addition to cash and equity compensation programs, executive officers
participate in the health and welfare benefit programs available to other
employees. In a few limited circumstances, CEL-SCI provides other benefits to
certain executive officers, such as car allowances.
All executive officers are eligible to participate in CEL-SCI's 401(k) plan
on the same basis as its other employees. CEL-SCI matches 100% of each
employee's contribution up to the first 6% of his or her salary.
The following table sets forth in summary form the compensation received by
(i) the Chief Executive and Financial Officer of CEL-SCI and (ii) by each other
executive officer of CEL-SCI who received in excess of $100,000 during the three
fiscal years ended September 30, 2012.
13
All
Other
Restric- Annual
ted Stock Option Compen-
Name and Princi- Fiscal Salary Bonus Awards Awards sation
pal Position Year (1) (2) (3) (4) (5) Total
---------------- ----- ------ ------- ------- --------- -------- -------
$ $ $ $ $ $
$
Maximilian de 2012 363,000 -- -- 200,863 102,591 666,454
Clara President 2011 363,000 -- -- 176,709 105,226 644,935
2010 363,000 -- -- 107,424 102,186 572,610
Geert R. Kersten, 2012 477,924 -- 14,925 332,027 56,935 881,811
Chief Executive 2011 464,005 -- 14,700 207,314 57,656 743,675
and Financial 2010 454,009 220,995 11,025 128,909 55,309 870,247
Officer
Patricia B. 2012 210,133 -- 12,968 156,715 6,031 385,847
Prichep Senior 2011 204,013 -- 12,541 99,141 6,031 321,726
Vice Presidentof 2010 199,898 -- 11,790 64,455 6,027 282,170
Operations and
Secretary
Eyal Talor, Ph.D. 2012 259,417 -- 9,600 140,564 6,031 415,612
Chief Scientific 2011 251,861 -- 9,600 100,362 6,031 367,854
Officer 2010 239,868 -- 15,623 64,455 6,027 325,973
Daniel Zimmerman, 2012 199,058 -- 12,303 115,354 6,031 332,746
Ph.D. Senior 2011 193,260 -- 11,896 98,948 6,031 310,135
Vice President 2010 165,800 -- 9,233 64,455 5,027 244,515
of Research.
Cellular Immunology
John Cipriano 2012 184,236 -- -- 76,515 31 260,782
Senior Vice 2011 178,870 -- -- 91,815 31 270,716
President of 2010 175,952 -- -- 240,711 27 416,690
Regulatory Affairs
(1) The dollar value of base salary (cash and non-cash) earned.
(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 all 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 at the market price from the Stock Compensation Plan.
The value of all stock awarded during the periods covered by the table
are calculated according to ASC 718-10-30-3 which represented the
grant date fair value.
14
(4) The fair value of all stock options granted during the periods covered
by the table are calculated on the grant date in accordance with ASC
718-10-30-3 which represented the grant date fair value
(5) All other compensation received that CEL-SCI could not properly report
in any other column of the table including annual contributions or
other allocations to vested and unvested defined contribution plans,
and the dollar value of any insurance premiums paid by, or on behalf
of, CEL-SCI with respect to term life insurance for the benefit of the
named executive officer, and the full dollar value of the remainder of
the premiums paid by, or on behalf of, CEL-SCI and car allowances paid
by CEL-SCI. 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
2012 expenses for this plan were $158,526. Other than the 401(k) Plan, CEL-SCI
does not have a defined benefit, pension plan, profit sharing or other
retirement plan.
Compensation of Directors During Year Ended September 30, 2012
Stock Option
Name Paid in Cash Awards (1) Awards (2) Total
---- ------------ ---------- ---------- -----------
Maximilian de Clara $ 40,000 $ - $ 200,863 $ 240,863
Geert Kersten $ 40,000 $ - $ 332,027 $ 372,027
Alexander Esterhazy $ 44,000 $ - $ 87,878 $ 131,878
C. Richard Kinsolving $ 44,000 $ - $ 85,897 $ 129,897
Peter R. Young $ 44,000 $ - $ 77,496 $ 121,496
(1) The fair value of stock issued for services.
(2) The fair value of options granted computed in accordance with ASC
718-10-30-3 on the date of grant which represents their grant date
fair value.
Directors' fees paid to Maximilian de Clara and Geert Kersten are also
included in the Executive Compensation table.
15
Employment Contracts
Maximilian de Clara
In April 2005, CEL-SCI entered into a three-year employment agreement with
Maximilian de Clara, CEL-SCI's President. The employment agreement provided that
CEL-SCI would 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. On August 30, 2010,
Mr. de Clara's employment agreement, as amended on September 8, 2006, was
extended to August 30, 2013.
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, 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) and the unvested portion of any stock options would
vest immediately ($288,272). 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.
Geert Kersten
Effective September 1, 2003, CEL-SCI entered into a three-year employment
agreement with Mr. Kersten. On September 1, 2006, Mr. Kersten's employment
agreement was extended to September 1, 2011. On September 1, 2011 CEL-SCI
extended its employment agreement with Mr. Kersten to August 31, 2016. During
the term of the new employment agreement CEL-SCI will pay Mr. Kersten an annual
salary of $464,004. Mr. Kersten will receive at least the same salary increases
each year as do other senior executives of CEL-SCI. Increases beyond those, if
any, shall be made at the sole discretion of CEL-SCI's directors.
During the employment term, Mr. Kersten will be entitled to receive any
other benefits which are provided to CEL-SCI's executive officers or other full
time employees in accordance with CEL-SCI's policies and practices and subject
to Mr. Kersten's satisfaction of any applicable condition of eligibility.
If Mr. Kersten resigns within ninety (90) days of the occurrence of any of
the following events: (i) a relocation (or demand for relocation) of Mr.
Kersten's place of employment to a location more than thirty-five (35) miles
from his current place of employment, (ii) a significant and material reduction
16
in Mr. Kersten's authority, job duties or level of responsibility or (iii) the
imposition of significant and material limitations on the Mr. Kersten's autonomy
in his position, the employment agreement will be terminated.
In the event that there is a material reduction in Mr. Kersten's authority,
duties or activities, or 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
($955,848) and the unvested portion of any stock options would vest immediately
($823,831). 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.
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 the foregoing, 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, any
options or bonus shares of CEL-SCI then held by Mr. Kersten will become fully
vested and the expiration date of any options which would expire during the four
year period following his termination of employment will be extended to the date
which is four years after his termination of employment.
Patricia B. Prichep / Eyal Talor, Ph.D.
On August 30, 2010, CEL-SCI entered into a three-year employment agreement
with Patricia B. Prichep, CEL-SCI's Senior Vice President of Operations. The
employment agreement with Ms. Prichep provides that during the term of the
agreement CEL-SCI will pay Ms. Prichep an annual salary of $194,298 plus any
increases approved by the Board of Directors during the period of the employment
agreement.
On August 30, 2010, CEL-SCI also entered into a three-year employment
agreement with Eyal Talor, Ph.D., CEL-SCI's Chief Scientific Officer. The
employment agreement with Dr. Talor provides that during the term of the
agreement CEL-SCI will pay Dr. Talor an annual salary of $239,868 plus any
increases approved by the Board of Directors during the period of the employment
agreement.
If Ms. Prichep or Dr. Talor resigns within ninety (90) days of the
occurrence of any of the following events: (i) a relocation (or demand for
relocation) of employee's place of employment to a location more than
thirty-five (35) miles from the employee's current place of employment, (ii) a
significant and material reduction in the employee's authority, job duties or
level of responsibility or (iii) the imposition of significant and material
limitations on the employee's autonomy in her or his position, the employment
agreement will be terminated and the employee will be paid the salary provided
17
by the employment agreement through the date of termination and the unvested
portion of any stock options held by the employee will vest immediately.
In the event there is a change in the control of CEL-SCI, the employment
agreements with Ms. Prichep and Dr. Talor allow Ms. Prichep and/or Dr. Talor (as
the case may be) to resign from her or his position at CEL-SCI and receive a
lump-sum payment from CEL-SCI equal to 18 months salary ($315,200 and $389,125
respectively). In addition, the unvested portion of any stock options held by
the employee will vest immediately ($574,657 and $574,657 respectively). For
purposes of the employment agreements, 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.
The employment agreements with Ms. Prichep and Dr. Talor will also
terminate upon the death of the employee, the employee's physical or mental
disability, willful misconduct, an act of fraud against CEL-SCI, or a breach of
the employment agreement by the employee. If the employment agreement is
terminated for any of these reasons the employee, or her 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 Alexander Esterhazy, Dr.
C. Richard Kinsolving and Dr. Peter Young, all of whom are independent
directors.
During the year ended September 30, 2012, 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 December 24, 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 was 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. Subsequently, on May 13, 2011, the Company extended the maturity date of
the note to July 6, 2015 to compensate Mr. de Clara for agreeing to subordinate
his note to the convertible preferred shares and convertible debt as part of the
settlement agreement. The number of shares which will be issued upon any
18
conversion will 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 January 6, 2015.
The loan from Mr. de Clara bears interest at 15% per year and is secured by a
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 Option, Bonus and Compensation Plans
CEL-SCI has Incentive Stock Option Plans, Non-Qualified Stock Option, Stock
Bonus and Stock Compensation Plans. A summary description of these Plans
follows. In some cases these Plans are collectively referred to as the "Plans".
Incentive Stock Option Plan. 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 Plans. Only CEL-SCI's employees may be granted options
pursuant to the Incentive Stock Option Plans.
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 Plans 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 sale a
capital-raising transaction or promoting CEL-SCI's common stock. The option
exercise price is determined by CEL-SCI's Board of Directors.
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 a
capital-raising transaction or promoting CEL-SCI's common stock.
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 in payment of salaries, fees and other
compensation owed to these persons. However, bona fide services must be rendered
19
by consultants or advisors and such services must not be in connection with the
offer or sale of securities in a capital-raising transaction or promoting
CEL-SCI's common stock.
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 or Stock
Compensation Plan and any options granted pursuant to the Incentive Stock Option
Plan or the Non-Qualified Stock Option Plans will be forfeited if the "vesting"
schedule established by the Committee administering the Plans 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 Plans 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 it deems
appropriate, provided that such amendment, termination or suspension will not
adversely affect rights or obligations with respect to shares or options
previously granted.
20
Stock Options
The following tables show information concerning the options granted during
the fiscal year ended September 30, 2012, to the persons named below:
Options Granted
Grant Options Price Per Expiration
Name Date Granted Share Date
Maximilian de Clara 12/05/11 471,999 $0.32 12/01/16
05/18/12 375,000 $0.39 05/17/22
Geert Kersten 12/05/11 1,254,400 $0.32 12/01/16
05/18/12 450,000 $0.39 05/17/22
Patricia B. Prichep 12/05/11 385,200 $0.32 12/01/16
05/18/12 300,000 $0.39 05/17/22
Eyal Talor, Ph.D. 12/05/11 277,733 $0.32 12/01/16
05/18/12 300,000 $0.39 05/17/22
Daniel Zimmerman, Ph.D. 12/05/11 252,000 $0.32 12/01/16
05/18/12 225,000 $0.39 05/17/22
John Cipriano 12/05/11 16,000 $0.32 12/01/16
05/18/12 225,000 $0.39 05/17/22
Options Cancelled/Expired
The following tables show information concerning the options cancelled or
expired during the fiscal year ended September 30, 2012, to the persons named
below:
Weighted Weighted Average
Average Remaining Contractual
Total Exercise
Employee Options Price Term (Years)
-------------------------------------------------------------------------
Maximilian de Clara 589,999 $1.12 1.37
Geert Kersten 1,568,000 $1.07 1.59
Patricia Prichep 481,500 $1.08 1.86
21
Eyal Talor, Ph.D 347,166 $1.06 1.99
Daniel Zimmerman, Ph.D 315,000 $1.05 1.74
John Cipriano 20,000 $0.61 2.75
Options Exercised
Date of Shares Acquired Value
Name Exercise On Exercise Realized
None
The following lists the outstanding options held by the persons named
below:
Shares Underlying Unexercised
Options Which are:
-----------------------------
Exercise Expiration
Name Exercisable Unexercisable Price Date
---- ----------- ------------- ------------- ------------
Maximilian de Clara 50,000 0.48 09/21/15
100,000 0.58 09/12/16
200,000 0.63 09/13/17
200,000 0.62 03/04/18
1,436,250 (1) 0.25 04/23/19
250,000 0.38 07/20/19
166,667 0.48 07/20/20
83,334 0.69 04/14/21
471,999 0.32 12/01/16
-------
2,958,250
500,000 (2) 0.38 07/06/19
83,333 0.48 07/20/20
166,666 0.69 04/14/21
375,000 0.39 05/17/22
-------
1,124,999
------------------------------------------------------------------------------
Shares Underlying Unexercised
Options Which are:
-----------------------------
Exercise Expiration
Name Exercisable Unexercisable Price Date
---- ----------- ------------- ------------- -------------
Geert R. Kersten 1,890,000 0.22 04/01/13
50,000 0.48 09/21/15
200,000 0.58 09/12/16
200,000 0.63 09/13/17
200,000 0.62 03/04/18
1,838,609 (1) 0.25 04/23/19
300,000 0.38 07/20/19
22
Shares Underlying Unexercised
Options Which are:
-----------------------------
Exercise Expiration
Name Exercisable Unexercisable Price Date
---- ----------- ------------- ------------- -------------
Geert R. Kersten
(cont'd) 200,000 0.48 07/20/20
100,000 0.69 04/14/21
1,254,400 0.32 12/01/16
---------
6,233,009
4,000,000 (2) 0.38 07/06/19
100,000 0.48 07/20/20
200,000 0.69 04/14/21
450,000 0.39 05/17/22
-------
4,750,000
-------------------------------------------------------------------------------
Patricia B. Prichep 50,000 0.33 04/26/15
243,000 0.22 04/01/13
337,000 0.22 04/01/13
30,000 0.48 09/21/15
90,000 0.58 09/12/16
100,000 0.63 09/13/17
100,000 0.62 03/04/18
717,096 (1) 0.25 04/23/19
150,000 0.38 07/20/19
100,000 0.48 07/20/20
50,000 0.69 04/14/21
385,200 0.32 12/01/16
-------
2,352,296
3,000,000 (2) 0.38 07/06/19
50,000 0.48 07/20/20
100,000 0.69 04/14/21
300,000 0.39 05/17/22
-------
3,450,000
-------------------------------------------------------------------------------
Eyal Talor, Ph.D. 50,000 0.33 04/26/15
374,166 0.22 04/01/13
30,000 0.48 09/21/15
80,000 0.58 09/12/16
100,000 0.63 09/13/17
100,000 0.62 03/04/18
240,820 (1) 0.25 04/23/19
150,000 0.38 07/20/19
100,000 0.48 07/20/20
23
Shares Underlying Unexercised
Options Which are:
-----------------------------
Exercise Expiration
Name Exercisable Unexercisable Price Date
---- ----------- ------------- ------------- -----------
Eyal Talor, Ph.D.
(cont'd) 50,000 0.69 04/14/21
277,733 0.32 12/01/16
-------
1,552,719
3,000,000 (2) 0.38 07/06/19
50,000 0.48 07/20/20
100,000 0.69 04/14/21
300,000 0.39 05/17/22
-------
3,450,000
--------------------------------------------------------------------------------
Daniel Zimmerman, 50,000 0.33 04/16/15
Ph.D. 392,000 0.22 04/01/13
30,000 0.48 09/21/15
60,000 0.58 09/12/16
75,000 0.63 09/13/17
75,000 0.62 03/04/18
200,000 (3) 0.38 07/15/14
100,000 0.48 07/20/20
50,000 0.69 04/14/21
252,000 0.32 12/01/16
-------
1,284,000
50,000 0.48 07/20/20
100,000 0.69 04/14/21
225,000 0.39 05/17/22
-------
375,000
--------------------------------------------------------------------------------
John Cipriano 30,000 0.48 09/21/15
60,000 0.58 09/12/16
75,000 0.63 09/13/17
75,000 0.62 03/04/18
100,000 1.93 09/30/19
100,000 0.48 07/20/20
50,000 0.69 04/14/21
16,000 0.32 12/01/16
------
506,000
50,000 0.48 07/20/20
100,000 0.69 04/14/21
225,000 0.39 05/17/22
-------
375,000
24
(1) Options awarded to employees who did not collect a salary, or reduced
or deferred their salary between 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.
(2) 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. The
grant-date fair value of these options awarded to the senior
management of the Company amounts to $3.3 million in total.
(3) Options awarded to employee during the period that he was a consultant
to CEL-SCI.
Summary. The following shows certain information as of February 28, 2013
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 Remaining
Reserved Outstanding Shares Options/Shares
Name of Plan Under Plans Options Issued Under Plans
------------ ----------- -------------- ------ ---------------
Incentive Stock Option Plans 21,100,000 13,898,275 N/A 5,135,225
Non-Qualified Stock
Option Plans (1) 57,760,000 34,573,813 N/A 16,871,573
Bonus Plans 15,940,000 N/A 8,345,844 7,589,642
Stock Compensation Plan 13,500,000 N/A 6,886,531 6,613,469
(1) The 2013 Non-Qualified Plan was adopted by CEL-SCI's directors on
December 18, 2012 and authorizes the issuance of up to 20,000,000
shares of CEL-SCI's common stock to persons that exercise options
granted pursuant to the Plan. As of February 28, 2013, CEL-SCI had
granted options to purchase 3,344,166 shares of its common stock under
the 2013 Non-Qualified Plan. Any options granted pursuant to the 2013
Plan may not be exercised until shareholders approve the adoption of
the Plan.
Of the shares issued pursuant to CEL-SCI's Stock Bonus Plans, 2,322,175
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, 2012, CEL-SCI's most recent fiscal year
end. With the exception of the 2013 Non-Qualified Stock Option Plan, CEL-SCI's
Incentive and Non-Qualified Stock Option Plans have been approved by CEL-SCI's
shareholders.
25
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 10,668,275 $ 0.36 8,945,225
Option Plans
Non-Qualified Stock 26,803,813 $ 0.42 4,888,738
Option Plans
Compensation Committee
During the year ending September 30, 2012 CEL-SCI had a Compensation
Committee which was comprised of Alexander Esterhazy, C. Richard Kinsolving and
Peter Young. During the year ended September 30, 2012 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, 2012, 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.
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.
26
On September 8, 2006 Mr. de Clara's employment agreement was extended to
April 30, 2010. Mr. de Clara's employment agreement continued on a month to
month basis from April 30, 2010 until August 30, 2010 when it was extended until
August 30, 2013. In extending 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, 2011, 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. On September 1, 2011 Mr. Kersten's employment agreement was extended to
August 31, 2016. 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, 2011, the compensation paid to Mr. Kersten was based
on his employment contract.
On August 30, 2010, CEL-SCI entered into a three-year employment agreement
with Patricia B. Prichep, CEL-SCI's Senior Vice President of Operations. The
employment agreement with Ms. Prichep provides that during the term of the
agreement CEL-SCI will pay Ms. Prichep an annual salary of $194,298 plus any
increases approved by the Board of Directors during the period of the employment
agreement.
On August 30, 2010, CEL-SCI also entered into a three-year employment
agreement with Eyal Talor, Ph.D., CEL-SCI's Chief Scientific Officer. The
employment agreement with Dr. Talor provides that during the term of the
agreement CEL-SCI will pay Dr. Talor an annual salary of $239,868 plus any
increases approved by the Board of Directors during the period of the employment
agreement.
During the year ending September 30, 2012, 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.
27
During the year ended September 30, 2012 CEL-SCI granted options for the
purchase of 1,150,000 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.
Except as otherwise disclosed in this proxy statement, during the year
ended September 30, 2012, 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:
Alexander Esterhazy
C. Richard Kinsolving
Peter Young
Audit Committee
During the year ended September 30, 2012 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 MKT 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 independent registered public
accounting firm and review CEL-SCI's financial statements with CEL-SCI's
independent registered public accounting firm.
During the fiscal year ended September 30, 2012, the Audit Committee met
four times. All members of the Audit Committee attended these meetings, with the
exception of Alexander Esterhazy who was in attendance for three of these
meetings.
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, 2012 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. 114 "The Auditor's
Communication With Those Charged With Governance".
(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
28
(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, 2012 for filing with the
Securities and Exchange Commission.
(5) During the year ended September 30, 2012 CEL-SCI paid BDO USA LLP,
CEL-SCI's independent registered public accounting firm, fees 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 was attached CEL-SCI's proxy statement relating to
its April 15, 2011 annual meeting of shareholders.
PROPOSAL TO APPROVE ADOPTION OF
2013 NON-QUALIFIED STOCK OPTION PLAN
Shareholders are being requested to vote to approve to the adoption of
CEL-SCI's 2013 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 2013 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 2013 Non-Qualified Plan was adopted by CEL-SCI's directors on December
18, 2012 and authorizes the issuance of up to 20,000,000 shares of CEL-SCI's
common stock to persons that exercise options granted pursuant to the Plan. As
of January 18, 2013, CEL-SCI had granted options to purchase 3,344,166 shares of
common stock under the 2013 Non-Qualified Plan. Any options granted pursuant to
the 2013 Plan may not be exercised until shareholders approve the adoption of
the Plan.
The 2013 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 2013 Non-Qualified
Plan.
29
PROPOSAL TO APPROVE ADOPTION OF CEL-SCI'S
AMENDED AND RESTATED ARTICLES OF INCORPORATION
CEL-SCI was incorporated in Colorado in 1983. Since its incorporation,
CEL-SCI's Articles of Incorporation have been amended on over 20 occasions. The
adoption of the Amended and Restated Articles of Incorporation will not add any
new provisions to CEL-SCI's Articles of Incorporations, but rather will remove
the following provisions which are unnecessary, outdated, or in conflict with
Colorado's Business Corporation Act (the "BCA").
Article I - Period of Duration.
This article is unnecessary since, under the BCA, corporations have
perpetual existence unless a contrary provision is provided in the Articles of
Incorporation
Article III - Purpose.
The BCA does not require a corporation to specifiy the nature of its
business in the Articles of Incorporation.
Article VII - Share Transfer Restrictions.
Section 7-106-208 of the BCA covers restrictions on the transfer of a
corporation's shares.
Present Article VII provide sthat CEL-SCI's board of directors is
authorized to impose restrictions upon the transfer of any of CEL-SCI's
authorized shares, or any interest therein.
Present Article VII conflicts with Section 7-106-208 which requires that
any restriction on the transfer of shares:
o does not affect shares which were issued before the restriction became
effective,
o is not valid unless the restriction is noted on the certificate
representing the shares; and
o must be for a reasonable purpose.
Article IX - Initial Board of Directors.
Of the persons names as CEL-SCI's initial board of directors, only one
person, Maximilian de Clara, is still a director. In addition, the BCA does not
require Articles of Incorporation to name a corporation's directors.
30
Article X - Indemnification.
This article is unnecessary since Sections 7-109-101 through 7-109-110 of
the BCA provide for the indemnification of a corporation's directors.
Present Article X is essentially the same as Sections 7-109-101 through
7-109-110 except that subpart (F) of present Article X provides in part as
follows:
"The indemnification provided by this Article X shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under any bylaw, agreement, vote of shareholders or disinterested
directors, or otherwise."
Subpart (F) of present Article X conflicts with Section 7-109-109, which
provides that any indemnification provision in a corporation's Article of
Incorporation, bylaws, shareholder resolution, directors' resolution or contract
cannot be inconsistent with the indemnification provisions of the BCA.
Article XI - Transactions with Interested Directors.
Section 7-108-501 of the BCA covers conflicting interest transactions
between a corporation and any director of the corporation.
Present Article XI is essentially the same as Section 7-108-501 except in
the case of loans to a director, or any entity for which the director serves as
an officer or director or an entity in which the director has a financial
interest. Unlike present Article XI, Section 7-108-501 prohibits:
o a loan by a corporation to a director, or to an entity in which a
director of the corporation is a director or officer or has a
financial interest, until at least ten days after written notice of
the proposed authorization of the loan has been given to the
shareholders who would be enetitled to vote if the issue of the loan
was submitted to a vote of the shareholders, and
o a personal loan to a director by a corporation which is required to
file 10-K or 10-Q reports with the Securities and Exchange Commission.
Article XII - Voting of Shareholders.
Sections 7-107-201 through 7-107-209 of the BCA govern procedures for
voting at shareholder meetings.
31
Present Article XII provides as follows:
"With respect to any action to be taken by shareholders of this
corporation, a vote or concurrence of the holders of a majority of the
outstanding shares of the shares enetitled to vote thereon, or of any class or
series, shall be required."
Present Article XII conflicts with Section 7-107-207 (2) which provides
that if the BCA requires voting by two or more voting groups on a matter, action
on the matter is taken only when voted upon by each of those voting groups
counted seperately.
Present Article XII also conflicts with:
Section 7-107-209 (4) which provides:
"In an election of directors, that number of candidates equaling the
number of directors to be elected, having the highest number of votes cast in
favor of their election, are elected to the board of directors."
and
Section 7-108-108 (3) which provides:
"A director may be removed only if the number of votes cast in favor of
removal exceeds the number of votes cast against the removal..."
In addition, present Article XII does not address the following provisions
of the BCA which govern procedures for votong at shareholder meetings:
7-107-201 - Shareholders' list for meeting
7-107-202 - Voting entitlement of shares
7-107-203 - Proxies
7-107-204 - Shares held by nominees
7-107-205 - Corporation's acceptance of votes
7-107-206 - Quorum and voting requirements for voting groups
7-107-208 - Greater quorum or voting requirements
7-107-209 - Voting for directors - cumulative voting
If the Amended and Restated Articles are adopted, action on any matter,
other than the election of directors, will be approved if the votes vast
favoring the action exceed the votes cast opposing the action.
32
Article XIII - Incorporator.
Pursuant to Section 7-110-102 of the BCA, the name and address of the
incorporator are no longer necessary after a corporation's Article of
Incorporation have been filed.
In addition to the foregoing, the adoption of the Amended and Restated
Articles of Incorporation will eliminate seven amendments which were filed to
define the rights and preferences of various series of preferred stock
previously sold by CEL-SCI. As of the date of this proxy statement, no preferred
shares were outstanding as all previously issued preferred shares have either
been converted into shares of CEL-SCI's common stock or have been redeemed.
Since no preferred shares are outstanding, the adoption of the Amended and
Restated Articles will eliminate these seven amendments.
Shareholders are requested to approve CEL-SCI's Amended and Restated
Articles of Incorporation in the form attached.
PROPOSAL TO APPROVE A REVERSE SPLIT OF CEL-SCI'S
COMMON STOCK, SHOULD THE BOARD OF DIRECTORS BELIEVE THIS
TO BE IN THE BEST INTERESTS OF CEL-SCI'S SHAREHOLDERS,
IN A RATIO THAT WILL BE DETERMINED
BY CEL-SCI'S BOARD OF DIRECTORS.
Stockholders are being requested to approve a reverse split of the
outstanding shares of the Company's common stock by a ratio that will be
determined by the Company's Board of Directors, provided that, in any case, the
reverse split ratio will not be greater than 10 for 1. The Company's Board of
Directors has not made any determination as to whether it will 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. The Company's Directors
believe that, since it is not possible to predict future market conditions, it
would be in the best interests of the stockholders to adopt a reverse split of
the Company's outstanding common stock that allows the Board of Directors to
determine whether or not to proceed with a stock split and if so, to determine
the ratio of the stock split. The proposed reverse stock split would combine a
whole number of outstanding shares of the Company's common stock into one share
of common stock, thus reducing the number of outstanding shares without any
corresponding change in the Company's par value. As a result, the number of
shares of the Company'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.
The Company's Board of Directors reserves the right, even after stockholder
approval, to forego the reverse stock split if it determines such action is not
in the Company's best interests or the best interests of the Company's
stockholders. In fact, in prior years the Board of Directors had received
shareholder permission to proceed with a reverse split, but elected not to move
forward with it. If the reverse split is abandoned, the Board of Directors may
33
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
the Company's common stock. The primary reason for the reverse split stock is to
increase the trading price of the Company's common stock, by reducing the number
of the Company's outstanding shares, and increasing the number of shares the
Company can issue in the future.
The Board of Directors believes that the low trading price of the Company's
common stock prevents many persons from investing in the Company. The Company's
Board of Directors believes that the current low market price for the Company's
common stock has had a negative effect on the marketability of the Company'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. Third, the
Company's low share price may create the impression that the Company is not
credible. Fourth, 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 the Company'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 the Company's common stock was substantially higher.
The Company's Board of Directors believes that increasing the per share
market price of the Company's common stock may encourage greater interest in the
Company and enhance the acceptability and marketability of the Company's common
stock to the financial community and investing public. As of March 26, 2013, the
Company had ______ 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 the Company's current
business.
While the Company expects that the reverse stock split will increase the
market price of its common stock, the Company 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 the Company's
business and 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, the Company 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 the Company's stock price. A reverse
stock split is often viewed negatively by the market and, consequently, can lead
to a decrease in the Company's overall market capitalization. If the per share
price does not increase proportionately as a result of the reverse stock split,
the Company's overall market capitalization will be reduced.
The Company's Articles of Incorporation provide that the Company is
presently authorized to issue 600,000,000 shares of common stock. The reverse
34
split, if adopted, would not change the number of shares of common stock which
the Company is authorized to issue. However, a reverse split would reduce the
number of the Company's outstanding shares, which would enable the Company to
issue more shares that it would be able to issue if the reverse split was not
adopted.
Notwithstanding that above, as of the date of this proxy statement, the
Company did not have any definitive agreements, arrangements, plans, intentions
or commitments, written or oral, with any person to sell or issue any additional
shares of its common stock, whether for cash or otherwise, except for the
Company's obligation to issue common stock upon the exercise of outstanding
options and warrants or the conversion of notes.
Even a reverse stock split in the maximum range (10 for 1) would only
eliminate 75 shareholders of record since, according to the records of the
Company's transfer agent, only 75 shareholders own less than 10 shares.
The Company would still have approximately 1,400 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 will be
rounded to the nearest whole share.
The Company's Board of Directors recommends that stockholders vote FOR this
proposal.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors has selected BDO USA, LLP, an independent registered
public accounting firm, to audit the books and records of CEL-SCI for the fiscal
year ending September 30, 2013. BDO USA served as CEL-SCI's independent
registered public accounting firm for the fiscal year ended September 30, 2012.
A representative of BDO USA is expected to be present at the shareholders'
meeting.
BDO USA, LLP served as CEL-SCI's auditors for the years ended September 30,
2012 and 2011. The following table shows the aggregate fees billed to CEL-SCI
during these years by BDO USA, LLP:
Year Ended September 30,
2012 2011
---- ----
Audit Fees $289,000 $237,835
Audit-Related Fees -- --
Tax Fees -- --
All Other Fees -- 4,370
Audit fees represent amounts billed for professional services rendered for
the audit of CEL-SCI's annual financial statements, including the audit of
internal control over financial reporting, the reviews of the financial
35
statements included in CEL-SCI's 10-Q reports for the fiscal year, and all
regulatory filings. All other fees represent amounts paid to BDO USA, LLP for
their work on an application for a PPACA grant applied for by CEL-SCI. Before
BDO USA, 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 all fees charged by BDO USA, LLP are consistent
with BDO USA, LLP maintaining its independence from CEL-SCI.
The board of directors recommends that the shareholders of CEL-SCI approve
its selection of BDO USA, LLP as CEL-SCI's independent public accounting firm to
audit the books and records of CEL-SCI for the year ending September 30, 2012.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
CEL-SCI's Annual Report on Form 10-K for the year ending September 30, 2012
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, 2013 must be received by the Secretary of CEL-SCI no
later than January 31, 2014.
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 2012 fiscal year, is available on CEL-SCI's website (www.celsci.com).
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.
36
CEL-SCI CORPORATION
AMENDED AND RESTATED ARTICLES OF INCORPORATION
1. The domestic entity name for the Corporation is CEL-SCI Corporation.
2. The principal office address of the Corporation's principal office is:
8229 Boone Blvd. #802
Vienna, VA 22182
3. The registered agent name and registered agent address of the
Corporation are:
The Corporation Company
1675 Broadway, Suite 1200
Denver, CO 80202
4. The classes of shares and number of shares of each class that the
Corporation is authorized to issue are as follows:
The authorized capital stock of the Corporation shall consist of 600,000,000
shares of common stock, $0.01 par value, and 200,000 shares of preferred stock,
$0.01 par value. The preferred stock can be issued from to time, in one or more
series, as determine by this Corporation's Board of Directors. The designations,
powers, rights, preferences, qualifications, restrictions and limitations of
each series of preferred stock shall be established from time to time by the
Corporation's Board of Directors, in accordance with Colorado law.
5. Cumulative voting shall not be allowed in elections of directors or for
any purpose.
6. No holders of shares of capital stock of the Corporation shall be
entitled, as such, to any preemptive or preferential right to subscribe to any
unissued stock or any other securities which the Corporation may now or
hereafter be authorized to issue.
7. The presence in person, or by proxy, of one-third of the votes entitles
to be cast on any matter by a voting group at any shareholders' meeting
constitutes a quorum of that voting group for action on that matter.
8.No director of the Corporation shall have liability to the Corporation or
to its stockholders or to other holders monetary damages for breach of fiduciary
duty as a director; provided, however, that such provisions shall not eliminate
or limit the liability of a director to the Corporation or to its shareholders
or other security holders for monetary damages for: (i) any breach of the
37
director's duty of loyalty to the Corporation or to its shareholders or other
security holders; (ii) acts or omissions of the director not in good faith or
which involve intentional misconduct or a knowing violation of the law by such
director; (iii) acts by such director as specified by Colorado Law; or (iv) any
transaction from which such director derived an improper personal benefit.
The word "director" shall include at least the following, unless limited by
Colorado Law: an individual who is or was a director of the Corporation and an
individual who, while a director of a Corporation is or was serving at the
Corporation's request as a director, officer, partner, trustee, employee or
agent of any foreign or domestic corporation or of any partnership, joint
venture, trust, other enterprise or employee benefit plan. A director shall be
considered to be serving an employee benefit plan at the Corporation's request
if his duties to the Corporation also impose duties on or otherwise involve
services by him to the plan or to participants in or beneficiaries of the plan.
To the extent allowed by Colorado Law, the word "director" shall also include
heirs and personal representatives of all directors.
38
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 May 20, 2013, 10:30 a.m. local time,
at 4820-C Seton Drive, Baltimore, MD 21215, 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:
The Board of Directors recommends a vote FOR all the nominees listed, and FOR
Proposals 2-5.
(1) to elect person who shall constitute CEL-SCI's Board of DIrectors for
the ensuing year
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked as to contrary to below) for all nominees listed below
(INSTRUCTION TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH 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 2013 Non-Qualified Stock Option
Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) To approve the adoption of CEL-SCI's Amended and Restated Articles of
Incorporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) 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. A condition of the
reverse stock split ratio of the reverse split will be determined by
CEL-SCI's Board of Directors. The Board of Directors may elect not to
proceed with a stock split without further action by the shareholders.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(5) To ratify the appointment of BDO USA, LLP as CEL-SCI's independent
registered public accounting firm for the fiscal year ending September
30, 2013.
[ ] 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 ALL NOMINEES TO THE BOARD OF DIRECTORS AND ITEMS 2 THROUGH 5.
Dated this _____ day of __________ 2013.
--------------------------------
(Signature)
--------------------------------
(Print Name)
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
39
IMPORTANT ANNUAL STOCKHOLDERS' MEETING INFORMATION -- YOUR VOTE COUNTS!
Stockholder Meeting Notice
Important Notice Regarding the Availability of Proxy Materials for the
CEL-SCI Corporation Stockholder Meeting to be Held on May 20, 2013.
________________________________________________________________________________
Under new Securities and Exchange Commission rules, you are receiving this
notice that the proxy materials for the annual stockholders' meeting are
available on the Internet. Follow the instructions below to view the
materials and vote online or request a copy. The items to be voted on and
location of the annual meeting are on the reverse side. Your vote is
important!
This communication presents only an overview of the more complete proxy
materials that are available to you on the Internet. We encourage you to
access and review all of the important information contained in the proxy
materials before voting. The proxy statement, annual report and letter to
shareholders are available at:
www.envisionreports.com/CVM
Easy Online Access -- A Convenient Way to View Proxy Materials and Vote
When you go online to view materials, you can also vote your shares.
Step 1: Go to www.envisionreports.com/CVM to view the materials.
Step 2: Click on Cast Your Vote or Request Materials.
Step 3: Follow the instructions on the screen to log in.
Step 4: Make your selection as instructed on each screen to select
delivery preferences and vote.
When you go online, you can also help the environment by consenting to receive
electronic delivery of future materials.
Obtaining a Copy of the Proxy Materials - If you want to receive a
paper or e-mail copy of these documents, you must request one. There
is no charge to you for requesting a copy. Please make your request
for a copy as instructed on the reverse side on or before ______, 2013
to facilitate timely delivery.
40
Stockholder Meeting Notice
CEL-SCI Corporation's Annual Meeting of Stockholders will be held at 4820-C
Seton Drive, Baltimore, MD 21215, on May 20, 2013, at 10:30 a.m. local time.
Proposals to be voted on at the meeting are listed below along with the Board of
Directors' recommendations.
The Board of Directors recommends that you vote FOR the following proposals:
1. To elect the persons who shall constitute CEL-SCI's Board of Directors
for the ensuing year. 01- Maximilian de Clara 02- Geert R. Kersten 03-
Alexander G. Esterhazy 04- C. Richard Kinsolving 05- Peter R. Young
2. To approve the adoption of CEL-SCI's 2013 Non-Qualified Stock Option
Plan.
3. To approve adoption of CEL-SCI's Amended and Restated Articles of
Incorporation.
4. 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. A condition of the
reverse stock split is that the ratio of the reverse split will be
determined by CEL-SCI's Board of Directors. The Board of Directors may
elect not to proceed with a stock split without further action by the
shareholders.
5. To ratify the appointment of BDO USA, LLP as CEL-SCI's independent
registered public accounting firm for the fiscal year ending September
30, 2013.
To transact such other business as may properly come before the meeting.
PLEASE NOTE - YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares you
must vote online or request a paper copy of the proxy materials to receive a
proxy card. If you wish to attend and vote at the meeting, please bring this
notice with you.
Directions to attend the meeting can be found on our website at
http://www.cel-sci.com/annual_meeting.html.
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Here's how to order a copy of the proxy materials and select a future
delivery preference:
Paper copies: Current and future paper delivery requests can be
submitted via the telephone, Internet or email options below.
Email copies: Current and future email delivery requests must be
submitted via the Internet following the instructions below.
If you request an email copy of current materials you will receive an
email with a link to the materials.
PLEASE NOTE: You must use the number in the shaded bar on the reverse
side when requesting a set of proxy materials.
_ Internet - Go to www.envisionreports.com/CVM. Click Cast
Your Vote or Request Materials. Follow the instructions to
log in and order a paper or email copy of the current
meeting materials and submit your preference for email or
paper delivery of future meeting materials.
_ Telephone - Call us free of charge at 1-866-641-4276 using a
touch-tone phone and follow the instructions to log in and
order a paper copy of the materials by mail for the current
meeting. You can also submit a preference to receive a paper
copy for future meetings.
_ Email - Send email to investorvote@computershare.com with
"Proxy Materials CEL-SCI Corporation" in the subject line.
Include in the message your full name and address, plus the
number located in the shaded bar on the reverse, and state
in the email that you want a paper copy of current meeting
materials. You can also state your preference to receive a
paper copy for future meetings.
To facilitate timely delivery, all requests for a paper copy
of the proxy materials must be received by _____, 2013.