SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-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:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
CEL-SCI CORPORATION
8229 Boone Blvd.
Suite 802
Vienna, Virginia 22l82
(703) 506-9460
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD July 22, 2014
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 July 22, 2014 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 2014 Incentive Stock Bonus Plan
which will allow awards of CEL-SCI's common stock to employees for
meeting major CEL-SCI milestones spelled out in advance (performance
based).
(3) to approve on an advisory basis, compensation of CEL-SCI's executive
officers;
(4) to approve on an advisory basis, the frequency of advisory votes on
the compensation of CEL-SCI's executive officers and
(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, 2014;
to transact such other business as may properly come before the meeting.
May 28, 2014 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 May 28, 2014 there were 65,970,785
outstanding shares of CEL-SCI's common stock.
CEL-SCI CORPORATION
June 9, 2014 Geert R. Kersten, Chief Executive Officer
The Board of Directors solicits the enclosed proxy. Your vote is important no
matter how large or small your holdings. To assure your representation at the
meeting, please vote promptly.
Important Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting to be held on July 22, 2014. This Proxy Statement and our
Form 10-K are available at:
www.irdirect.net/cvm/sec_filings/
If you need additional copies of this Proxy Statement or
the enclosed proxy card, or if you have other
questions about the proposals or how to vote your shares,
you may contact our proxy solicitor:
ADVANTAGE PROXY
(877) 870-8565 (toll free) or (206) 870-8565
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
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 July 22, 2014, 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 June 9, 2014.
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 other proposals to
come before the meeting will be adopted if votes cast in favor of the proposal
exceed the votes cast against the proposal.
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 May 28, 2014, 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 753,202 1.1
Bergstrasse 79
6078 Lungern,
Obwalden, Switzerland
Geert R. Kersten (2) 1,789,597 2.7
8229 Boone Blvd., Suite 802
Vienna, VA 22182
Patricia B. Prichep 409,545 0.6
8229 Boone Blvd., Suite 802
Vienna, VA 22182
Eyal Talor, Ph.D. 283,104 0.4
8229 Boone Blvd., Suite 802
Vienna, VA 22182
Daniel H. Zimmerman, Ph.D. 218,786 0.3
8229 Boone Blvd., Suite 802
Vienna, VA 22182
John Cipriano 88,100 0.1
8229 Boone Blvd., Suite 802
Vienna, VA 22182
Alexander G. Esterhazy 154,549 0.2
20 Chemin du Pre-Poiset
CH- 1253 Vandoeuvres
Geneve, Switzerland
C. Richard Kinsolving, Ph.D. 179,625 0.3
P.O. Box 20193
Bradenton, FL 34204-0193
Peter R. Young, Ph.D. 171,276 0.3
208 Hewitt Drive, Suite 103-143
Waco, TX 76712
All Officers and Directors 4,047,784 5.9
as a Group (9 persons)
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(1) Includes shares issuable prior to August 31, 2014 upon the exercise of
options or warrants granted to the following persons:
Options or Warrants Exercisable
Name Prior to August 31, 2014
------- --------------------------------
Maximilian de Clara 728,079
Geert R. Kersten 1,055,371 (4)
Patricia B. Prichep 303,620
Eyal Talor, Ph.D. 223,662
Daniel Zimmerman 165,900
John Cipriano 88,100
Alexander G. Esterhazy 131,233
C. Richard Kinsolving, Ph.D. 149,400
|
Peter R. Young, Ph.D. 141,500 (4)
(2) Amount includes shares held in trust for the benefit of Mr. Kersten's
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.
(4) Amount includes Series S warrants purchased in the open market.
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.
The nominating committee has nominated CEL-SCI's current directors for
re-election. 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 84 Director and President
Geert R. Kersten, Esq. 55 Director, Chief Executive Officer and Treasurer
Patricia B. Prichep 63 Senior Vice President of Operations and Corporate
Secretary
|
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Name Age Position
---- --- --------
Dr. Eyal Talor 58 Chief Scientific Officer
Dr. Daniel H. Zimmerman 73 Senior Vice President of Research, Cellular
Immunology
John Cipriano 72 Senior Vice President of Regulatory Affairs
Alexander G. Esterhazy 72 Director
|
Dr. C. Richard Kinsolving 78 Director
Dr. Peter R. Young 69 Director
The directors of CEL-SCI serve in such capacity until the next annual
meeting of CEL-SCI's shareholders and until their successors have been duly
elected and qualified. The officers of CEL-SCI serve at the discretion of
CEL-SCI's directors.
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 CEL-SCI's 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
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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
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
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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
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 CEL-SCI's board of directors, audit committee, nominating committee and
compensation committee.
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
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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, nominating 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
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, the chair of the nominating 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, C. Richard Kinsolving, Ph.D. and Peter R. Young,
Ph.D. 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, 2013. 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.
7
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, 208
Hewitt Drive, Suite 103-143, Waco, TX 76712.
For purposes of electing directors at its annual meeting, CEL-SCI has a
nominating committee consisting of Mr. Esterhazy, Dr. Kinsolving and Dr. Young.
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 nominating committee 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
Dr. Peter Young at the address shown on the cover page of this proxy statement.
CEL-SCI's nominating committee has not established any specific qualifications
or skills a nominee must meet to serve as a director. Although CEL-SCI does not
have any process for identifying and evaluating director nominees, CEL-SCI does
not believe there would be any differences in the manner in which CEL-SCI
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
June 25, 2013.
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 to specified Board members or not sent
to the Board of Directors as a whole are not relayed to Board members.
8
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.
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.
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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.
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., Cadence Pharmaceuticals, Inc., Cortex Pharmaceuticals,
Inc., EpiCept Corp., IGI Laboratories Inc., StemCells, Inc., Psychemedics
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Corporation, Biota Biopharmaceuticals, Inc., NuPathe Inc., POZEN, Inc., Synta
Pharmaceuticals, Ziopharm Oncology, Sunesis Pharmaceuticals, CytRx Corporation,
Novavax Inc., BioCryst Pharmaceuticals, Zalicus, Galena Biopharma Inc., XOMA
Ltd., Discovery Laboratories Inc., and Targacept Inc. 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
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 illogical and inefficient until the time of product sales. This is
evidenced by the huge stock swings even in a short time. Worse yet, many of
these stock swings can occur as a group; biotech is in favor or biotech is not
in favor. As such any long term compensation tied to the share price only is
likely to be deficient in creating a proper incentive to achieving key
milestones. With that in mind, CEL-SCI's Compensation Committee has proposed the
2014 Incentive Stock Bonus Plan to align incentive payments of middle and senior
management to clearly defined milestones. Those milestones would all represent
substantial progress for the Company and should therefore benefit the
shareholders substantially.
11
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, 2013.
All
Other
Restric- Annual
ted Stock Option Compen-
Name and Fiscal Salary Bonus Awards Awards sation
Principal Position Year (1) (2) (3) (4) (5) Total
------------------- ------ ------- ------ --------- ------- ------- -----
$ $
Maximilian de Clara 2013 $ 332,750 -- -- 306,863 40,000 679,613
President 2012 363,000 -- -- 200,863 102,591 666,454
2011 363,000 -- -- 176,709 105,226 644,935
Geert R. Kersten 2013 439,093 -- 15,225 1,516,692 53,514 2,024,524
Chief Executive 2012 477,924 -- 14,925 332,027 56,935 881,811
and Financial Officer 2011 464,005 -- 14,700 207,314 57,656 743,675
and Treasurer
Patricia B. Prichep 2013 202,253 -- 13,941 485,634 5,531 707,359
Senior Vice President 2012 210,133 -- 12,968 156,715 6,031 385,847
of Operations and 2011 204,013 -- 12,541 99,141 6,031 321,726
Corporate Secretary
Eyal Talor, Ph.D. 2013 272,388 -- 9,600 460,255 6,031 748,274
Chief Scientific 2012 259,417 -- 9,600 140,564 6,031 415,612
Officer 2011 251,861 -- 9,600 100,362 6,031 367,854
Daniel Zimmerman, 2013 205,030 -- 12,989 87,911 6,031 311,961
Ph.D. Senior Vice 2012 199,058 -- 12,303 115,354 6,031 332,746
President of 2011 193,260 -- 11,896 98,948 6,031 310,135
Research, Cellular
Immunology
12
|
John Cipriano 2013 189,763 -- -- 47,968 31 237,762
Senior Vice President 2012 184,236 -- -- 76,515 31 260,782
of Regulatory Affairs 2011 178,870 -- -- 91,815 31 270,716
|
(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 who
participates in 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.
(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
2013 expenses for this plan were $162,865. Other than the 401(k) Plan, CEL-SCI
does not have a defined benefit, pension plan, profit sharing or other
retirement plan.
13
Compensation of Directors During Year Ended September 30, 2013
Stock Option
Name Paid in Cash Awards (1) Awards (2) Total
---- ------------ ---------- ---------- -----------
Maximilian de Clara $ 40,000 $ - $ 306,863 $ 346,863
Geert Kersten $ 40,000 $ - $1,516,692 $ 1,556,692
Alexander Esterhazy $ 44,000 $ - $ 171,535 $ 215,535
C. Richard Kinsolving $ 44,000 $ - $ 184,688 $ 228,688
Peter R. Young $ 44,000 $ - $ 178,112 $ 222,112
|
(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.
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. On August 30, 2013 Mr. de Clara's employment
agreement, as amended on September 8, 2006 was extended again to August 30,
2016.
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 $381,231). 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
14
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. Mr.
Kersten's annual salary for fiscal year 2013 was $521,893. 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) reduction in Mr. Kersten's salary (ii) 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, (iii) a
significant and material reduction 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
($1,043,786) and the unvested portion of any stock options would vest
immediately ($1,456,228). 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.
15
On August 30, 2013 CEL-SCI amended certain sections of Mr. Kersten's
employment agreement so that it would correspond with similar sections of the
employment agreements with Ms. Prichep and Dr. Talor.
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. On
August 30, 2013 the employment agreement was extended to August 30, 2016. The
new employment agreement with Ms. Prichep provides that during the term of the
agreement CEL-SCI will pay Ms. Prichep an annual salary of $229,466 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. On August
30, 2013 the employment agreement was extended to August 30, 2016. The new
employment agreement with Dr. Talor provides that during the term of the
agreement CEL-SCI will pay Dr. Talor an annual salary of $283,283 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
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 ($344,199 and $424,925
respectively). In addition, the unvested portion of any stock options held by
the employee will vest immediately ($615,289 and $615,289 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
16
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, 2013, 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 164,824
shares of CEL-SCI's common stock at a price of $4.00 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. The number of shares which will be issued upon any conversion will be
determined by dividing the amount to be converted by $4.00. As further
consideration for the second extension, Mr. de Clara received warrants which
allow Mr. de Clara to purchase 184,930 shares of CEL-SCI's common stock at a
price of $5.00 per share at any time prior to January 6, 2015. 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 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.
17
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
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
18
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.
Stock Options
The following tables show information concerning the options granted during
the fiscal year ended September 30, 2013, to the persons named below:
Options Granted
Grant Options Price Per Expiration
Name Date Granted Share Date
---------- ----- ------- --------- ---------
Maximilian de Clara 12/18/12 100,000 $ 2.80 12/17/22
Maximilian de Clara 7/1/13 37,500 $ 2.10 6/30/23
Geert Kersten 12/18/12 189,000 $ 2.80 12/17/17
Geert Kersten 12/18/12 500,000 $ 2.80 12/17/22
Geert Kersten 7/1/13 45,000 $ 2.10 6/30/23
Patricia Prichep 12/18/12 58,000 $ 2.80 12/17/17
Patricia Prichep 12/18/12 150,000 $ 2.80 12/17/22
Patricia Prichep 7/1/13 30,000 $ 2.10 6/30/23
|
19
Grant Options Price Per Expiration
Name Date Granted Share Date
---------- ----- ------- --------- ---------
Eyal Talor 12/18/12 37,417 $ 2.80 12/17/17
Eyal Talor 12/18/12 150,000 $ 2.80 12/17/22
Eyal Talor 7/1/13 30,000 $ 2.10 6/30/23
Daniel Zimmerman 12/18/12 39,200 $ 2.80 12/17/17
Daniel Zimmerman 7/1/13 22,500 $ 2.10 6/30/23
John Cipriano 04/03/13 10,000 $ 2.50 9/30/19
John Cipriano 7/1/13 22,500 $ 2.10 6/30/23
|
Options Cancelled
The following tables show information concerning the options cancelled
during the fiscal year ended September 30, 2013, to the persons named below:
Weighted
Average
Weighted Remaining
Total Average Contractual
Employee Options Exercise Price Term (Years)
-------- ------- -------------- ------------
Geert Kersten 189,000 $2.20 0.28
Patricia Prichep 58,000 $2.20 0.28
Eyal Talor 37,417 $2.20 0.28
Daniel Zimmerman 39,200 $2.20 0.28
John Cipriano 10,000 $19.30 6.50
Options Exercised
Date of Shares Acquired Value
Name Exercise On Exercise Realized
----- --------- --------------- --------
|
None
20
The following lists the outstanding options held by the persons named
below:
Shares underlying unexercised
Options which are:
--------------------------
Exercise Expiration
Name Exercisable Unexercisable Price ($) Date
----- ----------- ------------- --------- ---------
Maximilian de Clara 5,000 4.80 09/21/15
10,000 5.80 09/12/16
20,000 6.30 09/13/17
20,000 6.20 03/04/18
143,625 (1) 2.50 04/23/19
25,000 3.80 07/20/19
25,000 4.80 07/20/20
16,667 6.90 04/14/21
47,200 3.20 12/01/16
12,500 3.90 05/17/22
--------
324,992
50,000 (2) 3.80 07/06/19
8,333 6.90 04/14/21
25,000 3.90 05/17/22
100,000 2.80 12/17/22
37,500 2.10 06/30/23
---------
220,833
Geert R. Kersten 5,000 4.80 09/21/15
20,000 5.80 09/12/16
20,000 6.30 09/13/17
20,000 6.20 03/04/18
183,860 (1) 2.50 04/23/19
30,000 3.80 07/20/19
30,000 4.80 07/20/20
20,000 6.90 04/14/21
125,440 3.20 12/01/16
15,000 3.90 05/17/22
189,000 2.80 12/17/17
---------
658,300
400,000 (2) 3.80 07/06/19
10,000 6.90 04/14/21
30,000 3.90 05/17/22
500,000 2.80 12/17/22
45,000 2.10 06/30/23
---------
985,000
|
21
Shares underlying unexercised
Options which are:
--------------------------
Exercise Expiration
Name Exercisable Unexercisable Price ($) Date
----- ----------- ------------- --------- ---------
Patricia B. Prichep 5,000 3.30 04/26/15
3,000 4.80 09/21/15
9,000 5.80 09/12/16
10,000 6.30 09/13/17
10,000 6.20 03/04/18
71,710(1) 2.50 04/23/19
15,000 3.80 07/20/19
15,000 4.80 07/20/20
10,000 6.90 04/14/21
38,520 3.20 12/01/16
10,000 3.90 05/17/22
58,000 2.80 12/17/17
--------
255,230
300,000 (2) 3.80 07/06/19
5,000 6.90 04/14/21
20,000 3.90 05/17/22
150,000 2.80 12/17/22
30,000 2.10 06/30/23
---------
505,000
Eyal Talor, Ph.D. 5,000 3.30 04/26/15
3,000 4.80 09/21/15
5,000 3.30 04/26/15
8,000 5.80 09/12/16
10,000 6.30 09/13/17
10,000 6.20 03/04/18
24,082(1) 2.50 04/23/19
15,000 3.80 07/20/19
15,000 4.80 07/20/20
10,000 6.90 04/14/21
27,773 3.20 12/01/16
10,000 3.90 05/17/22
37,417 2.80 12/17/17
--------
175,272
300,000 (2) 3.80 07/06/19
5,000 6.90 04/14/21
20,000 3.90 05/17/22
150,000 2.80 12/17/22
30,000 2.10 06/30/23
---------
505,000
|
22
Shares underlying
unexercised
Options which are:
---------------------------
Exercise Expiration
Name Exercisable Unexercisable Price ($) Date
----- ----------- ------------- --------- ---------
Daniel Zimmerman, Ph.D. 5,000 3.30 04/16/15
3,000 4.80 09/21/15
6,000 5.80 09/12/16
7,500 6.30 09/13/17
7,500 6.20 03/04/18
20,000 (3) 3.80 07/15/14
15,000 4.80 07/20/20
10,000 6.90 04/14/21
25,200 3.20 12/01/16
7,500 3.90 05/17/22
39,200 2.80 12/17/17
---------
145,900
5,000 6.90 04/14/21
15,000 3.90 05/17/22
22,500 2.10 06/30/23
---------
42,500
John Cipriano 3,000 4.80 09/21/15
6,000 5.80 09/12/16
7,500 6.30 09/13/17
7,500 6.20 03/04/18
15,000 4.80 07/20/20
10,000 6.90 04/14/21
1,600 3.20 12/01/16
10,000 2.50 09/30/19
7,500 3.90 05/17/22
--------
68,100
5,000 6.90 04/14/21
15,000 3.90 05/17/22
22,500 2.10 06/30/23
---------
42,500
|
(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
23
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 May 28, 2014
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 1,960,000 1,573,597 n/a 145,703
Non-Qualified Stock
Option Plans 5,680,000 4,412,584 n/a 705,497
Bonus Plans 1,594,000 n/a 983,866 609,378
Stock Compensation Plan 1,350,000 n/a 961,965 388,035
|
Of the shares issued pursuant to CEL-SCI's Stock Bonus Plans, 387,089
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, 2013, CEL-SCI's most recent fiscal year
end. All of the plans in the table above have been approved by CEL-SCI's
shareholders.
Number of
Securities
Remaining
Available
Under Equity
Number of Weighted Compensation
Securities to Average Plans, Excluding
be Issued Upon Exercise Price Securities
Outstanding of Outstanding Reflected in
Plan Category Options (a) Options Column (a)
------------- ----------- -------------- --------------
Incentive Stock Option Plans 1,573,597 $3.22 145,703
Non-Qualified Stock Option
Plans 3,614,544 $3.80 1,503,537
|
24
Compensation Committee
During the year ending September 30, 2013, CEL-SCI had a Compensation
Committee which was comprised of Alexander Esterhazy, C. Richard Kinsolving and
Peter Young. During the year ended September 30, 2013, 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, 2013, 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.
On September 8, 2006, Mr. de Clara's employment agreement was amended and
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. On August 30, 2013, Mr. de Clara's employment
agreement, as amended on September 8, 2006, was extended again to August 30,
2016. 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.
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
25
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.
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. On
August 30, 2013 the employment agreement with Ms. Prichep was extended to August
30, 2016. 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. On August
30, 2013, the employment agreement with Dr. Talor was extended to August 30,
2016. 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, 2013, 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's other executive officers since CEL-SCI's
financial performance and stockholder value are influenced to a substantial
degree by external factors and as a result comparing the compensation payable to
the other executive officers to CEL-SCI's financial or stock price performance
can be misleading.
During the year ended September 30, 2013, CEL-SCI granted options for the
purchase of 1,421,117 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, 2013, 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.
26
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, 2013 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. 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, 2013, 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, 2013 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 PCAOB (Public Company Accounting Oversight Board)
Standard No. 16 "Communication with Audit Committees".
(3) The Audit Committee has received the written disclosures and the
letter from CEL-SCI's independent registered public accounting
firm required by PCAOB independence standards, and had discussed
with CEL-SCI's independent registered public accounting firm the
independent registered public accounting firm's independence; and
(4) Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited
financial statements be included in CEL-SCI's Annual Report on
Form 10-K for the year ended September 30, 2013 for filing with
the Securities and Exchange Commission.
(5) During the year ended September 30, 2013, 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.
27
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
2014 INCENTIVE STOCK BONUS PLAN
On May 27, 2014, upon recommendation of the Compensation Committee, the
Board of Directors (the "Board"), subject to approval by the Company's
shareholders, approved the adoption of the CEL-SCI Corporation 2014 Incentive
Stock Bonus Plan (the "Plan"). The primary purpose of the 2014 Plan is to 1)
align the interests of those Company employees whose work is essential to the
Company's ability to commercialize its patented Multikine technology with those
of the Company's shareholders through performance based compensation and 2) to
tie these key employees to the Company for the rest of the foreseeable drug
development phase of Multikine, the Company's flag ship product currently being
developed against head and neck cancer and, in conjunction with the U.S. Navy,
for anal warts in HIV/HPV co-infected patients.
Multikine is an immunotherapy product that is being developed very
differently from others. Whether for this reason, or for other reasons, it has
taken longer to develop Multikine than had been anticipated. This is not
uncommon for first-in-a-new-class drugs, but obviously we would like to get
Multikine on the market as soon as possible. The Company's Compensation
Committee determined that a key ingredient to the Company's success lies in
retaining its key personnel for the duration of the Company's projects. These
employees have the uniquely specialized product and institutional knowledge, as
well as the determination, to deal with complex issues as they arise.
The Compensation Committee therefore developed a compensation package that
ties key employees to the Company for the rest of the key development programs
and rewards them for success. If that success is not achieved, they will not
receive the stated equity rewards. The attached plan incorporates all of these
elements. The Company believes that it represents the best way to move forward
in that it ties key individuals to the Company through the key development stage
and rewards them only for success, which is where shareholders will see their
financial return. Therefore we recommend that you vote for the 2014 Incentive
Stock Bonus Plan.
Under the 2014 Plan we propose to award those key employees restricted
shares of Company common stock, which will only be earned and retained if the
Company meets certain very important milestones (a) leading to the
28
commercialization of the Company's Multikine technology or (b) resulting in
significant increases in the market price the Company's shares. In addition,
with minor exceptions, the grantee must be employed by the Company at the time
the milestones are met in order to retain the restricted shares. If any of the
performance criteria are not met within the time frames set forth in the grant,
all or such portion of the shares that have not been earned will be returned to
the Company for cancellation. The Board believes that meeting these milestones
will significantly benefit all shareholders. These milestones cannot be changed
once the awards are made. In addition, once the initial awards are made to the
key employees, no alterations can be made to the awards and no other stock or
option incentives can be granted to any person receiving an award under the 2014
Plan (a "Grantee") without shareholder approval prior to July 31, 2017. The
shares will be restricted since 1) the shares will be held in escrow and will
only be released to the employee upon meeting the specified milestone(s), and 2)
until the shares are registered by CEL-SCI, these shares can be sold by the
employee only subject to Rule 144.
The 2014 Plan, if adopted, will authorize the issuance of up to 16,000,000
shares of the Company's common stock as restricted stock awards. No other types
of awards are authorized under the 2014 Plan.
The following factors were some of the considerations taken into account by
the Compensation Committee and the Board in approving the proposed 2014 Plan;
(a) Drug development is a lengthy process and the expertise required for
it is hard to find. In the case of our investigational immunotherapy
drug Multikine, that expertise is especially hard to find since
Multikine is a complex biologic and is being developed as a first line
therapy with a novel drug administration. Therefore, it is
particularly important for the Company to put in place a compensation
system that ties important employees to the Company for the long-term
and rewards them for excellence.
(b) The Company's current incentive stock award plans allow the issuance
of stock options to employees. Typically stock options vest over a
period of time tied to continued employment by the recipient of the
option. All of the previously granted stock options by the Company are
tied solely to continued employment. In contrast, the 2014 Plan
requires the Company to condition the vesting of awards to the meeting
of important drug development milestones and/or the attainment of
significant increases in the Company's stock price, both of which we
believe will be beneficial to our shareholders. Therefore we believe
that it is in the Company's best interest to adopt the 2014 Plan so
that it can condition the vesting of these awards upon the happening
of future events that are a precursor to the Company's ability to
commercialize its patented technology and generate revenue, and as a
result to realize significant increases in the market price of the
Company's shares. We also believe the 2014 Plan promotes the interests
of the Company and its stockholders by providing executive officers
and other essential employees of the Company with appropriate
incentives and rewards to encourage them to enter into and remain in
29
their positions with the Company and to acquire a significant
proprietary interest in the long-term success of the Company and
increases in its stock price.
(c) We are entering a critical phase in the development of our Multikine
technology. We are currently in the process of enrolling patients for
our Phase III head and neck cancer study. We are also in a recently
signed collaborative development (CRADA - Cooperative Research and
Development Agreement) of Multikine with the U.S. Navy for the
treatment of anal warts in HIV/HPV co-infected patients. At this
critical time it is imperative that we retain and incentivize the key
members of our upper and middle management teams.
The number of shares authorized to be issued under the 2014 Plan is
16,000,000. This represents 12.79% of the shares outstanding after issuance, on
a fully diluted basis, based upon 65,970,785 shares issued and outstanding as of
May 28, 2014, and 43,119,153 shares reserved for issuance under outstanding
warrants, options and convertible note as of that date.
Purpose of the 2014 Plan
The purpose of the 2014 Plan is to promote the interests of the Company and
its stockholders by providing executive officers and significant employees of
the Company with appropriate incentives and rewards to encourage them to enter
into and remain in their positions with the Company and to acquire a significant
proprietary interest in the long-term success of the Company.
We believe strongly that our equity compensation programs and emphasis on
employee stock ownership will be important to our ability to achieve our goal of
commercializing our patented technology in the years ahead.
Administration of the 2014 Plan
Unless otherwise determined by the Board, the Compensation Committee of the
Board (the "Committee") will administer the 2014 Plan. The Committee is composed
solely of "non-employee directors" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), "outside
directors" within the meaning of Section 162(m) of the Internal Revenue Code,)
and "independent directors" within the meaning of NYSE MKT listing standards.
The Committee has the power, in its discretion, to grant awards under the
2014 Plan, to select the individuals to whom awards are granted, to determine
the terms of the grants, to interpret the provisions of the 2014 Plan and to
otherwise administer the 2014 Plan. Except as prohibited by applicable law or
stock exchange rules, the Committee may delegate all or any of its
responsibilities and powers under the Plan to one or more of its members. In no
event, however, shall the Committee have the power to accelerate vesting of any
award; provided that the Committee may include in an award acceleration of
vesting in the event a "change in control" (as defined in the Plan) of the
Company occurs.
30
The 2014 Plan provides that members of the Committee shall be indemnified
and held harmless by the Company from any loss or expense resulting from claims
and litigation arising from actions related to the 2014 Plan.
SUMMARY OF TERMS OF THE 2014 PLAN
A summary of the 2014 Plan is set forth below. Capitalized terms used in
this summary that are not otherwise defined have the respective meanings given
such terms in the 2014 Plan.
Shares Available for Issuance under the 2014 Plan
Pursuant to the 2014 Plan, 16,000,000 shares would be available to the
Company for issuance. All of these shares may be issued only as restricted stock
grants the vesting of which must be subject to such significant performance
criteria ("Performance Goals") as shall be determined by the Committee together
with the satisfaction of any other conditions, such as continued employment, as
the Committee may determine to be appropriate. If any shares of common stock
subject to an award are forfeited or cancelled, the shares of common stock with
respect to such award shall, to the extent of any such forfeiture or
cancellation, again be available for awards under the 2014 Plan; provided,
however, shares of stock will not again be available if such shares are
surrendered or withheld as payment of withholding taxes with respect to an
award.
Adjustments to Shares Subject to the 2014 Plan
The number of shares available for issuance under the 2014 Plan will be
adjusted in the event of any stock splits, stock dividends, recapitalizations or
similar events.
Eligibility and Participation
Eligibility to participate in the 2014 Plan is limited to significant
employees of the Company as determined by the Committee.
Awards
The Committee may grant awards of restricted stock to eligible individuals.
The Committee will have complete discretion, subject to the terms of the 2014
Plan, to determine the persons to whom awards will be awarded and the time or
times of grant.
Restricted Stock is common stock that the Company grants subject to
transfer restrictions and vesting criteria. The grant of these awards under the
2014 Plan are subject to such terms, conditions and restrictions as the
Committee determines consistent with the terms of the 2014 Plan.
At the time of grant, the Committee will place restrictions on Restricted
Stock that shall lapse, in whole or in part, only upon the attainment of
Performance Goals; provided that if the award is granted to a 162(m) Officer,
31
the grant of the award and the establishment of the Performance Goals shall be
made during the period required under Internal Revenue Code Section 162(m).
Except to the extent restricted under the award agreement relating to the
Restricted Stock, a Grantee shall have all of the rights of a stockholder
including the right to vote Restricted Stock and the right to receive cash
dividends, if any.
Any award that is granted under the 2014 Plan must be granted contingent on
achievement of Performance Goals. Under the 2014 Plan, Performance Goals will be
based on one or more of the following criteria applied to the Company, (if
applicable, such criteria shall be determined in accordance with generally
accepted accounting principles (GAAP") or based upon the Company's GAAP
financial statements): (1) implementation or completion of critical project or
processes; (2) market price of the Company's securities; (3) control of
expenses; and (4) any combination of, or a specified increase in, any of the
foregoing. Performance Goals may include a threshold level of performance below
which no award will be earned, a level of performance at which certain portion
of an award will be earned and a level of performance at which the entire amount
of the award will be earned.
Transferability of Awards
Any unvested awards may not be transferred except by will or applicable
laws of descent and distribution.
Termination of Awards
Except as may be provided in connection with a Change in Control, all
unvested awards shall immediately terminate upon the Grantee's termination of
employment with the Company; provided that the Committee may include in an award
that upon the Grantee's death or permanent disability, the award may vest in
accordance with its terms to the extent that the Performance Goals to which the
award is subject are met within one year of such Grantee's termination of
employment on account of death or permanent disability.
Forfeiture
Notwithstanding any other provision of the 2014 Plan and except as
otherwise provided in an award, if the Committee finds by a majority vote that:
the grantee (i) before or after termination of his or her relationship with the
Company for any reason, committed fraud, embezzlement, theft, a felony, or
proven dishonesty in the course of his or her employment and that such act
damaged the Company, or (ii) disclosed trade secrets of the Company, or other
non-public proprietary information of the Company, then any outstanding awards
that have not vested will be forfeited. The decision of the Committee as to the
nature of a grantee's conduct or the damage done to the Company will be final.
The Committee may, in its discretion, include a form of non-compete,
non-solicitation and/or non-disparagement agreement in any award agreement, and
such non-compete, non-solicitation or non-disparagement agreement may be
personalized, in the Committee's discretion, to fit the circumstances of any
specific grantee.
32
Vesting in Connection with a Change in Control
The Committee may provide in an award that upon the occurrence of a Level
One Change in Control, all outstanding restricted stock which is the subject of
such award shall vest and all restrictions pertaining thereto shall lapse.
The Committee may provide in an Award Agreement that upon the occurrence of
a Level Two Change in Control, if during the period commencing on the date that
is 12 months prior to the occurrence of the Level Two Change in Control and
ending on the date that is 48 months following the Level Two Change in Control,
the Grantee's employment with the Company is terminated, other than for Cause,
or the Grantee terminates his employment on account of Good Reason, all
outstanding restricted stock which is the subject of such award shall vest and
all restrictions pertaining to such award (other than as may be provided by
applicable securities laws) shall lapse.
(i) A Level One Change in Control shall occur upon (a) acquisition by any
individual, entity or group of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended) of 50% or more of the Company's either (1) the then
outstanding shares of common stock of the Company or (2) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote in the election of directors or (b) a majority of the
Board consisting of persons who were not nominated or appointed in the
first instance by the Board.
(ii) A Level Two Change in Control shall occur upon acquisition by any
individual, entity or group of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended) of 20% or more of the Company's either (1) the then
outstanding shares of common stock of the Company or (2) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote in the election of directors.
(iii) Cause shall mean "cause" as defined in the Grantee's award agreement
or written employment agreement with the Company, or if not defined in
any such agreement, "cause" shall mean (a) conviction of, or pleas of
nolo contendere, by the Grantee for a felony or dishonesty while
performing his employment duties, (b) a Grantee's violation of any
non-competition, non-solicitation, confidentiality or other
restrictive covenant agreement applicable to the Grantee or (c) the
Grantee's continued failure to materially carry out his duties as an
employee which failure has not been cured within 30 days after the
Grantee receives written notice of such failure.
(iv) Good Reason shall mean (a) a reduction in compensation (including
benefits) of the Grantee or (b) the Grantee being assigned any duties
which are materially inconsistent with the duties of the Grantee
immediately prior to the occurrence of the Level Two Change in Control
33
or (c) the office at which the Grantee performs his duties is more
than 10 miles from the office at which the Grantee performed his
duties immediately prior to the occurrence of the Level Two Change in
Control.
Tax Withholding
Issuance of restricted shares under the 2014 Plan is subject to withholding
of all applicable taxes, and the Committee may condition the delivery of any
restricted shares under the 2014 Plan on satisfaction of the applicable
withholding obligations. The Committee, in its discretion, and subject to such
requirements as the Committee may impose prior to the occurrence of such
withholding, may permit such withholding obligations to be satisfied through
cash payment by the Grantee, through the surrender of shares of common stock
which the Grantee already owns, or through the surrender of shares of common
stock to which the Grantee is otherwise entitled under the 2014 Plan, but only
to the extent of the minimum amount required to be withheld under applicable
law.
Term of the 2014 Plan
Unless earlier terminated by the Board, the 2014 Plan, if approved, will
terminate on the date which is ten years after the date on which the Plan has
been approved by shareholders. No awards may be granted under the 2014 Plan
subsequent to that date.
Amendment and Termination
The Board may, at any time, amend or terminate the 2014 Plan, except that
the following actions may not be taken without stockholder approval: (i) any
increase in the number of shares that may be issued under the 2014 Plan (except
by certain adjustments provided under the 2014 Plan); (ii) any change in the
class of persons eligible to receive awards under the 2014 Plan; (iii) any
change in the requirements of the 2014 Plan regarding the requirement that all
awards must be shares of restricted stock the vesting of which is subject to
Performance Goals.
U.S. Tax Treatment of Awards
The following is a brief description of the material United States federal
income tax consequences associated with awards under the 2014 Plan. It is based
on existing United States laws and regulations, and there can be no assurance
that those laws and regulations will not change in the future. Tax consequences
in other countries may vary. This information is not intended as tax advice to
anyone, including participants in the 2014 Plan.
Restricted stock is not taxable to a Grantee at the time of grant, but
instead is included in ordinary income (at its then fair market value) when the
restrictions lapse. A Grantee may elect, however, to recognize income at the
time of grant, in which case the fair market value of the restricted shares at
the time of grant is included in ordinary income and there is no further income
recognition when the restrictions lapse. If a Grantee makes such an election and
thereafter forfeits the restricted shares, he will be entitled to no tax
deduction, capital loss or other tax benefit. The Company is entitled to a tax
34
deduction in an amount equal to the ordinary income recognized by the Grantee
[subject to any applicable limitations under Code Section 162(m).]
Tax Withholding
The Company has the right to deduct or withhold, or require a Grantee to
remit to the Company, an amount sufficient to satisfy federal, state and local
taxes (including employment taxes) required by law to be withheld with respect
to any lapse of restriction or other taxable event arising as a result of the
2014 Plan. The Committee may, at the time the award is granted or thereafter,
require or permit that any such withholding requirement be satisfied, in whole
or in part, by delivery of, or withholding from the award, shares having a fair
market value on the date of withholding equal to the amount required to be
withheld for tax purposes.
Certain Interests of Directors
In considering the recommendation of the Board with respect to the 2014
Plan, stockholders should be aware that members of the Board may from time to
time have interests that present them with conflicts of interest in connection
with this proposal to approve the 2014 Plan. For example, Directors who are also
employees of the Company will be eligible for the grant of awards under the 2014
Plan. Currently Messrs. de Clara and Kersten are both a director and an employee
of the Company, and neither individual serves on the Compensation Committee.
Non-employee directors of the Board will not be eligible for grants under the
2014 Plan.
Required Vote
The affirmative vote of a majority of votes cast is required to approve
this proposal. Broker non-votes are not considered to be votes cast for these
purposes.
The Board of Directors recommends a vote FOR approval of the adoption of
the 2014 Plan.
Restricted Stock expected to be Granted to Mr. Kersten, Ms. Prichep, Dr. Talor
and Mr. Cipriano upon adoption of the 2014 Plan.
The Committee, as of the date of shareholder approval of the 2014 Plan,
plans to grant (a) 5,800,000 restricted shares of Common Stock to Geert Kersten,
the Company's Chief Executive Officer; (b) 3,100,000 restricted shares to
Patricia Prichep, the Company's Senior Vice President of Operations, (c)
3,100,000 restricted shares to Dr. Eyal Talor, the Company's Chief Scientific
Officer and (d) 1,600,000 shares to John Cipriano the Company's Senior
Vice-President for Regulatory Affairs.
Geert R. Kersten, the Chief Executive Officer, has been with CEL-SCI for
over 25 years and is responsible for developing and executing our business
strategy and is our primary liaison to the investment community. He has also
been a consistent purchaser of our stock in the open market. Last year alone he
35
spent $336,023 to purchase 373,595 CEL-SCI shares of common stock and in 2014 he
purchased 300,000 of our publicly traded warrants for $119,000.
Patricia B. Prichep, the Senior Vice President of Operations, has been with
CEL-SCI for over 21 years, and is primarily responsible for CEL-SCI's day-to-day
operations.
Dr. Eyal Talor, the Chief Scientific Officer, has been with CEL-SCI for
over 20 years and is primarily responsible for the development and testing of
CEL- SCI's products being developed using our Multikine technology.
John Cipriano, our Senior Vice President of Regulatory Affairs, has been
with us for over 10 years and is primarily responsible for our submission to
appropriate regulatory authorities of our products being developed using our
Multikine technology.
The knowledge and experience of these officers with respect to the
Multikine technology and the Company is irreplaceable and therefore the Board
concluded that it would be in the best interests of the Company and its
shareholders to award these officers (the " Officer Grantees") restricted shares
of our common stock ("Awarded Shares") in order to incentivize these executives
to remain with the Company throughout this critical phase of the Multikine
development and, among other things, align the interests of these executives
with all shareholders of the Company.
The agreements under which the shares would be awarded (the "Restricted
Share Agreements") will provide that the Awarded Shares (or a portion of the
shares) would only be earned based upon the achievement of certain significant
milestones leading to the commercialization of the Company's Multikine
technology or significant increases in the market price of the Company's shares.
If the performance criteria is not met within the time frames set forth below,
all or a portion of the Awarded Shares would be returned to the Company for
cancellation. In order to insure that these shares would be returned to the
Company, they will be held in escrow. These shares would only be released to the
holders when and, only to the extent that, the Performance Goals set forth in
the Restricted Share Agreements have been met.
Upon the achievement of the following Performance Goals, a percentage of
the Awarded Shares would be earned by the Officer Grantees and would thereafter
no longer be subject to being forfeited to the Company.
i. Upon either (a) the enrollment of 350 patients in the Phase 3 head and
neck cancer study or (b) the closing price of a share of Company
common stock on the primary exchange on which such common stock is
then traded shall be in excess of $3.50 for ten consecutive trading
days, each Officer Grantee shall earn 25% of the Awarded Shares.
ii. Upon either (a) the full enrollment of patients in the Phase 3 head
and neck cancer study or (b) the start of a pivotal clinical trial for
Multikine (Leukocyte Interleukin, Injection) (the "Proprietary
Technology") in another disease indication than head and neck cancer
36
or (c) the closing price of a share of Company common stock on the
primary exchange on which such common stock is then traded shall be in
excess of $6.00 for ten consecutive trading days, each Officer Grantee
shall earn 50% of the Awarded Shares, less any of the Awarded Shares
previously earned.
iii. Upon either (a) the end of the Phase 3 head and neck cancer study or
any other pivotal study for Multikine (Leukocyte Interleukin,
Injection) (the "Proprietary Technology") or (b) the closing price of
a share of Company common stock on the primary exchange on which such
common stock is then traded shall be in excess of $9.00 for ten
consecutive trading days, each Officer Grantee shall earn 75% of the
Awarded Shares, less any of the Awarded Shares previously earned.
iv. Upon either (a) the filing of the first marketing application for any
pharmaceutical based upon the Proprietary Technology in any of the
USA, Canada, UK, Germany, France, Italy, Spain, Japan, or Australia,
or (b) the closing price of a share of Company common stock on the
primary exchange on which such common stock is then traded shall be in
excess of $12.00 for ten consecutive trading days, each Officer
Grantee shall earn 100% of the Awarded Shares, less any of the Awarded
Shares previously earned.
The stock price per share amounts would be proportionately adjusted in the
event of any stock splits, stock dividends; recapitalizations or similar events.
The Officer Grantees may not sell, convey, transfer, pledge, encumber or
otherwise dispose of the Awarded Shares until the shares are earned by them.
If the Officer Grantees have not have earned any part of the Awarded Shares
as of the date which is three years after the date of the grant, they would
forfeit and return to the Company all of the Awarded Shares.
The Officer Grantees would forfeit and return to the Company all Awarded
Shares that have not been earned by them as of the date which is ten years after
the date of the grant.
The Restricted Share Agreements will provide that (i) upon the occurrence
of a Level One Change in Control, all Awarded Shares shall vest and all
restrictions pertaining thereto shall lapse and (ii) upon the occurrence of a
Level Two Change in Control, if during the period commencing on the date that is
12 months prior to the occurrence of the Level Two Change in Control and ending
on the date that is 48 months following the Level Two Change in Control, the
Officer Grantee's employment with the Company is terminated, other than for
Cause, or the Officer Grantee terminates his or her employment on account of
Good Reason, all Awarded Shares shall vest and all restrictions pertaining
thereto shall lapse.
The Committee believes that the proposed award of the Awarded Shares will
most effectively align the Officer Grantees' interests with those of the Company
and its shareholders for the following reasons:
37
o The Awarded Shares would only be earned by the Officer Grantees upon
the attainment of the Performance Goals.
o The attainment of the technology related performance criteria are
essential to the Company commercializing its technology and therefore
generating revenue. As these goals are reached the Company expects
that its stock price should appreciate thus benefiting all of its
shareholders. The stock price related Performance Goals reflects a
benefit for all of the shareholders. If none of the Performance Goals
are met within three years after the date of the grant, the Officer
Grantees will not earn any of the Awarded Shares.
o The Awarded Shares would not only be tied to performance goals but
require each Officer Grantee's continued employment with the Company.
If an Officer Grantee's employment with the Company is terminated,
except in connection with a Level Two Change in Control, the Officer
Grantee would forfeit any Awarded Shares not then earned.
If the 2014 Plan is approved, and the proposed awards are made to the
Officer Grantees no stock option or stock bonus awards beyond those set forth in
this Proxy will be made to the Officer Grantees prior to July 31, 2017.
Additional Issuances under the 2014 Plan
While the Board believes that the Mr. Kersten, Ms. Prichep, Dr. Talor and
Mr. Cipriano are critical to the future success of the Company, there are other
employees who are also important to the Company's future. The Committee will
determine the amount and nature of the future awards to be granted to such
persons. However, as required by the 2014 Plan, any future awards from the 2014
Plan must be performance based.
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The recently enacted Dodd-Frank Wall Street Reform and Consumer Protection
Act of 2010, or the Dodd-Frank Act, enables CEL-SCI's shareholders to vote to
approve, on a nonbinding advisory basis, the compensation of CEL-SCI's executive
officers.
Accordingly, CEL-SCI will ask shareholders to vote for the following
resolution at the annual meeting:
"RESOLVED, that CEL-SCI's shareholders approve, on a nonbinding
advisory basis, the compensation of CEL-SCI's executive officers, as
disclosed in CEL-SCI's Proxy Statement for the 2014 Annual Meeting of
Shareholders pursuant to the compensation disclosure rules of the
Securities and Exchange Commission, including the Summary Compensation
Table and the other related tables and narrative disclosure in
CEL-SCI's proxy statement."
To the extent there is any significant vote against the named executive
officer compensation as disclosed in this proxy statement, CEL-SCI's Board of
38
Directors and its Compensation Committee will consider shareholders' concerns
and the Compensation Committee will evaluate whether any actions are necessary
to address those concerns.
The Board of Directors recommends that the shareholders approve on a
nonbinding advisory basis the aforementioned resolution approving the
compensation of CEL-SCI's executive officers set forth in this proxy statement.
ADVISORY VOTE ON THE FREQUENCY OF AN ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Act also enables CEL-SCI's shareholders to indicate how
frequently CEL-SCI should seek an advisory vote on the compensation of CEL-SCI's
executive officers. Shareholders may indicate on a nonbinding advisory basis
whether an advisory vote on compensation of CEL-SCI's executive officers is held
every one, two, or three years.
The option of one year, two years or three years that receives the highest
number of votes cast by the shareholders will be the frequency for the advisory
vote on executive compensation that has been selected by the shareholders.
However, because this vote is advisory and not binding on CEL-SCI in any way,
CEL-SCI's Board of Directors may decide that it is in the best interests of
CEL-SCI's shareholders and CEL-SCI to hold an advisory vote on executive
compensation more or less frequently than the option approved by the
shareholders.
The Board of Directors recommends that the shareholders of CEL-SCI cast a
vote of "3 Years" on the frequency of holding an advisory vote on executive
compensation.
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, 2014. BDO USA, LLP served as CEL-SCI's independent
registered public accounting firm for the fiscal year ended September 30, 2013.
A representative of BDO USA, LLP is expected to be present at the shareholders'
meeting.
BDO USA, LLP served as CEL-SCI's auditors for the years ended September 30,
2013 and 2012. The following table shows the aggregate fees billed to CEL-SCI
during these years by BDO USA, LLP:
Year Ended September 30,
2013 2012
---- ----
Audit Fees $236,000 $289,000
Audit-Related Fees -- --
Tax Fees -- --
All Other Fees -- --
|
Audit fees represent amounts billed for professional services rendered for
the audit of CEL-SCI's annual financial statements, including the audit of
internal control over financial reporting, the reviews of the financial
statements included in CEL-SCI's 10-Q reports for the fiscal year, and all
39
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, 2013.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
CEL-SCI's Annual Report on Form 10-K for the year ending September 30, 2013
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, 2014 must be received by the Secretary of CEL-SCI no
later than January 31, 2015.
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 2013 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.
40
ANNEX 1
CEL-SCI CORPORATION
2014 INCENTIVE STOCK BONUS PLAN
1. Purpose
Effective as of the Effective Date (as defined below), CEL-SCI Corporation,
(the "Company") hereby establishes the 2014 Incentive Stock Bonus Plan (the
"Plan"). The Plan enables executive officers and other employees, who contribute
significantly to the success of the Company, to participate in its future
prosperity and growth and aligns their interests with those of the shareholders.
The purpose of the Plan is to provide long term incentive for outstanding
service to the Company and its shareholders and to assist in recruiting and
retaining people of outstanding ability and initiative in executive and
management positions.
2. Administration
With respect to awards, the Plan shall be administered by the Compensation
Committee of the Board of Directors (the "Committee").
The Committee shall have complete authority (except as otherwise provided
herein) to interpret all provisions of the Plan and any award to determine the
terms of awards consistent with the provisions of the Plan, to prescribe the
form of instruments evidencing awards, to adopt, amend and rescind general and
special rules and regulations for its administration, and to make all other
determinations necessary or advisable for its administration of the Plan. Their
determinations shall be final and conclusive. They may act by resolution or in
any other manner permitted by law.
Each person who is or shall have been a member of the Committee or the
Board, shall be indemnified and held harmless by the Company against any loss,
cost, liability or expense that may be imposed upon or reasonably incurred by
him or her in connection with any claim, action, suit or proceeding to which
such person may be a party or in which such person may be involved by reason of
any action taken in good faith under the Plan and against and from any and all
amounts paid by such person in settlement thereof with the Company's approval or
paid in satisfaction of any judgment in any such action suit or proceeding;
provided that such person shall give the Company notice of such action, suit or
proceeding and give the Company an opportunity, at its expense, to undertake the
defense of any such action, suit or proceeding.
3. Shares Available
The aggregate of the number of shares of common stock of the Company
("Shares") delivered by the Company in payment of awards to employees under the
Plan shall not exceed 16,000,000 subject to adjustment as provided herein. To
the extent that any award under the Plan is forfeited the shares subject to such
awards (a) not delivered to the grantee, or (b) redelivered to the Company, as a
result thereof, shall again be available for awards under the Plan. Shares
tendered or withheld to pay tax withholding of any award hereunder will count
against the foregoing limitations and not be added back to the shares available
under the Plan. Shares available for awards may consist, in whole or in part, of
authorized and unissued shares or treasury shares.
Awards may be made under the Plan at any time after (or subject to)
approval of the Plan by shareholders at the 2014 Annual Meeting until the
termination of the Plan in accordance with the terms hereof. Awards under the
Plan shall be evidenced by a written agreement, contract or other instrument or
document, including an electronic communication, as may from time to time be
designated by the Committee (an "Award Agreement").
Awards made under the Plan may only be restricted shares, the vesting of
which must be subject to such significant performance criteria as shall be
determined by the Committee (the "Performance Criteria ") together with the
satisfaction of any other conditions, such as continued employment, as the
Committee may determine to be appropriate; provided, however, the limitations on
vesting set forth in this sentence need not apply in the event of a "Change in
Control" of the Company (as defined, herein ) if the Committee in its discretion
determines to include such provision in the Award Agreement. The achievement of
the Performance Criteria may not extend past a date which is more than 10 years
after the date of the grant of the award Performance Criteria will be based on
one or more of the following applied to the Company, (if applicable, such
criteria shall be determined in accordance with United States generally accepted
accounting principles (GAAP") or based upon the Company's GAAP financial
statements): (i) implementation or completion of critical projects or processes;
(ii) market price of the Company's securities; (iii) control of expenses; and
(iv) any combination of any of the foregoing.
4. Eligibility for Awards
Any salaried employee (including officers) of the Company who is deemed by
the Committee to be a significant employee in regard to the future growth of the
Company may be granted an award. The Committee (i) will designate the persons to
whom grants are to be made and (ii) will specify the number of restricted shares
subject to each grant.
5. Vesting upon a Change in Control
The Committee may provide in an Award Agreement that upon the occurrence of
a Level One Change in Control, all outstanding restricted stock which is the
subject of such Award Agreement shall vest and all restrictions pertaining
thereto shall lapse and have no further force and effect, including the failure
to meet the Performance Criteria set forth in the Award Agreement.
The Committee may provide in an Award Agreement that upon the occurrence of
a Level Two Change in Control, if during the period commencing on the date that
is 12 months prior to the occurrence of the Level Two Change in Control and
ending on the date that is 48 months following the Level Two Change in Control,
the participant's employment with the Company is terminated, other than for
Cause, or the participant terminates his employment on account of Good Reason,
all outstanding restricted stock which is the subject of such Award Agreement
shall vest and all restrictions pertaining to such awards shall lapse and have
no further force and effect including the failure to meet the Performance
Criteria set forth in the Award Agreement.
2
For purposes of the 2014 Plan:
(i) A Level One Change in Control shall occur upon (a) acquisition by any
individual, entity or group of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended) of 50% or more of the Company's either (1) the then
outstanding shares of common stock of the Company or (2) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote in the election of directors or (b) a majority of the
Board consisting of persons who were not nominated or appointed in the
first instance by the Board.
(ii) A Level Two Change in Control shall occur upon acquisition by any
individual, entity or group of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended) of 20% or more of the Company's either (1) the then
outstanding shares of common stock of the Company or (2) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote in the election of directors.
(iii) Cause shall mean "cause" as defined in the participant's award
agreement or written employment agreement with the Company, or if not
defined in any such agreement, "cause" shall mean (a) conviction of,
or pleas of nolo contendere by the participant for a felony or
dishonesty while performing his employment duties, (b) a participant's
violation of any non-competition, non-solicitation, confidentiality or
other restrictive covenant agreement applicable to the participant or
(c) the participant's continued failure to materially carry out his
duties as an employee which failure has not been cured within 30 days
after the participant receives written notice of such failure.
(iv) Good Reason shall mean (a) a reduction in compensation (including
benefits) or (b) the participant being assigned any duties which are
materially inconsistent with the duties of the participant immediately
prior to the occurrence of the Level Two Change in Control or (c) the
office at which the participant performs his duties is more than 10
miles from the office at which the participant performed his duties
immediately prior to the occurrence of the Level Two Change in
Control.
6. Transfers
Except as otherwise provided by the Committee, awards under the Plan are
not transferable other than by will or the laws of descent and distribution. A
transferred award will be subject to forfeiture by the transferee to the extent
that award would be subject to forfeiture by the grantee had the award not been
transferred.
3
7. Adjustments
Notwithstanding anything to the contrary that may be contained herein, in
the event of a reorganization, merger, consolidation, reclassification,
recapitalization, combination or exchange of shares, stock split, stock
dividend, rights offering or similar event affecting shares of the Company the
following shall be equitably adjusted: (i) the number and class of shares (a)
reserved under the Plan and (b) for which awards may be granted to an
individual, and (ii) the appropriate fair market value and other price
determinations for such awards. All such determinations shall be made by the
Committee.
8. Qualified Performance-Based Awards
The provisions of the Plan are intended to ensure that all restricted
shares granted hereunder to any individual who is or may be a "covered employee"
(within the meaning of Section 162(m)(3) of the Internal Revenue Code) qualify
for the Section 162(m) exception (the "Section 162(m) Exception") for
performance-based compensation (a "Qualified Performance-Based Award"), and all
of the awards specified in this Section 7 and the Plan shall be interpreted and
operated consistent with that intention.
Qualified Performance-Based Awards may not be amended, nor may the
Committee exercise discretionary authority in any manner that would cause the
Qualified Performance-Based Award to cease to qualify for the Section 162(m)
Exception.
9. Forfeiture; Non-Competition Agreements.
Notwithstanding any other provision of the Plan, except as otherwise
provided in an award agreement, if the Committee finds by a majority vote that:
(i) the grantee, before or after termination of his or her employment with the
Company committed fraud, embezzlement, theft, a felony, or proven dishonesty in
the course of his or her employment with the Company or (ii) disclosed trade
secrets or other non-public proprietary information of the Company, then any
outstanding awards which have not vested, will be forfeited. The decision of the
Committee as to the nature of a grantee's conduct for purposes of this Section 8
shall be final.
10. General Provisions
It shall be a condition to the obligation of the Company to deliver Shares
that the participant pay the Company such amount as it may request for the
purpose of satisfying any such tax liability. Any award under the Plan may
provide that the participant may elect, in accordance with any Committee
regulations, to pay the amount of such withholding taxes in Shares, valued for
purposes thereof at the closing price per share on the primary market on which
the shares are then traded on the day prior to the event which causes the tax
liability to be incurred.
No person, estate or other entity shall have any of the rights of a
shareholder with reference to shares subject to an award until a certificate or
4
certificates for the shares have been delivered to that person, estate or other
entity. The Plan shall not confer upon any employee any right to continue in
that capacity.
The Plan and all determinations made and actions taken pursuant hereto, to
the extent not governed by the laws of the United States, shall be governed by
the laws of Colorado.
11. Amendment and Termination
The Board of Directors of the Company may alter, amend or terminate the
Plan from time to time, except that the Plan may not be materially amended
without shareholder approval if shareholder approval is required by law,
regulation or an applicable stock exchange rule. Notwithstanding the previous
sentence, the Plan may not be amended without shareholder approval to increase
the aggregate number of shares which may be issued under the Plan.
12. Effective and Termination Dates
The Plan will become effective if and when approved by shareholders at the
2014 Annual Meeting of Shareholders (the date of such approval the "Effective
Date"). Any employee who receives an award under the Plan will thereafter not be
eligible to receive an award under any other previously approved Company stock
plan until July 31, 2017.
No awards shall be granted under the Plan after the date that is ten years
after the Effective Date. Awards granted before that date shall remain valid
thereafter in accordance with their terms.
5
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 July 22, 2014, 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 below:
(1) To elect the persons 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 THE NOMINEE'S NAME IN THE LIST BELOW)
Nominees: Maximilian de Clara, Geert R. Kersten, Alexander G. Esterhazy,
C. Richard Kinsolving, Peter R. Young
The Board of Directors recommends you vote FOR the following proposals;
(2) To approve the adoption of CEL-SCI's 2014 Incentive Stock Bonus Plan which
will allow awards of CEL-SCI common stock to employees for meeting major
CEL-SCI milestones spelled out in advance (performance based).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) to approve on an advisory basis, compensation of CEL-SCI's executive
officers;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Board of Directors recommends you vote 3 YEARS on the following proposal:
(4) to approve on an advisory basis, the frequency of advisory votes on the
compensation of CEL-SCI's executive officers and
[ ] 1 Year [ ] 2 Years [ ] 3 Years [ ] ABSTAIN
The Board of Directors recommends you vote FOR the following proposal;
(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,
2014
[ ] 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.
Directions to the Annual Meeting can be found at
www.cel-sci.com/annual_meeting.html.
Dated this ____ day of __________, 2014.
(Signature)
(Signature)
Please sign your name exactly as it appears on your stock certificate. If shares
are held jointly, each holder should sign. Executors, trustees, and other
fiduciaries should so indicate when signing.
Please Sign, Date and Return this Proxy so that your shares may be voted at the
meeting.
Send the proxy statement by regular mail, email, or fax to:
CEL-SCI Corporation
Attn: Gavin de Windt
8229 Boone Blvd., #802
Vienna, VA 22182
Phone: 703-506-9460
Fax: 703-506-9471
Email: gdewindt@cel-sci.com
CEL SCI CORPORATION
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 July 22, 2014.
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 July 8, 2014 to facilitate
timely delivery.
Stockholder Meeting Notice
CEL-SCI Corporation's Annual Meeting of Stockholders will be held at 4820-C
Seton Drive, Baltimore, MD 21215, on July 22, 2014, 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:
(1) To elect the persons who shall constitute CEL-SCI's Board of Directors
for the ensuing year.
The Board of Directors recommends you vote FOR the following proposals:
(2) To approve the adoption of CEL-SCI's 2014 Incentive Stock Bonus Plan
which will allow stock awards of CEL-SCI common stock to employees for
meeting major CEL-SCI milestones spelled out in advance (performance
based).
(3) to approve on an advisory basis, compensation of CEL-SCI's executive
officers;
The Board of Directors recommends you vote 3 YEARS on the following proposal:
(4) to approve on an advisory basis, the frequency of advisory votes on
the compensation of CEL-SCI's executive officers and
The Board of Directors recommends you vote FOR the following proposal:
(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, 2014
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.
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.
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