EXHIBIT 99
CEL-SCI CORPORATION
Common Stock
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Prospectus relates to shares (the "Shares") of common stock (the
"Common Stock") of CEL-SCI Corporation which may be issued pursuant to certain
employee incentive plans adopted by CEL-SCI. The employee incentive plans
provide for the grant, to selected employees of CEL-SCI and other persons, of
either stock bonuses or options to purchase shares of CEL-SCI's Common Stock.
Persons who received Shares pursuant to the Plans and who are offering such
Shares to the public by means of this Prospectus are referred to as the "Selling
Shareholders".
CEL-SCI has Incentive Stock Option Plans, Non-Qualified Stock Option Plans
and Stock Bonus Plans. In some cases the plans described above are collectively
referred to as the "Plans". The terms and conditions of any stock bonus and the
terms and conditions of any options, including the price of the shares of Common
Stock issuable on the exercise of options, are governed by the provisions of the
respective Plans and the stock bonus or stock option agreements between CEL-SCI
and the Plan participants.
The Selling Shareholders may offer the shares from time to time in
negotiated transactions in the over-the-counter market, at fixed prices which
may be changed from time to time, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. The Selling Shareholders may effect such transactions by selling the
Shares to or through securities broker/dealers, and such broker/dealers may
receive compensation in the form of discounts, concessions, or commissions from
the Selling Shareholders and/or the purchasers of the Shares for whom such
broker/dealers may act as agent or to whom they sell as principal, or both
(which compensation as to a particular broker/dealer might be in excess of
customary commissions). See "Selling Shareholders" and "Plan of Distribution".
None of the proceeds from the sale of the Shares by the Selling
Shareholders will be received by CEL-SCI. CEL-SCI has agreed to bear all
expenses (other than underwriting discounts, selling commissions and fees and
expenses of counsel and other advisers to the Selling Shareholders). CEL-SCI has
agreed to indemnify the Selling Shareholders against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the
"Securities Act").
The date of this Prospectus is __________, 2004.
AVAILABLE INFORMATION
CEL-SCI is subject to the information requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith, files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Proxy statements, reports and other information concerning
CEL-SCI can be inspected and copied at the Commission's office at 450 Fifth
Street, N.W., Washington, D.C. 20549. Certain information concerning CEL-SCI is
also available at the Internet Web Site maintained by the Securities and
Exchange Commission at www.sec.gov. This Prospectus does not contain all
information set forth in the Registration Statement of which this Prospectus
forms a part and exhibits thereto which CEL-SCI has filed with the Commission
under the Securities Act and to which reference is hereby made.
DOCUMENTS INCORPORATED BY REFERENCE
CEL-SCI will provide, without charge, to each person to whom a copy of
this Prospectus is delivered, including any beneficial owner, upon the written
or oral request of such person, a copy of any or all of the documents
incorporated by reference herein (other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference into this Prospectus).
Requests should be directed to:
CEL-SCI Corporation
8229 Boone Blvd., Suite 802
Vienna, Virginia 223l4
(703) 506-9460
Attention: Secretary
The following documents filed with the Commission by CEL-SCI (Commission
File No. 0-11503) are hereby incorporated by reference into this Prospectus:
(1) CEL-SCI's Annual Report on Form 10-K for the fiscal year ended
September 30, 2003;
(2) CEL-SCI's Annual Report on Form 10-K/A for the fiscal year ended
September 30, 2003;
(3) CEL-SCI's report on Form 10-Q for the quarter ended December 31,
2003;
(4) CEL-SCI's report on Form 10-Q for the quarter ended March 31, 2004;
(5) Proxy Statement relating to the May 6, 2004 Annual Meeting of
Shareholders.
All documents filed with the Commission by CEL-SCI pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering registered hereby shall
be deemed to be incorporated by reference into this Prospectus from the date of
the filing of such documents. Any statement contained in a document incorporated
or deemed to be incorporated by reference shall be deemed to be modified or
superseded for the purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Such statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
TABLE OF CONTENTS
PAGE
THE COMPANY ........................................................ 5
RISK FACTORS........................................................ 6
COMPARATIVE SHARE DATA ............................................. 9
USE OF PROCEEDS .................................................... 11
SELLING SHAREHOLDERS ............................................... 11
PLAN OF DISTRIBUTION ............................................... 14
DESCRIPTION OF COMMON STOCK ........................................ 14
GENERAL ............................................................ 15
PROSPECTUS SUMMARY
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION
APPEARING ELSEWHERE IN THIS PROSPECTUS.
CEL-SCI Corporation was formed as a Colorado corporation in 1983. CEL-SCI
is involved in the research and development of certain drugs and vaccines.
MULTIKINE(R), CEL-SCI's first and main product, uses CEL-SCI's proprietary cell
culture technologies. CEL-SCI is testing MULTIKINE to determine if it is
effective in creating an anti-cancer immune response in head and neck cancer
patients, and in HIV-infected women with Human Papilloma Virus induced cervical
dysplasia, the precursor stage before the development of cervical cancer.
MULTIKINE has been shown to induce both an anti-cancer immune response and to
significantly increase the susceptibility of tumor cells to radiation therapy.
LEAPS, another technology of CEL-SCI, is being tested by CEL-SCI to
determine if it is effective in developing potential treatments and/or vaccines
against various diseases. Present target diseases are herpes simplex, malaria
and autoimmune myocarditis.
Using the LEAPS technology, CEL-SCI discovered a peptide, named CEL-1000,
which is currently being tested in animals for the prevention/treatment of
herpes simplex, malaria, viral encephalitis, smallpox, vaccinia and a number of
other indications. CEL-1000 is also being tested as a bio-terrorism agent by the
National Institute of Allergy and Infectious Diseases and by the U.S. Army
Research Institute of Infectious Diseases.
Before human testing can begin with respect to a drug or biological
product, preclinical studies are conducted in laboratory animals to evaluate the
potential efficacy and the safety of a product. Human clinical studies generally
involve a three-phase process for marketing approval and a possible fourth phase
of post-approval studies. The initial clinical evaluation, Phase I, consists of
administering the product and testing for safe and tolerable dosage levels.
Phase II trials continue the evaluation of safety and determine the appropriate
dosage for the product, identify possible side effects and risks in a larger
group of subjects, and provide preliminary indications of efficacy. Phase III
trials consist of testing for actual clinical efficacy within an expanded group
of patients at geographically dispersed test sites. Phase IV clinical trials are
performed if the FDA requires or a company wishes to pursue them. Phase IV
studies generally confirm the effectiveness or safety information about the
product.
CEL-SCI has completed Phase II clinical trials with MULTIKINE and believes
that it has compiled sufficient data and clinical information to justify a Phase
III clinical trial for head and neck cancer. CEL-SCI plans to meet with FDA in
2004 to discuss such a trial. Depending on the FDA's review of CEL-SCI's data,
the FDA may require additional Phase II trials or may authorize a Phase III
clinical trial. CEL-SCI's LEAPS technology is in the pre-clinical stage.
CEL-SCI has funded the costs associated with the clinical trials relating
to CEL-SCI's technologies, research expenditures and CEL-SCI's administrative
expenses with the public and private sales of CEL-SCI's securities and
borrowings from third parties, including affiliates of CEL-SCI.
All of CEL-SCI's products are in the development stage. As of June 15, 2004
CEL-SCI was not receiving any revenues from the sale of MULTIKINE or any other
products which CEL-SCI was developing.
CEL-SCI does not expect to develop commercial products for several years,
if at all. CEL-SCI has had operating losses since its inception, had an
accumulated deficit of approximately $(88,865,000) at March 31, 2004, and
expects to incur substantial losses for the foreseeable future.
CEL-SCI's executive offices are located at 8229 Boone Blvd., #802, Vienna,
Virginia 22182, and its telephone number is (703) 506-9460.
As of June 15, 2004 CEL-SCI had 72,023,596 outstanding shares of common
stock.
RISK FACTORS
Investors should be aware that this offering involves the risks described
below, which could adversely affect the price of CEL-SCI's common stock. In
addition to the other information contained in this prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
offered by this prospectus.
RISKS RELATED TO CEL-SCI
Since CEL-SCI Has Earned Only Limited Revenues and Has a History of Net Losses,
CEL-SCI Will Require Additional Capital to Remain in Operation.
CEL-SCI has had only limited revenues since it was formed in 1983. Since
the date of its formation and through March 31, 2004 CEL-SCI incurred net losses
of approximately $(88,865,000). During the years ended September 30, 2001, 2002
and 2003 CEL-SCI suffered losses of $(10,733,679), $(8,342,244) and $(6,371,498)
respectively. During the six months ended March 31, 2004 CEL-SCI lost
$(2,311,366). CEL-SCI has not derived any revenue from the sale of its products.
CEL-SCI has relied principally upon the proceeds of public and private sales of
securities and convertible notes to finance its activities to date. All of
CEL-SCI's potential products are in the early stages of development, and any
commercial sale of these products will be many years away. Accordingly, CEL-SCI
expects to incur substantial losses for the foreseeable future. There can be no
assurance CEL-SCI will be profitable.
Since CEL-SCI does not intend to pay dividends on its common stock, any return
to investors will come only from potential increases in the price of CEL-SCI's
common stock.
At the present time, CEL-SCI intends to use available funds to finance
CEL-SCI's operations. Accordingly, while payment of dividends rests within the
discretion of the Board of Directors, no common stock dividends have been
declared or paid by CEL-SCI and CEL-SCI has no intention of paying any common
stock dividends.
If Cel-Sci cannot obtain additional capital, Cel-Sci may have to postpone
development and research expenditures which will delay Cel-Sci's ability to
produce a competitive product. Delays of this nature may depress the price of
CEL-SCI's common stock.
Clinical and other studies necessary to obtain approval of a new drug can
be time consuming and costly, especially in the United States, but also in
foreign countries. CEL-SCI's estimates of the costs associated with future
clinical trials and research may be substantially lower than the actual costs of
these activities. The different steps necessary to obtain regulatory approval,
especially that of the Food and Drug Administration, involve significant costs
and may require several years to complete. CEL-SCI expects that it will need
substantial additional financing over an extended period of time in order to
fund the costs of future clinical trials, related research, and general and
administrative expenses. Although CEL-SCI's equity line of credit agreement is
expected to be a source of funding, the amounts which CEL-SCI is able to draw
from the equity line during each drawdown period are limited and may not satisfy
CEL-SCI's capital needs.
The extent of CEL-SCI's clinical trials and research programs are
primarily based upon the amount of capital available to CEL-SCI and the extent
to which CEL-SCI has received regulatory approvals for clinical trials. CEL-SCI
is unable to estimate the future costs of clinical trials since CEL-SCI has not
yet met with the FDA to discuss the design of future clinical trials; and until
the scope of future clinical trials is known, CEL-SCI will not be able to price
any trials with clinical trial organizations.
Over the past three years CEL-SCI's research and development expenditures
have decreased, due in part to the capital available to CEL-SCI. The inability
of CEL-SCI to conduct clinical trials or research, whether due to a lack of
capital or regulatory approval, will prevent CEL-SCI from completing the studies
and research required to obtain regulatory approval for any products which
CEL-SCI is developing.
To raise additional capital CEL-SCI will most likely sell shares of its
common stock or securities convertible into common stock at prices that may be
below the prevailing market price of CEL-SCI's common stock at the time of sale.
The issuance of additional shares will have a dilutive impact on other
stockholders and could have a negative effect on the market price of CEL-SCI's
common stock. Since April 2001 CEL-SCI has sold approximately 28,000,000 shares
of its common stock to private investors at prices that were between 7% and 30%
below the market price of CEL-SCI's common stock at the time of sale.
Any failure to obtain or any delay in obtaining required regulatory
approvals may adversely affect the ability of CEL-SCI or potential licensees to
successfully market any products they may develop.
MULTIKINE is made from components of human blood which involves inherent risks
that may lead to product destruction or patient injury which could materially
harm CEL-SCI's financial results, reputation and stock price.
MULTIKINE is made, in part, from components of human blood. There are
inherent risks associated with products that involve human blood such as
possible contamination with viruses, including Hepatitis or HIV. Any possible
contamination could require CEL-SCI to destroy batches of MULTIKINE or cause
injuries to patients who receive the product thereby subjecting CEL-SCI to
possible financial losses and harm to its business.
Although CEL-SCI has product liability insurance for MULTIKINE, the successful
prosecution of a product liability case against CEL-SCI could have a materially
adverse effect upon its business if the amount of any judgment exceeds CEL-SCI's
insurance coverage.
Although no claims have been brought to date, participants in CEL-SCI's
clinical trials could bring civil actions against CEL-SCI for any unanticipated
harmful effects arising from the use of MULTIKINE or any drug or product that
CEL-SCI may try to develop. Although CEL-SCI believes its insurance coverage of
$2,000,000 per claim is adequate, the defense or settlement of any product
liability claim could adversely affect CEL-SCI even if the defense and
settlement costs did not exceed CEL-SCI's insurance coverage.
CEL-SCI's directors are allowed to issue shares of preferred stock with
provisions that could be detrimental to the interests of the holders of
CEL-SCI's common stock.
The provisions in CEL-SCI's Articles of Incorporation relating to
CEL-SCI's Preferred Stock would allow CEL-SCI's directors to issue Preferred
Stock with rights to multiple votes per share and dividend rights which would
have priority over any dividends paid with respect to CEL-SCI's Common Stock.
The issuance of Preferred Stock with such rights may make more difficult the
removal of management even if such removal would be considered beneficial to
shareholders generally, and will have the effect of limiting shareholder
participation in certain transactions such as mergers or tender offers if such
transactions are not favored by incumbent management.
RISKS RELATED TO GOVERNMENT APPROVALS
CEL-SCI's product candidates must undergo rigorous preclinical and clinical
testing and regulatory approvals, which could be costly and time-consuming and
subject CEL-SCI to unanticipated delays or prevent CEL-SCI from marketing any
products.
Therapeutic agents, drugs and diagnostic products are subject to approval,
prior to general marketing, by the FDA in the United States and by comparable
agencies in most foreign countries. Before obtaining marketing approval,
CEL-SCI's product candidates must undergo rigorous preclinical and clinical
testing which is costly and time consuming and subject to unanticipated delays.
There can be no assurance that such approvals will be granted.
CEL-SCI cannot be certain when or under what conditions it will undertake
further clinical trials, including a Phase III program for MULTIKINE. The
clinical trials of CEL-SCI's product candidates may not be completed on
schedule, and the FDA or foreign regulatory agencies may order CEL-SCI to stop
or modify its research or these agencies may not ultimately approve any of
CEL-SCI's product candidates for commercial sale. Varying interpretations of the
data obtained from pre-clinical and clinical testing could delay, limit or
prevent regulatory approval of CEL-SCI's product candidates. The data collected
from CEL-SCI's clinical trials may not be sufficient to support regulatory
approval of its various product candidates, including MULTIKINE. For example,
MULTIKINE is now being made by a process that was different from the process
tested in many of CEL-SCI's clinical studies to date. It is possible that the
FDA will require CEL-SCI to conduct additional studies to demonstrate that the
MULTIKINE that it plans to use for its Phase III program is the same as the
product previously tested in CEL-SCI's phase II studies. Even if CEL-SCI
believes the data collected from its clinical trials are sufficient, the FDA has
substantial discretion in the approval process and may disagree with CEL-SCI's
interpretation of the data. In this regard, the FDA is aware of Phase II
clinical study results from US and Canadian studies, but not results from
foreign trials. The foreign data comprises approximately 75% of the subjects
participating in CEL-SCI's Phase II program. CEL-SCI can make no assurances that
the FDA will accept the data from its foreign studies or that the agency would
not require CEL-SCI to conduct more Phase II studies before beginning Phase III
trials. CEL-SCI's failure to adequately demonstrate the safety and efficacy of
any of its product candidates would delay or prevent regulatory approval of its
product candidates, which could prevent CEL-SCI from achieving profitability.
The requirements governing the conduct of clinical trials, manufacturing,
and marketing of CEL-SCI's product candidates, including MULTIKINE, outside the
United States vary widely from country to country. Foreign approvals may take
longer to obtain than FDA approvals and can require, among other things,
additional testing and different trial designs. Foreign regulatory approval
processes include all of the risks associated with the FDA approval processes.
Some of those agencies also must approve prices for products. Approval of a
product by the FDA does not ensure approval of the same product by the health
authorities of other countries. In addition, changes in regulatory policy in the
US or in foreign countries for product approval during the period of product
development and regulatory agency review of each submitted new application may
cause delays or rejections.
In addition to conducting further clinical studies of MULTIKINE and
CEL-SCI's other product candidates, CEL-SCI also must undertake the development
of its manufacturing process and optimize its product formulations. CEL-SCI is
continuing, for example, to develop MULTIKINE to decrease or further
characterize the amount of DNA in MULTIKINE and to develop ways of better
measuring the amount of DNA in the product. CEL-SCI can make no assurances that
it will succeed in decreasing the amount of DNA in MULTIKINE to a level that is
acceptable for product approval or that it can develop a method of measuring the
amount of DNA that the FDA accepts as suitable for approving the marketing of
the product.
CEL-SCI has only limited experience in filing and pursuing applications
necessary to gain regulatory approvals, which may impede its ability to obtain
timely approvals from the FDA or foreign regulatory agencies, if at all. CEL-SCI
will not be able to commercialize MULTIKINE and other product candidates until
it has obtained regulatory approval, and any delay in obtaining, or inability to
obtain, regulatory approval could harm its business. In addition, regulatory
authorities may also limit the types of patients to which CEL-SCI or others may
market MULTIKINE or CEL-SCI's other products.
Even if CEL-SCI obtains regulatory approval for its product candidates, CEL-SCI
will be subject to stringent, ongoing government regulation.
Even if CEL-SCI's products receive regulatory approval, either in the
United States or internationally, it will continue to be subject to extensive
regulatory requirements. These regulations are wide-ranging and govern, among
other things:
o product design, development, manufacture and testing;
o adverse drug experience and other reporting regulations;
o product advertising and promotion;
o product manufacturing, including good manufacturing practice requirements;
o record keeping requirements;
o registration of CEL-SCI's establishments with the FDA and certain state
agencies
o product storage and shipping;
o drug sampling and distribution requirements;
o electronic record and signature requirements; and
o labeling changes or modifications.
CEL-SCI and any third-party manufacturers or suppliers must continually
adhere to federal regulations setting forth requirements, known as current Good
Manufacturing Practices, or cGMPs, and their foreign equivalents, which are
enforced by the FDA and other national regulatory bodies through their
facilities inspection programs. If CEL-SCI's facilities, or the facilities of
its manufacturers or suppliers, cannot pass a pre-approval plant inspection, the
FDA will not approve the marketing application of CEL-SCI's product candidates.
In complying with cGMP and foreign regulatory requirements, CEL-SCI and any of
its potential third-party manufacturers or suppliers will be obligated to expend
time, money and effort in production, record-keeping and quality control to
ensure that its products meet applicable specifications and other requirements.
State regulatory agencies and the regulatory agencies of other countries have
similar requirements.
CEL-SCI entered into an agreement with Cambrex Bio Science, Inc. whereby
Cambrex agreed to provide CEL-SCI with a facility for the periodic manufacturing
of MULTIKINE in accordance with the cGMPs established by FDA regulations. This
agreement expires on December 31, 2006. If the Cambrex facility were not
available for the production of MULTIKINE, CEL-SCI estimates that it would take
approximately six to ten months to find or build an alternative manufacturing
facility for MULTIKINE. CEL-SCI does not know what cost it would incur to obtain
an alternative source of MULTIKINE.
If CEL-SCI does not comply with regulatory requirements at any stage,
whether before or after marketing approval is obtained, it may be subject to
criminal prosecution, seizure, injuction, fines, or be forced to remove a
product from the market or experience other adverse consequences, including
restrictions or delays in obtaining regulatory marketing approval, which could
materially harm CEL-SCI's financial results, reputation and stock price.
Additionally, CEL-SCI may not be able to obtain the labeling claims necessary or
desirable for product promotion. CEL-SCI may also be required to undertake
post-marketing trials. In addition, if CEL-SCI or other parties identify adverse
effects after any of CEL-SCI's products are on the market, or if manufacturing
problems occur, regulatory approval may be withdrawn and CEL-SCI may be required
to reformulate its products, conduct additional clinical trials, make changes in
its product's labeling or indications of use, or submit additional marketing
applications to support these changes. If CEL-SCI encounters any of the
foregoing problems, its business and results of operations will be harmed and
the market price of our common stock may decline.
Also, the extent of adverse government regulations which might arise from
future legislative or administrative action cannot be predicted. Without
government approval, CEL-SCI will be unable to sell any of its products.
RISKS RELATED TO INTELLECTUAL PROPERTY
CEL-SCI may not be able to achieve or maintain a competitive position and other
technological developments may result in CEL-SCI's proprietary technologies
becoming uneconomical or obsolete.
The biomedical field in which CEL-SCI is involved is undergoing rapid and
significant technological change. The successful development of therapeutic
agents from CEL-SCI's compounds, compositions and processes through
CEL-SCI-financed research, or as a result of possible licensing arrangements
with pharmaceutical or other companies, will depend on its ability to be in the
technological forefront of this field.
Many pharmaceutical and biotechnology companies are developing products
for the prevention or treatment of cancer and infectious diseases including
Introgen Therapeutics, Inc. and ImClone Systems, Inc. which are currently
developing drugs for head and neck cancer. Both Introgen and ImClone, as well as
many other companies working on drugs designed to prevent, cure or treat cancer,
have substantial financial, research and development, and marketing resources
and are capable of providing significant long-term competition either by
establishing in-house research groups or by forming collaborative ventures with
other entities. In addition, smaller companies and non-profit institutions are
active in research relating to cancer and infectious diseases and are expected
to become more active in the future.
CEL-SCI's patents might not protect CEL-SCI's technology from competitors, in
which case CEL-SCI may not have any advantage over competitors in selling any
products which it may develop.
Certain aspects of CEL-SCI's technologies are covered by U.S. and foreign
patents. In addition, CEL-SCI has a number of patent applications pending. There
is no assurance that the applications still pending or which may be filed in the
future will result in the issuance of any patents. Furthermore, there is no
assurance as to the breadth and degree of protection any issued patents might
afford CEL-SCI. Disputes may arise between CEL-SCI and others as to the scope
and validity of these or other patents. Any defense of the patents could prove
costly and time consuming and there can be no assurance that CEL-SCI will be in
a position, or will deem it advisable, to carry on such a defense. Other private
and public concerns, including universities, may have filed applications for, or
may have been issued, patents and are expected to obtain additional patents and
other proprietary rights to technology potentially useful or necessary to
CEL-SCI. The scope and validity of such patents, if any, the extent to which
CEL-SCI may wish or need to acquire the rights to such patents, and the cost and
availability of such rights are presently unknown. Also, as far as CEL-SCI
relies upon unpatented proprietary technology, there is no assurance that others
may not acquire or independently develop the same or similar technology.
CEL-SCI's first MULTIKINE patent expired in 2000. Since CEL-SCI does not know if
it will ever be able to sell MULTIKINE on a commercial basis, CEL-SCI cannot
predict what effect the expiration of this patent will have on CEL-SCI.
Notwithstanding the above, CEL-SCI believes that trade secrets and later issued
patents will protect the technology associated with MULTIKINE.
RISKS RELATED TO THIS OFFERING
Since the market price for CEL-SCI's common stock is volatile, investors in this
offering may not be able to sell any of CEL-SCI's shares at a profit.
The market price of CEL-SCI's common stock, as well as the securities of
other biopharmaceutical and biotechnology companies, have historically been
highly volatile, and the market has from time to time experienced significant
price and volume fluctuations that are unrelated to the operating performance of
particular companies. During the twelve months ended March 31, 2004 CEL-SCI's
stock price has ranged from a low of $0.20 per share to a high of $1.75 per
share. Factors such as fluctuations in CEL-SCI's operating results,
announcements of technological innovations or new therapeutic products by
CEL-SCI or its competitors, governmental regulation, developments in patent or
other proprietary rights, public concern as to the safety of products developed
by CEL-SCI or other biotechnology and pharmaceutical companies, and general
market conditions may have a significant effect on the future market price of
CEL-SCI's common stock.
Shares issuable upon the exercise of options and warrants, or as a result of
sales made in connection with the equity line of credit may substantially
increase the number of shares available for sale in the public market and may
depress the price of CEL-SCI's common stock.
CEL-SCI has outstanding options and warrants which allow the holders to
acquire up to 14,788,126 additional shares of CEL-SCI's common stock. Until the
options and warrants expire, the holders will have an opportunity to profit from
any increase in the market price of CEL-SCI's common stock without assuming the
risks of ownership. Holders of the options and warrants may exercise or convert
these securities at a time when CEL-SCI could obtain additional capital on terms
more favorable than those provided by the options. The exercise of the options
and warrants will dilute the voting interest of the owners of presently
outstanding shares of CEL-SCI's common stock. The sale of the shares of common
stock issuable upon the exercise of the options and warrants could adversely
affect the market price of CEL-SCI's stock.
In addition, an unknown number of shares of common stock are issuable
under a equity line of credit arrangement to Rubicon Group Ltd. As CEL-SCI sells
shares of its common stock to Rubicon Group under the equity line of credit, and
Rubicon Group sells the common stock to third parties, the price of CEL-SCI's
common stock may decrease due to the additional shares in the market. If CEL-SCI
decides to draw down on the equity line of credit as the price of its common
stock decreases, CEL-SCI will be required to issue more shares of its common
stock for any given dollar amount invested by Rubicon Group, subject to the
minimum selling price specified by CEL-SCI. The more shares that are issued
under the equity line of credit, the more CEL-SCI's then outstanding shares will
be diluted and the more CEL-SCI's stock price may decrease. Any decline in the
price of CEL-SCI's common stock may encourage short sales, which could place
further downward pressure on the price of CEL-SCI's common stock. Short selling
is a practice of selling shares which are not owned by a seller with the
expectation that the market price of the shares will decline in value after the
sale.
CEL-SCI has filed registration statements with the Securities and Exchange
Commission so that the 14,788,126 shares of common stock which are issuable upon
the exercise of outstanding options and warrants, as well as the shares of
common stock may be sold under the equity line of credit are available for
public sale. The sale of these shares could place downward pressure on the price
of CEL-SCI's common stock.
See the "Comparative Share Data" section of this prospectus for more
information concerning CEL-SCI's outstanding options and warrants and the equity
line of credit.
COMPARATIVE SHARE DATA
As of June 15, 2004, CEL-SCI had 72,023,596 outstanding shares of common
stock.
The following table reflects shares of common stock which may be issued as
a result of the exercise of outstanding options and warrants or the conversion
of other securities issued by CEL-SCI. By means of separate registration
statements filed with the Securities and Exchange Commission, the shares of
common stock referenced in Notes A and B are being offered for public sale. The
shares of common stock issuable upon the exercise of options which are held by
CEL-SCI's officers and directors, and which are referenced in Note C, are being
offered for sale by means of this prospectus. See "Selling Shareholders".
Number of Note
Shares Reference
Shares issuable upon exercise of warrants 3,685,388 A
held by private investors
Shares issuable pursuant to equity line of credit Unknown B
Shares issuable upon exercise of equity line warrants 395,726 B
Shares issuable upon exercise of options and 10,557,012 C
warrants granted to CEL-SCI's officers, directors,
employees, consultants, and third parties
Shares issuable upon exercise of options 150,000 D
granted to investor relations consultants
A. In August 2001, three private investors exchanged their warrants for
CEL-SCI's Series E warrants. As of June 15, 2004 the Series E warrants
collectively allowed the holders to purchase up to 570,627 additional shares of
CEL-SCI's common stock at a price of $1.19 per share at any time prior to August
16, 2004. In August 2003, in accordance with the terms of the Series E preferred
stock, CEL-SCI issued warrants which permit the holders to purchase an
additional 23,758 shares of CEL-SCI's common stock at a price of $0.77 per share
at any time prior to August 17, 2006.
In July and September 2002, CEL-SCI sold Series G convertible notes, plus
Series G warrants, to a group of private investors for $1,300,000. As of June
30, 2003 all of the Series G notes had been converted into 8,390,746 shares of
CEL-SCI's common stock. As of June 15, 2004 the Series G warrants allowed the
holders to purchase up to 450,000 shares of CEL-SCI's common stock at a price of
$0.145 per share at any time prior to July 12, 2009.
In January and July 2003, CEL-SCI sold Series H convertible notes, plus
Series H warrants, to a group of private investors for $1,350,000. As of June
15, 2004 all of the Series H notes had been converted into 3,233,229 shares of
CEL-SCI's common stock. As of June 15, 2004 the Series H warrants allowed the
holders to purchase up to 550,000 shares of CEL-SCI's common stock at a price of
$0.25 per share at any time prior to January 7, 2010.
In May 2003, CEL-SCI sold shares of its common stock plus Series I
warrants to a strategic partner, at prices equal to or above the then current
price of CEL-SCI's common stock. As of June 15, 2004 the Series I warrants
allowed the holder to purchase 1,100,000 shares of CEL-SCI's common stock at a
price of $0.47 per share at any time prior to May 30, 2008.
On December 1, 2003, CEL-SCI sold 2,999,964 shares of its common stock to
a group of private institutional investors for approximately $2,550,000, or
$0.85 per share. As part of this transaction, the investors in the private
offering, and the sales agent for five of the investors, received Series J
warrants which, as of June 15, 2004, allowed the investors to purchase 991,003
shares of CEL-SCI's common stock at a price of $1.32 per share at any time prior
to December 1, 2006.
The warrant exercise price, and the number of shares issuable upon the
exercise of the Series G and H warrants are subject to adjustment under those
conditions explained in the section of the prospectus entitled "Description of
Securities".
B. An unknown number of shares of common stock are issuable under the equity
line of credit agreement between CEL-SCI and Rubicon Group, Ltd. As
consideration for extending the equity line of credit, CEL-SCI granted Rubicon
Group warrants to purchase 395,726 shares of common stock at a price of $0.83
per share at any time prior to September 16, 2008.
Under the equity line of credit agreement, Rubicon Group has agreed to
provide CEL-SCI with up to $10,000,000 of funding over a two year period ending
on the date that the registration statement relating to the shares to be sold
pursuant to the equity line of credit is declared effective by the Securities
and Exchange Commission. During this period, CEL-SCI may request a drawdown
under the equity line of credit by selling shares of its common stock to Rubicon
Group and Rubicon Group will be obligated to purchase the shares. CEL-SCI may
request a drawdown once every 22 trading days, although CEL-SCI is under no
obligation to request any drawdowns under the equity line of credit.
During the 22 trading days following a drawdown request, CEL-SCI will
calculate the amount of shares it will sell to Rubicon Group and the purchase
price per share. The purchase price per share of common stock will be based on
the daily volume weighted average price of CEL-SCI's common stock during each of
the 22 trading days immediately following the drawdown date, less a discount of
11%.
The minimum amount CEL-SCI can draw down at any one time is $100,000. The
maximum amount CEL-SCI can draw down at any one time is the lesser of $2,000,000
or the amount equal to:
o 4.5% of the weighted average price of CEL-SCI's common stock for the ninety
calendar day period prior to the date of the drawdown request
o multiplied by the total trading volume of CEL-SCI's common stock for the
ninety calendar day period prior to the date of the drawdown request.
CEL-SCI may request a drawdown by faxing a drawdown notice to Rubicon
Group, stating the amount of the drawdown and the lowest daily volume weighted
average price, if any, at which CEL-SCI is willing to sell the shares. The
lowest volume weighted average price will be set by CEL-SCI's Chief Executive
Officer in his sole and absolute discretion.
If CEL-SCI sets a minimum price which is too high and CEL-SCI's stock
price does not consistently meet that level during the 22 trading days after its
drawdown request, the amount CEL-SCI can draw and the number of shares CEL-SCI
will sell to Rubicon Group will be reduced. On the other hand, if CEL-SCI sets a
minimum price which is too low and its stock price falls significantly but stays
above the minimum price, CEL-SCI will have to issue a greater number of shares
to Rubicon Group based on the reduced market price.
The following summarizes the drawdowns requested by CEL-SCI under the
equity line of credit as of June 15, 2004.
Date of Shares Average Sale Net Proceeds
Sale Sold Price Per Share to CEL-SCI
------ ----- --------------- -----------
01/27/04 101,308 $1.09 $109,000
02/11/04 92,722 $1.19 $109,000
03/02/04 74,760 $1.07 $ 79,000
03/12/04 38,292 $1.04 $ 39,000
The net proceeds to CEL-SCI are net of a $1,000 fee paid to an escrow
agent.
C. The options are exercisable at prices ranging from $0.16 to $11.00 per share
with a weighted average exercise price of $0.76 per share. CEL-SCI may also
grant options to purchase additional shares under its Incentive Stock Option and
Non-Qualified Stock Option Plans.
D. CEL-SCI has granted options for the purchase of 150,000 shares of common
stock to Investor Relations Group in consideration for services provided to
CEL-SCI. The services provided to CEL-SCI involved the introduction of CEL-SCI
to brokers and fund managers and distribution of CEL-SCI's press releases and
other information regarding CEL-SCI. The options are exercisable at a price of
$1.63 per share and expire June 2006.
USE OF PROCEEDS
All of the shares offered by this Prospectus are being offered by certain
owners of CEL-SCI's common stock (the Selling Shareholders) and were issued by
CEL-SCI in connection with CEL-SCI's employee stock bonus or stock option plans.
None of the proceeds from this offering will be received by CEL-SCI. Expenses
expected to be incurred by CEL-SCI in connection with this offering are
estimated to be approximately $10,000. The Selling Shareholders have agreed to
pay all commissions and other compensation to any securities broker/dealers
through whom they sell any of the Shares.
SELLING SHAREHOLDERS
CEL-SCI has issued (or may in the future issue) shares of its common stock
to various persons pursuant to certain employee incentive plans adopted by
CEL-SCI. The employee incentive plans provide for the grant, to selected
employees of CEL-SCI and other persons, of either stock bonuses or options to
purchase shares of CEL-SCI's common stock. Persons who received Shares pursuant
to the Plans and who are offering such Shares to the public by means of this
Prospectus are referred to as the "Selling Shareholders".
CEL-SCI has adopted a number of Stock Option Plans as well as a Stock
Bonus Plan. A summary description of these Plans follows. In some cases these
Plans are collectively referred to as the "Plans".
Incentive Stock Option Plans. CEL-SCI has Incentive Stock Option Plans
which collectively authorize the issuance of up to 5,100,000 shares of CEL-SCI's
Common Stock to persons that exercise options granted pursuant to the Plan. Only
Company employees may be granted options pursuant to the Incentive Stock Option
Plan.
Non-Qualified Stock Option Plans. CEL-SCI has Non-Qualified Stock Option
Plans which collectively authorize the issuance of up to 8,760,000 shares of
CEL-SCI's Common Stock to persons that exercise options granted pursuant to the
Plans. CEL-SCI's employees, directors, officers, consultants and advisors are
eligible to be granted options pursuant to the Plans, provided however that bona
fide services must be rendered by such consultants or advisors and such services
must not be in connection with the offer or sale of securities in a
capital-raising transaction. The option exercise price is determined by the
Committee but cannot be less than the market price of CEL-SCI's Common Stock on
the date the option is granted.
Stock Bonus Plans. CEL-SCI has Stock Bonus Plans which collectively allow
for the issuance of up to 2,940,000 shares of Common Stock. Such shares may
consist, in whole or in part, of authorized but unissued shares, or treasury
shares. Under the Stock Bonus Plan, CEL-SCI s employees, directors, officers,
consultants and advisors are eligible to receive a grant of CEL-SCI's shares,
provided however that bona fide services must be rendered by consultants or
advisors and such services must not be in connection with the offer or sale of
securities in a capital-raising transaction.
Summary. The following sets forth certain information, as of June 15,
2004, concerning the stock options and stock bonuses granted by CEL-SCI. Each
option represents the right to purchase one share of CEL-SCI's Common Stock.
Total Shares
Shares Reserved for Shares Remaining
Reserved Outstanding Issued as Options/Shares
Name of Plan Under Plans Options Stock Bonus Under Plans
- ------------ ----------- ------------ ----------- --------------
Incentive Stock Option
Plans 5,100,000 3,886,100 N/A 1,112,315
Non-Qualified Stock
Option Plans 8,760,000 6,293,804 N/A 1,151,899
Stock Bonus Plans 2,940,000 N/A 1,237,444 1,705,856
The following table summarizes the options granted to CEL-SCI's officers,
directors, employees and consultants pursuant to the Plans as of June 15, 2004.
Certain options were granted in accordance with CEL-SCI's Salary Reduction Plan.
Pursuant to the Salary Reduction Plan, any employee of CEL-SCI was allowed to
receive options (exercisable at market price at time of grant) in exchange for a
reduction in such employee's salary.
Name of Option Holder Shares Subject to Options (1)
--------------------- -----------------------------
Maximilian de Clara 1,149,998
Geert R. Kersten 3,780,000
Name of Option Holder Shares Subject to Options (1)
--------------------- -----------------------------
John Cipriano 100,000
Patricia B. Prichep 1,160,000
Eyal Talor, Ph.D. 748,332
Daniel Zimmerman, Ph.D. 784,000
Alexander G. Esterhazy 360,000
C. Richard Kinsolving, Ph.D. 360,000
Peter R. Young, Ph.D. 159,999
Employees and consultants to Company 1,954,683
(1) The options issued to CEL-SCI's officers and directors are exercisable at
prices ranging from $0.16 to $1.94 per share. The other options issued to
the employees and consultants are exercisable at prices ranging from $0.22
to $11.00 per share.
Shares issuable upon the exercise of options granted to CEL-SCI's officers
and directors pursuant to the Plans, as well as shares issued pursuant to the
Stock Bonus Plan, are being offered by means of this Prospectus. The following
table provides certain information concerning the shareholdings of CEL-SCI's
officers and directors and the shares offered by means of this Prospectus as of
June 15, 2004.
Number of Shares Number of Shares
Name of Being Offered to be Owned on Percent
Selling Number of Option Bonus Completion of of
Shareholder Shares Owned Shares (2) Shares the Offering Class
- ----------- ------------ ---------- ------ ---------------- -------
Maximilian de Clara 1,380,351 1,149,998 -- 1,380,351 1.9%
Geert R. Kersten (1) 2,398,342 3,780,000 -- 2,398,342 3.3%
John Cipriano -- 100,000 -- --
Patricia B. Prichep 489,338 1,160,000 -- 489,338 *
Eyal Talor, Ph.D. 396,637 748,332 -- 396,637 *
Daniel Zimmerman, Ph.D. 416,033 784,000 -- 416,033 *
Alexander G. Esterhazy -- 360,000 -- -- --
C. Richard Kinsolving,
Ph.D. 69,090 360,000 -- 69,090 *
Peter R. Young, Ph.D. 14,601 159,999 -- 14,601
* Less than 1%.
(1) Includes shares held in trusts for the benefit of Mr. Kersten's children.
(2) Represents shares issued or issuable upon exercise of stock options.
Mr. de Clara and Mr. Kersten are both officers and directors of CEL-SCI.
Mr. Esterhazy, Mr. Kinsolving and Mr. Young are directors of CEL-SCI. The other
persons in the foregoing tables are officers of CEL-SCI.
Each Selling Shareholder has represented that the Shares were purchased
for investment and with no present intention of distributing or reselling such
Shares. However, in recognition of the fact that holders of restricted
securities may wish to be legally permitted to sell their Shares when they deem
appropriate, CEL-SCI has filed with the Commission under the Securities Act of
1933 a Form S-8 registration statement of which this Prospectus forms a part
with respect to the resale of the Shares from time to time in the
over-the-counter market or in privately negotiated transactions.
Certain of the Selling Shareholders, their associates and affiliates may
from time to time be employees of, customers of, engage in transactions with,
and/or perform services for CEL-SCI or its subsidiaries in the ordinary course
of business.
PLAN OF DISTRIBUTION
The Selling Shareholders may sell the Shares offered by this Prospectus
from time to time in negotiated transactions in the over-the-counter market at
fixed prices which may be changed from time to time, at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Selling Shareholders may effect such transactions by
selling the Shares to or through broker/dealers, and such broker/dealers may
receive compensation in the form of discounts, concessions, or commissions from
the Selling Shareholders and/or the purchasers of the Shares for which such
broker/dealers may act as agent or to whom they may sell, as principal, or both
(which compensation as to a particular broker/dealer may be in excess of
customary compensation).
The Selling Shareholders and any broker/dealers who act in connection with
the sale of the Shares hereunder may be deemed to be "underwriters" within the
meaning of ss.2(11) of the Securities Acts of 1933, and any commissions received
by them and profit on any resale of the Shares as principal might be deemed to
be underwriting discounts and commissions under the Securities Act. CEL-SCI has
agreed to indemnify the Selling Shareholders and any securities broker/dealers
who may be deemed to be underwriters against certain liabilities, including
liabilities under the Securities Act as underwriters or otherwise.
CEL-SCI has advised the Selling Shareholders that they and any securities
broker/dealers or others who may be deemed to be statutory underwriters will be
subject to the Prospectus delivery requirements under the Securities Act of
1933. CEL-SCI has also advised each Selling Shareholder that in the event of a
"distribution" of the shares owned by the Selling Shareholder, such Selling
Shareholder, any "affiliated purchasers", and any broker/ dealer or other person
who participates in such distribution may be subject to Rule 102 under the
Securities Exchange Act of 1934 ("1934 Act") until their participation in that
distribution is completed. A "distribution" is defined in Rule 102 as an
offering of securities "that is distinguished from ordinary trading transactions
by the magnitude of the offering and the presence of special selling efforts and
selling methods". CEL-SCI has also advised the Selling Shareholders that Rule
101 under the 1934 Act prohibits any "stabilizing bid" or "stabilizing purchase"
for the purpose of pegging, fixing or stabilizing the price of the Common Stock
in connection with this offering.
DESCRIPTION OF SECURITIES
Common Stock
CEL-SCI is authorized to issue 100,000,000 shares of common stock, (the
"common stock"). Holders of common stock are each entitled to cast one vote for
each share held of record on all matters presented to shareholders. Cumulative
voting is not allowed; hence, the holders of a majority of the outstanding
common stock can elect all directors.
Holders of common stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor and,
in the event of liquidation, to share pro rata in any distribution of CEL-SCI's
assets after payment of liabilities. The board is not obligated to declare a
dividend. It is not anticipated that dividends will be paid in the foreseeable
future.
Holders of common stock do not have preemptive rights to subscribe to
additional shares if issued by CEL-SCI. There are no conversion, redemption,
sinking fund or similar provisions regarding the common stock. All of the
outstanding shares of common stock are fully paid and non-assessable.
Preferred Stock
CEL-SCI is authorized to issue up to 200,000 shares of preferred stock.
CEL-SCI's Articles of Incorporation provide that the Board of Directors has the
authority to divide the preferred stock into series and, within the limitations
provided by Colorado statute, to fix by resolution the voting power,
designations, preferences, and relative participation, special rights, and the
qualifications, limitations or restrictions of the shares of any series so
established. As the Board of Directors has authority to establish the terms of,
and to issue, the preferred stock without shareholder approval, the preferred
stock could be issued to defend against any attempted takeover of CEL-SCI. As of
June 15, 2004 no shares of preferred stock were outstanding.
Warrants Held by Private Investors
In August 2001, three private investors exchanged their warrants for
CEL-SCI's Series E warrants. As of June 15, 2004 the Series E warrants
collectively allowed the holders to purchase up to 570,627 additional shares of
CEL-SCI's common stock at a price of $1.19 per share at any time prior to August
16, 2004. In August 2003, in accordance with the terms of the Series E preferred
stock, CEL-SCI issued warrants which permit the holders to purchase an
additional 23,758 shares of CEL-SCI's common stock at a price of $0.77 per share
at any time prior to August 17, 2006.
In July and September 2002, CEL-SCI sold Series G convertible notes, plus
Series G warrants, to a group of private investors for $1,300,000. All of the
Series G convertible notes have since been converted into shares of CEL-SCI's
common stock. As of June 15, 2004 the Series G warrants collectively allowed the
holders to purchase up to 450,000 shares of CEL-SCI's common stock at a price of
$0.145 per share at any time prior to July 12, 2009. Every three months after
June 9, 2004, the exercise price of the Series G warrants will be adjusted to an
amount equal to 84% of the average of the 3 lowest daily trading prices of
CEL-SCI's common stock on the American Stock Exchange during the 20 trading days
immediately prior to the three month adjustment date, provided that the adjusted
price is lower than the warrant exercise price on that date.
In January and July 2003, CEL-SCI sold Series H convertible notes, plus
Series H warrants, to a group of private investors for $1,350,000. All of the
Series H Convertible notes have since been converted into shares of CEL-SCI's
common stock. As of June 15, 2004 the Series H warrants collectively allowed the
holders to purchase up to 550,000 shares of CEL-SCI's common stock at a price of
$0.25 per share at any time prior to January 7, 2010. Every three months after
June 26, 2004 the exercise price of the Series H warrants will be adjusted to an
amount equal to 84% of the average of the 3 lowest daily trading prices of
CEL-SCI's common stock on the American Stock Exchange during the 15 trading days
immediately prior to the three month adjustment date, provided that the adjusted
price is lower than the warrant exercise price on that date.
If CEL-SCI sells any additional shares of common stock, or any securities
convertible into common stock at a price below the then applicable exercise
price of the Series G or H warrants, the warrant exercise price will be lowered
to the price at which the shares were sold or the lowest price at which the
securities are convertible, as the case may be. If the warrant exercise price is
adjusted, the number of shares of common stock issuable upon the exercise of the
warrant will be increased by the product of the number of shares of common stock
issuable upon the exercise of the warrant immediately prior to the sale
multiplied by the percentage by which the warrant exercise price is reduced.
If CEL-SCI sells any additional shares of common stock, or any securities
convertible into common stock at a price below the market price of CEL-SCI's
common stock, the exercise price of the Series G or H warrants will be lowered
by a percentage equal to the price at which the shares were sold or the lowest
price at which the securities are convertible, as the case may be, divided by
the then prevailing market price of CEL-SCI's common stock. If the warrant
exercise price is adjusted, the number of shares of common stock issuable upon
the exercise of the warrant will be increased by the product of the number of
shares of common stock issuable upon the exercise of the warrant immediately
prior to the sale multiplied by the percentage determined by dividing the price
at which the shares were sold by the market price of CEL-SCI's common stock on
the date of sale.
However, neither the exercise price of the Series G or H warrants nor the
shares issuable upon the exercise of the Series G or H warrants will be adjusted
as the result of shares issued in connection with a Permitted Financing. A
Permitted Financing involves shares of common stock issued or sold:
o in connection with a merger or acquisition or a strategic partnership;
o upon the exercise of options or the issuance of common stock to CEL-SCI's
employees, officers, directors, consultants and vendors in accordance with
CEL-SCI's equity incentive policies;
o pursuant to the conversion or exercise of securities which were outstanding
prior to July 12, 2002 in the case of the Series G warrants and January 7,
2003 in the case of the Series H warrants;
o to key officers of CEL-SCI in lieu of their respective salaries.
In May 2003, CEL-SCI sold shares of its common stock plus Series I
warrants to a private investor, at prices equal to or above the then current
price of CEL-SCI's common stock. As of June 15, 2004 the Series I warrants
allowed the holder to purchase 1,100,000 shares of CEL-SCI's common stock at a
price of $0.47 per share at any time prior to May 30, 2008.
In September 2003, CEL-SCI entered into an equity line of credit agreement
with Rubicon Group Ltd. in order to establish a possible source of funding for
the development of CEL-SCI's technologies. As consideration for extending the
equity line of credit, CEL-SCI granted Rubicon Group warrants to purchase
395,726 shares of common stock at a price of $0.83 per share at any time prior
to September 16, 2008.
On December 1, 2003, CEL-SCI sold 2,999,964 shares of its common stock to
a group of private institutional investors for approximately $2,550,000, or
$0.85 per share. As part of this transaction, the investors and the sales agent
for a number of the investors received Series J warrants which, as of June 15,
2004, allowed the investors to purchase 991,003 shares of CEL-SCI's common stock
at a price of $1.32 per share at any time prior to December 1, 2006.
All of the private investors referred to above were accredited investors.
Transfer Agent
Computershare Trust Co., Inc., of Denver, Colorado, is the transfer agent
for CEL-SCI's common stock.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference from the Company's Annual Report on Form 10-K/A for the year ended
September 30, 2003 have been audited by Deloitte & Touche LLP, an independent
registered public accounting firm, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
GENERAL
CEL-SCI's Bylaws provide that CEL-SCI will indemnify its directors and
officers against expense and liabilities they incur to defend, settle or satisfy
any civil or criminal action brought against them as a result of their being or
having been CEL-SCI directors or officers unless, in any such action, they have
acted with gross negligence or willful misconduct. Officers and Directors are
not entitled to be indemnified for claims or losses resulting from a breach of
their duty of loyalty to CEL-SCI, for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law or a
transaction from which the director derived an improper personal benefit.
Insofar as indemnification for liabilities arising under the Securities Act of
l933 may be permitted to CEL-SCI's directors and officers, CEL-SCI has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
l933, and is, therefore, unenforceable.
No dealer, salesman, or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus in connection with this offering and, if given or made, such
information or representations must not be relied upon as having been authorized
by CEL-SCI or the selling shareholders. This prospectus does not constitute an
offer to sell, or a solicitation of any offer to buy, the securities offered in
any jurisdiction to any person to whom it is unlawful to make an offer or
solicitation. Neither the delivery of this prospectus nor any sale made
hereunder shall, under any circumstances, create an implication that there has
not been any change in the affairs of CEL-SCI since the date hereof or that any
information contained herein is correct as to any time subsequent to its date.
All dealers effecting transactions in the registered securities, whether
or not participating in this distribution, may be required to deliver a
prospectus. This is an addition to the obligation of dealers to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
PLAN PROSPECTUSCEL-SCI Corporation8229 Boone Blvd.Suite 802
Vienna, Virginia 22314
(703) 506-9460
COMMON STOCK
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus relates to shares of the Common Stock of the Company ("the
Company") issuable pursuant to certain employee incentive plans adopted by the
Company. The employee incentive plans provide for the grant, to selected
employees of the Company and other persons, of either stock bonuses or options
to purchase shares of the Company's Common Stock. The employee incentive plans
benefit the Company by giving selected employees and other persons having a
business relationship with the Company a greater personal interest in the
success of the Company.
Shares of Common Stock reserved under the Company's Incentive Stock Option
Plans are offered to those employees of the Company who hold options (or may in
the future hold options) to purchase such shares granted by the Company pursuant
to the Incentive Stock Option Plans.
Shares of Common Stock reserved under the Company's Non-Qualified Stock
Option Plans are offered to those persons who hold options (or may in the future
hold options) to purchase such shares granted by the Company pursuant to the
Non-Qualified Stock Option Plans.
Shares of Common Stock reserved under the Stock Bonus Plan are offered to
those persons granted, or may in the future be granted, shares of Common Stock
pursuant to the Stock Bonus Plan.
This document constitutes part of a Prospectus covering securities that
have been registered under the Securities Act of 1933.
The date of this Prospectus is , 2004.
The Company's Stock Option Plans, Non-Qualified Stock Option Plans and
Stock Bonus Plans are sometimes collectively referred to in this Prospectus as
"the Plans". The terms and conditions of any stock bonus and the terms and
conditions of any options, including the price of the shares of Common Stock
issuable on the exercise of options, are governed by the provisions of the
respective Plans and the stock bonus or stock option agreements between the
Company and the Plan participants.
Offers or resales of shares of Common Stock acquired under the Plan by
"affiliates" of the Company are subject to certain restrictions under the
Securities Act of l933. See "RESALE OF SHARES BY AFFILIATES".
No person has been authorized to give any information, or to make any
representations, other than those contained in this Prospectus, in connection
with the shares offered by this Prospectus, and if given or made, such
information or representations must not be relied upon. This Prospectus does not
constitute an offering in any state or jurisdiction to any person to whom it is
unlawful to make such offer in such state or jurisdiction.
The Company's Common Stock is traded on the American Stock Exchange under
the symbol CVM.
With respect to the Company's Plans, the shares to which this prospectus
relates will be sold from time to time by the Company when and if options
granted pursuant to the Plans are exercised. In the case of shares issued by the
Company pursuant to the Stock Bonus Plans, the shares will be deemed to be sold
when the shares have been granted by the Company.
TABLE OF CONTENTS Page
AVAILABLE INFORMATION............................................ 4
DOCUMENTS INCORPORATED BY REFERENCE.............................. 4
GENERAL INFORMATION.............................................. 5
INCENTIVE STOCK OPTION PLANS..................................... 6
NON-QUALIFIED STOCK OPTION PLANS................................. 8
STOCK BONUS PLANS................................................ 9
OTHER INFORMATION REGARDING THE PLANS............................ 10
ADMINISTRATION OF THE PLANS...................................... 11
RESALE OF SHARES BY AFFILIATES................................... 11
AMENDMENT, SUSPENSION OR TERMINATION OF THE PLANS............. 12
DESCRIPTION OF COMMON STOCK.................................... 12
EXHIBITS:
Each Plan referred to in this Prospectus.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of l934 and in accordance therewith files reports, proxy
statements, and other information with the Securities and Exchange Commission.
Such reports, proxy statements, and other information concerning the Company can
be inspected at the Commission's office at 450 Fifth Street, N.W., Washington,
D.C. 20549. Copies of such material can be obtained from the Public Reference
Section of the Commission, Washington, D.C. 20549 at prescribed rates. Certain
information concerning the Company is also available at the Internet Web Site
maintained by the Securities and Exchange Commission at www.sec.gov.
All documents incorporated by reference, as well as other information
concerning the Plans, other than exhibits to such reports and documents, are
available, free of charge to holders of shares or options granted pursuant to
the Plans, upon written or oral request directed to: the (Attention: Employee
Plan Administrator), 8229 Boone Blvd., Suite 802, Vienna, Virginia 22182, (703)
506-9460.
This Prospectus does not contain all information set forth in the
Registration Statement, of which this Prospectus is a part, which the Company
has filed with the Commission under the Securities Act of l933 and to which
reference is hereby made. Each statement contained in this Prospectus is
qualified in its entirety by such reference.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission are incorporated by reference in this Registration
Statement: Annual Report on Form 10-K for the year ended September 30, 2003,
Annual Report on Form l0-K/A for the year ended September 30, 2003, report on
Form 10-Q for the quarter ended December 31, 2003, report on Form 10-Q for the
quarter ended March 31, 2004 and Proxy Statement relating to the Company's May
6, 2004 Annual Meeting of Shareholders. All reports and documents subsequently
filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, prior to the filing of a post-effective
amendment to this Registration Statement of which this Prospectus is a part
which indicates that all securities offered hereby have been sold or which
deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference in this Prospectus and to be a part thereof from the
date of filing of such reports or documents.
The Company does not intend to update this Prospectus in the future unless
and until there is a material change in the information contained herein.
GENERAL INFORMATION
The Company has Incentive Stock Option Plans, Non-Qualified Stock Option
Plans and Stock Bonus Plans. In some cases the plans described above are
collectively referred to as the "Plans". The terms and conditions of any stock
bonus and the terms and conditions of any options, including the price of the
shares of Common Stock issuable on the exercise of options, are governed by the
provisions of the respective Plans and the stock bonus or stock option
agreements between the Company and the Plan participants.
A summary of the Company's Plans follows.
Incentive Stock Option Plans. The Company has Incentive Stock Option Plans
which collectively authorize the issuance of up to 5,100,000 shares of the
Company's Common Stock to persons that exercise options granted pursuant to the
Plans. Only Company employees may be granted options pursuant to the Incentive
Stock Option Plan.
Non-Qualified Stock Option Plans. The Company has Non-Qualified Stock
Option Plans which collectively authorize the issuance of up to 8,760,000 shares
of the Company's Common Stock to persons that exercise options granted pursuant
to the Plans. The Company's employees, directors, officers, consultants and
advisors are eligible to be granted options pursuant to the Plans, provided
however that bona fide services must be rendered by such consultants or advisors
and such services must not be in connection with the offer or sale of securities
in a capital-raising transaction. The option exercise price is determined by the
Committee but cannot be less than the market price of the Company's Common Stock
on the date the option is granted.
Stock Bonus Plans. The Company has Stock Bonus Plans which collectively
allow for the issuance of up to 2,940,000 shares of Common Stock. Such shares
may consist, in whole or in part, of authorized but unissued shares, or treasury
shares. Under the Stock Bonus Plan, the Company's employees, directors,
officers, consultants and advisors are eligible to receive a grant of the
Company's shares, provided however that bona fide services must be rendered by
consultants or advisors and such services must not be in connection with the
offer or sale of securities in a capital-raising transaction.
Summary. The following sets forth certain information, as of June 15,
2004, concerning the stock options and stock bonuses granted by the Company.
Each option represents the right to purchase one share of the Company's Common
Stock.
Total Shares
Shares Reserved for Shares Remaining
Reserved Outstanding Issued as Options/Shares
Name of Plan Under Plans Options Stock Bonus Under Plans
- ------------ ----------- ------------ ----------- --------------
Incentive Stock Option
Plans 5,100,000 3,886,100 N/A 1,112,315
Non-Qualified Stock
Option Plans 8,760,000 6,293,804 N/A 1,151,899
Stock Bonus Plans 2,940,000 N/A 1,237,444 1,702,856
TOTAL:
The following table summarizes the options granted to the Company's
officers, directors, employees and consultants pursuant to the Plans as of June
15, 2004:
Name of Option Holder Shares Subject to Options (1)
--------------------- -----------------------------
Maximilian de Clara 1,149,998
Geert R. Kersten 3,780,000
John Cipriano 100,000
Patricia B. Prichep 1,160,000
Eyal Talor, Ph.D 748,332
Daniel Zimmerman 784,000
Alexander G. Esterhazy 360,000
C. Richard Kinsolving 360,000
Peter R. Young 159,999
Employees and consultants to Company 1,954,683
(1) The options issued to the Company's officers and directors are exercisable
at prices ranging from $0.16 to $1.94 per share. The other options issued to
the employees and consultants are exercisable at prices ranging from $0.22
to $11.00 per share. Certain options were granted in accordance with the
Company's Salary Reduction Plan. Pursuant to the Salary Reduction Plan, any
employee of the Company was allowed to receive options (exercisable at
market price at time of grant) in exchange for a reduction in such
employee's salary.
INCENTIVE STOCK OPTION PLANS
Securities to be Offered and Persons Who May Participate in the Plans
All employees of the Company are eligible to be granted options pursuant
to the Plans as may be determined by the Company's Board of Directors which
administers the Plans.
Options granted pursuant to the Plans terminate at such time as may be
specified when the option is granted.
The total fair market value of the shares of Common Stock (determined at
the time of the grant of the option) for which any employee may be granted
options which are first exercisable in any calendar year may not exceed
$l00,000.
In the discretion of the Board of Directors, options granted pursuant to
the Plans may include installment exercise terms for any option such that the
option becomes fully exercisable in a series of cumulating portions. The Board
of Directors may also accelerate the date upon which any option (or any part of
any option) is first exercisable. However, no option, or any portion thereof may
be exercisable until one year following the date of grant. In no event shall an
option granted to an employee then owning more than l0% of the Common Stock of
the Company be exercisable by its terms after the expiration of five years from
the date of grant, nor shall any other option granted pursuant to the Plans be
exercisable by its terms after the expiration of ten years from the date of
grant.Purchase of Securities Pursuant to the Plans
The purchase price per share of common stock purchasable under an option
is determined by the Board of Directors but cannot be less than the fair market
value of the Common Stock on the date of the grant of the option (or 110% of the
fair market value in the case of a person owning more than 10% of the Company's
outstanding shares). An option may be exercised, in whole or in part, at any
time, or in part, from time to time, during the option period, by giving written
notice of exercise to the Board of Directors at the Company's offices specifying
the number of shares to be purchased, such notice to be accompanied by payment
in full of the purchase price either by a payment of cash, bank draft or money
order payable to the Company. At the discretion of the Board of Directors
payment of the purchase price for shares of Common Stock underlying options may
be paid through the delivery of shares of the Company's Common Stock having an
aggregate fair market value equal to the option price, provided such shares have
been owned by the option holder for at least one year prior to such exercise. A
combination of cash and shares of Common Stock may also be permitted at the
discretion of the Board of Directors. No shares shall be issued until full
payment has been made. An optionee shall have the rights of a stockholder only
with respect to shares of stock for which certificates have been issued. Under
no circumstances may an option be exercised after the expiration of the option.
Tax Aspects of Incentive Stock Options Granted Under the Plans
Options granted under the Plans will be incentive stock options within the
meaning of Section 422 of the Internal Revenue Code (the "Code") and will be
subject to the provisions of the Code. Generally, if Common Stock of the Company
is issued to an employee pursuant to an option granted as described below, and
if no disqualifying disposition of such shares is made by such employee within
one year after the transfer of such shares to him or within two years after the
date of grant: (a) no income will be realized by the employee at the time of the
grant of the option; (b) no income will be realized by the employee at the date
of exercise; (c) when the employee sells such shares, any amount realized in
excess of the option price will be taxed as a long-term capital gain and any
loss sustained will be a long-term capital loss; and (d) no deduction will be
allowed to the Company for federal income tax purposes. Generally, if any
disqualifying disposition of such shares is made by an employee within one year
after the transfer of such shares to him, or within two years after the date of
grant, the difference between the amount paid for the shares upon exercise of
the option and the fair market value of the shares on the date the option was
exercised will be taxed as ordinary income in the year the disqualifying
disposition occurs and the Company will be allowed a deduction for such amount.
However, if such disqualifying disposition is a sale or exchange for which a
loss would have been recognized (if sustained), the amount taxed to the employee
as ordinary income (and deductible by the Company) will be limited to the excess
of the amount realized upon such sale or exchange over the amount paid for the
shares where such excess is less than the amount referred to in the preceding
sentence. This limitation does not apply to a disposition of the type as to
which losses (if sustained) are not recognized as deductible losses for income
tax purposes, e.g., a gift, a sale to certain related persons or a so-called
"wash" sale (a sale within 30 days before or after the acquisition of the
Company's shares or the receipt of an option or the entering into a contract to
buy the Company's shares). If the shares are sold in a disqualifying disposition
during such one-year period and the amount realized is in excess of the fair
market value of the shares at the time of exercise, such excess will be taxed as
a long-term or short-term capital gain depending upon the holding period.
An employee who exercises an incentive stock option may be subject to the
alternative minimum tax since the difference between the option price and the
fair market value of the stock on the date of exercise is an item of tax
preference. However, no item of preference will result if a disqualifying
disposition is made of the optioned stock.
NON-QUALIFIED STOCK OPTION PLANS
Securities to be Offered and Persons Who May Participate in the Plans
The Company's employees, directors and officers, and consultants or
advisors to the Company are eligible to be granted options pursuant to the Plans
as may be determined by the Company's Board of Directors which administers the
Plans, provided however that bona fide services must be rendered by such
consultants or advisors and such services must not be in connection with the
offer or sale of securities in a capital-raising transaction.
Options granted pursuant to the Plans terminate at such time as may be
specified when the option is granted.
In the discretion of the Board of Directors options granted pursuant to
the Plans may include installment exercise terms for any option such that the
option becomes fully exercisable in a series of cumulating portions. The Board
of Directors may also accelerate the date upon which any option (or any part of
any option) is first exercisable. In no event shall an option be exercisable by
its terms after the expiration of ten years from the date of grant.
Purchase of Securities Pursuant to the Plans
The purchase price per share of common stock purchasable under an option
is determined by the Board of Directors but cannot be less than the market price
of the Company's Common Stock on the date the option is granted. An option may
be exercised, in whole or in part, at any time, or in part, from time to time,
during the option period, by giving written notice of exercise to the Board of
Directors at the Company's offices specifying the number of shares to be
purchased, such notice to be accompanied by payment in full of the purchase
price either by a payment of cash, bank draft or money order payable to the
Company. At the discretion of the Board of Directors payment of the purchase
price for shares of Common Stock underlying options may be paid through the
delivery of shares of the Company's Common Stock having an aggregate fair market
value equal to the option price, provided such shares have been owned by the
option holder for at least one year prior to such exercise. A combination of
cash and shares of Common Stock may also be used at the discretion of the Board
of Directors. No shares shall be issued until full payment has been made. An
optionee shall have the rights of a stockholder only with respect to shares of
stock for which certificates have been issued. Under no circumstances may an
option be exercised after the expiration of the option.
Tax Aspects of Options Granted Under the Plans
The difference between the option price and the market value of the shares
on the date the option is exercised is taxable as ordinary income to an Optionee
at the time of exercise and to the extent such difference does not constitute
unreasonable compensation is deductible by the Company at that time. Gain or
loss on any subsequent sale of shares received through the exercise of an option
will be treated as capital gain or loss.
Since the amount of income realized by an Optionee on the exercise of an
option under the Plans represents compensation for services provided to the
Company, the Company may be required to withhold income taxes from the
Optionee's income even though the compensation is not paid in cash. To withhold
the appropriate tax on the transfer of the shares, the Company will (i) reduce
the number of shares issued or distributed to reflect the necessary withholding,
(ii) withhold the appropriate tax from other compensation due to the Optionee,
or (iii) condition the transfer of any shares to the Optionee on the payment to
the Company of an amount equal to the taxes required to be withheld.
STOCK BONUS PLANS
Securities to be Offered and Persons Who May Participate in the Plans
Under the Stock Bonus Plans, the Company's employees, directors and
officers, and consultants or advisors to the Company will be eligible to receive
a grant of the Company's shares, provided however that bona fide services must
be rendered by such consultants or advisors and such services must not be in
connection with the offer or sale of securities in a capital-raising
transaction. The aggregate number of shares which may be granted may not exceed
the amount available in the Bonus Share Reserve. The grant of the Company's
shares rests entirely with the Company's Board of Directors which administer the
Plan. It is also left to the Board of Directors to decide the type of vesting
and transfer restrictions which will be placed on the shares.
Shares of Common Stock which may be granted under the Stock Bonus Plans
(the "Bonus Share Reserve") may consist, in whole or in part, of authorized but
unissued shares or treasury shares.
Tax Aspects of Shares Granted Pursuant to the Plan
Any shares of stock transferred to any person pursuant to the Stock Bonus
Plan will be subject to the provisions of Section 83 of the Internal Revenue
Code. Consequently, if (and so long as) the shares received remain substantially
nonvested, the recipient of the shares will not have to include the value of
these shares in gross income. The shares will remain substantially nonvested so
long as they are subject to a substantial risk of forfeiture and are
nontransferable. A substantial risk of forfeiture exists if a person's rights in
the shares are conditioned upon the future performance of substantial services.
Nontransferability will exist if a person is restricted from selling, assigning
or pledging these shares, and, if transfer is permitted, a transferee is
required to take the shares subject to the substantial risk of forfeiture.
However, in the year such shares become either transferable or not subject to a
substantial risk of forfeiture, the recipient of the shares will be required to
include in gross income for that taxable year the excess of the share's fair
market value at the time they became vested over the amount (if any) paid for
such shares. This amount will be taxable as ordinary compensation income.
There is available an election through which a person can choose to
recognize as ordinary income in the year of transfer the excess of the share's
fair market value at the time of transfer over the amount (if any) the person
paid for such shares. By making this election any future appreciation
(depreciation) in value will be treated as appreciation (depreciation)
attributable to a capital asset rather than as compensation income. An election
to be valid must be made within thirty (30) days of the date on which the shares
are issued by the Company.
The Company does not recognize income when granting or transferring shares
to the recipient of the shares pursuant to the Plan. Furthermore, Section 83
permits the Company to take an ordinary business deduction equal to the amount
includible by the recipient of the shares in the year the recipient recognizes
the value of the shares as income.
OTHER INFORMATION REGARDING THE PLANS
All shares to be issued pursuant to the Plans will, prior to the time of
issuance, constitute authorized but unissued shares or treasury shares.
The terms and conditions upon which a person will be permitted to assign
or hypothecate options or shares received pursuant to any of the Plans will be
determined by the Company's Board of Directors which administers the Plans. In
general, however, options are non-transferable except upon death of the option
holder. Shares issued pursuant to the Stock Bonus Plan will generally not be
transferable until the person receiving the shares satisfies the vesting
requirements imposed by the Committee when the shares were issued.
Any shares issued pursuant to the Stock Bonus Plan and any options granted
pursuant to the stock option Plans will be forfeited if the "vesting" schedule
established by the Committee administering the Plan at the time of the grant is
not met. For this purpose, vesting means the period during which the employee
must remain an employee of the Company or the period of time a non-employee must
provide services to the Company. At the time an employee ceases working for the
Company (or at the time a non-employee ceases to perform services for the
Company), any shares or options not fully vested will be forfeited and
cancelled.
Employment by the Company does not include a right to receive bonus shares
or options pursuant to the Plans. Only the Board of Directors has the authority
to determine which persons shall be issued bonus shares or granted options and,
subject to the limitations described elsewhere in this Prospectus and in the
Plans, the number of shares of Common Stock issuable as bonus shares or upon the
exercise of any options.
The Plans are not qualified under Section 401(a) of the Internal Revenue
Code, nor are they subject to any provisions of the Employee Retirement Income
Security Act of 1974.
The description of the federal income tax consequences as set forth in
this Prospectus is intended merely as an aid for such persons eligible to
participate in the Plans, and the Company assumes no responsibility in
connection with the income tax liability of any person receiving shares or
options pursuant to the Plans. Persons receiving shares or options pursuant to
the Plans are urged to obtain competent professional advice regarding the
applicability of federal, state and local tax laws.
As of the date of this Prospectus, and except with respect to shares or
options which have not yet vested, no terms of any Plan or any contract in
connection therewith creates in any person a lien on any of the securities
issuable by the Company pursuant to the Plans.
ADMINISTRATION OF THE PLANS
The Plans are administered by the Company's Board of Directors. All
directors serve for a one-year term or until their successors are elected. Any
director may be removed at any time by a majority vote of the Company's
shareholders present at any meeting called for the purpose of removing a
director. Any vacancies which may occur on the Board of Directors will be filled
by the remaining Directors. The Board of Directors is vested with the authority
to interpret the provisions of the Plans and supervise the administration of the
Plans. In addition, the Board of Directors is empowered, to select eligible
employees of the Company 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.
The Company's directors are elected each year at the annual shareholder's
meeting.
RESALE OF SHARES BY AFFILIATES
Shares of Common Stock acquired pursuant to the Plans may be resold
freely, except that any person deemed to be an "affiliate" of the Company,
within the meaning of the Securities Act of l933 (the "Act") and the rules and
regulations promulgated thereunder, may not sell shares acquired by virtue of
the Plans unless such shares are sold by means of a special Prospectus, are
otherwise registered by the Company under the Securities Act for resale by such
person or an exemption from registration under the Act is available. In any
event, the sale of shares by affiliates will be limited in amount to the number
of shares which can be sold by Rule 144(e). An employee who is not an officer or
director of the Company generally would not be deemed an "affiliate" of the
Company.
In addition, the of shares or options by officers and directors will
generally be considered a "sale" for purposes of Section l6(b) of the Securities
Exchange Act of l934.
AMENDMENT, SUSPENSION OR TERMINATION OF PLANS
The Board of Directors of the Company may at any time, and from time to
time, amend, terminate, or suspend one or more of the Plans in any manner they
deem appropriate, provided that such amendment, termination or suspension shall
not adversely affect rights or obligations with respect to shares or options
previously granted. The Board of Directors may not, without shareholder
approval: make any amendment which would materially modify the eligibility
requirements for the Plans; increase or decrease the total number of shares of
Common Stock which may be issued pursuant to Incentive Stock Option Plans except
in the case of a reclassification of the Company's capital stock or a
consolidation or merger of the Company; extend the period for granting options;
or materially increase in any other way the benefits accruing to employees who
are eligible to participate in the Plans.
DESCRIPTION OF COMMON STOCK
The Common Stock issued as a stock bonus and the Common Stock issuable
upon the exercise of any options granted pursuant to the Plans entitles holders
to receive such dividends, if any, as the Board of Directors declares from time
to time; to cast one vote per share on all matters to be voted upon by
stockholders; and to share ratably in all assets remaining after the payment of
liabilities in the event of liquidation, dissolution or winding up of the
Company. The shares carry no preemptive rights. All shares offered under the
Plans will, upon issuance by the Company (and against receipt of the purchase
price in the case of options), be fully paid and non-assessable.