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EX-31.2 - CERTIFICATION - Tamir Biotechnology, Inc. | ex31-2.htm |
EX-31.1 - CERTIFICATION - Tamir Biotechnology, Inc. | ex31-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-K/A
Amendment
No. 1
[X]
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF
1934
|
For
the fiscal year ended July 31, 2009
[ ]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from __________ to
__________
|
0-11088
|
Commission
file number
|
ALFACELL
CORPORATION
(Exact
name of registrant as specified in its charter)
Delaware
|
22-2369085
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
300 Atrium Drive, Somerset,
New Jersey
(Address
of principal executive offices)
08873
(Zip
Code)
Registrant’s
telephone number, including area code: (732)
652-4525
Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to Section 12(g) of the Act: Common Stock, $.001
par value
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes
[ ] No [ X ]
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes
[ ] No [ X ]
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [ X ] No [ ]
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes [ ] No
[ ]
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definitions of
“accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange
Act. (Check one): Large Accelerated
Filer
[ ] Accelerated
Filer
[ ] Non-accelerated
Filer [ ]Smaller Reporting Company [
X ]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act) Yes
[ ] No [ X ]
The
aggregate market value of the common stock, par value $.001 per share, held by
non-affiliates based upon the reported last sale price of the common stock on
January 31, 2009, the end of the registrant’s second fiscal quarter, was
approximately $4,766,000. As of November 10, 2009 there were
47,313,880 shares of common stock outstanding.
Documents
Incorporated by Reference
None
EXPLANATORY
NOTE
Alfacell
Corporation (the “Company” or “Alfacell” or “we” or “our”) is filing this
Amendment No. 1 to its annual report on Form 10-K (the “Form 10-K/A”) for the
fiscal year ended July 31, 2009 as originally filed with the Securities and
Exchange Commission (“SEC”) on November 13, 2009 (the “Original Form 10-K”), to
include the information required by Part III of Form 10-K. Other than
the change on the cover of the Original Form 10-K to indicate that the Company’s
Common Stock is registered pursuant to Section 12(g) of the Act, the change on
the cover of the Original Form 10-K to indicate that the Company is a “Smaller
Reporting Company” not a “Non-accelerated Filer” and the deletion of the
reference on the cover of the Original Form 10-K to the incorporation by
reference of Alfacell’s definitive proxy statement and as set forth in Part III
below, no other changes are made to the Original Form 10-K. Our
definitive proxy statement will not be filed with the SEC within 120 days after
the end of our fiscal year July 31, 2009; therefore, we are filing this Form
10-K/A to provide the incorporated information within the required time
period. Unless expressly stated, this Form 10-K/A does not reflect
events occurring after the filing of the Original Form 10-K, nor does it modify
or update in any way the disclosures contained in the Original
Form 10-K.
TABLE
OF CONTENTS
PART
III
|
|||
ITEM
10.
|
Directors,
Executive Officers and Corporate Governance
|
4
|
|
ITEM
11.
|
Executive
Compensation
|
10
|
|
ITEM
12.
|
Security
Ownership of Certain Beneficial Owners
|
||
and
Management and Related Stockholder Matters
|
24
|
||
ITEM
13.
|
Certain
Relationships and Related Transactions and Director
Independence
|
26
|
|
ITEM
14.
|
Principal
Accounting Fees and Services
|
27
|
|
ITEM
15.
|
Exhibits
and Financial Statement Schedules
|
28
|
3
PART III
ITEM
10. DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE.
Board
of Directors
Name
|
Age
|
Director
Since
|
Current
Position With Company
|
John
P. Brancaccio
|
61
|
2004
|
Director
|
Stephen
K. Carter, M.D.
|
72
|
1997
|
Director
|
Donald
R. Conklin
|
73
|
1997
|
Director
|
Charles
Muniz(1)
|
55
|
2009
|
President,
Chief Executive Officer, Chief Financial Officer and
Director
|
Kuslima
Shogen(2)
|
64
|
1981
|
Director
|
David
Sidransky, M.D.
|
50
|
2004
|
Chairman
of the Board
|
Paul
M. Weiss, Ph.D.
|
51
|
2003
|
Director
|
Executive
Officer
Name
|
Age
|
Current
Position With Company
|
Officer
Since (3)
|
Charles
Muniz(1)
|
55
|
President,
Chief Executive Officer, Chief Financial Officer and
Director
|
2009
|
____________________________
(1) Mr.
Muniz was elected as our Company’s President, Chief Operating Officer,
Chief Financial Officer and Director on April 3, 2009 and entered into an
employment agreement with the Company to serve as our President, Chief
Executive Officer and Chief Financial Officer on October 19,
2009.
|
(2) Ms.
Shogen retired from her position as our Company’s Chief Executive Officer
on March 31, 2009.
|
(3) Officers
of Alfacell hold office until their successors are elected and qualified
or until their earlier removal, death or
resignation.
|
Business
Experience of Directors and Executive Officers
The
Company’s Directors and Executive Officers have provided the following
information about their principal occupation, business experience and other
matters.
Charles Muniz joined us on
April 3, 2009 as our President, Chief Operating Officer and Chief Financial
Officer and a member of our Board of Directors and entered into an employment
agreement with the Company to serve as our President, Chief Executive Officer
(“CEO”) and Chief Financial Officer on October 19, 2009. From 2007
until he joined Alfacell, Mr. Muniz was a consultant to a wide variety of
clients focusing primarily on the strategic use of operations and
technology. Prior to consulting, he was President and Chief Executive
Officer of Digital Creations Corp., a company he founded which sold high-end
systems, work stations, peripherals, networking and software products, from 1989
to 2007. Mr. Muniz attended Pace University in New York and majored
in Business Administration.
John P. Brancaccio joined the
Board in January 2004. Mr. Brancaccio is the chief financial officer
of Accelerated Technologies, Inc., an incubator for venture backed medical
device companies. He also serves on the boards of Callisto
Pharmaceuticals, Inc., Synergy Pharmaceuticals, Inc. and Xenomics, Inc., all of
which are publicly traded biopharmaceutical companies where he is chairman of
their respective audit committees and a member of their respective compensation
and nominating committees. He was the secretary and treasurer of
Memory Pharmaceuticals Corporation from December 2003 to March 2004 after
serving in the capacity of their acting chief financial officer from May 2002 to
December 2003. Prior to Memory Pharmaceuticals, Mr. Brancaccio held
the positions of chief financial officer and chief operating officer of Eline
Group, a publicly traded entertainment and media company, where he oversaw the
roll up of several related companies into the group and completed private equity
financing placements. Prior to joining Eline Group, he held a number
of senior executive positions in public and private companies including Atlantic
Pharmaceuticals, Zambon Corporation, Deven International and Health Learning
Systems. During his tenure with these companies he participated in
initial public offerings and negotiation of licensing and development agreements
within both the pharmaceutical and biotechnology industries. He is a
retired Certified Public Accountant and a graduate of Seton Hall
University.
4
Stephen K. Carter, M.D.,
joined the Board in May 1997. Dr. Carter served as Senior Vice
President of Research and Development for Boehringer-Ingelheim Pharmaceuticals
from 1995 through 1997. Before this, he spent over 13 years with
Bristol-Myers Squibb, an international leader in the development of innovative
anti-cancer and anti-viral therapies. He held a variety of senior
executive research and development positions while at Bristol-Myers, including
serving for five years as Senior Vice President of worldwide clinical research
and development of its Pharmaceutical Research Institute. From 1976
to 1982, he established and directed the Northern California Cancer
Program. Prior to this, he held a number of positions during a
nine-year tenure at the National Cancer Institute, including the position of
Deputy Director at the National Institutes of Health. He served on
the board of directors of Cytogen, Vion Pharmaceuticals and Emisphere
Technologies, Inc. and was a member of the Scientific and Clinical Advisory
Board of Sopherion Therapeutics, Inc. He has also been a member of
the faculties of the medical schools of Stanford University, the University of
California at San Francisco and New York University. Dr. Carter has
published extensively on the development of anti-cancer drugs, was the
co-founding editor of journals devoted to cancer therapeutics or immunology, and
has served on the editorial boards of a number of additional journals dedicated
to cancer treatment. He is a member of the American Society of
Clinical Oncology, the American Association for Cancer Research and the Society
of Surgical Oncology, as well as several other medical societies. Dr.
Carter earned his B.A. from Columbia University and his M.D. from New York
Medical College.
Donald R. Conklin joined the
Board in May 1997. Prior to his retirement in May 1997, Mr. Conklin
was a senior executive with Schering-Plough, a major worldwide pharmaceutical
firm. During his more than 35 years with Schering-Plough, he held a
variety of key management positions within the firm. From 1986 to
1994, he served as President of Schering-Plough Pharmaceuticals and Executive
Vice President of Schering-Plough Corporation. In this position, he
was responsible for worldwide pharmaceutical operations, including the launch of
INTRON A(R) (interferon alfa-2b). Prior to this, Mr. Conklin had
served as President of Schering USA and had held a variety of executive
marketing positions in the United States, Europe and Latin
America. Immediately preceding his retirement, he was Chairman of
Schering-Plough Health Care Products and an Executive Vice President of
Schering-Plough Corporation. Mr. Conklin received his B.A. with
highest honors from Williams College and his M.B.A. degree from the Rutgers
University School of Business.
Kuslima Shogen served as our
Chief Executive Officer from September 1986 until her retirement on March 31,
2009 and as a Director since our inception. She also served as our
Chairman of the Board from August 1996 through January 2008, as our Acting Chief
Financial Officer from June 23, 1999 through March 2004, as our Chief Financial
Officer from September 1986 through July 1994 and as our President from
September 1986 through July 1996. Ms. Shogen formed our company in
1981 to pursue research that she had initiated while a biology student in the
University Honors Program at Fairleigh Dickenson University (“FDU”). Prior to
our founding, from 1976 to 1981 she was founder and president of a biomedical
research consortium specializing in Good Laboratory Practices and animal
toxicology. During that time, she also served as a consultant for the
Lever Brothers Research Group. Ms. Shogen has received numerous
awards for achievements in biology, including the Sigma Xi first prize from the
Scientific Research Society of North America in 1974 and first prize for the
most outstanding research paper in biology at the Eastern College Science
Conferences competitions in 1972, 1973, and 1974. She also received
the first-ever Pioneer Award from the Mesothelioma Applied Research Foundation
in October 2005 and in August 2005, was named to the inaugural PharmaVOICE 100
list of Most Inspiring People in the healthcare industry and was one of only 27
chief executive officers recognized. She earned a B.S. degree in
1974, and an M.S. degree in 1976 from FDU and also completed graduate studies in
1978 in embryology at FDU. In April 1998, Ms. Shogen received the
Pinnacle Award from FDU, the highest honor the university bestows on its
graduates. She is a Phi Beta Kappa graduate.
5
David Sidransky, M.D., joined
the Board in May 2004, was elected Chairman of the Board in January 2008 and is
the Chairman of our Scientific Advisory Board. Dr. Sidransky is a founder
of several private biotechnology companies and has served on scientific advisory
boards of numerous private and public companies, including Medimmune, Telik,
Roche and Amgen. He was formerly on the board of scientific counselors at
the NIDCR and a member of the Recombinant DNA advisory committee at the National
Institute of Health NIH (RAC). He served on the board of directors of
ImClone Systems, Zila Inc, and Xenomics and is now chairman of the board of
Champions Biotechnology Inc. Dr. Sidransky is on numerous editorial
boards and has served as senior editor of several cancer related journals.
Currently, Dr. Sidransky is the Director of the Head and Neck Cancer Research
Division at Johns Hopkins University School of Medicine. In addition, he
is Professor of Oncology, Otolaryngology-Head and Neck Surgery, Cellular &
Molecular Medicine, Urology, Genetics, and Pathology at John Hopkins University
and Hospital. Dr. Sidransky is certified in Internal Medicine and Medical
Oncology by the American Board of Medicine. He has over 400 peer-reviewed
publications, has contributed more than 60 cancer reviews and chapters, and also
has numerous issued biotechnology patents. He has been the recipient of
many awards and honors, including the 1997 Sarstedt International Prize from the
German Society of Clinical Chemistry, the 1998 Alton Ochsner Award Relating
Smoking and Health by the American College of Chest Physicians and the 2004
Hinda Rosenthal Award by the American Association of Cancer Research. Dr.
Sidransky received his B.A. from Brandeis University and his M.D. from the
Baylor College of Medicine.
Paul Weiss, Ph.D., joined the
Board in February 2003. Since October 2007, Dr. Weiss has been a
Managing Director at Venture Investors, LLC, a Madison, Wisconsin-based venture
capital group focusing on early-stage life sciences companies. Prior
to joining Venture Investors, LLC, Dr. Weiss was President of the Gala Biotech
business unit of Cardinal Health (now Catalent Pharma Solutions) from February
2002 until October 2007. He had served as a director on Gala’s Board
from 1998 to 2001, when he joined the management team as Senior Vice President
of Business Development. He later became President of Gala and
remained so during the acquisition of Gala by Cardinal Health in 2003 and then
the acquisition of Gala (and other Cardinal Health businesses) by The Blackstone
Group in 2007. Prior to joining Gala, Dr. Weiss was Vice President of
Technology and Product Licensing at 3-Dimensional Pharmaceuticals (3DP) from
1998 to 2001, which went public in 2001 and was later acquired by Johnson &
Johnson. Prior to joining 3DP, Dr. Weiss was Director of Licensing
for Wyeth Pharmaceuticals. Dr. Weiss holds a Ph.D. in Biochemistry
and an MBA from the University of Wisconsin-Madison and a B.Sc. in Biochemistry
from the Carleton University Institute of Biochemistry in Ottawa,
Ontario.
As
described on the Form 8-K filed by the Company on October 20, 2009, the Company
closed on a private placement of convertible promissory notes and warrants in
which the Company received $3,250,000 in gross proceeds on October 19,
2009. As a condition to such financing, each member of the Board
other than Dr. Sidransky, Chairman of the Board, and Mr. Muniz agreed to
resign from the Board upon the request of Dr. Sidransky made at any time
following October 19, 2009 and December 31, 2009.
Family
Relationships
There are
no family relationships among any of the Company’s directors or executive
officers.
Board
Meetings
The Board
met fourteen times during the 2009 fiscal year. Other than Dr.
Carter, each director attended at least 75% of the meetings of the Board and
committees on which he or she served. Dr. Carter did not attend any
of the Company’s fourteen Board meetings in the 2009 fiscal year.
6
Independent
Directors
The Board
has determined that the following directors are “independent” under Nasdaq
Marketplace Rule 4200(a)(15): John P. Brancaccio, Stephen K. Carter,
M.D., Donald R. Conklin, David Sidransky, M.D. and Paul M. Weiss,
Ph.D. The Board has also determined that the following directors (who
are members of the Audit Committee) are “independent” in accordance with Section
10A(m)(3) of the Exchange Act: John P. Brancaccio and Paul M. Weiss,
Ph.D.
Board
Committee Membership
The Board
has standing Compensation, Corporate Governance and Nominating, Audit, Research
and Clinical Oversight, and Commercial and Business Development Oversight
Committees. The current membership of the standing committees is set
forth in the following table:
Name
|
Compensation
Committee
|
Corporate
Governance
and
Nominating
Committee
|
Audit
Committee
|
Research
and Clinical
Oversight
Committee
|
Commercial
and Business
Development
Oversight
Committee
|
John
P. Brancaccio
|
**
|
**
|
|||
Stephen
K. Carter, M.D.
|
*
|
||||
Donald
R. Conklin
|
*
|
*
|
|||
David
Sidransky, M.D.
|
**
|
**
|
*
|
||
Paul
M. Weiss, Ph.D.
|
*
|
*
|
*
|
*
|
**
|
____________________________
|
* Member
|
|
** Chair
|
Compensation
Committee. All of the members of Alfacell’s Compensation
Committee are considered “independent directors” in accordance with Nasdaq
Marketplace Rule 4200(a)(15). In fiscal year 2009, the Compensation
Committee met twice.
On June
28, 2004, the Board adopted Alfacell Corporation’s Compensation Committee
Charter, a copy of which is maintained on our website at
www.alfacell.com. According to its charter, the Compensation
Committee shall consist of at least three members, each of whom shall be
non-employee directors who have been determined by the Board to meet the
independence requirements of the Nasdaq Stock Market.
The
Compensation Committee Charter describes the primary functions of the
Compensation Committee as follows:
·
|
Review
and approve executive compensation on an annual basis, including the
corporate goals and objectives to be used in evaluating the performance of
the CEO and determining the CEO’s
compensation;
|
·
|
Review
trends in management compensation, oversee the development of new
compensation plans and, when necessary, approve the revision of existing
plans;
|
·
|
Oversee
management’s decisions concerning compensation and performance for
non-executive officers;
|
7
·
|
Review
the Company’s incentive compensation and other stock-based plans and
recommend change to such plans to the Board as
needed;
|
·
|
Administer
stock plans and benefit programs and approve any amendments to existing
plans;
|
·
|
Recommend
director compensation;
|
·
|
Evaluate
compliance with the Company’s compensation plans and policies;
and
|
·
|
Review
the compensation policy for all of Alfacell’s
employees.
|
Corporate Governance and Nominating
Committee. All of the members of Alfacell’s Corporate
Governance and Nominating Committee are considered “independent directors” in
accordance with Nasdaq Marketplace Rule 4200(a)(15). In fiscal year
2009, the Corporate Governance and Nominating Committee did not
meet.
The
Corporate Governance and Nominating Committee was formed by the Board for the
purpose of considering future nominees to the Board. On November 28,
2007, the Board adopted Alfacell Corporation’s Corporate Governance and
Nominating Committee Charter, a copy of which is maintained on our website at
www.alfacell.com. According to its charter, the Corporate Governance
and Nominating Committee shall be comprised of at least three directors, each of
whom shall meet the independence requirements of the Nasdaq Stock
Market.
The
Corporate Governance and Nominating Committee Charter describes the primary
functions of the Corporate Governance and Nominating Committee as
follows:
·
|
Identify
and evaluate individuals qualified to serve as members of the Board
(including individuals nominated by stockholders in proposals made in
writing to the Company’s Secretary that are timely received and that
contain sufficient background information concerning the nominee to enable
proper judgment to be made as to the nominee’s
qualifications);
|
·
|
Recommend
for the Board’s selection nominees for election as directors of the
Company at the next annual or special meeting of stockholders at which
directors are to be elected or to fill any vacancies then existing on the
Board;
|
·
|
Cause
to be prepared and recommend to the Board the adoption of corporate
governance guidelines and from time to time, review and assess the
guidelines and recommend changes for approval by the
Board;
|
·
|
From
time to time, review and assess the Code of Business Conduct and Ethics
and recommend changes for approval by the
Board;
|
·
|
Make
recommendations to the Board regarding issues of management succession;
and
|
·
|
Conduct
annual reviews and assessments of the adequacy of the Corporate Governance
and Nominating Committee Charter and recommend any proposed changes to the
Board for approval.
|
Audit
Committee. All of the members of Alfacell’s Audit Committee
are considered “independent directors” in accordance with Nasdaq Marketplace
Rule 4200(a)(15) and Section 10A(m)(3) of the Securities Exchange Act of 1934,
as amended to date (the “Exchange Act”). Alfacell’s Board has
determined that Mr. Brancaccio qualifies as an “audit committee financial
expert” as defined by Item 407 of Regulation S-K. In fiscal year
2009, the Audit Committee met five times.
On
November 25, 2008, the Board adopted the Amended and Restated Audit Committee
Charter, a copy of which is maintained on our website at
www.alfacell.com. According to its charter, the Audit Committee shall
be comprised of at least three directors, each of whom shall meet the
independence requirements of the Nasdaq Stock Market and Section 10A(m)(3) of
the Exchange Act, and each of whom shall not have participated in the
preparation of the financial statements of the Company at any time during the
past three years. The Audit Committee’s purpose, duties and
responsibilities under its charter include those specified in the listing
standards of the Nasdaq Stock Exchange for audit committees.
8
The Audit
Committee Charter describes the primary functions of the Audit Committee as
follows:
·
|
Appoint,
evaluate and, as the Committee may deem appropriate, terminate and replace
our independent registered public accounting
firm;
|
·
|
Monitor
the independence of our independent registered public accounting
firm;
|
·
|
Determine
the compensation to be paid to our independent registered public
accounting firm;
|
·
|
Review
with management and our independent registered public accounting firm the
effect of regulatory and accounting initiatives as well as off-balance
sheet structures on the Company’s financial
statements;
|
·
|
Review
the experience and qualifications of the Company’s senior finance
executives as well as senior members of the independent registered public
accounting firm team and the quality control procedures
thereof;
|
·
|
Pre-approve
all audit services and permitted non-audit services to be performed by our
independent registered public accounting firm and establish policies and
procedures for the engagement of our independent registered public
accounting firm to provide permitted non-audit
services;
|
·
|
Conduct
annual reviews and assessments of the adequacy of the Audit Committee
Charter and the continued independence of the independent registered
public accounting firm and recommend any proposed changes to the Board for
approval;
|
·
|
Advise
the Board with respect to the Company’s policies and procedures regarding
compliance with applicable laws and regulations and with the Company’s
Code of Business Conduct and
Ethics;
|
·
|
Review
all related-party transactions for potential conflict of interest
situations and approve such related-party
transactions;
|
·
|
Establish
procedures for the confidential and anonymous receipt, retention and
treatment of complaints regarding the Company’s accounting, internal
controls and auditing matters; and
|
·
|
Report
to the Board on all of the foregoing
matters.
|
Research and Clinical Oversight
Committee. The Research and Clinical Oversight Committee (“Research
Committee”) was established in February 2007 and is chaired by David Sidransky,
M.D. All of the members of Alfacell’s Research Committee are
considered “independent directors” in accordance with Nasdaq Marketplace Rule
4200(a)(15).
The
primary function of the Research Committee is to work closely with management
and the Scientific Advisory Board to provide support and direction to the
Company’s research and development programs. The Research Committee functions as
an advisory committee and does not hold formal committee meetings or take formal
committee actions.
Commercial and Business Development
Oversight Committee. The Commercial and Business Development
Oversight Committee (“Development Committee”) was established in February 2007
and is chaired by Paul Weiss, Ph.D. All of the members of Alfacell’s
Development Committee are considered “independent directors” in accordance with
Nasdaq Marketplace Rule 4200(a)(15).
The
primary function of the Development Committee is to assist management in
pursuing commercial and business development opportunities for the products
currently in development. The Development Committee functions as an
advisory committee and does not hold formal committee meetings or take formal
committee actions.
Section
16(a) Beneficial Ownership Reporting Compliance
Based
upon a review of filings with the Securities and Exchange Commission and written
representations of certain reporting persons that no other reports were
required, we believe that during fiscal year 2009 all of our directors,
executive officers and beneficial owners of more than 10% of any class of equity
securities complied on a timely basis with the reporting requirements of Section
16(a) of the Exchange Act, except for the Form 3, filed by Mr. Muniz in April
2009 upon his joining our Company, which was not timely filed.
9
Code
of Ethics
Alfacell
has adopted a written Code of Business Conduct and Ethics (“Code of Ethics”)
that applies to the Company’s principal executive officer, principal financial
officer, principal accounting officer, and controller and to all its other
employees. These standards are a guide to help ensure that all our
employees live up to our high ethical standards. A copy of the Code
of Ethics is maintained on our website at www.alfacell.com.
We intend
to post on our website, any amendment to or waiver from any provision in our
Code of Ethics that applies to our principal executive officer, principal
financial officer, principal accounting officer or controller, or persons
performing similar functions, and that relates to any element of the standards
enumerated in the rules of the SEC.
ITEM
11. EXECUTIVE
COMPENSATION.
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During
the fiscal year ended July 31, 2009, the members of the Board who served on the
Compensation Committee were Messrs. John P. Brancaccio, Donald R. Conklin and
Paul M. Weiss, Ph.D. All such directors are independent directors and
have never been officers of Alfacell. During the fiscal year ended
July 31, 2009, no executive officer of Alfacell served on the compensation
committee or board of directors of any other entity which had any executive
officer who also served on the Compensation Committee or Board of
Alfacell.
COMPENSATION
DISCUSSION AND ANALYSIS
Compensation
Philosophy
Alfacell’s
compensation program is based on the philosophy that the interests of our
employees should be closely aligned with those of our
stockholders. The Company’s compensation program is based on the
following principles:
·
|
Compensation
opportunities should attract the best talent, motivate individuals to
perform at their highest levels, reward outstanding achievement and retain
the leadership and skills necessary for building long-term stockholder
value;
|
·
|
Compensation
should include a bonus potential which is tied directly to operating
objectives; and
|
·
|
Compensation
should include a long-term incentive award generally in the form of stock
option grants to increase ownership in the Company and encourage
executives to manage from the perspective of owners of the
Company.
|
The
Compensation Committee believes that the compensation program for executive
officers should reward the achievement of the short-term and long-term
objectives of the Company, and that compensation should be related to the value
created for its stockholders. However, given the highly volatile
nature of biotechnology company stocks it would be impracticable for the Company
to tie executive compensation solely to stock performance. In making
its compensation decisions, the Compensation Committee generally reviews the
progress made by the individual officer in attaining his or her individual
performance goals and the progress made by the Company in its drug development
programs, while keeping the Company’s stock performance in
mind. Generally, performance tied to the long-term objectives of the
Company or the overall business objectives of the Company are rewarded with
equity compensation, whereas performance tied to short-term goals of the Company
or individual performance. As different elements of the Company’s
compensation have different underlying rationale and policy, determinations the
Compensation Committee made with regard to one compensation element have not
influenced decisions it made with respect to other compensation elements it
contemplated or awarded. For example, the factor that our CEO may
receive a bonus if the performance objectives are satisfied and may receive
additional value through his stock options if the Company’s stock performs well
has not influenced the determination as to the base salary of our
CEO.
10
The
Company’s compensation philosophy was last reviewed by the Board in May 2007, at
which time two new
compensation programs were approved by the Board, the Incentive Bonus Program
and the Annual Milestones bonus program. These two bonus programs
were approved by the Board because they each met the Company’s desire to reward
and encourage executive officers and employees for not only causing the Company
to meet its primary objectives but also to meet certain short-term objectives
within a timeline prescribed by management. See “Incentive Compensation” below
for details relating to these two programs.
Role
of the Compensation Committee
The
Compensation Committee currently consists of Messrs. John P. Brancaccio,
Chairman, Donald R. Conklin, and Paul M. Weiss Ph.D. All committee
members have been and currently are non-employee directors as defined under Rule
16b-3 of the Exchange Act and satisfy the director independence standards of the
Nasdaq Stock Market and the definition of “outside director” under Section
162(m) of the Internal Revenue Code. No special expertise in
compensation matters is required for appointment to the Compensation
Committee.
The
Compensation Committee is responsible for all components of the Company’s
executive compensation program and for administering all stock option plans
including the 2004 Stock Incentive Plan, under which stock option grants may be
made to executive officers. On an annual basis, the Compensation
Committee reviews and approves the corporate goals and objectives relevant to
the compensation for the CEO and other executive officers, if
any. The Compensation Committee evaluates at least once a year, the
CEO and executive officers’ performance in light of these established goals and
objectives and based upon these evaluations will set the CEO’s and executive
officers’ annual compensation, including salary, bonus, incentive and equity
compensation.
Role
of Consultants and Market Review
The
Compensation Committee possesses the authority under its charter to hire
advisors to provide it with information as needed in making compensation
decisions. The Compensation Committee did not use a compensation
consultant for fiscal year 2009.
Role
of Management
While the
Compensation Committee determines overall compensation philosophy, it relies on
the CEO and other executive officers, if any, to make recommendations in
accordance with such compensation philosophy. The Company’s CEO and
CFO, if any, provide the Board and the Compensation Committee with feedback on
the performance of the Company’s non-executive officers and make compensation
recommendations to the Compensation Committee for its approval. In
2009, the CEO attended the Compensation Committee’s meetings to provide his
perspectives on competition in the industry and the needs of the business,
information regarding the Company’s performance and other advice specific to
their areas of expertise. However, the CEO did not attend meetings
where his compensation and/or performance was discussed. Once a
recommendation has been approved by the Compensation Committee, it is sent to
the Board for ratification. Upon ratification by the Board, the
execution and administration of the recommendation may be delegated by the
Compensation Committee to management as the Compensation Committee deems
appropriate.
On April
3, 2009, Mr. Muniz joined Alfacell and acted as our President, Chief Operating
Officer and Chief Financial Officer. With the retirement of Kuslima
Shogen as our CEO in March 2009 and the departure of our former CFO, Lawrence
Kenyon, in December 2008, Mr. Muniz has been our only executive since he joined
the Company. At the time he joined the Company, the Compensation
Committee agreed to pay him a consulting fee of $3,500 per week plus cost of
travel between his home state of Florida and New Jersey. On October
19, 2009, the Company entered into an Employment Agreement (the “Employment
Agreement”) with Mr. Muniz to serve as the Company’s President, Chief Executive
Officer and Chief Financial Officer. Under his Employment Agreement,
Mr. Muniz will receive an annual base salary of $300,000 and is entitled to
receive cash incentive compensation or annual stock option awards as determined
by the Board or the
Compensation Committee of the Board from time to time. In addition,
Mr. Muniz is entitled to participate in any and all employee benefit plans
established and maintained by the Company for executive officers of the Company.
Pursuant to the Employment Agreement, Mr. Muniz received an option (the
“Option”), granted under and in accordance with the Company’s 2004 Stock
Incentive Plan, to purchase an aggregate of 500,000 shares of Common Stock
exercisable for ten years from the date the Option is granted. The Option shall
vest in equal amounts on each of the first, second and third year anniversary of
the grant so long as Mr. Muniz remains employed by the Company. The exercise
price of the Option equals the fair market value of the Common Stock on the date
of grant.
11
The
Employment Agreement continues in effect for two years following the date of the
agreement and automatically renews for successive one-year periods, unless Mr.
Muniz’s employment is terminated by him or by the Company. In the event that
Mr. Muniz’s employment is terminated by the Company for any reason, then
Mr. Muniz is entitled to receive his earned but unpaid base salary and
incentive compensation, unpaid expense reimbursements, accrued but unused
vacation and any vested benefits under any employee benefit plan of the Company.
In the event that Mr. Muniz’s employment is terminated by the Company without
“Cause” or by Mr. Muniz for “Good Reason” (as such terms are defined in the
Employment Agreement), and provided Mr. Muniz executes a release in favor of the
Company, then in addition to the above mentioned payments and benefits, Mr.
Muniz is entitled to receive an amount equal to his then current annual base
salary, payable in equal installments over 12 months in accordance with the
Company’s payroll practice, and all medical and health benefits for 18 months
following the termination date. In addition, in the event Mr. Muniz’s
employment is terminated without Cause or for Good Reason within 12 months
following a Change in Control (as defined in the Employment Agreement), and
provided Mr. Muniz executes a release in favor of the Company, in lieu of the
severance described above, Mr. Muniz is entitled to receive a lump cash payment
equal to his then current annual base salary, all medical and health benefits
for 18 months following the termination date and full acceleration of vesting of
all unvested stock options and other stock-based
awards. Mr. Muniz’s Employment Agreement requires him to refrain
from competing with the Company and from hiring our employees and soliciting our
customers for a period of one year following the termination of his employment
with the Company for any reason. The Employment Agreement was filed
as Exhibit 10.5 to the Company’s Form 8-K filed with the SEC on October 20,
2009.
Executive
Compensation Components
Compensation
for the Company’s executive officers includes the following
components:
Base Salary. Fixed
annual compensation that is certain as to payment and provides continuous income
to meet ongoing living costs. This component is intended to ensure
that Alfacell is able to retain executives capable of achieving the Company’s
strategic and business objectives. The Compensation Committee reviews
executive officers’ salaries annually and will make adjustments based on its
expectations of that officer’s performance as compared to the officer’s actual
performance and what the Compensation Committee’s expectations are for that
officer’s future performance. Additionally, the Compensation
Committee factors in cost of living adjustments as well as the Company’s overall
performance and stock performance. As described on our annual
report on Form 10-K for the fiscal year 2008, in 2008, the Compensation
Committee also utilized a study of market compensation levels prepared by an
independent compensation consultant in order to evaluate the executive’s
compensation, including base salaries. Such a study was used by the
Compensation Committee in setting base salaries for the Company’s fiscal year
2008. Such study was not used in previous years and was not used in
fiscal year 2009.
In the
fiscal year 2009, in light on the Company’s financial difficulties, lack of
executive leadership and inability to conduct a thorough market-based analysis
of executive compensation, the Compensation Committee determined that Mr. Muniz,
the Company’s sole executive officer, should receive the same base compensation
package, in all material respects, as his predecessor, Kuslima
Shogen.
12
Stock Option
Grants. Long-term incentive plan which offers eligible Company
officers and employees incentives to put forth maximum efforts for the success
of the Company’s business, to afford executive officers an opportunity to
acquire a proprietary interest in the Company and to relate the compensation of
officers to the value they create for the Company’s
stockholders. Currently, all stock-based awards are granted under the
2004 Stock Incentive Plan, which was approved by the Board of Directors and
stockholders of the Company in November 2003 and in January 2004,
respectively. The 2004 Stock Incentive Plan provides for the grant of
stock options and other stock-based awards to employees, officers, consultants,
independent contractors and directors providing services to Alfacell and its
subsidiaries as determined by the Board or by the Compensation
Committee. The types of awards that may be granted under the 2004
Stock Incentive Plan are stock options, stock appreciation rights, restricted
stock, restricted stock units, performance awards, dividend equivalents, other
stock grants, other stock-based awards and any combination
thereof. Stock options are granted based on the fair market value of
a share on the date of grant of such option. The terms, time and
method of the options are determined at the sole discretion of the Compensation
Committee.
At the
time he joined in the Company in April 2009, Mr. Muniz did not receive any
stock-based compensation. After completion of the Company’s financing
in October 2009, pursuant to his Employment Agreement, Mr. Muniz received stock
options to purchase a total of 500,000 shares of Common Stock. The
Compensation Committee determined that this was an appropriate grant in light of
prior grants made to the Company’s former CEO, Mr. Muniz’s success in obtaining
financing for the Company in very difficult market conditions and the need to
provide Mr. Muniz with additional incentive to create further value for the
Company’s stockholders.
Incentive
Compensation. The primary purpose is to align the interests of
the executive officers with those of the stockholders by rewarding executive
officers for creating stockholder value over the long-term. The 2004
Stock Incentive Plan provides for the award of stock options, stock appreciation
rights, restricted stock, restricted stock units, performance awards, dividend
equivalents, and other stock grants or stock based awards.
Other
Benefits. The CEO is eligible to participate in the Company’s
401(k) plan, health and dental coverage, life insurance, disability insurance,
paid time off and paid holidays on the same terms as are available to all
employees generally. Other benefits available to the CEO are the
payment of reasonable costs of temporary housing, reasonable airfare associated
with relocation and relocation assistance. The CEO receives a monthly
auto allowance and the Company pays the premiums on a life insurance policy for
the CEO where the Company is not the beneficiary of that life insurance
policy. These awards are designed to be competitive with overall
market practices, and are in place to attract and retain the personnel needed in
the business.
Post-termination
Agreements. Other than severance payments provided for in Mr.
Muniz’s Employment Agreement and Ms. Shogen’s Retirement Agreement, as described
in this Form 10-K/A, the Company does not utilize post-termination
agreements. In addition, under grants awarded pursuant to the 2004
Stock Incentive Plan, the recipients of such grants have received
Stock Option Agreements which contain provisions that allow for the awarded
options to become fully vested and immediately exercisable or exercisable during
the six months following a change in control but in no event beyond the option
period provided in the Stock Option Agreement; provided, however, that the terms
of Mr. Muniz’s Employment Agreement, as described above, supersede the terms set
forth in his Stock Option Agreement. Per the Company’s standard Stock
Option Agreement, a change in control is deemed to occur if (i) a person, as
defined by Section 13 (d) and 14 (d) of the Exchange Act, becomes the beneficial
owner, directly or indirectly, of securities representing 20% or more of the
combined voting power of the Company’s then outstanding shares (except that
ownership by the McCash Family Limited Partnership must be 50% to qualify as a
change in control); (ii) during any 12 month period, the individuals who were,
at the beginning of such period, a majority of the Board cease to be a majority
of the Board; (iii) the Company’s stockholders approve a merger or consolidation
with another corporation except where the Company remains in control after such
merger or consolidation or where the merger or consolidation was effected to
recapitalize the Company and no one person acquired more than 50% of the
combined voting power of the Company; or (iv) the stockholders of the Company
approve a plan of complete liquidation or enter into an agreement for the sale
or disposition of all or substantially all of the assets of the
Company.
13
Additionally,
under the terms of the Stock Option Agreements issued under the 2004 Stock
Incentive Plan, if there is a termination of service due to the death, total
disability or retirement of the optionee on or after age 65 after seven years of
service with the Company, then the options become fully exercisable at the time
of death, total disability or retirement, as the case may be, and may be
exercised by the optionee or optionee’s estate during the six months following
the month of optionee’s death, total disability or retirement but in no event
beyond the option period provided in the Stock Option Agreement. If
there is a termination of employment due to voluntary resignation then to the
extent options are exercisable as of the date of the termination, such options
may be exercised within six months of the date of termination of
employment. If there is termination for cause, then to the extent
options are exercisable as of the date of the termination, such options may be
exercised within 30 days of the date of termination. “Cause” is
defined as (i) frequent and unjustifiable absenteeism other than optionee’s
illness or physical or mental disability; (ii) fraud or dishonesty materially
injurious to the Company; (iii) gross or willful misconduct or willful neglect
to act which is committed or omitted by optionee in bad faith; (iv) gross breach
of optionee’s fiduciary duties which has a materially injurious effect on the
Company; (v) optionee’s conviction as a felon; or (vi) optionee’s willful or
continuous neglect or refusal to perform his or her duties. If there
is termination for any reason other than those described above, then to the
extent options are exercisable as of the date of the termination, such options
may be exercised within 12 months of the date of termination of
employment.
Under
grants awarded pursuant to the Company’s 1997 and 1993 Stock Option Plans, prior
to a dissolution or liquidation of the Company or a merger or consolidation
where the Company is not the surviving corporation, the optionee has the right
to exercise all outstanding options. If the optionee terminates
employment, then to the extent options are exercisable as of the date of
termination, such options may be exercised within 190 days of the date of
termination of employment. If the Board determines that the optionee
engaged in activities or employment contrary to the best interest of the
Company, then the Board can cancel the options within 190 days of the
termination of employment. If an optionee dies while still in service
to the Company, then to the extent options are exercisable as of the date of
death, such options may be exercised.
The
rationale for the acceleration of the options under the 2004 Stock Incentive
Plan, and the 1997 and 1993 Stock Option Plans upon a change in control of the
Company is to ensure that officers are motivated to pursue creating or obtaining
the maximum value for stockholders and to encourage officers to remain with the
Company after a change in control has occurred.
Kuslima
Shogen, the Company’s former CEO and scientific founder, retired on March 31,
2009. On April 25, 2008, Alfacell entered into a retirement agreement
with Ms. Shogen which was filed as Exhibit 99.1 to
the Company’s Form 8-K filed with the SEC on April 28, 2008 (the
“Retirement Agreement”). Under the terms of the Retirement Agreement,
during the two year period commencing April 1, 2008, Ms. Shogen was entitled to
receive periodic payments at the rate of $300,000 per year. The
options to purchase the Company’s common stock held by Ms. Shogen on the date of
her retirement remained exercisable after Ms. Shogen’s retirement in accordance
with their terms. No change was made to the terms of such existing options under
the Retirement Agreement, except the Compensation Committee of the Company’s
Board of Directors amended the Company’s 1993 Stock Option Plan and 1997 Stock
Option Plan to allow such options to be transferred by Ms. Shogen to members of
her family. The Compensation Committee agreed to give Ms. Shogen the ability to
transfer her existing options granted under the 2004 Stock Incentive Plan to
members of her family. If Ms. Shogen elects COBRA continuation
coverage after her retirement date, the Company will pay for Ms. Shogen’s COBRA
insurance continuation premiums until the earliest of the second anniversary of
her retirement date and the date Ms. Shogen is no longer eligible for COBRA
insurance overage under applicable law or the date on which Ms. Shogen becomes
eligible for Medicare. In the event Ms. Shogen becomes ineligible for COBRA
coverage under the Company’s insurance plans for any reason other than her death
prior to the second anniversary of her retirement date, the Company will make a
lump sum cash payment to Ms. Shogen equal to the amount of the premiums the
Company would have had to pay to maintain Ms. Shogen’s coverage under the
Company’s insurance plans had Ms. Shogen remained eligible for coverage under
such plans for the period commencing on the date Ms. Shogen became ineligible
for such coverage and ending on the second anniversary of her retirement
date.
14
Pursuant
to the terms of the Retirement Agreement, Ms. Shogen also agreed to terminate
the Royalty Agreement dated July 24, 1991, as amended on April 16, 2001 by and
between the Company and Ms. Shogen and filed as Exhibit 10.37 to the Company’s
Form 10-Q filed with the SEC on March 12, 2007 (the “Royalty Agreement”). The
terms of the Royalty Agreement are described in Note 12 to the Financial
Statements on pages F-44 through F-45 of the Company’s Form 10-K for the fiscal
year 2008. In exchange for termination of the Royalty Agreement, the Company
agreed to make the following payments and awards to Ms. Shogen:
|
·
|
A
lump sum payment of $500,000 made within ten business days of the date of
the Retirement Agreement, from which Alfacell was entitled to deduct the
amount of the outstanding principal and accrued interest of $187,410 owed
by Ms. Shogen to Alfacell as of the date of the Retirement
Agreement.
|
|
·
|
If
the NDA for ONCONASE®
for the treatment of malignant mesothelioma is approved by the FDA, Ms.
Shogen would receive a one time payment equal to 5% of the initial
milestone payment payable to the Company by Par Pharmaceutical Inc.
(“Par”) pursuant to the License Agreement dated as of January 14, 2008 by
and between the Company and Par (the “License
Agreement”).
|
|
·
|
If
the NDA for ONCONASE®
for the treatment of malignant mesothelioma is approved by the FDA, Ms.
Shogen would also receive a payment of $350,000 on each of the first and
second anniversaries of the date of such approval for a total payment of
$700,000.
|
|
·
|
An
option (the “Option”) to purchase an aggregate of 1,000,000 shares of the
Company’s common stock under the 2004 Stock Incentive Plan at an exercise
price equal to the fair market value of the common stock as of the date of
the Retirement Agreement as determined under such plan. The Option has a
term of ten years and will become exercisable only upon the approval of
the NDA for ONCONASE®
for the treatment of malignant mesothelioma is approved by the FDA. As the
result of the option to purchase 250,000 shares of common stock granted
under the 2004 Stock Incentive Plan to Ms. Shogen on March 5, 2008 in
connection with the Company’s execution of the License Agreement and in
order to enable the Company to grant this Option to Ms. Shogen, the Board
of Directors amended the annual award limitation for a participant in the
2004 Stock Incentive Plan for 2008 as it relates to Ms. Shogen from
1,000,000 shares to 1,250,000
shares.
|
|
·
|
Payments
equal to 15% of any royalties payable with respect to net sales which are
received by Alfacell pursuant to any and all license agreements entered
into by Alfacell for the marketing and distribution of ONCONASE®
and any other products derived from amphibian source extract, produced
either as a natural, synthesized, and/or genetically engineered drug which
are covered by the claims of any issued patent owned or controlled by
Alfacell which is issued and valid as of December 31, 2007 (the “Licensed
Products”) and 5% of net sales of Licensed Products which Alfacell books
on its financial statements but only to the extent that the aggregate
annual net sales of Licensed Products upon which such royalty payments are
received by Alfacell and annual net sales of Licensed Products booked by
Alfacell when combined are in excess of $100 million in a year. In the
event either or both of the aggregate annual net sales of Licensed
Products upon which Alfacell receives royalties and the annual net sales
of Licensed Products which Alfacell books on its financial statements are
less than $100 million, but when combined such aggregate annual net sales
exceed $100 million, the payments to be received by Ms. Shogen in that
year will be paid with respect to the amount of such aggregate net sales
that exceeds $100 million and pro rated between the 15% Ms. Shogen is
entitled to receive on royalties received by Alfacell and the 5% Ms.
Shogen is entitled to receive on net sales booked by Alfacell based upon
the percentage of the total net sales of the Licensed Products that year
represented by aggregate net sales upon which Alfacell receives a royalty
and the net sales booked by Alfacell. Ms. Shogen’s rights to receive these
payments shall terminate when all claims under the relevant patents which
cover the Licensed Products have
expired.
|
15
On
September 14, 2009, the Company entered into an amendment (the “Amendment”) to
the Retirement Agreement amending certain terms. Under the Retirement
Agreement, Ms. Shogen was entitled to received periodic payments during the two
year period commencing April 1, 2008 at the rate of $300,000 per
year. Pursuant to the Amendment, the periodic payments were reduced
to $150,000 per year. Under the Retirement Agreement, Ms.
Shogen was entitled to receive continuing payments equal to 15% of any royalties
received by Alfacell pursuant to any and all license agreements entered into by
Alfacell for the marketing and distribution of Licensed Products. Under the
Amendment, the amount of such royalties related to net sales of Licensed
Products to be received by Ms. Shogen has been reduced to 5%. Under
the Retirement Agreement, Ms. Shogen was entitled to receive continuing payments
equal to 5% of net sales of Licensed Products booked by Alfacell on its
financial statements. Under the Amendment, the amount of such net
sales booked by Alfacell has been reduced to 2% of net sales. Under the
Amendment, in the event Alfacell obtains marketing approval for ONCONASE® from
the Food and Drug Administration or the European Medicines Agency, Ms. Shogen
will be entitled to receive an additional payment equal to the difference
between the continuing payments actually paid to Ms. Shogen during the two year
period commencing April 1, 2008 and $600,000, the original aggregate amount of
continuing payments to which Ms. Shogen was entitled under the Retirement
Agreement. Such additional payment may be made by Alfacell, at its
option, in cash, Alfacell common stock or a combination of both. The
Amendment is binding on the parties as of September 14, 2009 provided that the
changes in payments to Ms. Shogen under the Retirement Agreement described above
would not go into effect unless and until Alfacell obtains additional equity or
debt financing, which Alfacell received in October 2009. Except as
specifically amended in the Amendment, all terms and conditions of the
Retirement Agreement remain in full force and effect.
The
following table summarizes the estimated value of the stock options for each
named executive officer derived from the terms of the 2004 Stock Incentive Plan,
the 1997 Stock Option Plan and the 1993 Stock Option Plan assuming that a
triggering event took place on the last business day of our most recently
completed fiscal year, July 31, 2009 and that the price per share of our common
stock is the closing market price as of that date.
Name
|
Death
or Total
Disability(1)
|
Voluntary
Termination or
Termination
for Cause(1)
|
Change
in
Control(1)
|
Charles
Muniz
|
$0
|
$0
|
$0
|
Kuslima
Shogen
|
$1,380
|
$1,380
|
$1,380
|
Lawrence
Kenyon
|
$0
|
$0
|
$0
|
____________________________
(1)
|
These
amounts represent the aggregate in-the-money value of stock options which
would become vested as a direct result of the termination event or change
in control before the applicable stated vesting date. The stated vesting
date is the date at which an award would have vested absent such
termination event or change in control. This calculation of
value does not attribute any additional value to stock options based on
their remaining terms and does not discount the value of awards based on
the portion of the vesting period elapsed at the date of the termination
event or change in control. These amounts represent the
intrinsic value of stock options, based on a closing stock price of $0.28
on July 31, 2009.
|
Pension Plans. The Company
does not have pension plans for its employees, executive officers or
directors.
Non-Qualified Deferred Compensation
Plans. The Company does not have non-qualified deferred
compensation plans for its employees, executive officers or
directors.
16
Tax
and Accounting Considerations
Deductibility of Executive
Compensation. In making compensation decisions affecting the
executive officers, the Compensation Committee considers the Company’s ability
to deduct under applicable federal corporate income tax law compensation
payments made to executives. Specifically, the Compensation Committee
considers the requirements and impact of Section 162(m) of the Internal Revenue
Code, which generally disallows a tax deduction for annual compensation in
excess of $1 million paid to our named executive officers. Certain
compensation that qualifies under applicable tax regulations as
“performance-based” compensation is specifically exempted from this deduction
rule. The Compensation Committee cannot assure that it will be able
to fully deduct all amounts of compensation paid to persons who are named
executive officers in the future. Further, because the Compensation
Committee believes it is important to preserve flexibility in designing its
compensation programs, it has not adopted a policy that all compensation must
qualify as deductible under Section 162(m). The cash compensation
that the Company paid to each of its named executive officers during 2009 was
below $1 million. We believe that stock options granted to named
executive officers under the 1997 Stock Option Plan and the 2004 Stock Incentive
Program would qualify as “performance-based compensation” and therefore are
Section 162(m) qualified.
Accounting for Stock Based
Compensation. On August 1, 2005, the Company adopted the fair
value recognition provisions of revised Statement of Financial Accounting
Standards No. 123R, “Share-Based Payment” (“SFAS No. 123R”), to account for all
stock grants under all of its stock plans.
Summary
Compensation Table
The
following table provides a summary of cash and non-cash compensation for each of
the last three fiscal years ended July 31, 2009, 2008 and 2007 with respect to
the one person who served as Alfacell’s Chief Executive Officer and the two
other people who served as Alfacell’s only other executive officer, the
President and CFO, during the year ended July 31, 2009 (collectively, the “Named
Executive Officers”).
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)(1)
|
Non-Equity
Incentive Plan Compensa-tion
|
Non-Qualified
Deferred Compensa-tion Earnings
($)
|
All
Other Compen-sation(2)
|
Total
($)
|
||||||||||||||||||||||
Charles Muniz |
2009
|
$ | 87,500 | (4) | - | - | - | - | $ | 11,041 | (5) | $ | 98,541 | ||||||||||||||||||
President, Chief | |||||||||||||||||||||||||||||||
Executive Officer and Chief Financial Officer(3) | |||||||||||||||||||||||||||||||
Kuslima Shogen |
2009
|
$ | 207,692 | - | - | - | - | $ | 139,241 | (7) | $ | 346,933 | |||||||||||||||||||
Chief Executive |
2008
|
$ | 278,877 | - | $ | 2,305,000 | $ | 500,000 | (8) | - | $ | 25,514 | (9) | $ | 3,109,391 | ||||||||||||||||
Officer(6)
|
2007
|
$ | 233,688 | - | $ | 565,460 | - | - | $ | 24,026 | (10) | $ | 823,174 | ||||||||||||||||||
Lawrence A. Kenyon |
2009
|
$ | 109,615 | $ | 109,615 | ||||||||||||||||||||||||||
President, Chief |
2008
|
$ | 215,231 | $ | 42,000 | - | - | - | $ | 6,990 | (12) | $ | 264,221 | ||||||||||||||||||
Financial
Officer, Corporate Secretary(11)
|
2007
|
$ | 104,192 | (13) | - | $ | 666,875 | - | - | $ | 38,157 | (14) | $ | 809,224 |
17
____________________________
(1)
|
These
amounts represent the dollar amount recognized for financial statement
reporting purposes the grant date fair value of stock options granted to
the named executive officers in accordance with SFAS No.
123R. The grant date fair value was estimated using the
Black-Scholes stock option pricing model in accordance with SFAS No.
123R. Pursuant to the SEC rules, the amounts exclude the impact
of estimated forfeitures related to service-based vesting
conditions. Valuation assumptions used in the calculation are
as disclosed in the Annual Report on the Original Form 10-K for the year
ended July 31, 2009.
|
(2)
|
Excludes
perquisites and other personal benefits that in the aggregate do not
exceed $10,000. These amounts consist of Alfacell’s annual
contributions to a 401(k) plan unless otherwise
noted.
|
(3)
|
Mr.
Muniz was appointed as the Company’s President, Chief Operating Officer,
Chief Financial Officer and director to the Board on April 3,
2009.
|
(4)
|
Mr.
Muniz initially began consulting with the Company on February 9,
2009. On April 3, 2009, Mr. Muniz was appointed as the
Company’s President, Chief Operating Officer and Chief Financial
Officer. Given the Company’s difficult financial condition, Mr.
Muniz continued to receive consulting payments from the date he first
began consulting with the Company continuing through October 19,
2009. This amount represents consulting fee from his first day of
employment through July 31, 2009.
|
(5)
|
This
amount consists of travel cost between Mr. Muniz’ home state of Florida
and New Jersey for a period of six months totaling $5,218 and health
insurance reimbursement of $5,823 for fiscal year
2009.
|
(6)
|
Ms.
Shogen retired from the Company on March 31,
2009.
|
(7)
|
This
amount consists of post-retirement payments of $126,923, Alfacell’s annual
contribution to a 401(k) plan totaling $3,461 and a monthly auto allowance
totaling $8,857 for fiscal year
2009.
|
(8)
|
This
amount represents a lump sum payment as part of Ms. Shogen’s Retirement
Agreement in exchange for the termination of the Royalty
Agreement.
|
(9)
|
This
amount consists of Alfacell’s annual contribution to a 401(k) plan
totaling $9,999, a monthly auto allowance totaling $12,997 for fiscal year
2008 and premiums paid by the Company on a life insurance policy on Ms.
Shogen totaling $2,518. The Company is not the beneficiary of
the life insurance policy.
|
(10)
|
This
amount consists of Alfacell’s annual contribution to a 401(k) plan
totaling $6,738, a monthly auto allowance totaling $13,000 for fiscal year
2007 and premiums paid by the Company on a life insurance policy on Ms.
Shogen totaling $4,288. The Company is not the beneficiary of
the life insurance policy.
|
(11)
|
Mr.
Kenyon resigned as the Company’s President and Chief Financial Officer on
December 12, 2008 and as Corporate Secretary and director on the Board on
April 2, 2009.
|
(12)
|
This
amount consists of Alfacell’s annual contribution to a 401(k) plan.
|
(13)
|
Represents
salary for period commencing on January 16, 2007, Mr. Kenyon’s first
day of employment with the Company, through July 31,
2007.
|
(14)
|
As
part of Mr. Kenyon’s employment arrangements approved by the Board, the
Company provided for moving expenses totaling $9,146 and cost
of travel between his home state of Illinois and New Jersey for a period
of 12 months totaling $29,011. Alfacell made no contributions
to Mr. Kenyon’s 401(k) plan during the fiscal year ended July 31,
2007.
|
18
Grants
of Plan-Based Awards in Fiscal Year
2009
|
There
were no grant of stock options under equity and non-equity incentive plans to
the Named Executive Officers during the fiscal year ended July 31,
2009:
Outstanding
Equity Awards at Fiscal Year-End
The
following table sets forth the information with respect to the Named Executive
Officers concerning the exercisable and unexercisable stock option awards held
as of July 31, 2009(1):
Name |
Number
of Securities Underlying Unexercised Options (#)
Exercisable
|
Number
of Securities Underlying Unexercised Options (#)
Unexercisable
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Kuslima
Shogen(2)
|
23,000(3)
|
-
|
-
|
$0.85
|
8/21/09
|
23,000(3)
|
-
|
-
|
$0.49
|
10/4/09
|
|
23,000(3)
|
-
|
-
|
$0.49
|
10/7/09
|
|
69,000(3)
|
-
|
-
|
$0.26
|
10/7/09
|
|
30,000(3)
|
-
|
-
|
$1.58
|
9/19/09
|
|
90,000(3)
|
-
|
-
|
$1.58
|
10/7/09
|
|
150,000(3)
|
-
|
-
|
$6.73
|
10/7/09
|
|
100,000
|
-
|
-
|
$6.73
|
3/31/10
|
|
100,000(3))
|
-
|
-
|
$1.61
|
10/7/09
|
|
72,000(3)
|
-
|
-
|
$1.29
|
10/7/09
|
|
250,000
|
-
|
$2.18
|
3/31/10
|
||
1,000,000(4)
|
$2.00
|
4/25/18
|
|||
Lawrence
A. Kenyon(5)
|
225,000(3)
|
-
|
-
|
$1.55
|
8/17/09
|
____________________________
(1)
|
The
Company does not have stock awards as part of its compensation program,
therefore the columns entitled “Stock Awards” have been omitted from this
table.
|
(2)
|
Ms.
Shogen retired from the Company on March 31,
2009.
|
(3)
|
These
options expired on their respective expiration
dates.
|
(4)
|
These
performance options are only exercisable upon the meeting of the
conditions set out in Ms. Shogen’s Retirement Agreement as described
above.
|
(5)
|
Mr.
Kenyon resigned as the Company’s President and Chief Financial Officer on
December 12, 2008 and as Corporate Secretary and director on April 2,
2009.
|
Option
Exercises and Stocks Vested
|
The Named
Executive Officers did not exercise options during fiscal year 2009 and the
Company did not grant stock awards as part of its compensation
program.
19
Non-Employee
Directors’ Compensation
In
February 2007, the Board adopted a non-employee director compensation policy
whereby each member of the Board who was not an employee of Alfacell will
receive $15,000 per year in consideration of the member’s serving on the Board,
payable in four equal quarterly installments. In addition, each
non-employee director will be granted an annual retainer of 20,000 options on
the last trading day of December for each year under the 2004 Stock Incentive
Plan. The Chairman of the Board will receive an option bonus equal to
the number of options received by the Chairman for his board and committee
memberships. Committee chairpersons receive 10,000 options for each
committee chaired while each committee member receives 5,000 options for each
committee on which he serves. The exercise price of the options will
be equal to the closing price of the Common Stock on the date of the
grant. The options will vest on the first anniversary of the date of
the grant provided that the option holder remains a director as of such
anniversary date and the options will terminate on the sixth anniversary of the
date of the grant.
As
described on the Form 8-K filed by the Company on October 20, 2009, the Company
closed on a private placement of convertible promissory notes and warrants in
which the Company received $3,250,000 in gross proceeds on October 19,
2009. As a condition to the closing of such financing, each member of
the Board other than David Sidransky, Chairman of the Board, and Mr. Muniz
agreed to resign from the Board upon the request of Dr. Sidransky made at any
time following the closing and December 31, 2009. In connection with
such condition, the Board amended the vesting of the options granted on December
31, 2008 to non-employee directors, except for Dr. Sidransky, to be accelerated
in full upon their resignation as requested by the Chairman of the
Board. Additionally, with the exception of Dr. Sidransky, the terms
of the options granted to non-employee directors on February 8, 2007, December
31, 2007 and December 31, 2008 were amended to provide that if the non-employee
director leaves the Board, the option will be exercisable for two years, instead
of one year, from the date such non-employee director leaves the Board any time
between October 19, 2009 and December 31, 2009.
In
January 2009, the Board ceased the non-employee director
compensation.
Under our
director compensation policies, directors who also serve as executive officers
do not receive additional compensation for their service on our
Board.
The
exercise price and vesting schedules for the regular and discretionary option
grants described above are set forth in the table titled “Directors’ Stock Options”
below. The total compensation paid to independent directors for their
service as directors of the Company for fiscal year 2009 is set forth in the
table titled “Directors’
Compensation” below.
During
the fiscal year ended July 31, 2009, the following independent or non-employee
directors were compensated as follows for their service as directors of the
Company:
20
Name
|
Fees
Earned or Paid in Cash(1)
($)
|
Stock
Awards
($)
|
Option
Awards(2)
($)
|
Non-Equity
Incentive Plan Compensa-tion
($)
|
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
($)
|
All
Other Compen-sation
($)
|
Total
($)
|
||||||||||||||||
John
P. Brancaccio
|
$7,500 | - | $5,600 | - | - | - | $13,100 | ||||||||||||||||
Stephen
K. Carter, M.D.
|
$7,500 | - | $4,000 | - | - | - | $11,500 | ||||||||||||||||
Donald
R. Conklin
|
$7,500 | - | $4,800 | - | - | - | $12,300 | ||||||||||||||||
James
J. Loughlin(3)
|
$7,500 | - | $5,600 | (3) | - | - | - | $13,100 | |||||||||||||||
David
Sidransky, M.D.
|
$7,500 | - | $14,400 | - | - | - | $21,900 | ||||||||||||||||
Paul
Weiss, Ph.D.
|
$7,500 | - | $8,000 | - | - | - | $15,500 |
____________________________
|
(1)
|
These
amounts represent the retainer paid for services as
director.
|
(2)
|
These
amounts represent the dollar amount recognized for financial statement
reporting purposes for the fair value of stock options granted to
non-employee directors for fiscal year 2009. The grant date
fair value of the options was estimated using the Black-Scholes stock
option pricing model in accordance with SFAS No.
123R. Valuation assumptions used in the calculation are as
disclosed in the Annual report on Original Form 10-K for the year ended
July 31, 2009.
|
(3)
|
Mr.
Loughlin resigned as a member of the Board on March 5,
2009. The stock options granted to him in December 2008 were
forfeited.
|
Directors’
Stock Options
During
the fiscal year ended July 31, 2009, the following independent or non-employee
directors were granted options under Alfacell’s 2004 Stock Incentive Plan as
described above:
Name
|
Number
of
Options
Granted(1)
|
Exercise
Price of
Options
Granted
|
John
P. Brancaccio
|
35,000(2)
|
$0.24
|
Stephen
K. Carter, M.D.
|
25,000(3)
|
$0.24
|
Donald
R. Conklin
|
30,000(4)
|
$0.24
|
James
J. Loughlin(5)
|
35,000(5)
|
$0.24
|
David
Sidransky, M.D.
|
90,000(6)
|
$0.24
|
Paul
M. Weiss, Ph.D.
|
50,000(7)
|
$0.24
|
____________________________
|
(1)
|
All
the options listed here were granted on December 31, 2008, vest on
December 31, 2009, provided that the option holder continuously remains a
director until such time, and expire on December 31, 2014. The
exercise price of these options was the closing price of the Company’s
Common Stock on the date of the grant. As described above,
these options will be accelerated in full upon the resignation of the
non-employee director, except Dr. Sidransky, as requested by the Chairman
of the Board any time between October 19, 2009 and December 31,
2009.
|
21
(2)
|
Mr.
Brancaccio’s options are the result of his serving on the Audit Committee
and as Chairman of the Compensation
Committee.
|
(3)
|
Dr.
Carter’s’ options are the result of his serving on the Research and
Clinical Oversight Committee.
|
(4)
|
Mr.
Conklin’s options are the result of his serving on the Compensation
Committee and Commercial and Business Development Oversight
Committee.
|
(5)
|
Mr.
Loughlin’s options are the result of his serving on the Corporate
Governance and Nominating Committee and as Chairman of the Audit
Committee. Mr. Loughlin resigned as a member of the Board
on March 5, 2009 and these options were forfeited as a result of his
resignation.
|
(6)
|
Dr.
Sidransky’s options are the result of his serving as Chairman of the
Board, Chairman of the Corporate Governance and Nominating Committee,
Chairman of the Research and Clinical Oversight Committee and a member of
the Commercial and Business Development Oversight
Committee.
|
(7)
|
Dr.
Weiss’ options are the result of his serving on the Compensation
Committee, the Corporate Governance and Nominating Committee, the Audit
Committee, the Research and Clinical Oversight Committee and as Chairman
of the Commercial and Business Development Oversight
Committee.
|
Outstanding
Equity Awards at Fiscal Year-End
The
following table sets forth the information with respect to the independent or
non-employee directors concerning exercisable and unexercisable stock options
held as of July 31, 2009(1):
Name
|
Number
of Securities
Underlying
Unexercised
Options
(#) Exercisable
|
Number
of Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
John
P. Brancaccio
|
13,750
|
-
|
$3.74
|
12/30/09
|
20,000
|
-
|
$4.38
|
12/30/10
|
|
20,000
|
-
|
$1.89
|
12/30/11
|
|
20,000
|
-
|
$1.60
|
12/30/12
|
|
15,000
|
-
|
$1.49
|
02/08/13
|
|
35,000
|
-
|
$1.72
|
12/31/13
|
|
-
|
35,000(2)
|
$0.24
|
12/31/14
|
|
Stephen
K. Carter, M.D.
|
15,000
|
-
|
$3.78
|
12/30/09
|
20,000
|
-
|
$4.38
|
12/30/10
|
|
20,000
|
-
|
$1.89
|
12/30/11
|
|
20,000
|
-
|
$1.60
|
12/30/12
|
|
5,000
|
-
|
$1.49
|
02/08/13
|
|
25,000
|
-
|
$1.72
|
12/31/13
|
|
-
|
25,000(2)
|
$0.24
|
12/31/14
|
|
Donald
R. Conklin
|
15,000
|
-
|
$3.78
|
12/30/09
|
20,000
|
-
|
$4.38
|
12/30/10
|
|
20,000
|
-
|
$1.89
|
12/30/11
|
|
20,000
|
-
|
$1.60
|
12/30/12
|
|
10,000
|
-
|
$1.49
|
02/08/13
|
|
30,000
|
-
|
$1.72
|
12/31/13
|
|
-
|
30,000(2)
|
$0.24
|
12/31/14
|
22
Name
|
Number
of Securities
Underlying
Unexercised
Options
(#) Exercisable
|
Number
of Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
James
J. Loughlin(3)
|
13,750(4)
|
-
|
$3.74
|
9/11/09
|
20,000(4)
|
-
|
$4.38
|
9/11/09
|
|
20,000(4)
|
-
|
$1.89
|
9/11/09
|
|
20,000(4)
|
-
|
$1.60
|
9/11/09
|
|
15,000(4)
|
-
|
$1.49
|
9/05/09
|
|
35,000(4)
|
-
|
$1.72
|
9/05/09
|
|
-
|
35,000(2)(5)
|
$0.24
|
12/31/14
|
|
David
Sidransky, M.D.
|
8,750
|
-
|
$8.18
|
12/30/09
|
20,000
|
-
|
$4.38
|
12/30/10
|
|
20,000
|
-
|
$1.89
|
12/30/11
|
|
20,000
|
-
|
$1.60
|
12/30/12
|
|
70,000
|
-
|
$1.49
|
02/08/13
|
|
90,000
|
-
|
$1.72
|
12/31/13
|
|
-
|
90,000(2)
|
$0.24
|
12/31/14
|
|
Paul
M. Weiss, Ph.D.
|
15,000
|
-
|
$3.78
|
12/30/09
|
20,000
|
-
|
$4.38
|
12/30/10
|
|
20,000
|
-
|
$1.89
|
12/30/11
|
|
20,000
|
-
|
$1.60
|
12/30/12
|
|
30,000
|
-
|
$1.49
|
02/08/13
|
|
50,000
|
-
|
$1.72
|
12/31/13
|
|
-
|
50,000(2)
|
$0.24
|
12/31/14
|
____________________________
|
(1)
|
The
Company does not have stock awards as part of its compensation program,
therefore the columns entitled “Stock Awards” have been omitted from this
table.
|
(2)
|
These
options vest on December 31, 2009, provided that the option holder
continuously remains a director as of December 31,
2009.
|
(3)
|
Mr.
Loughlin resigned as a member of the Board on March 5,
2009.
|
(4)
|
These
options expired on their respective expiration
dates.
|
(5)
|
These
options were forfeited as a result of Mr. Loughlin’s
resignation.
|
23
The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis as required by Item 402(b) of Regulation S-K with
management. Based on these reviews and discussions, the Compensation
Committee recommended to the Board of Directors that the Compensation Discussion
and Analysis be included in this Form 10-K/A.
This
report is respectfully submitted by the members of the Compensation Committee of
the Board.
John P.
Brancaccio, Chairman
Donald R.
Conklin
Paul M.
Weiss, Ph.D.
ITEM
12. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
The
following table sets forth certain information as of October 15, 2009 concerning
stock ownership of all persons known by the Company to own beneficially more
than 5% of the outstanding shares of the Company’s voting stock, each director,
each nominee for director, each current executive officer named in the Summary
Compensation Table and all directors and current executive officers of the
Company as a group:
Security
Ownership of Certain Beneficial Owners
Name
and address of beneficial
owner
or identity of group
|
Amount
and Nature of
Beneficial
Ownership
|
Percent
of shares
outstanding(1)
|
McCash
Family Limited Partnership
N3810
S. Grand Oak Drive
Iron
Mountain, MI 49801
|
5,046,383(2)
|
10.3%
|
James
O. McCash, and the James O. McCash Trust
N3820
S. Grand Oak Drive
Iron
Mountain, MI 49801
|
2,910,820(3)
|
6.1%
|
Knoll
Capital Management LP, Fred Knoll and Europa International,
Inc.,
Knoll
Special Opportunities Fund II Master Fund Ltd., KOM Capital
Management,
LLC, Patrick O’Neill(4)
666
Fifth Avenue, Suite 3702
New
York, NY 10103
|
4,485,520(5)
|
9.4%
|
____________________________
(1)
|
The
percentage of stock outstanding for each stockholder is calculated by
dividing (i) the number of shares deemed to be beneficially held by such
stockholder as of the date of the calculation (including the number of
shares issuable upon exercise of options or warrants held by such
stockholder which were exercisable as of the date as of the calculation or
which will become exercisable within 60 days after the date of such
calculation) by (ii) the sum of (A) the number of shares of Common Stock
outstanding as of the date of the calculation, plus (B) the number of
shares issuable upon exercise of options or warrants held by such
stockholder which were exercisable as of the date of the calculation or
which will become exercisable within 60 days after the date of such
calculation.
|
(2)
|
Includes
1,624,821 shares subject to warrants which are currently exercisable or
will become exercisable within 60 days of October 15, 2009. The
information concerning the stock ownership of the McCash Family Limited
Partnership was obtained from the Schedule 13D/A filed with the SEC on
January 8, 2007 and other information known to the
Company.
|
(3)
|
The
information concerning the stock ownership of the James O. McCash, and the
James O. McCash Trust was obtained from the Schedule 13G/A filed with the
SEC on February 5, 2008 and other information known to the
Company.
|
(4)
|
The
information concerning the stock ownership of Knoll Capital Management LP,
Fred Knoll and Europa International, Inc., Knoll Special Opportunities
Fund II Master Fund Ltd., KOM Capital Management, LLC, Patrick O’Neill was
obtained from the Schedule 13G/A filed with the SEC on February 17, 2009
and other information known to the Company.
|
(5)
|
Includes
428,572 shares subject to warrants which are currently exercisable or will
become exercisable within 60 days of October 15,
2009.
|
24
The table
below shows the amount of Alfacell Common Stock beneficially owned (unless
otherwise indicated) by Alfacell’s directors and the Named Executive Officers
listed in the Summary Compensation Table individually, and Alfacell’s directors
and Named Executive Officers as a group. All information is as of
October 15, 2009.
Security
Ownership of Management
Name
and address of beneficial
owner
or identity of group(1)
|
Position
|
Amount
and Nature
of
Beneficial Ownership(2)
|
Percent
of shares
outstanding(3)
|
Charles
Muniz
|
President,
Chief Executive Officer, Chief Financial Officer and
Director
|
610,000(4)
|
1.3%
|
John
P. Brancaccio
|
Director
|
130,050(5)
|
*
|
Stephen
K. Carter, M.D.
|
Director
|
120,000(6)
|
*
|
Donald
R. Conklin
|
Director
|
500,500(7)
|
1.1%
|
Kuslima
Shogen
|
Director
|
1,156,445(8)
|
2.4%
|
David
Sidransky, M.D.
|
Chairman
of the Board
|
273,750(9)
|
*
|
Paul
M. Weiss, Ph.D.
|
Director
|
195,090(10)
|
*
|
All
Named Executive Officers and directors as a group (7
persons)
|
2,985,835(11)
|
6.2%
|
____________________________
|
*
|
Represents
less than 1% of Alfacell’s outstanding Common Stock.
|
(1)
|
Unless
otherwise indicated below, the persons in the above table have sole voting
and investment power with respect to all shares beneficially owned by
them. The address of all Named Executive Officers and directors
is c/o Alfacell Corporation, 300 Atrium Drive, Somerset, New Jersey,
08873.
|
(2)
|
All
shares listed are Common Stock. Except as discussed below, none
of these shares are subject to rights to acquire beneficial ownership, as
specified in Rule 13d-3(1) under the Exchange Act, and the beneficial
owner has sole voting and investment power, subject to community property
law where applicable.
|
(3)
|
The
percentage of stock outstanding for each stockholder is calculated by
dividing (i) the number of shares deemed to be beneficially held by such
stockholder as of October 15, 2009 (including the number of shares
issuable upon exercise of options or warrants held by such stockholder
which were exercisable as of the date as of the calculation or which will
become exercisable within 60 days after the date of such calculation) by
(ii) the sum of (A) the number of shares of Common Stock outstanding as of
October 15, 2009 plus (B) the number of shares issuable upon exercise of
options or warrants held by such stockholder which were exercisable as of
October 15, 2009 or which will become exercisable within 60 days after
October 15, 2009.
|
(4)
|
Includes
300,000 shares of Common Stock owned by Mr. Muniz’
wife.
|
(5)
|
Includes
123,750 shares underlying options which are currently exercisable or which
will become exercisable within 60 days after October 15,
2009.
|
(6)
|
Includes
105,000 shares underlying options which are currently exercisable or which
will become exercisable within 60 days after October 15,
2009.
|
(7)
|
Includes
115,000 shares underlying options which are currently exercisable or which
will become exercisable within 60 days after October 15,
2009.
|
(8)
|
Includes
422,000 shares underlying options which are currently exercisable or which
will become exercisable within 60 days after October 15,
2009.
|
(9)
|
Includes
228,750 shares underlying options which are currently exercisable or which
will become exercisable within 60 days after October 15,
2009.
|
(10)
|
Includes
6,535 shares of Common Stock owned by Mr. Weiss’ wife and 155,000 shares
underlying options which are currently exercisable or which will become
exercisable within 60 days after October 15, 2009.
|
(12)
|
Includes
all shares owned beneficially by the directors and the executive officers
named in the table.
|
25
The
following table provides information as of July 31, 2009 on our equity based
compensation plans that may be issued upon the exercise of stock
options:
Plan Category
|
Number
of securities to be issued upon exercise of outstanding options, warrants and rights
|
Weighted-average
exercise price of outstanding options, warrants and rights
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities
reflected in column (a))
|
(a)
|
(b)
|
(c)
|
|
Equity
compensation plans approved by security holders
|
4,771,650
|
$
2.64
|
5,012,500
|
ITEM
13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.
Related
Party Transactions
The
Company recognizes that related party transactions can create the appearance
that Company decisions are made based on factors other than the Company’s best
interest or the best interest of the Company’s stockholders. Related
party transactions can also create potential or actual conflicts of interest
between the Company and the related party. For purposes of Item 404
of Regulation S-K, related person transactions are transactions which exceed
$120,000 in the aggregate or 1% of the average of the Company’s total assets at
year end for the last three completed fiscal years, to which the Company and a
related party with a direct or indirect material interest,
participated. The Company’s Code of Business Conduct and Ethics
requires that any such related party transactions be specifically approved by
the Company’s Ethics Officer. In addition directors, officers and
employees must notify the Ethics Officer or the Chair of the Audit Committee of
the existence of any actual or potential conflicts of interest. The
Audit Committee performs a review of related party transactions as part of its
review of the Annual Report on Original Form 10-K.
The
Company was a party to the following transactions in which the amount involved
exceeded $120,000 and in which any executive officers, directors, holders of
more than 5% of our capital stock and members of such person’s immediate
families had or will have a direct or indirect material interest.
26
On
October 20, 2009, the Company announced that it completed a sale of 65 units
(the “Units”) in a private placement (the “Offering”) to certain investors
pursuant to a securities purchase agreement entered into on October 19,
2009. Each Unit consists of (i) $50,000 principal amount of 5%
Senior Secured Convertible Promissory Notes (collectively, the “Notes”)
convertible into shares of the Company’s Common Stock, (ii) Series A
Common Stock Purchase Warrants to purchase in the aggregate that number of
shares of Common Stock initially issuable upon conversion of the aggregate
amount of Notes issued as part of the Unit, at an exercise price of $0.15 per
share with a three year term and (iii) Series B Common Stock Purchase
Warrants to purchase in the aggregate that number of shares of Common Stock
initially issuable upon conversion of the aggregate amount of Notes issued as
part of the Unit, at an exercise price of $0.25 per share with a five year term.
The closing of the Offering occurred on October 19, 2009 and the Company
received an aggregate of $3,250,000 in gross proceeds. Charles Muniz,
the Company’s President, Chief Executive Officer, Chief Financial Officer and
director, subscribed for 20 Units, certain trusts and individuals related to
James O. McCash, a beneficial owner of more than five percent of the Company’s
voting securities, subscribed for an aggregate of 20 Units, Europa International
Inc., an affiliate of Knoll Capital Management LP, a beneficial owner of more
than five percent of the Company’s voting securities, subscribed for 15
Units. The relevant documentation and additional description of the
Offering were filed with the SEC on Form 8-K on October 20, 2009. The
Company’s entry into an employment agreement with Mr. Muniz upon terms
reasonably acceptable to the investors in the Offering was a condition to the
Closing.
In
addition, see the discussion of the Retirement Agreement and arrangements
related thereto by and between the Company and the Company’s CEO, Kuslima
Shogen, set forth above in the Post-Termination Agreement
subsection of the “Compensation and Discussion
Analysis”.
Director
Independence
Please
see the sections entitled Independent Directors and
Board Committee Membership
in Item 10 “Directors, Executive Officers and Corporate Governance” above
for disclosures on Board independence and committee membership.
ITEM
14. PRINCIPAL ACCOUNTING FEES
AND SERVICES.
In
accordance with the requirements of the Sarbanes-Oxley Act of 2002 and the Audit
Committee Charter, all audit and audit-related work and all non-audit work
performed by the independent registered public accounting firm, J.H. Cohn LLP,
is approved in advance by the Audit Committee, including the proposed fees for
such work. The Audit Committee is informed of each service actually
rendered that was approved through its pre-approval process.
27
Audit
Fees
Audit
fees paid by Alfacell to J.H. Cohn LLP for the audit of the financial statements
included in Alfacell’s Annual Report on the Original Form 10-K, auditors’ review
of the financial statements included in Alfacell’s Quarterly Reports on Form
10-Q, work related to Alfacell’s registration statements and consultation on
accounting topics for the years ended July 31, 2009 and July 31, 2008 totaled
approximately $101,000 and $167,000,
respectively. Also included in the audit fees for fiscal year July 31, 2008 were
fees for the audit of internal control over financial reporting and management’s
assessment of internal control over financial reporting.
Audit-related
Fees
None.
Tax
Fees
None.
All
Other Fees
None.
ITEM
15. EXHIBITS AND FINANCIAL
STATEMENT SCHEDULES.
(a)(1)
and (2)
|
The
information required by this item is incorporated herein by reference to
the financial statements and notes thereto listed in Item 8 of Part II of
the Original Form 10-K.
|
(a)(3)
|
All
exhibits filed by the Company in its Original Form 10-K are incorporated
herein by reference. The following exhibits are filed as a part
of this report
|
Exhibit
No.
|
Item Title
|
Filed
Herewith or Incorporated by
Reference
|
31.1
|
Certification
of Principal Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
+
|
31.2
|
Certification
of Principal Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
+
|
32.1
|
Certification
of Principal Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
*
|
32.2
|
Certification
of Principal Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
*
|
+ Filed
herewith
* Filed
as an Exhibit to the Original Form 10-K
28
SIGNATURE
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
ALFACELL
CORPORATION
Dated:
November 30, 2009
|
By: /s/ CHARLES MUNIZ
Charles Muniz, Chief Executive Officer, President and Chief Financial
Officer
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Dated: November
30, 2009
|
/s/
CHARLES MUNIZ
Charles
Muniz, Chief Executive Officer, President,
Chief
Financial Officer (Principal Executive Officer,
Principal
Financial Officer and Principal Accounting
Officer)
and Director
|
Dated: November
30, 2009
|
/s/
DAVID SIDRANSKY
David
Sidransky, M.D., Chairman of the
Board
|
Dated: November
30, 2009
|
/s/
JOHN P. BRANCACCIO
John
P. Brancaccio, Director
|
Dated: November
__, 2009
|
_______________________
Stephen
K. Carter, M.D., Director
|
Dated: November
30, 2009
|
/s/
DONALD R. CONKLIN
Donald
R. Conklin, Director
|
Dated: November
__, 2009
|
_______________________
Kuslima
Shogen, Director
|
Dated: November
30, 2009
|
/s/
PAUL M. WEISS
Paul
M. Weiss, Ph.D., Director
|
29