SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2)
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CISTRON BIOTECHNOLOGY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i) and 0-11.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify previous filing by registration number, or the
form or schedule and the date of its filing.
<PAGE>
[LOGO]
CISTRON
BIOTECHNOLOGY
10 Bloomfield Avenue
Pine Brook, New Jersey 07058
(973) 575-1700
-------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 23, 1999
-------------------------------------
To the Stockholders of
CISTRON BIOTECHNOLOGY, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Cistron Biotechnology, Inc. (the "Company") will be held at
the Waldorf-Astoria, 301 Park Avenue, East Foyer, 3rd Floor, New York, New York
10022, on Tuesday, February 23, 1999, at 10:00 a.m., New York time, to consider
and act upon the following proposals:
1. To elect a board of five (5) directors.
2. To ratify the reappointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending June 30, 1999.
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
A proxy statement describing the matters to be considered at the Annual
Meeting is attached to this notice. Only holders of record of Common Stock at
the close of business on January 19, 1999, the Record Date for the Annual
Meeting, are entitled to notice of and to vote at the Annual Meeting.
By Order of the Board of Directors,
Seth I. Truwit
Secretary
Pine Brook, New Jersey
January 25, 1999
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE ANNUAL MEETING
ARE REQUESTED TO DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED
PROXY IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
<PAGE>
CISTRON
BIOTECHNOLOGY
10 Bloomfield Avenue
Pine Brook, New Jersey 07058
(973) 575-1700
----------------------------------------
PROXY STATEMENT
----------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
To Be Held On February 23, 1999
INTRODUCTION
General
This Proxy Statement is being furnished to holders of Common Stock, par
value $.01 per share ("Common Stock"), of Cistron Biotechnology, Inc., a
Delaware corporation (the "Company"), in connection with the solicitation of
proxies by the board of directors of the Company for use at the Annual Meeting
of Stockholders to be held on Tuesday, February 23, 1999, at the
Waldorf-Astoria, 301 Park Avenue, East Foyer, 3rd Floor, New York, New York
10022, at 10:00 a.m., New York time, and at any and all adjournments or
postponements thereof (the "Annual Meeting"). The cost of this solicitation will
be borne by the Company. This Proxy Statement and enclosed proxy card are being
mailed to the Company's stockholders on or about January 27, 1999.
Matters to be Considered at the Annual Meeting
At the Annual Meeting, the stockholders will be asked to consider and vote
upon the following proposals:
1. To elect a board of five (5) directors.
2. To ratify the reappointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending June 30, 1999.
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
Voting at the Annual Meeting
Only holders of record of Common Stock at the close of business on
January 19, 1999 (the "Record Date") are entitled to notice of and to vote at
the Annual Meeting, each such holder of record being entitled to one vote per
share on each matter to be considered at the Annual Meeting. On the Record Date,
there were 24,317,020 shares of Common Stock issued and outstanding.
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of Common Stock entitled to vote at the
Annual Meeting (12,158,511 shares of the 24,317,020 shares outstanding) is
necessary to constitute a quorum at the Annual Meeting. If a quorum is present,
a plurality vote of the shares of Common Stock present in person or represented
by proxy at the
1
<PAGE>
Annual Meeting is required to elect the board of five (5) directors, and the
affirmative vote by the holders of a majority of such votes is required to
ratify the reappointment of Deloitte & Touche LLP as independent auditors of the
Company for the year ending June 30, 1999. All abstentions and broker non-votes,
if any, will not be included as shares that are present and entitled to vote at
the Annual Meeting.
If the enclosed proxy card is properly executed and returned to the
Company prior to voting at the Annual Meeting, the shares represented thereby
will be voted in accordance with the instructions marked thereon, subject to the
following conditions:
Shares represented by proxies which are marked "WITHHOLD AUTHORITY" to
vote for (i) all five (5) nominees or (ii) any individual nominee(s) for
election as directors, and are not otherwise marked "FOR" the other nominees,
will not be counted in determining whether a plurality vote has been received
for the election of directors. Similarly, shares represented by proxies that are
marked "ABSTAIN" on any other proposal will not be counted in determining
whether the requisite vote has been received for such proposal. IN THE ABSENCE
OF INSTRUCTIONS, THE SHARES WILL BE VOTED FOR ALL THE PROPOSALS SET FORTH IN THE
NOTICE OF ANNUAL MEETING. At any time prior to its exercise, a proxy may be
revoked by the holder of Common Stock granting it by delivering written notice
of revocation or a duly executed proxy bearing a later date to the Secretary of
the Company at the address of the Company set forth on the first page of this
Proxy Statement or by attending the Annual Meeting and voting in person.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date, the beneficial
ownership of the Company's Common Stock by (i) each person known by the Company
to own beneficially five percent or more of such shares together with their
address, (ii) each director, (iii) each person named in the Summary Compensation
Table under "Executive Compensation" on page 6 of this Proxy Statement, and (iv)
all directors and executive officers as a group, together with their respective
percentage ownership of the outstanding shares:
<TABLE>
<CAPTION>
Name and Address of Shares Beneficially Percent of Outstanding Shares
Beneficial Owner Owned Owned
- ---------------- ----- -----
<S> <C> <C>
Henry Grausz, M.D...................................... 5,817,993(2) 23.7%
1001 G. Street, N.W.
Suite 200 East
Washington, D.C. 20001
Isidore S. Edelman, M.D. .............................. 2,411,681(3) 9.9
464 Riverside Drive, # 61
New York, NY 10027
Pasteur Merieux Serums & Vaccins, S.A. ................ 2,000,000(4) 8.0
58 Avenue Leclerc
69007 Lyon, France
Bruce C. Galton(1)..................................... 1,411,157(5) 5.5
Franklin J. Iris(1).................................... --(6) *
Thomas P. Carney, Ph.D.(1)............................. 150,000(7) *
Frank G. Stout(1)...................................... 600(8) *
Richard S. Dondero..................................... 447,207(9) 1.8
Robert S. Naismith, Ph.D.(1) .......................... 400,000(10) 1.6
All directors and executive officers
as a group (6 persons)................................ 2,408,964(11) 9.0
</TABLE>
- ----------
* less than 1%
2
<PAGE>
(1) c/o Cistron Biotechnology, Inc. ,10 Bloomfield Avenue, Pine Brook, New
Jersey 07058.
(2) Includes 259,587 shares issuable upon currently exercisable options.
(3) Includes 54,374 shares issuable upon currently exercisable options, but
does not include 194,935 shares owned by Dr. Edelman's spouse, as to which
he disclaims beneficial ownership.
(4) Includes 1,333,333 shares of the Company's Common Stock and a currently
exercisable warrant to purchase 666,667 shares of the Company's Common
Stock. See "Certain Relationships and Related Transactions."
(5) Includes 1,365,960 shares issuable upon exercise of currently exercisable
options.
(6) No shares or options owned as of the Record Date.
(7) Consists of 150,000 shares issuable upon exercise of currently exercisable
options.
(8) Mr. Stout disclaims beneficial ownership of 302,289 shares and 136,870
shares owned by the New England Medical Center Hospitals, Inc. and
Wellesley College, respectively, the Institutions of which Mr. Stout
serves as designee on the Company's board of directors.
(9) Includes 431,722 shares issuable upon exercise of currently exercisable
options.
(10) Consists of a currently exercisable warrant (the "Naismith Warrant") to
purchase 400,000 shares of the Company's Common Stock. The Naismith
Warrant was originally issued by the Company to BlueStone Capital
Partners, LP ("BlueStone") in October 1998. BlueStone subsequently
assigned its interest in the Naismith Warrant to Dr. Robert Naismith. At
the time of Dr. Naismith's employment with BlueStone from October 1996
until April 1998, BlueStone was the beneficial owner of the warrant (the
"BlueStone Warrant") to purchase 400,000 shares of the Company's Common
Stock. During his service as a director of BlueStone, Dr. Naismith
disclaimed beneficial ownership of the BlueStone Warrant. As of April 1998
Dr. Naismith was no longer employed as a Managing Director of BlueStone
and therefore he ceased to have any beneficial ownership of the BlueStone
Warrant. See "Certain Relationships and Related Transactions."
(11) Includes options described in notes (5), (7), (9) and (10).
On the Record Date, the outstanding Common Stock was held by 727
registered stockholders.
ELECTION OF DIRECTORS
At the Annual Meeting, the entire board of five (5) directors, as fixed by
the Company's by-laws, is to be elected to hold office until the next Annual
Meeting of Stockholders and until their successors are duly elected and
qualified. Unless otherwise specifically directed by stockholders executing
proxies, it is intended that all proxies in the accompanying form received in
time for the Annual Meeting will be voted at the Annual Meeting for the election
of the five (5) nominees named below, all of whom are currently directors of the
Company. In the event any nominee should become unavailable for election for any
presently unforeseen reason, it is intended that the proxies will be voted for
such substitute nominee as may be designated by the present board of directors.
3
<PAGE>
Nominees
Each nominee's name, age, office with the Company, the year first elected
as a director and certain biographical information are set forth below:
<TABLE>
<CAPTION>
Year First Served
Name Age As a Director Position
- ---- --- ------------- --------
<S> <C> <C> <C>
Bruce C. Galton 47 1988 Chairman and CEO, Chief Financial Officer,
Treasurer, and Director
Franklin J. Iris 68 1998 Director
Thomas P. Carney, Ph.D. 83 1989 Director
Frank G. Stout 50 1990 Director
Robert Naismith, Ph.D. 54 1998 Director
</TABLE>
Bruce C. Galton has been Chairman and CEO, Chief Financial Officer, and
Treasurer since July 8, 1998 after having served as the Company's Acting
Chairman and CEO from May 1997 until July 8, 1998. From November 1988 until May
1997, Mr. Galton served as the Company's President, Chief Operating and
Financial Officer. From January 1985 until November 1988, Mr. Galton served as
the Company's Vice President and Chief Financial Officer, Secretary and
Treasurer. From 1977 to 1984, Mr. Galton was employed in various capacities by
Becton, Dickinson & Co. Mr. Galton was Manager of Cost and Budgets at Becton's
B-D Immunodiagnostics division from August 1983 to December 1984 and Financial
Manager of its Becton, Dickinson Laboratory Systems Division from May 1981 to
August 1983. He holds a B.S. from the University of Virginia and an MBA from
Fairleigh Dickinson University.
Franklin J. Iris was appointed as a director of the Company in July 1998.
Mr. Iris has over 25 years of experience as an executive and consultant in the
health care industry. He is the founder (1985) and principal of Iris &
Associates, an investment consulting and acquisition services firm. He also
serves as director of several health care companies, including Photon
Technology, Cytec Corporation, Serex, Inc. and Enzymatics. Mr. Iris was
previously president of the Laboratory Group and a Corporate Vice President with
Becton Dickinson and Company.
Thomas P. Carney, Ph.D. has been a director of the Company since September
1989. Dr. Carney has been Chairman and CEO of Metatech Corporation, which
develops medical devices, since it was organized in 1976. Prior to forming
Metatech Corporation, Dr. Carney was the Executive Vice President of G.D. Searle
& Company (1965-1976) and was Vice President of Research and Development of Eli
Lilly and Company prior to joining Searle. Dr. Carney holds a B.S. in chemical
engineering from the University of Notre Dame and Masters and Ph.D. degrees from
Pennsylvania State University.
Frank G. Stout has been the Vice President-Research Administration of New
England Medical Center Hospitals, Inc. (Tufts University) since 1983. Prior to
1983, Mr. Stout was Assistant Director of Research Administration of the Center
for the Advancement of Research and Biotechnology. Mr. Stout received his B.S.
in Biology from the University of South Dakota and his MPH in Health
Administration from the Tulane Medical Center.
Robert W. Naismith, Ph.D. has been a director of the Company since January
7, 1998. Dr. Naismith has served as the Chairman and Chief Executive Officer of
Genome Securities, Inc., an investment banking firm focused on healthcare and
the life sciences industry, since July 1998. Dr. Naismith was formerly the
Managing Director of Healthcare at BlueStone Capital Partners, L.P.
("BlueStone"), from October 1, 1996 until April 1998. Dr. Naismith has also
served as Director and Chairman of the Compensation Committee of the board of
directors of Penn Security Bank & Trust Company, Scranton, Pennsylvania since
1988 and as Director of the Marion Nichols Corporation, Clark Summit,
Pennsylvania since 1993. Dr. Naismith co-founded, and served as the President,
Chief
4
<PAGE>
Executive Officer and a director of Biofor, Inc., a biopharmaceutical research
and discovery company specializing in rational drug design via computer-assisted
molecular analysis from 1986 to 1995. He was co-founder and Executive Vice
President of Pharmakon Research International, Inc., an international
preclinical contact organization from 1980 until 1988. In addition, he served as
Vice President of Scherer Healthcare, Inc., an Atlanta based health care company
whose subsidiaries address various medical service and product markets, from
1986 to 1995, from 1994 to 1997 as Chairman and Director of Derma Sciences,
Inc., a wound-care company, Director and Chairman of the Joint Conference
Committee of the Community Medical Center, Scranton, Pennsylvania from 1980 to
1992, and in 1996 as Chairman and Director of The Micro Cap Fund, Inc., a
publicly traded bridge fund. He holds an adjunct associate professorship in the
School of Medicine at Case Western Reserve University, adjunct professorships in
the Department of Biology at Pennsylvania State University, and the Department
of Biology at the University of Scranton. He was awarded a tenured Associate
Professorship at Pennsylvania State University in Biology in 1977. Dr. Naismith
also serves as a Senior Fellow at the Institute of Molecular Biology & Medicine
at the University of Scranton, Scranton, Pennsylvania, Trustee of the William
Harvey Medical Foundation, London, U.K., a Director of the Pennsylvania Regional
Tissue Bank and the International Institute for the Advancement of Medicine. He
is a member of several editorial boards and the author of over 30 publications.
Dr. Naismith received his Ph.D. in Genetics from the Pennsylvania State
University in 1971.
All directors hold office until the next annual meeting of stockholders
and until their successors are elected and qualified. Officers hold office until
their successors are chosen and qualify, subject to earlier removal by the board
of directors and subject to rights, if any, under contracts of employment.
Legal Proceedings
As part of the Company's Chapter 11 settlement agreement, the Institutions
(defined herein) have the right to designate one individual nominated by
management to the board of directors. If the Company is consolidated or merged
or acquired by a third party whose primary products and/or interest is in areas
other than IL-1, its variants, derivatives or applications, the Company will no
longer be obligated to appoint such a representative and the representative of
the Institutions then acting as a Director of The Company will resign. The
"Institutions" are New England Medical Center Hospitals, Inc., Tufts University,
Massachusetts Institute of Technology and Wellesley College. Currently, Mr.
Frank G. Stout is the Institutions' designee on the board.
On August 1, 1997, the Company filed suit in the circuit Court of Fairfax
County (Virginia) against Rebuild, L.L.C. ("Rebuild") and against Henry Grausz,
M.D., the Company's former chairman, to collect $230,000 (plus interest and
attorney's fees) loaned to Rebuild under a short-term note, originally due May
15, 1997. The loan was personally and unconditionally guaranteed by Dr. Grausz,
who is a member of Rebuild. On October 10 1997, a judgment was entered in favor
of the Company in the Circuit Court of Fairfax County (Virginia) against Rebuild
and Henry Grausz. The judgment was for $230,000 loan principal plus interest and
attorneys' fees. In December 1997, Dr. Grausz filed a petition under Chapter 11
of the Federal Bankruptcy Code. The Company is an unsecured creditor as to the
judgment against Dr. Grausz entered in favor of the Company in October 1997. As
of the date hereof, Dr. Grausz had not filed a reorganization plan.
Meetings and Committees
There were 9 meetings of the board of directors during fiscal 1998. No
director attended fewer than 75% of the aggregate number of meetings of the
board held during the period in fiscal 1998 in which he was a director and the
total number of meetings held by the committee of the board in which he served
in fiscal 1998 during the period he served on such committee.
5
<PAGE>
On January 7, 1998, the board of directors formed a compensation
committee, which is comprised of non-employee directors, Franklin J. Iris,
Thomas P. Carney, Frank G. Stout and Robert W. Naismith. The compensation
committee held 1 meeting during fiscal 1998. The compensation committee grants
stock options under the Company's stock option plan, reviews management
compensation, evaluates management performance and considers management
succession and related matters.
The Company has no standing audit or nominating committees.
RATIFICATION OF REAPPOINTMENT OF INDEPENDENT AUDITORS
Subject to ratification by the stockholders, the board of directors has
reappointed Deloitte & Touche LLP as independent auditors of the Company for the
fiscal year ending June 30, 1999. The affirmative vote of a majority of shares
of Common Stock present in person or represented by proxy at the Annual Meeting
is required to ratify the reappointment of Deloitte & Touche LLP. It is
anticipated that a representative of Deloitte & Touche LLP will be present at
the Annual Meeting to answer questions within such firm's field of expertise.
The board of directors recommends that stockholders vote FOR the
ratification of the reappointment of the independent auditors.
OTHER BUSINESS
Management does not know of any matter to be brought before the Annual
Meeting other than as described above. In the event any other matter properly
comes before the Annual Meeting, the persons named in the accompanying form of
proxy have discretionary authority to vote on such matters.
EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation earned in
each of the last three fiscal years by each Chief Executive Officer and by the
only other executive officer whose cash compensation during such year exceeded
$100,000 in fiscal year 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
Long-Term
Compensation
------------
Annual Compensation Awards
------------------- ------
Fiscal Common Stock
Name and Principal Position Year Salary($) Bonus($) Underlying Options
--------------------------- ---- --------- -------- ------------------
<S> <C> <C> <C> <C>
Bruce C. Galton (1)............... 1998 $210,000 $100,000 10,150 (2)
Chairman and CEO, Chief 1997 $187,500 $50,000 --
Financial Officer, Treasurer and 1996 $156,667 -- 784,000
Director
Richard S. Dondero................ 1998 $101,000 -- --
Vice President-- Operations 1997 $95,883 $50,000 --
and Product Development 1996 $90,000 -- 31,546
-------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Bruce C. Galton served as the Acting Chairman and CEO from May 1997 to
July 1998.
(2) On October 11, 1997, Bruce Galton received a grant of 10,150 options to
purchase shares of the Company's Common Stock at an exercise price of
$.255.
6
<PAGE>
Option Grant Table
The following table sets forth certain information concerning
options granted in fiscal 1998 to Bruce C. Galton, the only individual named in
the Summary Compensation Table who was granted options in fiscal year 1998:
OPTION GRANT IN FISCAL YEAR 1998
- --------------------------------------------------------------------------------
% of Total
Number of Options
Securities Granted to Exercise
Underlying Options Employees in Price Per
Name Granted Fiscal Year Share Expiration Date
---- ------- ----------- ----- ---------------
- --------------------------------------------------------------------------------
Bruce C. Galton 10,150 100% $.255 2007
- --------------------------------------------------------------------------------
Option Exercises and Value Table
The following table sets forth certain information concerning the
number of options exercised during fiscal year 1998, and the number of
unexercised options held as at June 30, 1998, by the individuals named in the
Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998 AND OPTION
VALUES AT JUNE 30, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Number of Unexercised Options Value of Unexercised
at June 30, 1998 In-the-Money Options
---------------- at June 30, 1998(1)
Shares -------------------
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bruce C. Galton 45,197 $8,646(2) 171,810 1,194,150(3) $24,984 --
Richard S. Dondero -- -- 150,176 281,546(3) $15,027 --
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on the average of the closing bid and asked prices on June 30, 1998
of $.1725 per share.
(2) Based on the average of the closing bid and asked prices on the date of
exercise of $.255 per share compared to the exercise price of $.0637 per
share.
(3) Unexercisable options for Mr. Galton to purchase 1,194,150 shares and for
Mr. Dondero to purchase 281,546 shares are out-of-the-money.
In April 1994, Mr. Galton and Mr. Dondero each entered into five-year
employment contracts with the Company, which expire in April 1999. The
employment contracts contain a confidentiality provision that requires Mr.
Galton and Mr. Dondero to maintain as confidential any confidential information
obtained during the course of employment for the period of such agreement and
for the three
7
<PAGE>
years after termination thereof.
Mr. Galton's employment agreement provides that in the event he is
terminated without cause by the board of directors, or if the Company refuses to
renew his employment agreement, then upon Mr. Galton's written request, the
Company will (i) pay Mr. Galton an amount equal to six months of his current
salary in equal monthly installments, commencing the month in which the
termination occurs or the salary which would be due under the remaining
unexpired term of the agreement, whichever is greater, (ii) enter into a
consulting contract with Mr. Galton at full pay and benefits for a minimum of
three months and (iii) lend Mr. Galton such amount as may be required to
exercise any stock options then exercisable by Mr. Galton to purchase shares of
the Company's Common Stock.
The employment agreement also provides that in the event the Company
relocates during the term of the employment agreement, and Mr. Galton relocates
with the Company, the Company will reimburse Mr. Galton for all relocation costs
and pay Mr. Galton a bonus of $25,000 upon completing such relocation. If Mr.
Galton chooses not to relocate with the Company, he will receive the applicable
termination pay described in clauses (i) and (iii) of the preceding paragraph
plus an additional three months salary as severance pay.
During fiscal 1998, the Company maintained a "key man" life insurance
policy on the life of Mr. Galton in the amount of $1,000,000. This policy was
renewed for fiscal 1999.
Compensation of Directors
Starting in fiscal 1996, directors who are not employees received a
retainer fee of $1,200 per annum and $500 for each meeting of the board of
directors attended. From fiscal 1996 through fiscal 1998, Dr. Isidore Edelman,
who was a director of the Company until July 1998, was paid at the rate of $200
per hour for any scientific consulting services he performed at the Company's
request. During fiscal 1998, Dr. Edelman was paid an aggregate of $4,500 for
such consulting services. Directors who are not employees or officers of the
Company also receive options to purchase 50,000 shares of Common Stock for each
year of service as such, up to a total of 150,000 shares. Mr. Stout has agreed
to serve without cash compensation and without receipt of such stock options.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended, requires
that officers, directors and holders of more than 10% of the Common Stock
(collectively, "Reporting Persons") file reports of their trading in Company
equity securities with the Securities and Exchange Commission. Based on a review
of Section 16 forms filed by the Reporting Persons during the last fiscal year,
the Company believes that the Reporting Persons complied with all applicable
Section 16 filing requirements except that Dr. Robert Naismith filed one late
report on Form 3, in which he reported his appointment as a director.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Robert W. Naismith, Ph.D. served as a Managing Director of BlueStone from
October 1996 until April 1998. In September 1997 the Company engaged the
services of BlueStone to act as the Company's financial advisor as to corporate
and strategic financial initiatives. The agreement with BlueStone (the
"BlueStone Agreement") obligated the Company to pay BlueStone certain
compensation (discussed below) and also provided that BlueStone had the right to
nominate Dr. Robert W. Naismith to the Company's board of directors following an
initial six-month advisory period, provided the BlueStone Agreement was then in
effect. Dr. Naismith was nominated by BlueStone and elected as a director at the
Company's annual meeting of stockholders for the fiscal year 1997.
8
<PAGE>
The Company engaged BlueStone from September 1997 until September 1998,
during which time the Company paid BlueStone approximately $150,000 in cash and
issued BlueStone a warrant to purchase 400,000 shares of the Company's Common
Stock at $.25 per share. At the end of October 1998, the Company also paid
BlueStone additional investment banking compensation including a warrant to
purchase up to 400,000 shares of the Company's Common Stock at $.25 per share
and a fee equal to 7% of the equity and research payments ($133,000 in aggregate
fees) to BlueStone when the Company entered into a definitive agreement with
Pasteur Merieux Serums & Vaccins, S.A. ("PMS&V"), a subsidiary of Rhone-Poulenc
Group. BlueStone subsequently assigned its interest in the warrant to Dr. Robert
Naismith. Pursuant to the terms of the BlueStone Agreement, the Company remains
obligated to pay BlueStone 7% of any license fees or milestone payments PMS&V
may make to the Company under the terms of an agreement between PMS&V and the
Company.
Dr. Naismith is the chairman and chief executive officer of Genome
Securities, Inc. ("Genome"). On October 8, 1998 the Company entered into an
agreement (the "Genome Agreement") whereby the Company engaged Genome to act as
the Company's exclusive financial advisor as to corporate and financial
initiatives for a period of six months. Pursuant to the terms of the Genome
Agreement, the Company pays Genome monthly advisory fees of $10,000 per month
and has paid an aggregate of approximately $50,000 in such fees. The Company has
also agreed to pay Genome additional investment banking compensation if Genome
should assist the Company with completing an acquisition, merger, joint venture
or other arrangement as defined under the terms of the Genome Agreement.
On June 30, 1998, the Company and PMS&V (each a "Party" and collectively
"Parties") entered into a letter of intent to fund an IL-1(beta) vaccine
adjuvant development program in the fields of preventative and therapeutic
vaccines and to make an equity investment in the Company. On October 30, 1998,
PMS&V and the Company entered into several agreements (the "Agreements"),
including (i) a Common Stock and Warrant Purchase Agreement (the "Purchase
Agreement") pursuant to which PMS&V purchased 1,333,333 shares of the Company's
Common Stock (the "Stock") at approximately $.75 per share and received a
warrant (the "Warrant") to purchase 666,667 additional shares of the Company's
Common Stock at $.25 per share, for an aggregate consideration of $1,000,000;
(ii) the Warrant; and (iii) a Registration Rights Agreement (the "Registration
Rights Agreement"), pursuant to which PMS&V received certain "piggyback" and
demand registration rights relating to the Stock and the shares of the Company's
Common Stock issuable upon exercise of the Warrant.
Also on October 30 1998, the Parties entered into an Option and
Collaboration Agreement (the "Option Agreement"), pursuant to which PMS&V
obtained a three-year option to acquire an exclusive license to use the
Company's IL-1(beta) technology in the fields of therapeutic and preventive
vaccines. Under the Option Agreement, PMS&V agreed to fund the Company's vaccine
adjuvant development program over a three-year period for $900,000. The Option
Agreement contemplates that PMS&V will conduct its own preclinical and clinical
work on the use of IL-1 (beta) as a vaccine adjuvant in the fields of
preventative and therapeutic vaccines.
STOCKHOLDER PROPOSALS FOR THE NEXT
ANNUAL MEETING OF STOCKHOLDERS
Any stockholder proposal to be considered for inclusion in the Company's
proxy soliciting material for the next Annual Meeting of Stockholders must be
received by the Company at its principal office by December 31, 1999.
Dated: January 25, 1999
9
<PAGE>
CISTRON BIOTECHNOLOGY, INC.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints BRUCE C. GALTON and THOMAS P. CARNEY, and
each of them, proxies, each with the power of substitution, to vote the shares
of the undersigned at the Annual Meeting of Stockholders of Cistron
Biotechnology, Inc. on February 23, 1999, and any adjournments and postponements
thereof, upon all matters as may properly come before the Annual Meeting.
Without otherwise limiting the foregoing general authorization, the proxies are
instructed to vote as indicated herein. THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR MATTERS (1) and (2) LISTED BELOW, TO COME BEFORE THE ANNUAL MEETING:
I. To elect a Board of five (5) directors,
|_| FOR |_| WITHHOLD AUTHORITY
(EXCEPT AS MARKED TO THE CONTRARY TO VOTE FOR ALL FIVE (5)
BELOW) ALL FIVE (5) NOMINEES LISTED NOMINEES LISTED BELOW
BELOW
Bruce C. Galton, Franklin J. Iris, Thomas P. Carney, Ph.D., Frank G. Stout
and Robert W. Naismith, Ph.D.
To withhold authority to vote for any individual nominee(s), print such
nominee's name below:
(Please complete, date and sign on the reverse side and mail
in the enclosed envelope)
II. To ratify the reappointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending June 30, 1999; and
FOR AGAINST ABSTAIN
|_| |_| |_|
III. Upon any and all other business that may come before the Annual Meeting.
FOR AGAINST ABSTAIN
|_| |_| |_|
Check here if you plan to attend the Annual Meeting of Stockholders. |_|
THIS PROXY, WHICH IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, WILL BE
VOTED FOR the matters described in Paragraphs (1) and (2) unless the Stockholder
specifies otherwise, in which case it will be voted as specified.
Signature(s):
Date: , 1999
Note: Executors, Administrators, Trustees, etc.
should give full title.
