1
SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
CEL-SCI CORPORATION
---------------- ---------------------
(Name of Registrant as Specified In Its Charter)
William T. Hart - Attorney for Registrant
--------- -------------------------------------------
(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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to Exchange Act Rule 0-11:
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4) Proposed maximum aggregate value of transaction:
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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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 MARCH 14, 2002
To the Shareholders:
Notice is hereby given that the annual meeting of the shareholders of
CEL-SCI Corporation (the "Company") will be held at the Company's laboratory
which is located at 4820-C Seton Drive, Baltimore, Maryland 21215 on March 14,
2002, at 11:00 A.M., for the following purposes:
(1) to elect the directors who shall constitute the Company's Board of
Directors for the ensuing year;
(2) to approve the adoption of the Company's 2001 Incentive Stock Option
Plan which provides that up to 500,000 shares of common stock may be issued upon
the exercise of options granted pursuant to the Incentive Stock Option Plan.
(3) to approve the adoption of the Company's 2001 Non-Qualified Stock Option
Plan which provides that up to 2,500,000 shares of common stock may be issued
upon the exercise of options granted pursuant to the Non-Qualified Stock Option
Plan.
(4) to approve the adoption of the Company's 2001 Stock Bonus Plan which
provides that up to 200,000 shares of common stock may be issued to persons
granted stock bonuses pursuant to the Stock Bonus Plan.
(5) to approve the issuance of such number of shares of common stock as may
be required by the terms of the Company's Equity Line of Credit and certain
other convertible securities and warrants.
(6) to ratify the appointment of Deloitte & Touche as the Company's
independent accountants for the fiscal year ending September 30, 2002;
to transact such other business as may properly come before the meeting.
January 30, 2002 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 January 30, 2002, there were _________
shares of the Company's Common Stock issued and outstanding.
CEL-SCI CORPORATION
February __, 2002 By Geert R. Kersten
-----------------------------------
Chief Executive Officer
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY 7CARD, AND SIGN,
DATE AND RETURN THE PROXY CARD. TO SAVE THE COST OF FURTHER SOLICITATION PLEASE
MAIL YOUR PROXY CARD PROMPTLY.
CEL-SCI CORPORATION
8229 Boone Blvd.
Suite 802
Vienna, Virginia 22l82
(703) 506-9460
PROXY STATEMENT
The accompanying proxy is solicited by the Company's directors for voting at
the annual meeting of shareholders to be held on March 14, 2002, 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 the Company at the address set forth above or in person at the time
of the meeting. Additionally, any later dated proxy will revoke a previous proxy
from the same shareholder. This proxy statement was mailed to shareholders of
record on or about February __, 2002.
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 any other
proposals to come before the meeting will require the approval of a majority of
votes cast at the meeting.
Shares of the Company'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 sets forth, as of December 20, 2001, information with
respect to the shareholdings of (i) each person owning beneficially 5% or more
of the Company's common stock (ii) each officer who received compensation in
excess of $100,000 during the Company'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.
Number of Percent of
Name and Address Shares (1) Class (4)
---------------- ----------- -------------
Maximilian de Clara 473,404 1.9%
Bergstrasse 79
6078 Lungern,
Obwalden, Switzerland
Geert R. Kersten 1,282,483 (2) 5.2%
8229 Boone Blvd., Suite 802
Vienna, VA 22182
Patricia B. Prichep 284,824 1.2%
8229 Boone Blvd., Suite 802
Vienna, VA 22182
M. Douglas Winship 119,707 *
8229 Boone Blvd., Suite 802
Vienna, VA 22182
Eyal Talor, Ph.D. 146,329 *
8229 Boone Blvd., Suite 802
Vienna, VA 22182
Daniel H. Zimmerman, Ph.D. 196,487 *
8229 Boone Blvd., Suite 802
Vienna, VA 22182
Alexander G. Esterhazy 25,000 *
20 Chemin du Pre-Poiset
CH- 1253 Vandoeuvres
Geneve, Switzerland
C. Richard Kinsolving 11,000 *
5414 61st Street East
Bradenton, FL 34203
All Officers and Directors 2,517,6349.9%as a Group (8 persons)
* Less than 1%
(1) Includes shares issuable prior to March 14, 2002 upon the exercise of
options or warrants granted to the following persons:
Options or Warrants Exercisable
Name Prior to March 14, 2002
---- -------------------------------
Maximilian de Clara 383,333
Geert R. Kersten 1,108,334
Patricia B. Prichep 260,168
M. Douglas Winship 94,167
Eyal Talor, Ph.D. 105,834
Daniel H. Zimmerman, Ph.D. 156,001
Alexander G. Esterhazy 25,000
C. Richard Kinsolving --
(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 the Company.
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.
Certain information concerning the Company's officers and the Board of
Directors follows:
Name Age Position
Maximilian de Clara 71 Director and President
Geert R. Kersten, Esq. 43 Director, Chief Executive Officer and
Treasurer
Patricia B. Prichep 49 Senior Vice President of Operations and
Secretary
M. Douglas Winship 52 Senior Vice President of Regulatory
Affairs and Quality Assurance
Dr. Eyal Talor 45 Senior Vice President of Research and
Manufacturing
Dr. Daniel H. Zimmerman 59 Senior Vice President of Research,
Cellular Immunology
Name Age Position
Alexander G. Esterhazy 56 Director
Dr. C. Richard Kinsolving 66 Director
Mr. Maximilian de Clara, by virtue of his position as an officer and
director of the Company, may be deemed to be the "parent" and "founder" of the
Company as those terms are defined under applicable rules and regulations of the
Securities and Exchange Commission.
The principal occupations of the Company's officers and directors, during
the past several years, are as follows:
Maximilian de Clara. Mr. de Clara has been a Director of the Company since
its inception in March l983, and has been President of the Company since July
l983. Prior to his affiliation with the Company, and since at least l978, Mr. de
Clara was involved in the management of his personal investments and personally
funding research in the fields of biotechnology and biomedicine. Mr. de Clara
attended the medical school of the University of Munich from l949 to l955, but
left before he received a medical degree. During the summers of l954 and l955,
he worked as a research assistant at the University of Istanbul in the field of
cancer research. For his efforts and dedication to research and development in
the fight against cancer and AIDS, Mr. de Clara was awarded the "Pour le Merit"
honorary medal of the Austrian Military Order "Merito Navale" as well as the
honor cross of the Austrian Albert Schweitzer Society.
Geert R. Kersten, Esq. Mr. Kersten was Director of Corporate and Investment
Relations for the Company between February 1987 and October 1987. In October of
1987, he was appointed Vice President of Operations. In December 1988, Mr.
Kersten was appointed Director of the Company. Mr. Kersten also became the
Company's Treasurer in 1989. In May 1992, Mr. Kersten was appointed Chief
Operating Officer and in February 1995, Mr. Kersten became the Company's Chief
Executive Officer. In previous years, Mr. Kersten worked as a financial analyst
with Source Capital, Ltd., an investment advising firm in McLean, Virginia. Mr.
Kersten is a stepson of Maximilian de Clara, who is the President and a Director
of the Company. Mr. Kersten attended George Washington University in Washington,
D.C. where he earned a B.A. in Accounting and an M.B.A. with emphasis on
International Finance. He also attended law school at American University in
Washington, D.C. where he received a Juris Doctor degree.
Patricia B. Prichep has been the Company's Senior Vice President of
Operations since March 1994. Between December 1992 and March 1994, Ms. Prichep
was the Company's Director of Operations. Ms. Prichep became the Company's
Secretary in May 2000. From June 1990 to December 1992, Ms. Prichep was the
Manager of Quality and Productivity for the NASD's Management, Systems and
Support Department. Between 1982 and 1990, Ms. Prichep was Vice President and
Operations Manager for Source Capital, Ltd.
M. Douglas Winship has been the Company's Senior Vice President of
Regulatory Affairs and Quality Assurance since April 1994. Between 1988 and
April 1994, Mr. Winship held various positions with Curative Technologies, Inc.,
including Vice President of Regulatory Affairs and Quality Assurance
(1991-1994).
Eyal Talor, Ph.D. has been the Company's Senior Vice President of Research
and Manufacturing since March 1994. From October 1993 until March 1994, Dr.
Talor was Director of Research, Manufacturing and Quality Control, as well as
the Director of the Clinical Laboratory, for Chesapeake Biological Laboratories,
Inc. From 1991 to 1993, Dr. Talor was a scientist with SRA Technologies, Inc.,
as well as the director of SRA's Flow Cytometry Laboratory (1991-1993) and
Clinical Laboratory (1992-1993). During 1992 and 1993, Dr. Talor was also the
Regulatory Affairs and Safety Officer For SRA. Since 1987, Dr. Talor has held
various positions with the John Hopkins University, including course coordinator
for the School of Continuing Studies (1989-Present), research associate and
lecturer in the Department of Immunology and Infectious Diseases (1987-1991),
and associate professor (1991-Present).
Daniel H. Zimmerman, Ph.D. has been the Company's Senior Vice President of
Cellular Immunology since January 1996. Dr. Zimmerman founded CELL-MED, Inc. and
was its president from 1987-1995. From 1973 to 1987 Dr. Zimmerman served in
various positions at Electronucleonics, Inc. including Scientist, Senior
Scientist, Technical Director and Program Manager. From 1969-1973 Dr. Zimmerman
was a Senior Staff Fellow at NIH.
Alexander G. Esterhazy has been an independent financial advisor since
November 1997. Between July 1991 and October 1997 Mr. Esterhazy was a senior
partner of Corpofina S.A. Geneva, a firm engaged in mergers, acquisitions and
portfolio management. Between January 1988 and July 1991 Mr. Esterhazy was a
managing director of DG Bank in Switzerland. During this period Mr. Esterhazy
was in charge of the Geneva, Switzerland branch of the DG Bank, founded and
served as vice president of DG Finance (Paris) and was the President and Chief
Executive officer of DG-Bourse, a securities brokerage firm.
C. Richard Kinsolving, Ph.D. has been a Director of the Company 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).
All of the Company's officers devote substantially all of their time to the
Company's business. Messrs. Esterhazy and Kinsolving, as directors, devote only
a minimal amount of time to the Company.
The Company has an audit committee and compensation committee. The members
of the audit committee are Alexander G. Esterhazy and C. Richard Kinsolving. The
members of the compensation committee are Maximilian de Clara, Alexander
Esterhazy and C. Richard Kinsolving.
Executive Compensation
The following table sets forth in summary form the compensation received
by (i) the Chief Executive Officer of the Company and (ii) by each other
executive officer of the Company who received in excess of $100,000 during the
fiscal year ended September 30, 2001.
All
Other Other
Annual Restric- Com-
Compen- ted Stock Options pensa-
Name and Princi- Fiscal Salary Bonus sation Awards Granted tion
pal Position Year (1) (2) (3) (4) (5) (6)
--------------- ------ -------------- ------ --------- ------- -----
Maximilian 2001 $357,167 -- $52,186 $262,000 95,000 $ 64
de Clara, 2000 $345,583 -- $72,945 $550,000 60,000 $ 64
President 1999 $335,292 -- $72,945 $435,625 145,000 $ 63
Geert R. Kersten, 2001 $265,175 -- $10,462 $ 8,313 655,000 $4,114
Chief Executive 2000 $303,049 -- $15,349 $ 10,375 60,000 $4,114
Officer, Secretary 1999 $268,480 $15,154 $ 10,000 145,000 $4,113
and Treasurer
Patricia B. 2001 $104,505 -- $ 3,000 $ 6,270 260,000 $ 63
Prichep, Senior 2000 $114,430 -- $ 3,000 $ 6,998 23,000 $ 63
Vice President
of Operations
M. Douglas 2001 $163,725 -- $ 2,400 $ 9,824 65,000 $ 64
Winship, Senior 2000 $154,658 -- $ 2,400 $ 9,280 20,000 $ 64
Vice President of 1999 $146,609 -- $ 2,400 $ 8,797 27,500 $ 63
Regulatory Affairs
and Quality Assurance
Eyal Talor, Ph.D. 2001 $157,420 -- $ 3,000 $ 9,269 200,000 $ 63
Senior Vice 2000 $150,334 -- $ 3,000 $ 9,020 50,000 $ 63
President of 1999 $139,085 -- $ 3,000 $ 8,345 30,000 $ 63
Research and
Manufacturing
Daniel Zimmerman, 2001 $117,145 -- $ 3,000 $ 6,962 175,000 $ 64
Ph.D., 2000 $124,165 -- $ 3,000 $ 7,450 20,000 $ 64
Senior Vice 1999 $114,806 -- $ 3,000 $ 6,888 45,000 $ 63
President of
Cellular Immunology
(1) The dollar value of base salary (cash and non-cash) received.
(2) The dollar value of bonus (cash and non-cash) received.
(3) Any other annual compensation not properly categorized as salary or bonus,
including perquisites and other personal benefits, securities or property.
Amounts in the table represent automobile, parking and other transportation
expenses, plus, in the case of Maximilian de Clara and Geert Kersten,
director's fees of $8,000.
(4) During the periods covered by the table, the value of the shares of
restricted stock issued as compensation for services to the persons listed
in the table. In the case of Mr. de Clara, the shares were issued in
consideration for past services rendered to the Company. In the case of all
other persons listed in the table, the shares were issued as the Company's
contribution on behalf of the named officer to the Company's 401(k)
retirement plan.
As of September 30, 2001, the number of shares of the Company's common
stock, owned by the officers included in the table above, and the value of
such shares at such date, based upon the market price of the Company's
common stock were:
Name Shares Value
Maximilian de Clara 195,071 $247,741
Geert R. Kersten 157,173 $199,610
Patricia B. Prichep 16,843 $ 21,391
M. Douglas Winship 14,360 $ 18,237
Eyal Talor, Ph.D. 29,837 $ 37,893
Daniel Zimmerman, Ph.D. 31,299 $ 39,750
Dividends may be paid on shares of restricted stock owned by the Company's
officers and directors, although the Company has no plans to pay dividends.
(5) The shares of Common Stock to be received upon the exercise of all stock
options granted during the periods covered by the Table. Includes certain
options issued in connection with the Company's Salary Reduction Plans as
well as certain options purchased from the Company. See "Options Granted
During Fiscal Year Ended September 30, 2001" below.
(6) All other compensation received that the Company could not properly report
in any other column of the Table including annual Company 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, the Company
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, the Company. Amounts in the table represent life insurance
premiums.
Long Term Incentive Plans - Awards in Last Fiscal Year
None.
Employee Pension, Profit Sharing or Other Retirement Plans
During 1993 the Company implemented a defined contribution retirement
plan, qualifying under Section 401(k) of the Internal Revenue Code and covering
substantially all the Company's employees. Prior to January 1, 1998 the
Company's contribution was equal to the lesser of 3% of each employee's salary,
or 50% of the employee's contribution. Effective January 1, 1998 the plan was
amended such that the Company's contribution is now made in shares of the
Company's common stock as opposed to cash. Each participant's contribution is
matched by the Company 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. The Company's contribution of common
stock is valued each quarter based upon the closing price of the Company's
common stock. The fiscal 2001 expenses for this plan were $98,858. Other than
the 401(k) Plan, the Company does not have a defined benefit, pension plan,
profit sharing or other retirement plan.
Compensation of Directors
Standard Arrangements. The Company currently pays its directors $2,000 per
quarter, plus expenses. The Company has no standard arrangement pursuant to
which directors of the Company are compensated for any services provided as a
director or for committee participation or special assignments.
Other Arrangements. The Company has from time to time granted options to
its outside directors. See Stock Options below for additional information
concerning options granted to the Company's directors.
Employment Contracts
Effective April 12, 1999, the Company entered into a three-year employment
agreement with Mr. de Clara. The employment agreement provides that the Company
will pay Mr. de Clara an annual salary of $363,000 during the term of the
agreement. 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 the Company, then the agreement allows Mr. de Clara to resign from
his position at the Company and receive a lump-sum payment from the Company
equal to 18 months salary. For purposes of the employment agreement, a change in
the control of the Company means the sale of more than 50% of the outstanding
shares of the Company's Common Stock, or a change in a majority of the Company's
directors.
Effective August 1, 2000, the Company entered into a three-year employment
agreement with Mr. Kersten. The employment agreement provides that during the
term of the employment agreement the Company will pay Mr. Kersten an annual
salary of $336,132, subject to minimum annual increases of 5% per year. In the
event there is a change in the control of the Company, the agreement allows Mr.
Kersten to resign from his position at the Company and receive a lump-sum
payment from the Company equal to 24 months salary. For purposes of the
employment agreement a change in the control of the Company means: (1) the
merger of the Company with another entity if after such merger the shareholders
of the Company do not own at least 50% of voting capital stock of the surviving
corporation; (2) the sale of substantially all of the assets of the Company; (3)
the acquisition by any person of more than 50% of the Company's common stock; or
(4) a change in a majority of the Company's directors which has not been
approved by the incumbent directors.
Compensation Committee Interlocks and Insider Participation
The Company has a compensation committee comprised of all of the Company's
directors, with the exception of Mr. Kersten. During the year ended September
30, 2001, Mr. de Clara was the only officer participating in deliberations of
the Company's compensation committee concerning executive officer compensation.
During the year ended September 30, 2001, no director of the Company was
also an executive officer of another entity, which had an executive officer of
the Company serving as a director of such entity or as a member of the
compensation committee of such entity.
Stock Options
The following tables set forth information concerning the options granted
during the fiscal year ended September 30, 2001, to the persons named below, and
the fiscal year-end value of all unexercised options (regardless of when
granted) held by these persons.
Options Granted During Fiscal Year Ended September 30, 2001
-----------------------------------------------------------
Individual Grants
-------------------------------------------------
Potential Realizable
% of Total Value at Assumed
Options Annual Rates of Stock
Granted to Exercise Price Appreciation
Options Employees in Price Per Expiration for Option Term (1)
Name Granted (#) Fiscal Year Share Date 5% 10%
---- ------- --------------- -------- ---------- --- ----
Maximilian de Clara 35,000 (2) 2.04% $1.67 12/1/04 $16,100 $35,700
60,000 3.49% $1.38 3/22/11 $45,600 $132,000
------
95,000
Geert R. Kersten 35,000 (2) 2.04% $1.67 12/1/04 $16,100 $35,700
60,000 3.49% $1.38 3/22/11 $45,600 $132,000
560,000 (2) 32.62% $1.05 7/16/05 $162,400 $358,400
-------
655,000
Patricia B. Prichep 35,000 (2) 2.04% $1.67 12/1/04 $12,600 $35,700
25,000 1.46% $1.18 12/8/10 $30,000 $47,000
200,000 (2) 11.65% $1.05 7/16/05 $58,000 $128,000
-------
260,000
Eyal Talor, Ph.D. 25,000 1.46% $1.76 11/10/10 $27,500 $70,125
15,000 (2) 0.87% $1.67 12/1/04 $ 6,900 $15,300
160,000 (2) 9.32% $1.05 7/16/05 $46,400 $102,400
-------
200,000
M. Douglas Winship 25,000 1.46% $1.39 04/5/11 $21,750 $55,250
40,000 (2) 2.33% $1.05 7/16/05 $11,600 $25,600
------
65,000
Daniel Zimmerman, 35,000 (2) 2.04% $1.67 12/1/04 $16,100 $35,700
Ph.D. 20,000 1.16% $1.85 1/26/11 $23,200 $59,000
120,000 (2) 6.99% $1.05 7/16/05 $34,800 $76,800
-------
175,000
(1) The potential realizable value of the options shown in the table assuming
the market price of the Company's Common Stock appreciates in value from
the date of the grant to the end of the option term at 5% or 10%.
(2) Options were granted in accordance with the Company's Salary Adjustment
Plan. Pursuant to the Salary Adjustment Plan, any employee of the Company
was allowed to receive options (exercisable at market price at the time of
grant) in exchange for a one-time reduction in such employee's salary.
Option Exercises and Year-End Option Values
Value (in $) of
Unexercised
Number of In-the-Money
Unexercised Options at Fiscal
Shares Options (3) Year-End (4)
------------ -----------------
Acquired On Value Exercisable/ Exercisable/
Name Exercise (1) Realized (2) Unexercisable Unexercisable
---- ------------ ------------ ------------- -----------------
Maximilian de Clara -- -- 348,333/151,666 55,733/12,467
Geert R. Kersten -- --1,073,334/711,666 215,233/135,667
Patricia Prichep -- -- 203,501/285,999 34,320/51,970
Eyal Talor 82,500/206,666 15,950/36,667
M. Douglas Winship -- -- 94,167/83,333 19,067/12,833
Daniel Zimmerman -- -- 107,667/193,333 17,087/30,433
(1) The number of shares received upon exercise of options during the fiscal
year ended September 30, 2001.
(2) With respect to options exercised during the Company's fiscal year ended
September 30, 2001, the dollar value of the difference between the option
exercise price and the market value of the option shares purchased on the
date of the exercise of the options.
(3) The total number of unexercised options held as of September 30, 2001,
separated between those options that were exercisable and those options
that were not exercisable.
(4) For all unexercised options held as of September 30, 2001, the market value
of the stock underlying those options as of September 30, 2001.
Ten-Year Option/SAR Repricings
In July 2001 the Company lowered the exercise price on options held by
thirty-three of the Company's officers, directors and employees to $1.05 per
share. The options subject to this repricing allowed for the purchase of up to
2,117,165 shares of the Company's common stock and included options previously
granted to those persons listed below. The Company's Board of Directors lowered
the exercise of these options since at the time of repricing (July 17, 2001),
the options no longer provided a benefit to the option holders due to the
difference between the exercise price of the options and the market price of the
Company's common stock. The following table provides more information concerning
the repricing of these options.
Length of
Number of Market Exercise Original
Securities Price of Price at Option Term
Underlying Stock at Time of Remaining
Options/SARs Repricing Repricing New at Date of
Name and Date of Repriced or or Amend- or Amend- Exercise Repricing or
Principal Position Repricing Amended (#) ment (#) ment (#) Price ($) Admendment
-------------------------------------------------------------------------------------------------------
Maximilan de Clara, 7/17/01 60,000 1.05 3.06 1.05 8.75 yrs
President 70,000 1.05 5.62 1.05 5.17 yrs
56,666 1.05 3.25 1.05 5.83 yrs
50,000 1.05 4.68 1.05 6.83 yrs
50,000 1.05 2.06 1.05 7.75 yrs
23,333 1.05 3.87 1.05 4.00 yrs
Geert R. Kersten, 7/17/01 60,000 1.05 3.06 1.05 8.75 yrs
Chief Executive 50,000 1.05 2.06 1.05 7.75 yrs
Officer and 163,000 1.05 3.12 1.05 1.50 yrs
Treasurer 114,000 1.05 2.94 1.05 1.50 yrs
50,000 1.05 5.62 1.05 5.17 yrs
150,000 1.05 3.25 1.05 6.83 yrs
50,000 1.05 4.68 1.05 6.83 yrs
50,000 1.05 3.87 1.05 4.00 yrs
200,000 1.05 2.38 1.05 0.92 yrs
24,000 1.05 2.38 1.05 0.92 yrs
4,000 1.05 2.87 1.05 1.25 yrs
10,000 1.05 2.87 1.05 1.25 yrs
10,000 1.05 2.87 1.05 1.67 yrs
50,000 1.05 2.87 1.05 1.25 yrs
50,000 1.05 2.87 1.05 3.00 yrs
Patricia B. Prichep, 7/17/01 17,000 1.05 2.31 1.05 7.42 yrs
Senior Vice 15,000 1.05 2.06 1.05 7.75 yrs
President of 23,000 1.05 4.00 1.05 8.58 yrs
Operations and 30,000 1.05 3.12 1.05 1.50 yrs
Secretary 32,000 1.05 2.94 1.05 1.50 yrs
3,000 1.05 4.25 1.05 5.42 yrs
35,000 1.05 4.68 1.05 5.67 yrs
9,500 1.05 3.87 1.05 4.00 yrs
6,000 1.05 2.87 1.05 1.42 yrs
1,500 1.05 2.87 1.05 2.67 yrs
10,000 1.05 2.94 1.05 4.33 yrs
Length of
Number of Market Exercise Original
Securities Price of Price at Option Term
Underlying Stock at Time of Remaining
Options/SARs Repricing Repricing New at Date of
Name and Date of Repriced or or Amend- or Amend- Exercise Repricing or
Principal Position Repricing Amended (#) ment (#) ment (#) Price ($) Admendment
-------------------------------------------------------------------------------------------------------
M. Douglas Winship, 7/17/01 20,000 1.05 5.37 1.05 8.75 yrs
Senior Vice President 15,000 1.05 2.06 1.05 7.75 yrs
of Regulatory Affairs 45,000 1.05 4.31 1.05 5.75 yrs
and Quality Assurance 5,000 1.05 3.87 1.05 4.00 yrs
15,000 1.05 2.87 1.05 2.75 yrs
Eyal Talor, Ph.D., 7/17/01 20,000 1.05 2.06 1.05 8.00 yrs
Senior Vice President 12,000 1.05 2.94 1.05 1.50 yrs
of Research and 16,666 1.05 5.18 1.05 5.67 yrs
Manufacturing 15,000 1.05 3.31 1.05 7.00 yrs
15,500 1.05 3.87 1.05 4.00 yrs
Daniel Zimmerman, Ph.D., 7/17/01 15,000 1.05 2.06 1.05 7.75 yrs
Senior Vice President 20,000 1.05 4.00 1.05 8.58 yrs
of Cellular Immunology 24,000 1.05 2.94 1.05 1.50 yrs
3,000 1.05 4.25 1.05 5.42 yrs
7,000 1.05 3.94 1.05 5.92 yrs
15,000 1.05 5.06 1.05 6.58 yrs
12,000 1.05 3.44 1.05 4.42 yrs
Stock Option and Bonus Plans
The Company has Incentive Stock Option Plans, Non-Qualified Stock Option
Plans and Stock Bonus 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 collectively
authorize the issuance of up to 2,100,000 shares of the Company's Common Stock
to persons who exercise options granted pursuant to the Plan. Only Company
employees may be granted options pursuant to the Incentive Stock Option Plan.
To be classified as incentive stock options under the Internal Revenue
Code, options granted pursuant to the Plans must be exercised prior to the
following dates:
(a) The expiration of three months after the date on which an option
holder's employment by the Company is terminated (except if such
termination is due to death or permanent and total disability);
(b) The expiration of 12 months after the date on which an option
holder's employment by the Company is terminated, if such
termination is due to the Employee's permanent and total disability;
(c) In the event of an option holder's death while in the employ of the
Company, his executors or administrators may exercise, within three
months following the date of his death, the option as to any of the
shares not previously exercised;
The total fair market value of the shares of Common Stock (determined at
the time of the grant of the option) for which any employee may be granted
options which are first exercisable in any calendar year may not exceed
$100,000.
Options may not be exercised until one year following the date of grant.
Options granted to an employee then owning more than 10% of the Common Stock of
the Company may not be exercisable by its terms after five years from the date
of grant. Any other option granted pursuant to the Plan may not be exercisable
by its terms after ten years from the date of grant.
The purchase price per share of Common Stock purchasable under an option
is determined by the Committee but cannot be less than the fair market value of
the Common Stock on the date of the grant of the option (or 110% of the fair
market value in the case of a person owning more than 10% of the Company's
outstanding shares).
Non-Qualified Stock Option Plans. The Non-Qualified Stock Option Plans
collectively authorize the issuance of up to 5,760,000 shares of the Company's
Common Stock to persons that exercise options granted pursuant to the Plans. The
Company's employees, directors, officers, consultants and advisors are eligible
to be granted options pursuant to the Plans, provided however that bona fide
services must be rendered by such consultants or advisors and such services must
not be in connection with the offer or sale of securities in a capital-raising
transaction. The option exercise price is determined by the Committee but cannot
be less than the market price of the Company's Common Stock on the date the
option is granted.
Stock Bonus Plans. Up to 1,040,000 shares of Common Stock may be granted
under the Stock Bonus Plans. Such shares may consist, in whole or in part, of
authorized but unissued shares, or treasury shares. Under the Stock Bonus Plan,
the Company's employees, directors, officers, consultants and advisors are
eligible to receive a grant of the Company's shares, provided however that bona
fide services must be rendered by consultants or advisors and such services must
not be in connection with the offer or sale of securities in a capital-raising
transaction.
Other Information Regarding the Plans. The Plans are administered by the
Company's Compensation Committee ("the Committee"), each member of which is a
director of the Company. The members of the Committee were selected by the
Company's Board of Directors and serve for a one-year tenure and until their
successors are elected. A member of the Committee may be removed at any time by
action of the Board of Directors. Any vacancies which may occur on the Committee
will be filled by the Board of Directors. The Committee is vested with the
authority to interpret the provisions of the Plans and supervise the
administration of the Plans. In addition, the Committee is empowered to select
those persons to whom shares or options are to be granted, to determine the
number of shares subject to each grant of a stock bonus or an option and to
determine when, and upon what conditions, shares or options granted under the
Plans will vest or otherwise be subject to forfeiture and cancellation.
In the discretion of the Committee, any option granted pursuant to the
Plans may include installment exercise terms such that the option becomes fully
exercisable in a series of cumulating portions. The Committee may also
accelerate the date upon which any option (or any part of any options) is first
exercisable. Any shares issued pursuant to the Stock Bonus Plan and any options
granted pursuant to the Incentive Stock Option Plan or the Non-Qualified Stock
Option Plan will be forfeited if the "vesting" schedule established by the
Committee administering the Plan at the time of the grant is not met. For this
purpose, vesting means the period during which the employee must remain an
employee of the Company or the period of time a non-employee must provide
services to the Company. At the time an employee ceases working for the Company
(or at the time a non-employee ceases to perform services for the Company), 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 the Company's Common Stock
having an aggregate fair market value equal to the option price, provided such
shares have been owned by the option holder for at least one year prior to such
exercise. A combination of cash and shares of Common Stock may also be permitted
at the discretion of the Committee.
Options are generally non-transferable except upon death of the option
holder. Shares issued pursuant to the Stock Bonus Plan will generally not be
transferable until the person receiving the shares satisfies the vesting
requirements imposed by the Committee when the shares were issued.
The Board of Directors of the Company may at any time, and from time to
time, amend, terminate, or suspend one or more of the Plans in any manner they
deem appropriate, provided that such amendment, termination or suspension will
not adversely affect rights or obligations with respect to shares or options
previously granted. The Board of Directors may not, without shareholder
approval: make any amendment which would materially modify the eligibility
requirements for the Plans; increase or decrease the total number of shares of
Common Stock which may be issued pursuant to the Plans except in the case of a
reclassification of the Company's capital stock or a consolidation or merger of
the Company; reduce the minimum option price per share; extend the period for
granting options; or materially increase in any other way the benefits accruing
to employees who are eligible to participate in the Plans.
Summary. The following sets forth certain information, as of December 31,
2001, concerning the stock options and stock bonuses granted by the Company.
Each option represents the right to purchase one share of the Company's Common
Stock.
Total Shares
Shares Reserved for Shares Remaining
Reserved Outstanding Issued as Options/Shares
Name of Plan Under Plans Options Stock Bonus Under Plans
------------ ----------- ----------- ----------- --------------
Incentive Stock Option
Plans 2,100,000 1,250,100 N/A 763,315
Non-Qualified Stock Option
Plans 5,760,000 3,399,314 N/A 1,213,225
Stock Bonus Plans 1,040,000 N/A 838,241 201,759
Of the shares issued pursuant to the Company's Stock Bonus Plans 146,019
shares were issued as part of the Company's contribution to its 401(k) plan.
During the year ended September 30, 1999 the Company issued 200,000 shares
of its common stock to Mr. de Clara for past services provided to the Company.
In January 2000 the Company issued Mr. de Clara an additional 200,000 shares of
common stock for past services provided to the Company. In September 2001 the
Company issued Mr. de Clara an additional 200,000 shares of common stock for
past services provided to the Company. In October 2001 the Company issued Mr. de
Clara an additional 75,071 shares of common stock for past services provided to
the Company.
Compensation Committee
During the year ending September 30, 2001 the Company had a Compensation
Committee which, was comprised of Maximilian de Clara, Alexander Esterhazy and
C. Richard Kinsolving. During the year ended September 30, 2001 the Compensation
Committee did not formerly meet as a separate committee, but rather held its
meetings in conjunction with the Company's Board of Director's meetings.
During the year ended September 30, 2001, Mr. de Clara was the only officer
participating in deliberations of the Company's compensation committee
concerning executive officer compensation. During the year ended September 30,
2001, no director of the Company was also an executive officer of another
entity, which had an executive officer of the Company 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 the Company's executive compensation program include
annual base salaries and long-term incentive compensation consisting of stock
options. It is the Company'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.
The Company's long term incentive program consists exclusively of periodic
grants of stock options with an exercise price equal to the fair market value of
the Company'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 Company and individual performance, "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 1999 the Company entered into a three-year employment agreement
with Maximilian de Clara, the Company's President, which provides that during
the employment term the Company will pay Mr. de Clara a salary of $363,000.
Effective August 1, 2000, the Company entered into a three-year employment
agreement with Geert R. Kersten. The employment agreement provides that during
the term of the employment agreement the Company will pay Mr. Kersten an annual
salary of $336,132, subject to the minimum annual increases of 5% per year.
During the fiscal year ending September 30, 2001 the cash compensation paid to
Mr. de Clara and Mr. Kersten was based on these employment contracts. Since the
terms of the employment contracts established the compensation paid to Mr. de
Clara and Mr. Kersten, there was no relationship between the Company's
performance and Mr. de Clara's or Mr. Kersten's compensation for the last
completed fiscal year. During the year ended September 30, 2001 Mr. de Clara and
Mr. Kersten, in accordance with the Company's salary reduction program, agreed
to reduce a portion of the compensation payable in fiscal 2000 and 2001 pursuant
to their employment contracts in exchange for stock options.
During the year ending September 30, 2001, the compensation paid to the
Company'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 the Company, the achievement of specific
goals established for the Company 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 the Company's other executive officers since the
Company'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 the Company's financial
or stock price performance can be misleading.
During the year ended September 30, 2001 the Company granted options for the
purchase of 1,450,000 shares of the Company's common stock to the Company's
executive officers. In granting the options to the Company's executive officers,
the Board of Directors considered the same factors which were used to determine
the cash compensation paid to such officers.
During the year ended September 30, 2001 the Company issued 200,000 shares
of its common stock to the Company's President, Maximilian de Clara, in return
for past services provided to the Company. In October 2001 the Company issued
Mr. de Clara an additional 75,071 shares of common stock for past services
provided to the Company.
The foregoing report has been approved by the members of the Compensation
Committee:
Maximilian de Clara
Alexander Esterhazy
C. Richard Kinsolving
Stockholder Return Performance Graph
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's common stock with the
cumulative total return of the Amex Market Value Index and an old and new
Biotechnology peer group for the five fiscal years ending September 30, 2001.
Comparison of Five Year Cumulative Total Return Among
Cel-Sci Corporation, the Amex Market Value, and a Peer Group
The members of the Peer Group used for purposes of the following
comparison, and their respective trading symbols, are: Antex Biologics, Inc.
(ANX), Epimmune, Inc. (EPMN) and Neoprobe Corp. (NEOP).
Cumulative Total Return
9/96 9/97 9/98 9/99 9/00 9/01
---- ---- ---- ---- ---- ----
New Peer Group
Cel-Sci Corporation 124.32 156.76 56.76 58.11 48.65 23.30
Amex Market Value Index 101.91 127.81 119.69 153.76 191.35160.55
Peer Group 98.54 78.97 9.95 8.04 9.27 3.96
$100 invested on 09/30/96 in stock or index, including reinvestment of
dividends. The Company's fiscal year ends on September 30.
Audit Committee
During the year ending September 30, 2001 the Company had an Audit Committee
comprised of Alexander Esterhazy and C. Richard Kinsolving. The purpose of the
Audit Committee is to review and approve the selection of the Company's
auditors, review the Company's financial statements with the Company's
independent auditors, and review and discuss the independent auditor's
management letter relating to the Company's internal accounting controls. During
the fiscal year ending September 30, 2001, the Audit Committee met once. All
members of the Audit Committee attended this meeting.
The following is the report of the Audit Committee.
(1) The Audit Committee reviewed and discussed the Company's audited financial
statements for the year ended September 30, 2001 with the Company's
management.
(2) The Audit Committee discussed with the Company's independent auditors the
matters required to be discussed by Statement of Accounting Standards 61.
(3) The Audit Committee has received the written disclosures and the letter
from the Company's independent accountants required by Independence
Standards Board Standard No. 1 (Independence Standards Board Standard No.
1, Independence Discussions with Audit Committees), and had discussed with
the Company's independent accountants the independent accountants
independence; and
(4) Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements
be included in the Company's Annual Report on Form 10-K for the year ended
September 30, 2001 for filing with the Securities and Exchange Commission.
The foregoing report has been approved by the members of the Audit
Committee:
Alexander G. Esterhazy
C. Richard Kinsolving
PROPOSAL TO ADOPT 2001 INCENTIVE STOCK OPTION PLAN
Shareholders are being requested to vote on the adoption of the Company's
2001 Incentive Stock Option Plan. The purpose of the Incentive Stock Option Plan
is to furnish additional compensation and incentives to the Company's officers
and employees.
The 2001 Incentive Stock Option Plan, if adopted, will authorize the
issuance of up to 500,000 shares of the Company's common stock to persons that
exercise options granted pursuant to the plan. As of the date of this Proxy
Statement the Company had not granted any options pursuant to this plan.
The 2001 Incentive Stock Option Plan was adopted by the Board of Directors
on January 5, 2001. Any options granted under the Incentive Stock Option Plan
must be granted before January 5, 2011. If adopted, the Incentive Stock Option
Plan will function and be administered in the same manner as the Company's other
Incentive Stock Option Plans. The Board of Directors recommends that the
shareholders of the Company approve the adoption of the 2001 Incentive Stock
Option Plan.
PROPOSAL TO ADOPT 2001 NON-QUALIFIED STOCK OPTION PLAN
Shareholders are being requested to vote on the adoption of the Company's
2001 Non-Qualified Stock Option Plan. The Company's employees, directors and
officers, and consultants or advisors to the Company are eligible to be granted
options pursuant to the 2001 Non-Qualified Plan as may be determined by the
Company'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 2001 Non-Qualified Plan, if adopted, will authorize the issuance of up
to 2,500,000 shares of the Company's common stock to persons that exercise
options granted pursuant to the Plan. As of the date of this Proxy Statement,
1,325,000 options have been granted pursuant to the 2001 Non-Qualified Plan.
The 2001 Non-Qualified Plan was adopted by the Board of Directors on January
5, 2001. If adopted, the 2001 Non-Qualified Plan will function and be
administered in the same manner as the Company's other Non-Qualified Plans. The
Board of Directors recommends that the shareholders of the Company approve the
adoption of the 2001 Non-Qualified Plan.
PROPOSAL TO ADOPT 2001 STOCK BONUS PLAN
Shareholders are being requested to vote on the adoption of the Company's
2001 Stock Bonus Plan. The purpose of the year Stock Bonus Plan is to furnish
additional compensation and incentives to the Company's officers and employees
and by allowing the Company to continue to make contributions to its 401(k) plan
with shares of its common stock instead of cash.
Since 1993 the Company has maintained a defined contribution retirement plan
(also known as a 40l(k) Plan) covering substantially all the Company's
employees. Prior to January 1, 1998 the Company's contribution to the 401(k)
Plan was made in cash. Effective January 1, 1998 the Company's employees
approved a change in the plan such that the Company's contribution is now made
in shares of the Company's common stock as opposed to cash. The Company's
contribution of common stock is made quarterly and is valued based upon the
price of the Company's common stock on the American Stock Exchange. The Board of
Directors is of the opinion that contributions to the 401(k) plan with shares of
the Company's common stock serves to further align the shareholder's interest
with that of the Company's employees.
The 2001 Stock Bonus Plan, if adopted, will authorize the issuance of up to
200,000 shares of the Company's common stock to persons granted stock bonuses
pursuant to the plan. As of the date of this Proxy Statement the Company had not
granted any stock bonuses pursuant to the 2001 Stock Bonus Plan.
The 2001 Stock Bonus Plan was adopted by the Board of Directors on January
5, 2001. If adopted, this Plan will function and be administered in the same
manner as the Company's existing Stock Bonus Plans. The Board of Directors
recommends that the shareholders of the Company approve the adoption of the 2001
Stock Bonus Plan.
PROPOSAL TO APPROVE ISSUANCE OF COMMON STOCK PURSUANT TO THE COMPANY'S EQUITY
LINE OF CREDIT AND CERTAIN OTHER CONVERTIBLE SECURITIES AND WARRANTS
Equity Line of Credit
In order to provide a possible source of funding for CEL-SCI's current
activities and for the development of its current and planned products, CEL-SCI
entered into an equity line of credit agreement with Paul Revere Capital
Partners.
Under the equity line of credit agreement, Paul Revere Capital Partners
has agreed to provide the Company with up to $10,000,000 of funding prior to
June 22, 2003. During this twenty-four month period, the Company may request a
drawdown under the equity line of credit by selling shares of its common stock
to Paul Revere Capital Partners and Paul Revere Capital Partners will be
obligated to purchase the shares. The Company may request a drawdown once every
22 trading days, although the Company is under no obligation to request any
drawdowns under the equity line of credit.
During the 22 trading days following a drawdown request, the Company will
calculate the amount of shares it will sell to Paul Revere Capital Partners and
the purchase price per share. The purchase price per share of common stock will
be based on the daily volume weighted average price of the Company's common
stock during each of the 22 trading days immediately following the drawdown
date, less a discount of 11%.
The Company may request a drawdown by faxing a drawdown notice to Paul
Revere Capital Partners, Ltd., stating the amount of the drawdown and the lowest
daily volume weighted average price, if any, at which the Company is willing to
sell the shares. The lowest volume weighted average price will be set by the
Company's Chief Executive Officer in his sole and absolute discretion.
The following provides information concerning sales of the Company's
common stock to Paul Revere Capital Partners as of the date of this proxy
statement.
Average Sale Net Proceeds
Date of Sale Shares Sold Price Per Share to the Company
11/09/01 277,684 $1.08 $299,000
01/08/02 333,993 $0.87 $290,404
Series E Preferred Stock
In December 1999 and January 2000, the Company sold 1,148,592 shares of
its common stock, plus Series A and Series B warrants, to Advantage Fund II,
Koch Investment Group Limited and Mooring Capital Fund LLC for $2,800,000. The
Series A warrants allowed the holders to purchase up to 402,007 shares of the
Company's common stock at a price of $2.925 per share at any time prior to
December 8, 2002. The Company issued 274,309 shares of common stock upon the
exercise of the Series B warrants, which have since expired.
In March 2000, the Company sold 1,026,666 shares of its common stock, plus
Series C and Series D warrants, to the same private investors referred to above
for $7,700,000. The Series C warrants allowed the holders to purchase up to
413,344 shares of the Company's common stock at a price of $8.50 per share at
any time prior to March 21, 2003. The Series D warrants allowed the holders, to
the extent they held any shares purchased in the March 2000 offering, to acquire
additional shares of the Company's common stock at a nominal price in the event
the price of the Company's common stock fell below $7.50 per share prior to
certain fixed vesting dates. On the first fixed vesting date the price of the
Company's common stock was $1.47 and on the second, and final vesting date, the
price of the Company's common stock was $1.08. As a result, and in accordance
with the terms of the Series D warrants, the private investors were entitled to
receive 5,734,155 additional shares of the Company's common stock, of which
3,520,123 shares had been issued and 959,340 shares had been sold as of August
15, 2001.
On August 16, 2001 the Company, Advantage Fund II and Koch Investment
Group agreed to restructure the terms of the Series A, C and D warrants in the
following manner:
Advantage Fund II, Koch Investment Group Limited and Mooring Capital Fund
LLC exchanged the 3,588,564 shares of the Company's common stock which they
owned, plus their unexercised Series D Warrants, for 6,288 shares of the
Company's Series E Preferred stock. At the holder's option, each Series E
Preferred share is convertible into shares of the Company's common stock on the
basis of one Series E Preferred share for shares of common stock equal in number
to the amount determined by dividing $1,000 by the lesser of $5 or 93% of the
average closing bid prices (the "Conversion Price") of the Company's common
stock on the American Stock Exchange for the five days prior to the date of each
conversion notice.
Notwithstanding the above, a maximum 923 shares of common stock are
issuable upon the conversion of each Series E Preferred share prior to August
16, 2003.
Each Series E Preferred share can be redeemed by the Company at a price of
$1,200 per share, plus accrued dividends, at any time prior to July 18, 2003. At
any time on or after July 18, 2003 and prior to the close of business on August
16, 2003 the Company may redeem any outstanding Series E Preferred shares at a
price of $1,000 per share.
Preferred shares that have not been redeemed or converted by August 16,
2003 will automatically convert to twice the number of shares of common stock
which such shares would otherwise convert into based upon the Conversion Price
on such date. On August 16, 2003 the Company will also be required to issue the
holders of any Series E Preferred shares which are then outstanding Series E
warrants which will allow the holders of the warrants to purchase shares of the
Company's common stock equal in number to 33% of the common shares which were
issued upon the conversion of the remaining Series E Preferred shares. These
warrants, if issued, will be exercisable at any time prior to August 17, 2006 at
a price equal to 110% of the volume weighted average price of the Company's
common stock for the five days prior to August 16, 2003.
Each Series E Preferred share is entitled to a quarterly dividend of $60
per share, payable in cash. Dividends not declared will accumulate. Except as
otherwise provided by law the Series E Preferred shares do not have any voting
rights. The Series E Preferred shares have a liquidation preference over the
Company's common stock.
As part of this transaction the three investors exchanged their Series A
and Series C warrants for new Series E warrants. The Series E warrants
collectively allow the holders to purchase up to 815,351 additional shares of
the Company's common stock at a price of $1.19 per share at any time prior to
August 16, 2004.
As of December 31, 2001 1,441 Series E Preferred shares had been converted
into 1,288,556 shares of the Company's common stock. The actual number of shares
issuable upon the conversion of the Series E Preferred shares will vary
depending upon a number of factors, including the price of the Company's common
stock at certain dates. Accordingly, the number of shares of common stock which
will be issued upon the conversion of the Series E Preferred shares cannot be
determined at this time. However, prior to August 16, 2003, the Company would
not be required to issue more than additional 4,473,781 shares of its common
stock upon the conversion of the Series E Preferred shares.
Convertible Notes and Series F Warrants
In December 2001, the Company sold convertible notes, plus Series F
warrants, to a group of private investors for $800,000. The notes bear interest
at 7% per year, are due and payable on December 31, 2003 and are secured by
substantially all of the Company's assets. Interest is payable quarterly except
that the first interest payment is not due until July 1, 2002. If the Company
fails to make any interest payment when due, the notes will become immediately
due and payable.
At the holder's option the notes are convertible into shares of the
Company's common stock equal in number to the amount determined by dividing each
$1,000 of note principal to be converted by the Conversion Price. The Conversion
Price is 76% of the average of the three lowest daily trading prices of the
Company's common stock on the American Stock Exchange during the 20 trading days
immediately prior to the conversion date. The Conversion Price may not be less
than $0.57. However, if the Company's common stock trades for less than $0.57
per share for a period of 20 consecutive trading days, the $0.57 minimum price
will no longer be applicable.
If the Company sells any additional shares of common stock, or any
securities convertible into common stock at a price below the then applicable
Conversion Price, the Conversion Price will lowered to the price at which the
shares were sold or the lowest price at which the securities are convertible, as
the case may be. If the Company sells any additional shares of common stock, or
any securities convertible into common stock at a price below the market price
of the Company's common stock, the Conversion Price will lowered by a percentage
equal to the price at which the shares were sold or the lowest price at which
the securities are convertible, as the case may be, divided by the then
prevailing market price of the Company's common stock. However the Conversion
Price will not be adjusted as the result of shares issued in connection with a
Permitted Financing. A Permitted Financing involves shares of common stock
issued or sold:
- in connection with a merger or acquisition;
- upon the exercise of options or the issuance of common stock to
the Company's employees, officers, directors, consultants and
vendors in accordance with the Company's equity incentive
policies;
- pursuant to the conversion or exercise of securities which were
outstanding prior to December 31, 2001;
- pursuant to the Company's equity line of credit;
- to key officers of the Company in lieu of their respective
salaries.
The Company has agreed to file a registration statement with the
Securities and Exchange Commission in order that the shares of common stock
issued upon the conversion of the notes or the exercise of the warrants may be
resold in the public market. Upon the effective date of this registration
statement the holders of the notes have agreed to purchase an additional
$800,000 of convertible notes from the Company. The additional $800,000 of
convertible notes will have the same terms as the notes sold in December 2001.
The Series F warrants allow the holders to initially purchase up to
960,000 shares of the Company's common stock at a price of $0.95 per share at
any time prior to December 31, 2008.
If the Company sells any additional shares of common stock, or any
securities convertible into common stock at a price below the then applicable
warrant exercise price, the warrant exercise price will be lowered to the price
at which the shares were sold or the lowest price at which the securities are
convertible, as the case may be. If the warrant exercise price is adjusted, the
number of shares of common stock issuable upon the exercise of the warrant will
be increased by the product of the number of shares of common stock issuable
upon the exercise of the warrant immediately prior to the sale multiplied by the
percentage by which the warrant exercise price is reduced.
If the Company sells any additional shares of common stock, or any
securities convertible into common stock at a price below the market price of
the Company's common stock, the warrant exercise price will be lowered by a
percentage equal to the price at which the shares were sold or the lowest price
at which the securities are convertible, as the case may be, divided by the then
prevailing market price of the Company's common stock. If the warrant exercise
price is adjusted, the number of shares of common stock issuable upon the
exercise of the warrant will be increased by the product of the number of shares
of common stock issuable upon the exercise of the warrant immediately prior to
the sale multiplied by the percentage determined by dividing the price at which
the shares were sold by the market price of the Company's common stock on the
date of sale.
However, neither the warrant exercise price nor the shares issuable upon
the exercise of the warrant will be adjusted as the result of shares issued in
connection with a Permitted Financing.
On the date that the registration statement which the Company has agreed to
file is declared effective by the Securities and Exchange Commission, and every
three months following the effective date, the warrant exercise price will be
adjusted to an amount equal to 110% of the Conversion Price on such date,
provided that the adjusted price is lower than the warrant exercise price on
that date.
The actual number of shares issuable upon the conversion of the notes and
the exercise of the Series F warrants (if any) will vary depending upon a number
of factors, including the price of the Company's common stock at certain dates.
AMEX Requirements
The Company's common stock trades on the American Stock Exchange. The
rules of the AMEX require a corporation, the securities of which are listed on
the AMEX, to obtain shareholder approval if 20% or more of a corporation's
common stock will be sold in a private offering and below the greater of the
book value or market price of the corporation's common stock.
The AMEX will consider the issuance of any common stock pursuant to the
Equity Line of Credit or upon the conversion of the Series E Preferred shares or
the convertible notes to be a sale of the Company's common stock at less than
market price. In addition, if any of the Series F warrants are exercised at a
price below the market price of the Company's common stock on the date the
warrants were issued ($0.94), the AMEX will consider these shares to have been
sold at less than market price.
Consequently, the AMEX rule would prohibit the Company from issuing more
than the number of shares shown in the table below without prior shareholder
approval.
Number of Company's
Shares Which Were Maximum Number of
Outstanding on Date of Company's Shares Which
Agreement Pertaining Could Be Issued Prior to
to Each Financing Obtaining Shareholder Approval
Equity Line of Credit 20,214,130 4,042,826
Series E Preferred Shares 23,802,694 4,760,538
Convertible Notes and Series F
warrants (1) 23,344,342 4,646,238
(1) If any Series F warrants are exercised at a price which is less than $0.94
per share, the AMEX would consider the shares issued upon the exercise of the
warrant to have been sold at a price below market value.
It is possible, depending upon the future market price of the Company's
common stock, that shares of common stock in excess of those shown in the
foregoing table could be sold or issued pursuant to the term of the securities
described in the table.
In order to avoid any violation of the AMEX rules relating to the issuance
of shares below the market price of the Company's common stock, the terms of the
convertible notes and the Series F warrants provide that no more than 4,646,238
shares may be issued unless the Company obtains shareholder approval for the
issuance of such additional shares.
If a majority of the shareholders voting at the annual meeting do not
approve the additional issuance of shares, the Company will be prevented from
selling more than 4,042,826 shares pursuant to the terms of the Equity line of
Credit, will be required to pay the holders of the notes and the Series F
warrants 130% of the then outstanding principal balance of the notes plus an
amount equal to the then market value of the shares which would otherwise be
issuable upon the exercise of the Series F warrants had shareholder approval
been obtained.
The Company is requesting the Company's shareholders, if it should be
necessary, to approve the issuance of such number of common shares as may be
required by the terms of the Equity Line of Credit, the Series E preferred
shares, the convertible notes and the Series F warrants. The Company's Board of
Directors believes that approval of this proposal is in the best interests of
both the Company and its shareholders and unanimously recommends that
shareholders vote "FOR" this Proposal.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Deloitte & Touche, independent certified
public accountants, to audit the books and records of the Company for the fiscal
year ended September 30, 2002. Deloitte & Touche served as the Company's
independent public accountants for the fiscal year ended September 30, 2001. A
representative of Deloitte & Touche is not expected to be present at the
shareholders' meeting.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
The Company's Annual Report on Form 10-K for the year ending September 30,
2001 will be sent to any shareholder of the Company upon request. Requests for a
copy of this report should be addressed to the Secretary of the Company 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 the
Company's year ending September 30, 2002 must be received by the Secretary of
the Company no later than December 31, 2002.
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 the Company 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 the Company to additional
expense. The Company's annual report, including financial statements for the
2001 fiscal year, is included in this mailing.
The Company's Board of Directors do 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 enclosed proxy promptly. No postage is
required if mailed in the United States.
CEL-SCI CORPORATION
This Proxy is solicited by the Company's Board of Directors
The undersigned stockholder of the Company, acknowledges receipt of the
Notice of the Annual Meeting of Stockholders, to be held March 14, 2002, 11:00
A.M. local time, at the Company's laboratory, which is located at 4820-C Seton
Drive, Baltimore, Maryland 21215 and hereby appoints Maximilian de Clara or
Geert R. Kersten with the power of substitution, as Attorneys and Proxies to
vote all the shares of the undersigned at said annual meeting of stockholders
and at all adjournments thereof, hereby ratifying and confirming all that said
Attorneys and Proxies may do or cause to be done by virtue hereof. The above
named Attorneys and Proxies are instructed to vote all of the undersigned's
shares as follows:
(1) To elect the directors who shall constitute the Company's Board of
Directors for the ensuing year.
--
/__/ FOR all nominees listed below (except as marked to the
contrary below)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW)
--
/__/ WITHHOLD AUTHORITY to vote for all nominees listed below
Nominees:
Maximilian de Clara
Geert R. Kersten
Alexander G. Esterhazy
C. Richard Kinsolving
(2) To approve the adoption of the Company's 2001 Incentive Stock Option
Plan.
-- -- --
/ / FOR / / AGAINST / / ABSTAIN
(3) To approve the adoption of the Company's 2001 Non-Qualified Stock Option
Plan.
-- -- --
/ / FOR / / AGAINST / / ABSTAIN
(4) To approve the adoption of the Company's 2001 Stock Bonus Plan
-- -- --
/ / FOR / / AGAINST / / ABSTAIN
(5) To approve the issuance of such number of shares of common stock as may be
required by the terms of the Company's Equity Line of Credit and certain other
convertible securities and warrants.
-- -- --
/ / FOR / / AGAINST / / ABSTAIN
(6) To ratify the appointment of Deloitte & Touche as the Company's
independent accountants for the fiscal year ending September 30, 2002.
/ / FOR / / AGAINST / / ABSTAIN
To transact such other business as may properly come before the
meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DISCRETION IS INDICATED, THIS PROXY WILL BE
VOTED IN FAVOR OF ITEMS 1 THROUGH 6.
Dated this day of , 2002.
----- ----------
(Signature)
(Signature)
Please sign your name exactly as it appears on your stock certificate. If
shares are held jointly, each holder should sign. Executors, trustees, and other
fiduciaries should so indicate when signing.
Please Sign, Date and Return this Proxy so that your shares may be voted at
the meeting.