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 n
Check the appropriate box:
n Preliminary Proxy Statement
X Definitive Proxy Statement
n Confidential for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2)
n Definitive Additional Materials
n Soliciting Material Pursuant to 14a-11(c) or Rule 14a-
12
BIO-RESPONSE, INC.
(Name of Registrant as Specified in its Charter)
Capston Network Company
(Name of Person Filing Proxy Statement)
Payment of Filing Fee (Check appropriate box):
n $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1)
or 14a-6(i)(2)
n $500 for each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3)
n Fee computed per Exchange Act Rules 14a-6(i)(4) and 0-
11.
(1)Title of each class of securities to which
transaction applies:
(2)Aggregate number of securities to which transaction
applies:
(3)Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined:
(4)Proposed maximum aggregate value of transaction:
(5)Total fee paid:
n Fee paid previously with preliminary materials.
n Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identifying the
filing for which the offsetting fee was paid
previously. Identify the previous filing by
registration statement number, or the Form or Schedule
and the date of its filing.
(1)Amount previously paid:
(2)Form, Schedule or Registration Statement No.:
(3)Filing Party:
(4)Date Filed:
Dear Fellow Stockholders;
You are cordially invited to attend a Special Meeting of
the Stockholders (the "Meeting") of BIO-RESPONSE, INC., an
inactive Delaware corporation ("BIO-RESPONSE" or the
"Company"). The Meeting will be held at 1:00 p.m. on Monday,
March 10, 1997, in the Cardita Room of the Sheraton at Sand
Key Resort, 1160 Gulf Blvd., Clearwater Beach, Florida.
BIO-RESPONSE has not engaged in any business activities
since filing a voluntary bankruptcy petition in September,
1989. At present, the Company has no assets, liabilities,
management or ongoing operations. As a result, your BIO-
RESPONSE shares have been worthless for several years. At the
Meeting you will be asked to approve a plan (the "Plan")
proposed by Capston Network Co. ("Capston"), a Stockholder of
the Company whereby the Company will be restructured as a
"clean public shell" for the purpose of effecting a business
combination transaction with a suitable privately-held company
that has both business history and operating assets.
While the business combination transaction contemplated
by the Plan may be structured as a merger or consolidation,
Capston believes that the reverse takeover format will be most
attractive to potential acquisition targets. Accordingly,
Capston is seeking prior shareholder authorization for a
reverse takeover transaction that will involve up to 4,500,000
shares of Common Stock. If the proposed business combination
will involve the issuance of less than 4,500,000 shares to the
owners of the privately-held company, then Capston intends to
seek shareholder approval of the proposed transaction, without
regard to whether such shareholder approval might be required
under Delaware law.
If this Plan is successfully implemented, you may be able
to salvage some of the value that your BIO-RESPONSE shares
once represented. However, there can be no assurance the Plan
will be approved by shareholders or successfully implemented.
Moreover, even if the Plan is approved and successfully
implemented, there can be no assurance that the value of your
BIO-RESPONSE shares will increase. In any event, Capston
cannot go forward with the Plan without first obtaining
stockholder approval. Therefore, it is critically important
that you read the enclosed Proxy Statement and promptly mark
your vote, sign and return your Proxy Card.
While the elements of the Plan will be presented to
Stockholders as separate proposals, the Plan is an integrated
whole and if all elements of the Plan are not approved,
Capston intends to abandon the Plan in its entirety. The
specific matters to be considered by the Stockholders are:
1. To ratify the actions of Capston in (i) effecting a
renewal, revival and restoration of the Company's
Certificate of Incorporation; (ii) adopting amended by-
laws to govern the business affairs of the Company, and
(iii) filing the reports and other documents necessary to
bring the Company current with respect to its reporting
obligations under the Securities Exchange Act of 1934;
2. To elect a person designated by Capston to serve as the
sole member of the Board of Directors until the 1998
annual Meeting of Stockholders, or until her successor is
elected and qualified;
3. To consider and vote upon proposed an Amendment to the
Company's Certificate of Incorporation that will effect a
reverse split of all issued and outstanding shares of
Common Stock in the ratio of one (1) share of new Common
Stock for each 30.5885 shares presently outstanding so
that immediately thereafter the Company will have a total
of 300,000 shares issued and outstanding;
4. To consider and vote upon a proposal to issue 200,000
shares of Common Stock to persons designated by Capston as
compensation for services rendered in connection with the
implementation of the Plan;
5. To consider and vote upon a proposal which will give the
Board of Directors authority to pay an in-kind Finder's
Fee to unrelated third party finders who introduce the
Company to a suitable acquisition prospect.
6. Consider and vote upon a proposal that will give the Board
of Directors discretionary authority to (i) change the
Company's name and (ii) issue up to 4,500,000 shares of
Common Stock to unrelated third parties, all without prior
stockholder approval, in connection with a business
combination transaction of the type contemplated by the
Plan; and
7. To consider and vote upon a proposed Amendment to the
Company's Certificate of Incorporation that will increase
the authorized capital stock of the Company to 25,000,000
shares of $0.01 par value Common Stock and 5,000,000
shares of $0.01 par value Preferred Stock.
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING
IN PERSON. HOWEVER, WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING, YOU ARE URGED TO PROMPTLY MARK YOUR VOTE, SIGN, DATE,
AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE ENCLOSED,
SELF-ADDRESSED, STAMPED ENVELOPE SO THAT THE PRESENCE OF A
QUORUM MAY BE ASSURED AND YOUR SHARES OF STOCK MAY BE
REPRESENTED AND VOTED IN ACCORDANCE WITH YOUR DESIRES. A
STOCKHOLDER MAY REVOKE A PROXY BY DELIVERING TO CAPSTON A
WRITTEN NOTICE OF REVOCATION, DELIVERING TO CAPSTON A SIGNED
PROXY OF A LATER DATE OR APPEARING AT THE SPECIAL MEETING AND
VOTING IN PERSON.
_______________________________
Capston Network Company
Sally A. Fonner, President
BIO-RESPONSE, INC.
1612 North Osceola Avenue
Clearwater, Florida 34615
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held on March 10, 1997
Pursuant to 312(h) of the General Corporation Law of
Delaware, notice is hereby given that a Special Meeting of the
Stockholders of BIO-RESPONSE, INC., an inactive Delaware
corporation ("BIO-RESPONSE" or the "Company"), will be held at
1:00 p.m. on Monday, March 10, 1997, in the Cardita Room of
the Sheraton at Sand Key Resort, 1160 Gulf Blvd., Clearwater
Beach, Florida, for the following purposes:
1. To ratify the actions of Capston Network Co. ("Capston")
in (i) effecting a renewal, revival and restoration of the
Company's Certificate of Incorporation; (ii) adopting
amended by-laws to govern the business affairs of the
Company, and (iii) filing the reports and other documents
necessary to bring the Company current with respect to its
reporting obligations under the Securities Exchange Act of
1934;
2. To elect a person designated by Capston to serve as the
sole member of the Board of Directors until the 1998
annual Meeting of stockholders, or until her successor is
elected and qualified;
3. To consider and vote upon proposed an Amendment to the
Company's Certificate of Incorporation that will effect a
reverse split of all issued and outstanding shares of
Common Stock in the ratio of one (1) share of new Common
Stock for each 30.5885 shares presently outstanding so
that immediately thereafter the Company will have a total
of 300,000 shares issued and outstanding;
4. To consider and vote upon a proposal to issue 200,000
shares of Common Stock to persons designated by Capston as
compensation for services rendered in connection with the
implementation of the Plan;
5. To consider and vote upon a proposal which will give the
Board of Directors authority to pay an in-kind Finder's
Fee to unrelated third party finders who introduce the
Company to a suitable acquisition prospect.
6. Consider and vote upon a proposal that will give the Board
of Directors discretionary authority to (i) change the
Company's name and (ii) issue up to 4,500,000 shares of
Common Stock to unrelated third parties, all without prior
stockholder approval, in connection with a business
combination transaction of the type contemplated by the
Plan; and
7. To consider and vote upon a proposed Amendment to the
Company's Certificate of Incorporation that will increase
the authorized capital stock of the Company to 25,000,000
shares of $0.01 par value Common Stock and 5,000,000
shares of $0.01 par value Preferred Stock.
A record of stockholders has been taken as of the close
of business on January 31, 1997, and only those stockholders
of record on that date will be entitled to notice of and to
vote at the Meeting. A stockholders' list will be available
commencing February 7, 1997, and may be inspected during
normal business hours prior to the Meeting at the offices of
the Company, 1612 North Osceola Avenue, Clearwater, Florida
34615.
If you do not expect to be present at the Meeting, please
mark your vote, sign and date the enclosed proxy and return it
promptly in the enclosed stamped envelope which has been
provided for your convenience. The prompt return of proxies
will ensure the presence of a quorum and save Capston the
expense of further solicitation.
By Order of Capston
Network Co.
Sally A. Fonner,
President
Clearwater, Florida
January 29, 1997
PROXY STATEMENT
This proxy statement is being mailed to all known
Stockholders of BIO-RESPONSE, INC. ("BIO-RESPONSE" or the
"Company") commencing on or about February 7, 1997, in
connection with the solicitation by Capston Network Company
("Capston") of proxies to be voted at a Special Meeting of
Stockholders(the "Meeting") to be held in Clearwater Beach,
Florida on Monday, March 10, 1997, and at any adjournment
thereof. The Meeting has been called by Capston pursuant to
312(h) of the General Corporation Law of Delaware for the
purpose of considering a plan proposed by Capston (the "Plan")
whereby the Company will be restructured as a "clean public
shell" for the purpose of effecting a business combination
transaction with a suitable privately-held company.
Proxies will be voted in accordance with the directions
specified thereon and do not confer discretionary authority on
any person. Any proxy on which no direction is specified will
be voted in favor of all proposals. A Stockholder may revoke a
proxy at any time prior to the start of the meeting by
ensuring actual delivery to and receipt by Capston of a
written notice of revocation, delivering to Capston a signed
proxy of a later date or by appearing at the Meeting and
voting in person.
As of June 30, 1989, there were issued, outstanding and
entitled to vote 9,176,554 shares of common stock of the
Company ("Common Stock"). Each share of Common Stock entitles
the holder to one vote on each matter presented for
consideration by the Stockholders. Under the Company's By-
Laws, the presence, in person or by proxy, of shares entitled
to cast a combined total of 3,055,793 votes will constitute
a quorum. According to the Company's annual report on Form 10-
K for fiscal year ended December 31, 1988, there are 1,787
stockholders entitled to vote. With the exception of Capston
Network Company, no stockholders has indicated a pre-approval
of the proposals described in this proxy.
In connection with the reinstatement of the Company's
Charter, Capston adopted amended by-laws for the conduct of
the Company's business, subject to the approval and
ratification of the Stockholders. There are three material
changes in the amended by-laws. First, under the amended by-
laws adopted by Capston, the presence, in person or by proxy,
of one-third (1/3) of the total number of shares entitled to
vote at the Meeting will constitute a quorum rather a majority
of the total number of shares entitled to vote at the meeting.
The amendment, Article II, Section 5. Quorum: Adjournment,
reads as follows:
With respect to any matter, a quorum shall be present at
a meeting of stockholders if the holders of at least one-
third (1/3) of the shares entitled to vote on that
matter are represented at the meeting in person or by
proxy. If a quorum shall fail to attend any meeting, the
chairman of the meeting or the holders of a majority of
the shares of stock entitled to vote who are present, in
person or by proxy, may adjourn the meeting to another
place, date or time without notice other than
announcement at the meeting, until a quorum shall be
present or represented.
The second material change is the provision that permits
voting by implied consent under certain circumstances and that
amendment, Article II, Section 11. Method of Giving Consent,
Approval, etc., reads as follow:
Any vote, consent, approval, ratification or disapproval
required by these by-laws may be given as follows:
(a)by a written Consent executed by the consenting
Stockholder, provided that such Consent shall not have
been withdrawn by the Consenting Stockholder by
Notification to the Company at or prior to the time of
the doing of such act or thing; or
(b)by the affirmative vote by the Consenting Stockholder
to the doing of the act or thing for which the Consent is
solicited at any meeting called and held pursuant to
these by-laws to consider the doing of such act or thing.
(c)by failing to respond, within the time set forth in a
Notice which specifies (i) the specific act or proposal
for which Consent is being requested by the Company; (ii)
that the Company intends to rely on the provisions of
this Section 11(c) in determining whether the requisite
percentage in interest of the Stockholders has consented
to the specific act or proposal; and (iii) a Record Date
not less than 20 days after the date of the Notice on
which the specific act or proposal will be deemed
approved unless at least 10% in Interest of the
Stockholders object in writing prior to such Record Date.
The third material change is the addition of Article VIII,
Indemnification, which reads as follows:
Section 1. Mandatory Indemnification of Directors and
Officers. Each person who at any time is or was a
director or officer of the Corporation, and who was, is
or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether
civil, criminal, administrative, arbitrative or
investigative (a "Proceeding," which shall include any
appeal in such a Proceeding, and any inquiry or
investigation that could lead to such a Proceeding), by
reason of the fact that such person is or was a director
or officer of the Corporation, or is or was a director or
officer of the Corporation serving at the request of the
Corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar
functionary of another foreign or domestic corporation,
partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise shall be
indemnified by the Corporation to the fullest extent
authorized by the General Corporation Law of Delaware as
the same exists or may hereafter be amended from time to
time (the "GCLD"), or any other applicable law as may
from time to time be in effect (but, in the case of any
such amendment or enactment, only to the extent that such
amendment or law permits the Corporation to provide
broader indemnification rights than such law prior to
such amendment or enactment permitted the Corporation to
provide), against judgments, penalties (including excise
and similar taxes), fines, settlements and reasonable
expenses (including court costs and attorneys' fees)
actually incurred by such person in connection with such
Proceeding. The Corporation's obligations under this
Section include, but are not limited to, the convening of
any meeting, and the consideration of any matter thereby,
required by statute in order to determine the eligibility
of any person for indemnification. Expenses incurred in
defending a Proceeding shall be paid by the Corporation
in advance of the final disposition of such Proceeding to
the fullest extent permitted, and only in compliance
with, the GCLD or any other applicable laws as may from
time to time be in effect. The Corporation's obligation
to indemnify or to prepay expenses under this Section
shall arise, and all rights granted hereunder shall vest,
at the time of the occurrence of the transaction or event
to which such proceeding relates, or at the time that the
action or conduct to which such proceeding relates was
first taken or engaged in (or omitted to be taken or
engaged in), regardless of when such proceeding is first
threatened, commenced or completed. Notwithstanding any
other provision of the Articles of Incorporation or these
Bylaws, no action taken by the Corporation, either by
amendment of the Articles of Incorporation or these
Bylaws or otherwise, shall diminish or adversely affect
any rights to indemnification or prepayment of expenses
granted under this Section 1 which shall have become
vested as aforesaid prior to the date that such amendment
or other corporate action is taken.
Section 2. Permissive Indemnification of Employees and
Agents. The rights to indemnification and prepayment of
expenses which are conferred to the Corporation's
directors and officers by Section 1 of this Article VIII
may be conferred upon any employee or agent of the
Corporation if, and to the extent, authorized by its
Board of Directors.
Section 3. Indemnity Insurance. The Corporation shall
have power to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer,
partner, venturer, proprietor, trustee, employee, agent
or similar functionary of another corporation,
partnership, joint venture, sole proprietorship, trust,
employee benefit plan, or other enterprise, against any
liability asserted against him and incurred by him in any
such capacity or arising out of his status as such,
whether or not the Corporation would have the power to
indemnify him against such liability under the provisions
of the GCLD. Without limiting the power of the
Corporation to procure or maintain any kind of insurance
or other arrangement, the Corporation may, for the
benefit of persons indemnified by the Corporation (1)
create a trust fund, (2) establish any form of self-
insurance, (3) secure its indemnity obligation by grant
of a security interest or other lien on the assets of the
Corporation, or (4) establish a letter of credit,
guaranty or surety arrangement.
Capston has engaged the public accounting firm of Want &
Ender, C.P.A. of New York, New York to audit the Company's
financial statement for the period ending September 15, 1995,
and the years ending every year from December 31,1989 to
December 31,1996. Capston has also retained the firm of Want
& Ender as auditors of various other companies, but has no
other relationship with the firm. Ms. Fonner has no
relationship with the firm of Want & Ender. A representative
from the firm of Want & Ender will attend the meeting and be
available to answer questions from stockholders.
Corporate Background Information
BIO-RESPONSE conducted an initial public offering of its
Common Stock in January, 1979 pursuant to a Form S-2
Registration Statement under the Securities Act of 1933 (the
"Securities Act") that was declared effective by order of the
Securities and Exchange Commission (the "SEC") on June 1,
1979. In connection with an application to list its Common
Stock on the NASDAQ system, the Company also registered its
Common Stock pursuant to Section 12(g) of the Securities
Exchange Act of 1934 (the "Exchange Act"). The Company
remained current with respect to its reporting obligations
under the Exchange Act until 1988, when its last annual report
on Form 10-K was filed with the SEC.
After pursuing its business for several years, BIO-
RESPONSE filed a voluntary petition under Chapter 11 of the
Bankruptcy Act on September 14, 1989. This proceeding was
filed in with the U.S. Bankruptcy Court for the Northern
District of California and designated as Case # 4-89-04159 N-
3. On September 15, 1995 the Company's case under Chapter 11
was closed by an order of the Court. As a result of the
Bankruptcy, the Company has no assets, liabilities, management
or ongoing operations and has not engaged in any business
activities since September 1989.
During the pendancy of the Bankruptcy, the Company did
not file franchise tax returns with and pay the required
franchise taxes to the State of Delaware. As a result, the
Company's corporate charter was revoked by order of the
Secretary of State of the State of Delaware on August 30,
1991. Similarly, the Company did not file with the SEC either
(a) the regular reports that are required of all companies
that have securities registered under the Exchange Act, or (b)
a certification on Form 15 terminating its registration under
the Exchange Act. As a result, the Company remained a
Registrant under the Exchange Act but was seriously delinquent
in its SEC reporting obligations. According to the National
Quotation Bureau, the last published quotation for the
Company's Common Stock was posted by M. H. Meyerson & Co.,
Inc., one of the Company's market makers, on October 15, 1996.
At that time, the published quote was $0.00 bid and $0.05
asked. There have been no published quotations for the
Company's Common Stock since October 15, 1996.
Acting in its capacity as a Stockholder of the Company,
and without first receiving any consent, approval or
authorization of any officer, director or other Stockholder of
the Company, Capston effected a renewal, revival and
restoration of the Company's certificate of incorporation
pursuant to Section 312 of the General Corporation Law of the
State of Delaware. In general, Section 312 provides that any
corporation may "procure an extension, restoration, renewal or
revival of its certificate of incorporation, together with all
the rights, franchises, privileges and immunities and subject
to all of its duties, debts and liabilities which had been
secured or imposed by its original certificate of
incorporation" upon compliance with certain procedural
requirements.
After reviewing the applicable files, Capston determined
that the only debt of the Company that was "secured or imposed
by its original certificate" was the obligation of BIO-
RESPONSE to pay its Delaware taxes. Therefore, Capston paid
all past due franchise taxes on behalf of the Company and then
filed a Certificate of Renewal, Revival, Extension and
Restoration of the Company's Certificate of Incorporation on
behalf of the Company under the authority granted by Section
312(h). The total out-of-pocket costs paid by Capston incurred
in connection with the restoration of the Company's charter
was $450. This Certificate was filed in the office of the
Secretary of State of the State of Delaware on December 26,
1996 and at the date of this Proxy Statement the Company is
lawfully incorporated, validly existing and in good standing
under the laws of the State of Delaware.
Proposed Operations
While the Company has no assets, liabilities, management
or ongoing operations and has not engaged in any business
activities since September 1989, Capston believes that it may
be possible to recover some value for the Stockholders through
the adoption and implementation of a Plan whereby the Company
will be restructured as a "clean public shell" for the purpose
of effecting a business combination transaction with a
suitable privately-held company that has both business history
and operating assets.
Capston believes the Company will offer owners of a
suitable privately-held company the opportunity to acquire a
controlling ownership interest in a public company at
substantially less cost than would otherwise be required to
conduct an initial public offering. Nevertheless, Capston is
not aware of any empirical statistical data that would
independently confirm or quantify Capston's beliefs concerning
the perceived value of a merger or acquisition transaction for
the owners of a suitable privately-held company. The owners of
any existing business selected for a business combination with
the Company will incur significant costs and expenses,
including the costs of preparing the required business
combination agreements and related documents, the costs of
preparing a Current Report on Form 8-K describing the business
combination transaction and the costs of preparing the
documentation associated with any future reporting under the
Exchange Act and registrations under the Securities Act.
If the Plan is approved by the Stockholders, the Company
will be fully reactivated and then used as a corporate vehicle
to seek, investigate and, if the results of such investigation
warrant, effect a business combination with a suitable
privately-held company or other business opportunity presented
to it by persons or firms that seek the perceived advantages
of a publicly held corporation. The business operations
proposed in the Plan are sometimes referred to as a "blind
pool" because Stockholders will not ordinarily have an
opportunity to analyze the various business opportunities
presented to the Company, or to approve or disapprove the
terms of any business combination transaction that may be
negotiated by Capston on behalf of the Company. Consequently,
the Company's potential success will be heavily dependent on
the efforts and abilities of Capston and its officers,
directors and consultants, who will have virtually unlimited
discretion in searching for, negotiating and entering into a
business combination transaction. Capston and its officers,
directors and consultants have had limited experience in the
proposed business of the Company. Although Capston believes
that the Company will be able to enter into a business
combination transaction within 12 months after the approval of
the Plan by the Stockholders, there can be no assurance as to
how much time will elapse before a business combination is
effected, if ever. The Company will not restrict its search to
any specific business, industry or geographical location, and
the Company may participate in a business venture of virtually
any kind or nature.
Capston and its officers, directors and consultants
anticipate that the selection of a business opportunity for
the Company will be complex and extremely risky. Because of
general economic conditions, rapid technological advances
being made in some industries, and shortages of available
capital, Capston believes that there are numerous privately-
held companies seeking the perceived benefits of a publicly
traded corporation. Such perceived benefits may include
facilitating debt financing or improving the terms on which
additional equity or may be sought, providing liquidity for
the principals of the business, creating a means for providing
incentive stock options or similar benefits to key employees,
providing liquidity for all stockholders and other factors.
Potential business opportunities may occur in many
different industries and at various stages of development, all
of which will make the task of comparative investigation and
analysis of such business opportunities extremely difficult
and complex. Capston anticipates that the Company will be able
to participate in only one business venture. This lack of
diversification should be considered a substantial risk
inherent in the Plan because it will not permit the Company to
offset potential losses from one venture against gains from
another. Moreover, due to the Company's lack of any meaningful
financial, managerial or other resources, Capston believes the
Company will not be viewed as a suitable business combination
partner for either developing companies or established
business that are in need of substantial additional capital.
Acquisition of Opportunities
In implementing a particular business combination
transaction, the Company may become a party to a merger,
consolidation, reorganization, joint venture, franchise or
licensing agreement with another corporation or entity. It may
also purchase stock or assets of an existing business. After
the consummation of a business combination transaction, it is
likely that the present Stockholders of the Company will only
own a small minority interest in the combined companies. In
addition, as part of the terms of the acquisition transaction,
all of the Company's officers and directors will ordinarily
resign and be replaced by new officers and directors without a
vote of the Stockholders. Capston does not intend to obtain
the approval of the Stockholders prior to consummating any
acquisition other than a statutory merger that requires a
Stockholder vote. Capston and its officers, directors and
consultants do not intend to sell any shares held by them in
connection with a business acquisition.
It is anticipated that any securities issued in a
business combination transaction will be issued in reliance on
exemptions from registration under applicable Federal and
state securities laws. In some circumstances, however, as a
negotiated element of a business combination, the Company may
agree to register such securities either at the time the
transaction is consummated or at some specified time
thereafter. The issuance of substantial additional securities
and their potential sale into any trading market that may
develop may have a depressive effect on such market. While the
actual terms of a transaction to which the Company may be a
party cannot be predicted, it may be expected that the parties
to the business transaction will find it desirable to avoid
the creation of a taxable event and thereby structure the
acquisition in a so called "tax free" reorganization under
Sections 368(a)(1) or 351 of the Internal Revenue Code of
1986, as amended (the "Code"). In order to obtain tax free
treatment under the Code, it may be necessary for the owners
of the acquired business to own 80% or more of the voting
stock of the surviving entity. In such event, the stockholders
of the Company would retain less than 20% of the issued and
outstanding shares of the combined companies, which could
result in significant dilution in the equity of such
stockholders. The Company intends to structure any business
combination in such manner as to minimize Federal and state
tax consequences to the Company and any target company.
As part of the Company's investigation of potential
business opportunities, Capston and its officers, directors
and consultants will ordinarily meet personally with
management and key personnel, may visit and inspect material
facilities, obtain independent analysis or verification of
certain information provided, check reference of management
and key personnel, and take other reasonable investigative
measures, to the extent of the Company's limited resources and
Capston's limited expertise. The manner in which the Company
participates in an opportunity will depend on the nature of
the opportunity, the respective needs and desires of the
Company and other parties and the relative negotiating
strength of the Company and such other management.
With respect to any business combination negotiations,
Capston will ordinarily focus on the percentage of the Company
which target company stockholders would acquire in exchange
for their ownership interest in the target company. Depending
upon, among other things, the target company's assets and
liabilities, the Company's stockholders will in all likelihood
only own a small minority interest in the combined companies
upon completion of the business combination transaction. Any
business combination effected by the Company can be expected
to have a significant dilutive effect on the percentage of
shares held by the Company's current Stockholders.
Upon completion of a business combination transaction,
there can be no assurance that the combined companies will
have sufficient funds to undertake any significant
development, marketing and manufacturing activities.
Accordingly, the combined companies may be required to either
seek additional debt or equity financing or obtain funding
from third parties, in exchange for which the combined
companies might be required to issue a substantial equity
position. There is no assurance that the combined companies
will be able to obtain additional financing on terms
acceptable to the combined companies.
It is anticipated that the investigation of specific
business opportunities and the negotiation, drafting and
execution of relevant agreements, disclosure documents and
other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys and
others. If a decision is made not to participate in a specific
business opportunity the costs incurred in the related
investigation would not be recoverable. Furthermore, even if
an agreement is reached for the participation in a specific
business opportunity, the failure to consummate that
transaction may result in the loss of the Company of the
related costs incurred.
Exemption from Rule 419
As an existing Registrant under the Exchange Act, the
Company's proposed activities are not subject to SEC Rule 419
which was adopted to strengthen the regulation of "blind pool"
companies which Congress has found to have been common
vehicles for fraud and manipulation in the penny stock market.
The Company is not subject to Rule 419 because it is not
offering stock to the public in an offering registered under
the Securities Act. Accordingly, Stockholders are not entitled
to the substantive protection provided by Rule 419.
Fees to Capston and Others
Expense Reimbursement. No cash compensation has been paid
or accrued to Capston or any of its officers, directors or
consultants to date. Under the Plan, Capston and its officers,
directors and consultants will be entitled to reimbursement
for the actual out-of-pocket expenses incurred in connection
with the reinstatement of the Company's certificate of
incorporation, the preparation and filing of the Company's
reports under the Exchange Act and the negotiation of a
business combination transaction, but they will not be
entitled to any cash compensation in connection with services
rendered prior to the closing of a business combination.
Moreover, any such reimbursement will be subject to the
express approval of the owners of the business opportunity
acquired by the Company.
Stock Issuance. Subject to Stockholder approval, the
Company intends file a Form S-8 Registration Statement under
the Securities Act to register 200,000 shares of Common Stock
that will be issuable to persons designated by Capston as
compensation for services rendered in connection with the
implementation of the Plan. Therefore, if Capston is
successful in arranging a business combination for the
Company, approximately forty percent (40%) of the net value
derived by the Company's Stockholders will vest in Capston and
its officers, directors and consultants and the remaining
sixty percent (60%) will inure to the benefit of the existing
Stockholders of the Company.
Finder's Fees. As is customary in the industry, the
Company may pay a finder's fees to unrelated third parties who
introduce the Company to a suitable acquisition prospect. If
any such fee is paid, it will be approved by the Company's
Board of Directors and will be in accordance with the
standards discussed below. Finder's fees are customarily
between 1% and 5% of the total transaction value, based upon a
sliding scale of the amount involved. The traditional "Lehman
Formula" for calculating finder's fees is 5% of the first $1
million in transaction value, plus 4% of the second $1
million, plus 3% of the third $1 million, plus 2% of the
fourth $1 million plus 1% of any transaction value in excess
of $4 million. In Capston's opinion, the traditional Lehman
Formula finder's fee minimizes the economic incentive of
finder's who are involved in larger transactions. Therefore,
if the Plan is approved by Stockholders, Capston intends to
offer a "reversed stretched Lehman fee" to unrelated third
party finders who introduce the Company to a suitable
acquisition prospect. Under the reversed stretched Lehman
formula proposed by Capston, the finder will receive 1% of the
first $2 million in transaction value, 2% of the second $2
million in transaction value, 3% of the third $2 million in
transaction value, 4% of the fourth $2 million in transaction
value and 5% of any transaction value in excess of $8 million.
Since the Company does not have sufficient financial resources
to pay such a finder's fee in cash, it is anticipated that any
finder's fees will be paid with shares of the Company's Common
Stock which may be registered under the Securities Act prior
to issuance. Notwithstanding the foregoing, no finder's fees
will be paid to Capston or any of its officers, directors,
employees, agents or affiliates without the prior consent of
the Stockholders.
RISK FACTORS
The Plan proposed by Capston involves a high degree of
risk. Stockholders should carefully consider the following
factors, among others, before executing the form of Proxy
enclosed herewith.
No Recent Operating History. The Company has no assets,
liabilities, management or ongoing operations and has not
engaged in any business activities since September 1989. Even
if the Capston Plan is approved by the Stockholders, the
Company will be subject to all of the risks inherent in the
commencement of a new business enterprise with new management.
There can be no assurance that the Company will be able to
acquire an operating business or that such business if
acquired, will prove to be profitable. Although Capston and
its officers, directors and consultants have had experience
with respect to business acquisitions, the Company has no
recent operating history to aid stockholders in making an
informed judgment regarding the merits of the Plan. As of the
date of this Proxy Statement, Capston has not entered into any
arrangement for, nor is it presently negotiating with respect
to, an acquisition of any operating business.
No Specific Acquisition Plans. The Company intends to
engage as soon as is reasonably possible, in the search for
and evaluation of potential acquisition opportunities, but it
will not engage in the business of investing, reinvesting,
owning, holding, or trading securities. Capston has made no
specific acquisition plans and no specific industry or area of
business has been selected for investment. There is no
assurance Capston and its officers, directors and consultants
will possess the experience and skills necessary to make an
informed judgment about any business or industry that may be
chosen. Accordingly, the nature of the Plan involves an
extremely high degree of risk and the Common Stock is not a
suitable investment for anyone who cannot afford the loss of
his entire investment.
Blind Pool. Inasmuch as Capston has not contemplated the
acquisition of any specific operating business, the Company's
proposed business will, in fact, be a Blind Pool over which
Stockholders will have no control. It is anticipated that
under most circumstances stockholders will not be afforded the
opportunity to pass upon the merits of any business
opportunity that the Company may ultimately acquire and,
therefore, Stockholders must rely upon the abilities of
Capston and its officers, directors and consultants.
Limited Assets of the Company. As of the date of this
Proxy Statement, the Company has no substantial assets and it
is not anticipated that the Company will acquire any
substantial assets other than the assets of any business
opportunity it may acquire. Any business activity the Company
may eventually undertake will require substantial capital.
Since the Company does not know which type of business it will
acquire or the capital requirements for such business, there
can be no representations respecting the future capital needs
of the Company.
Potential Need for Additional Financing. Capston intends
to advance funds from time to time to help defray the
Company's operating costs, including the cost of professionals
retained by the Company, costs associated with complying with
filing requirements of the SEC and costs associated with
investigating and evaluating proposed acquisitions. These
advances will be recorded as liabilities on the books of the
Company and will be reimbursed to Capston upon successful
completion of a business combination transaction. There is no
assurance that Capston will have sufficient resources to
advance all required expenses and if Capston's resources are
insufficient, the Company may be required to seek capital. No
assurance can be given that the Company will be able to obtain
additional capital or, that any funds will be available on
terms acceptable to the Company.
Intense Competition. The Company is and will continue to
be an insignificant participant in the business of seeking
business opportunities. A large number of established and well-
financed entities, including venture capital firms, have
recently increased their merger and acquisition activities,
especially among companies active in high technology fields.
Nearly all such entities have significantly greater financial
resources, technical expertise and managerial capabilities
than the Company and, consequently, the Company will be at a
competitive disadvantage in identifying suitable acquisition
candidates and concluding a business combination transaction.
Dependence on Part-Time Management. The Company has no
employees as of the date hereof. Accordingly, the Company's
success will be largely dependent on the decisions made by
Capston and its officers, directors and consultants, none of
whom will devote their full time to the affairs of the
Company.
Experience of Capston. Although Capston and its officers,
directors and consultants have general business, finance and
acquisition experience, Stockholders should be aware that
Capston and its officers, directors and consultants are not
expected to have any significant experience in operating such
business as the Company might choose to acquire. Accordingly,
the Company will be required to obtain outside professionals
to assist them initially in assessing the merits and risks of
any proposed acquisition and thereafter in operating any
acquired business. No assurance can be made that the Company
will be able to obtain such assistance on terms acceptable to
the Company.
No Assurance of Acquisition of Operating Entity. Although
the Company proposes to combine with an existing, privately
held business which may or may not be profitable but which is
believed to have profitable growth potential (irrespective of
the industry in which such company engages) and although
Capston has received inquires from several companies seeking
to combine with publicly held "shells" and/or blind pools,
neither the Company nor Capston has solicited any proposals
regarding the Company's combination with another business.
There are no assurances that Capston and its officers,
directors and consultants will be able to locate a suitable
combination partner or that a combination can be structured on
terms acceptable to the Company.
Control of Combination Procedure by Capston. A
combination of the Company with another entity may be
structured as a merger or consolidation or involve the direct
issuance of the Company's Common Stock in exchange for the
other company's stock or assets. The General Corporation Law
of Delaware requires the affirmative vote of the holders of at
least a majority of the outstanding shares of a Delaware
corporation's capital stock to approve a merger or
consolidation, except in certain situations in which no vote
of the stockholders is necessary. Since stockholder approval
is not required in connection with the issuance of stock in
exchange for stock or assets and since the Plan will
specifically authorize the issuance of up to 4,500,000 shares
of Common Stock, without prior Stockholder approval, in
connection with a business combination transaction, it is
anticipated that Capston will have complete control over the
Company's combination policies and procedures.
Dilution Resulting from Combination. It is anticipated
that any entity which satisfies the Company's combination
suitability standards will possess assets and other indicia of
value substantially greater than those of the Company.
Consequently, any combination will almost certainly result in
a substantial dilution in the percentage of equity ownership
and voting power of holders of the Company's Common Stock as
stockholders of the combined enterprise. In the aggregate,
holders of the Company's Common Stock will probably own a
small minority percentage of the combined enterprise's voting
securities, with a concomitant reduction in their power to
elect directors and otherwise to influence management policy.
Likely Change in Control. The successful completion of a
merger or acquisition will likely result in a change of
control resulting from the issuance of a large number of
shares of the Company's authorized and unissued Common Stock.
Any such change in control is also likely to result in the
resignation or removal of the Company's present Officers and
Directors. In such an event, no assurance can be given as to
the experience or qualification of such persons either in the
operation of the Company's activities or in the operation of
the business, assets or property being acquired, although it
is likely that successor management will have greater
experience in the business of the combined companies than
Capston and its advisors.
No Market Research. The Company has neither conducted nor
have others made available to it results of market research
concerning the availability of potential business
opportunities. Therefore, Capston and its advisors can offer
no assurances that market demand exists for an acquisition or
merger as contemplated by the Company. Capston and its
advisors have not identified any particular industry or
specific business within an industry for evaluation by the
Company. There is no assurance the Company will be able to
acquire a business opportunity on favorable terms.
Lack of Diversification. In the event that Capston and
its advisors are successful in identifying and evaluating a
suitable business opportunity, the Company will in all
likelihood be required to issue its Common Stock in an
acquisition or merger transaction. Inasmuch as the Company's
cash is limited and the issuance of additional Common Stock
will result in a dilution of interest for present
stockholders, it is unlikely the Company will be capable of
negotiating more than one acquisition or merger. Consequently,
the Company's lack of diversification may subject it to
economic fluctuation within a particular industry in which an
acquired enterprise conducts business.
Potential Conflicts of Interest. Capston and its advisors
are all engaged full-time in other business activities, some
of which may be competitive with the proposed business
activities of the Company. In particular, Capston's principal
business involves the restructuring of defunct public
companies as clean public shells for the purpose of effecting
business combination with a suitable operating companies. To
the extent that Capston and its advisors have fiduciary duties
to such other business activities, possible conflicts of
interest may arise or may appear to exist in respect to the
possible diversion of corporate opportunities to other
entities with which they are or may become associated. No
assurance can be given that any such potential conflicts of
interest will not cause the Company to lose potential
opportunities.
No Market Maker. The Company's securities may be quoted
on NASD's Electronic Bulletin Board which reports quotations
by brokers or dealers making a market in particular
securities. The Company has no agreement with any broker or
dealer to act as a market maker for the Company's securities
and there is no assurance Capston and its advisors will be
successful in obtaining a market maker.
No Assurance of Public Market. Prior to this Proxy
Statement, there has been no public market for the Common
Stock and there is no assurance that a public market will ever
develop. If a trading market does in fact develop for the
Common Stock, there is a possibility that it will not be
sustained and Stockholders may have difficulty in selling
their Common Stock in the future at any price.
Possible Issuance of Additional Shares. If the Plan is
approved by the Stockholders, the Company's Certificate of
Incorporation will authorize the issuance of 25,000,000 shares
of Common Stock and 5,000,000 shares of Preferred Stock. Any
Preferred Stock that is subsequently issued by the Company may
be subject to conversion into Common Stock on terms approved
by the Board of Directors. If the Plan is approved by the
Stockholders, approximately 98% of the Company's authorized
shares of Common Stock will remain unissued. The Plan
specifically contemplates the issuance of up to 4,500,000
shares of Common Stock to unrelated third parties in
connection with a business combination transaction. Moreover,
after completion of a business combination, the Board of
Directors of the combined companies will have the power to
issue additional shares of Common Stock without stockholder
approval. Although the Company currently has no commitments,
contracts or intentions to issue any additional shares,
Stockholders should be aware that any such issuance may result
in a reduction of the book value or market price, if any, of
the outstanding shares of Common Stock. If the Company issues
additional shares, such issuances will also cause a reduction
in the proportionate ownership and voting power of all other
Stockholders. Further, any new issuance of shares of Common
Stock may result in a change of control of the Company. If any
acquisition resulted in a change of control, there can be no
assurance as to the experience or qualifications of those new
persons involved in either the management of the Company or of
the business being acquired. In that event, future operations
of the Company and the payment of dividends, if any, would be
wholly dependent upon such persons.
No Assurance of Dividends. The Company has not paid any
dividends upon its Common Stock, and by reason of its present
financial status and its contemplated financial requirements,
does not contemplate paying any dividends in the foreseeable
future.
RATIFICATION OF REINSTATEMENT, BY-LAWS AND SEC FILINGS
Acting in its capacity as a Stockholder of the Company,
and without first receiving any consent, approval or
authorization of any officer, director or other Stockholder of
the Company, Capston effected a renewal, revival and
restoration of the Company's certificate of incorporation
pursuant to Section 312 of the General Corporation Law of the
State of Delaware. In general, Section 312 provides that any
corporation may "procure an extension, restoration, renewal or
revival of its certificate of incorporation, together with all
the rights, franchises, privileges and immunities and subject
to all of its duties, debts and liabilities which had been
secured or imposed by its original certificate of
incorporation" upon compliance with certain procedural
requirements.
After reviewing the applicable files, Capston determined
that the only debt of the Company that was "secured or imposed
by its original certificate" was the obligation of BIO-
RESPONSE to pay its Delaware taxes. Therefore, Capston paid
all past due franchise taxes on behalf of the Company and then
filed a Certificate of Renewal, Revival, Extension and
Restoration of the Company's Certificate of Incorporation on
behalf of the Company. This Certificate was filed in the
office of the Secretary of State of the State of Delaware on
December 26, 1996 and at the date of this Proxy Statement the
Company is lawfully incorporated, validly existing and in good
standing under the laws of the State of Delaware.
In connection with the reinstatement of the Company's
Charter, Capston adopted amended by-laws for the conduct of
the Company's business, subject to the approval and
ratification of the Stockholders. Under the amended by-laws
adopted by Capston, the presence, in person or by proxy, of
one-third (1/3) of the total number of shares entitled to vote
at the Meeting will constitute a quorum.
Acting in its capacity as a Stockholder of the Company,
and without first receiving any consent, approval or
authorization of any officer, director or other Stockholder of
the Company, Capston filed with the SEC an omnibus Annual
Report on Form 10-K for the fiscal years ended December 31,
1989 through December 31, 1996. In connection therewith,
Capston advanced all of the costs and expenses associated with
the preparation of audited financial statements for the
Company, together with all of the filing fees due to the SEC.
As a result of these actions, the Company has been brought
current with respect to its reporting obligations under the
Exchange Act and is once again in compliance with applicable
SEC regulations respecting reporting.
Stockholders Entitled to Vote and Vote Required.
Reinstatement of Charter. Since the actions of Capston in
effecting a renewal, revival and restoration of the Company's
certificate of incorporation were not previously authorized by
the Company's Officers, Directors or Stockholders, it is
necessary for the Stockholders to ratify and adopt such
actions by a majority vote. The affirmative vote of the
holders of a majority of all shares of Common Stock entitled
to vote and represented in person or by proxy at the Meeting
is required to ratify Capston's Reinstatement of the Company's
Charter. In conformity with Article II, Section 11 of the
Company's amended by-laws, the failure to appear in person or
by proxy and vote on matters presented to the Meeting will be
treated as a vote FOR all proposals unless the holders of
least 10% of the Company's outstanding Common Stock appear in
person or by proxy and vote AGAINST the proposal. Executed
proxies that are marked "Abstain" and broker non-votes will be
counted as votes against the proposal.
Adoption of By-Laws. Since the actions of Capston in
adopting new by-laws for the Company were not previously
authorized by the Company's Officers, Directors or
Stockholders, it is necessary for the Stockholders to ratify
and adopt such actions by a majority vote. The affirmative
vote of the holders of a majority of all shares of Common
Stock entitled to vote and represented in person or by proxy
at the Meeting is required to ratify Capston's adoption of new
by-laws for the Company. In conformity with Article II,
Section 11 of the Company's amended by-laws, the failure to
appear in person or by proxy and vote on matters presented to
the Meeting will be treated as a vote FOR all proposals unless
the holders of least 10% of the Company's outstanding Common
Stock appear in person or by proxy and vote AGAINST the
proposal. Executed proxies that are marked "Abstain" and
broker non-votes will be counted as votes against the
proposal.
Filing of SEC Reports. Since the actions of Capston in
preparing and filing an omnibus Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 were not previously
authorized by the Company's Board of Directors or
Stockholders, it is necessary for the Stockholders to ratify
and adopt such actions by a majority vote. The affirmative
vote of the holders of a majority of all shares of Common
Stock entitled to vote and represented in person or by proxy
at the Meeting is required to ratify Capston's filing of an
omnibus Annual Report on Form 10-K for the fiscal year ended
December 31, 1996. In conformity with Article II, Section 11
of the Company's amended by-laws, the failure to appear in
person or by proxy and vote on matters presented to the
Meeting will be treated as a vote FOR all proposals unless the
holders of least 10% of the Company's outstanding Common Stock
appear in person or by proxy and vote AGAINST the proposal.
Executed proxies that are marked "Abstain" and broker non-
votes will be counted as votes against the proposal.
CAPSTON ASKS ALL STOCKHOLDERS TO APPROVE EACH OF THE FOREGOING
PROPOSALS. THE PROXY ENCLOSED HEREWITH WILL BE VOTED FOR EACH
PROPOSAL UNLESS THE STOCKHOLDER SPECIFICALLY VOTES AGAINST ONE
OR MORE PROPOSALS OR EXPRESSLY ABSTAINS FROM VOTING. SINCE
CAPSTON HAS PROPOSED THE PLAN AS AN INTEGRATED WHOLE, CAPSTON
INTENDS TO ABANDON THE PLAN IN ITS ENTIRETY IF ALL ELEMENTS OF
THE PLAN ARE NOT APPROVED BY THE STOCKHOLDERS.
ELECTION OF DIRECTORS
The by-laws of the Company provide that the Company shall
have not less than one (1) nor more than nine (9) Directors,
the exact number to be fixed by the Board of Directors from
time to time. Since Capston only effected a renewal, revival
and restoration of the Company's certificate of incorporation
in December of 1996, there are presently no members of the
Board of Directors and it will be necessary to appoint at
least one person to serve as a director of the Company to
serve, subject to the provisions of the by-laws of the
Company, until the 1998 annual Meeting of the Stockholders,
and until the election and qualification of a successor board
of directors. Capston's sole nominee for membership on the
Board of Directors is Ms. Sally A. Fonner, the principal
stockholder and president of Capston. A brief account of Ms.
Fonner's business experience and education follows:
Ms. Sally A. Fonner, age 48, has been an independently
employed business consultant for most of the past fifteen
years. She graduated from Stephens University in 1969 with a
Bachelor of Arts Degree in Social Systems. After a stint in
the private sector, Ms. Fonner returned to further her
education and obtained her MBA Degree from the Executive
Program of the University of Illinois in 1979. In many of her
assignments as a business consultant, she is frequently
engaged in dealings which involve financiers and large
monetary transactions. Currently, Ms. Fonner has been engaged
for the last two years in the complex area of financing
rehabilitation providers.
Board and Committee Activity, Structure and Compensation.
As Capston's representative, Ms. Fonner will receive no
compensation for serving on the Board of Directors, although
she will likely be allocated a substantial portion of the
200,000 compensation shares provided for in the Plan. After
the completion of a business combination transaction,
directors who are not salaried employees of the Company will
likely receive a cash stipend for attending Meetings of the
Board, together with reimbursement for expenses incurred in
connection with attending each such Meeting. The Company does
not currently have any standing committees; however, it is
expected that the Board will likely designate an Executive
Committee, a Compensation Committee and an Audit Committee
after the completion of a business combination transaction.
Stockholders Entitled to Vote and Vote Required.
Directors will be elected by a plurality of the votes
cast by the holders of all shares of Common Stock entitled to
vote at the Meeting. Abstentions and broker non-votes will be
disregarded in the tabulation of votes for the election of
Directors.
CAPSTON ASKS ALL STOCKHOLDERS TO VOTE FOR THE ELECTION OF MS.
FONNER TO SERVE AS THE SOLE DIRECTOR OF THE COMPANY UNTIL THE
1998 ANNUAL MEETING OF STOCKHOLDERS. THE PROXY ENCLOSED
HEREWITH WILL BE VOTED FOR EACH PROPOSAL UNLESS THE
STOCKHOLDER SPECIFICALLY VOTES AGAINST ONE OR MORE PROPOSALS
OR EXPRESSLY ABSTAINS FROM VOTING. SINCE CAPSTON HAS PROPOSED
THE PLAN AS AN INTEGRATED WHOLE, CAPSTON INTENDS TO ABANDON
THE PLAN IN ITS ENTIRETY IF ALL ELEMENTS OF THE PLAN ARE NOT
APPROVED BY THE STOCKHOLDERS.
PROPOSED REVERSE SPLIT
At the date of this Proxy Statement, the Company has an
aggregate of 9,176,554 shares of Common Stock issued and
outstanding. Since (i) Capston believes that the owners of a
suitable target company will ordinarily want to control
between 80% and 90% of the Company's Common Stock upon the
completion of a business combination transaction, and (ii)
Capston believes an ultimate capitalization in the 2,500,000
to 5,000,000 share range is ideal for a small public Company,
Capston believes that it will be in the best interest of the
Company and its Stockholders to reduce the number of
outstanding shares to approximately 300,000 shares by means of
a reverse split. Capston believes such action will optimize
the number of shares issued and outstanding after a business
combination transaction, result in a higher reported market
price for the Common Stock of the combined companies, and
reduce the market volatility of the Common Stock of the
combined companies. These changes, in turn, are expected to
enhance the overall perception of the Common Stock among
institutional investors and larger brokerage firms. These
goals, if achieved, are expected to enhance the Company's
ability to raise additional equity capital, and attract new
market makers and institutional stockholders.
Capston believes that the proposed reverse split will be
beneficial to the Company by significantly reducing the number
of issued and outstanding shares of Common Stock, reducing the
expected level of price volatility, and otherwise stabilizing
the anticipated market price of the Common Stock. Capston also
believes the proposed reverse split would increase the
Company's posture and relative worth of its shares in the eyes
of the investment community, although there is a risk that the
market may not adjust the price of the Company's Common Stock
by the ratio of a reverse split. Capston is aware of instances
where only modest price appreciation per share has resulted
from a reverse stock split. Trading in the Common Stock
thereafter will be at prices determined by supply and demand
and prevailing market conditions, which will not necessarily
result in the Common Stock of the Company maintaining a market
price in proportion to the reverse split effected.
The Common Stock is currently registered under Section
12(g) of the Exchange Act, and as a result, the Company is
subject to the periodic reporting and other requirements of
the Act. The proposed reverse split will not effect the
registration of the Common Stock under the Act, and the
Company has no present intention of terminating its
registration under the Act in order to become a "private"
company.
Other than the decrease in the total shares to be
outstanding, no substantive changes are being made in the
rights of Common Stock. Accordingly, upon the Effective Date
of a reverse split, each holder of record of new shares would
be entitled to one vote for each new share held at each
Meeting of the Stockholders in respect to any matter on which
Stockholders have the right to vote. Stockholders have no
cumulative voting rights, nor will they have the preemptive
right to purchase any additional shares of Common Stock.
Holders would be entitled to receive, when and as declared by
the Company's Board of Directors, out of earnings and surplus
legally available therefor, any dividends payable either in
cash, in property or in shares of the capital stock of the
Company.
No fractional new shares will be issued. Each holder of
less than 30.5885 shares, after exchange of all other old
shares held by the holder, will be issued one (1) new share in
exchange for such remaining old shares.
As soon as practical after the Effective Date of a
reverse split, the Company will mail letters of transmittal to
each holder of record of a stock certificate or certificates
which represents issued shares of Common Stock outstanding on
the Effective Date. The letter of transmittal will contain
instructions for the surrender of such certificate or
certificates to the Company's transfer agent in exchange for
the certificates representing the number of whole shares of
new Common Stock into which the shares of Common Stock have
been converted as a result of a reverse split. No payment will
be made or new certificate issued to a stockholder until he
has surrendered his outstanding certificates together with the
letter of transmittal to the Company's transfer agent.
Stockholders Entitled to Vote and Vote Required.
The affirmative vote of the holders of a majority of all
shares of Common Stock entitled to vote and represented in
person or by proxy at the Meeting will be required to approve
the proposed reverse split. Stockholders have no right under
Delaware law or the Certificate of Incorporation to dissent
from a reverse split in conformity with Article II, Section 11
of the Company's amended by-laws, the failure to appear in
person or by proxy and vote on matters presented to the
Meeting will be treated as a vote FOR all proposals unless the
holders of least 10% of the Company's outstanding Common Stock
appear in person or by proxy and vote AGAINST the proposal.
Executed proxies that are marked "Abstain" and broker non-
votes will be counted as votes against the proposal.
CAPSTON ASKS ALL STOCKHOLDERS TO APPROVE THE PROPOSED REVERSE
SPLIT. THE PROXY ENCLOSED HEREWITH WILL BE VOTED IN FAVOR OF
THE PROPOSED REVERSE SPLIT UNLESS THE STOCKHOLDER SPECIFICALLY
VOTES AGAINST THE PROPOSAL OR EXPRESSLY ABSTAINS FROM VOTING.
SINCE CAPSTON HAS PROPOSED THE PLAN AS AN INTEGRATED WHOLE,
CAPSTON INTENDS TO ABANDON THE PLAN IN ITS ENTIRETY IF ALL
ELEMENTS OF THE PLAN ARE NOT APPROVED BY THE STOCKHOLDERS.
ISSUANCE OF COMPENSATION SHARES
As part of the Plan, Capston proposes to issue a total of
200,000 shares of Common Stock ("Compensation Shares") to
individuals designated by Capston as compensation for services
rendered in connection with the implementation of the Plan.
The purpose of this proposed grant of Compensation Shares is
to increase the personal stake of the Grantees in the Company
since the Company's long-term business objectives will be
dependent in large part upon their efforts, expertise and
abilities.
Subject to Stockholder approval, the Company intends to
file a Form S-8 Registration Statement to register the 200,000
Compensation Shares under the Securities Act. Thereafter, the
Compensation Shares will be issued from time to time to
individuals designated by Capston who have materially
participated in the implementation of the Plan. Such shares
will not, however, be issued to finders or for services
rendered in a capital raising transaction. If Capston is
successful in arranging a business combination for the
Company, approximately forty percent (40%) of the net value
derived by the Company's Stockholders will vest in Capston and
its officers, directors and consultants and the remaining
sixty percent (60%) will inure to the benefit of the existing
Stockholders of the Company.
A Grantee will recognize income for federal tax purposes
at the time the Compensation Shares are issued. In general,
the amount of ordinary income recognized by a Grantee will
equal the fair market value of the Compensation Shares on the
date of grant. Gain or loss (if any) from a disposition of
Compensation Shares after the Grantee recognizes ordinary
income will generally constitute short or long-term capital
gain or loss. The Company will be entitled to a tax deduction
at the time the Grantee recognizes ordinary income on the
Compensation Shares.
Stockholders Entitled to Vote and Vote Required.
The affirmative vote of the holders of a majority of all
shares of Common Stock entitled to vote and represented in
person or by proxy at the Meeting will be required to approve
the proposed issuance of 200,000 Compensation Shares to
persons designated by Capston. In conformity with Article II,
Section 11 of the Company's amended by-laws, the failure to
appear in person or by proxy and vote on matters presented to
the Meeting will be treated as a vote FOR all proposals unless
the holders of least 10% of the Company's outstanding Common
Stock appear in person or by proxy and vote AGAINST the
proposal. Executed proxies that are marked "Abstain" and
broker non-votes will be counted as votes against the
proposal.
CAPSTON ASKS ALL STOCKHOLDERS TO APPROVE THE PROPOSED ISSUANCE
OF 200,000 COMPENSATION SHARES. THE PROXY ENCLOSED HEREWITH
WILL BE VOTED IN FAVOR OF THE PROPOSED ISSUANCE OF
COMPENSATION SHARES UNLESS THE STOCKHOLDER SPECIFICALLY VOTES
AGAINST THE PROPOSAL OR EXPRESSLY ABSTAINS FROM VOTING. SINCE
CAPSTON HAS PROPOSED THE PLAN AS AN INTEGRATED WHOLE, CAPSTON
INTENDS TO ABANDON THE PLAN IN ITS ENTIRETY IF ALL ELEMENTS OF
THE PLAN ARE NOT APPROVED BY THE STOCKHOLDERS.
APPROVAL OF FINDER'S FEE FORMULA
As is customary in the industry, the Plan contemplates
the payment of finder's fees to unrelated third parties who
introduce the Company to a suitable acquisition prospect. If
any such fee is paid, it will be approved by the Company's
Board of Directors and will be in accordance with the
standards discussed below.
Finder's fees are customarily between 1% and 5% of the
total transaction value, based upon a sliding scale of the
amount involved. The traditional "Lehman Formula" for
calculating finder's fees is 5% of the first $1 million in
transaction value, plus 4% of the second $1 million, plus 3%
of the third $1 million, plus 2% of the fourth $1 million plus
1% of any transaction value in excess of $4 million. In
Capston's opinion, however, the traditional Lehman Formula
finder's fee minimizes the economic incentive of finder's who
are involved in larger transactions.
In Capston's opinion, the Company and its Stockholders
will be better served by accepting a relatively small
percentage interest in a relatively large transaction, as
opposed to requiring a relatively large percentage interest in
a relatively small transaction. The reasons for this belief
are numerous. First, Capston believes that the ongoing costs
and expenses associated with reporting under the Exchange Act
can be a significant burden for a small company. Second,
Capston believes that relatively large companies are more
likely to thrive and prosper than smaller companies. Third,
Capston believes that relatively large companies are better
suited to shell transactions than small companies. Finally,
Capston believes that a relatively large company will be
required to satisfy the minimum entry standards for the NASDAQ
Stock Market and the Regional and National Stock Exchanges.
For example, the following table outlines the newly-adopted
Entry Standards for companies that wish to have their
securities listed in the NASDAQ Small Cap Market:
NASDAQ Small Cap Market
Net Tangible Assets
(Total Asset less Total
Liabilities and Goodwill) $4,000,000, or
Market Capitalization $50,000,000, or
Net Income (2 of last 3 years) $750,000
Total Assets N/A
Total Equity N/A
Public Float (Shares) 1,000,000
Market Value of Float $5,000,000
Bid Price $4.00
Market Makers 3
Stockholders 300
Operating History (years) 1
or Market Capitalization $50,000,000
Similarly, the following table outlines the newly-adopted
Entry Standards for companies that wish to have their
securities listed in the NASDAQ National Market System:
NASDAQ National Market System
Net Tangible Assets $6,000,000 $18,000,000 N/A
Market Capitalization N/A N/A $75,000,000
Total Assets N/A N/A $75,000,000
Total Revenue N/A N/A $75,000,000
Pre-tax Earnings
(2 of last 3 years) $1,000,000 N/A N/A
Public Float (shares) 1,100,000 1,100,000 1,100,000
Market Value of Float $8,000,000 $18,000,000 $20,000,000
Bid Price $5.00 $5.00 $5.00
Market Makers 3 3 4
Stockholders 400 400 400
Operating History (years) N/A 2 N/A
Since the size of the business operation acquired by the
Company will, in large part, determine the market where the
securities of the combined companies will qualify for listing,
Capston intends to use all reasonable efforts to identify and
negotiate with the largest possible business combination
partners. In furtherance thereof, Capston intends to offer a
"reversed stretched Lehman fee" to unrelated third party
finders who introduce the Company to a suitable acquisition
prospect. Under the reversed stretched Lehman formula proposed
by Capston, the finder may receive 1% of the first $2 million
in transaction value, 2% of the second $2 million in
transaction value, 3% of the third $2 million in transaction
value, 4% of the fourth $2 million in transaction value and 5%
of any transaction value in excess of $8 million. Since the
Company does not have sufficient financial resources to pay
such a finder's fee in cash, it is anticipated that any
finder's fees will be paid with shares of the Company's Common
Stock which may be registered under the Securities Act prior
to issuance. Notwithstanding the foregoing, no finder's fees
will be paid to Capston or any of its officers, directors,
employees, agents or affiliates without the prior consent of
the Stockholders.
Stockholders Entitled to Vote and Vote Required.
The affirmative vote of the holders of a majority of all
shares of Common Stock entitled to vote and represented in
person or by proxy at the Meeting will be required to approve
the proposed finder's fee formula. In conformity with Article
II, Section 11 of the Company's amended by-laws, the failure
to appear in person or by proxy and vote on matters presented
to the Meeting will be treated as a vote FOR all proposals
unless the holders of least 10% of the Company's outstanding
Common Stock appear in person or by proxy and vote AGAINST the
proposal. Executed proxies that are marked "Abstain" and
broker non-votes will be counted as votes against the
proposal.
CAPSTON ASKS ALL STOCKHOLDERS TO APPROVE THE PROPOSED FINDER'S
FEE FORMULA. THE PROXY ENCLOSED HEREWITH WILL BE VOTED IN
FAVOR OF THE PROPOSED FINDER'S FEE FORMULA UNLESS THE
STOCKHOLDER SPECIFICALLY VOTES AGAINST THE PROPOSAL OR
EXPRESSLY ABSTAINS FROM VOTING. SINCE CAPSTON HAS PROPOSED THE
PLAN AS AN INTEGRATED WHOLE, CAPSTON INTENDS TO ABANDON THE
PLAN IN ITS ENTIRETY IF ALL ELEMENTS OF THE PLAN ARE NOT
APPROVED BY THE STOCKHOLDERS.
APPROVAL OF NAME CHANGE AND BUSINESS COMBINATION FORMAT
In general, a business combination may be structured in
the form of a merger, consolidation, reorganization, joint
venture, franchise, licensing agreement or purchase of the
stock or assets of an existing business. Certain business
combination transactions, such as a statutory merger, are
complex to negotiate and implement and require stockholder
approval from both parties to the merger. On the other hand,
the simplest form of business combination is commonly known as
a reverse takeover. In a reverse takeover transaction, the
stockholders of the privately-held company exchange their
private company shares for newly issued stock of the public
company. As a result of the transaction, the privately-held
company becomes a wholly-owned subsidiary of the Public
Company and due to the large number of public company shares
that are customarily issued to stockholders of the privately-
held company, those stockholders end up with a controlling
interest in the public company and are then free to appoint
their own slate of officers and directors.
By using an existing public company, a privately-held
concern that wants to establish a public market for its stock
can start with an existing stockholder base. In addition,
there are usually several brokers who will have an interest in
the newly reorganized company because they have stock on their
books.
There are several potential problems that arise in
connection with a reverse takeover. First, there may be large
blocks of stock in the hands of individuals who are eager to
sell at any price, thereby making it difficult to support the
market during the period immediately after the reorganization.
Second, in addition to inheriting the stockholders and brokers
associated with the public company, the stockholders of the
private company will also inherit the business history of the
public company. Accordingly, a thorough due diligence
investigation of the public company and its principal
stockholders is essential to ensure that there are no
unreported liabilities or other legal problems.
In general, reverse takeovers are viewed with some
skepticism by both the financial community and the regulatory
authorities until the reorganized company has been active for
a sufficient period of time to demonstrate credible operating
performance. Until this performance is demonstrated, it can be
difficult to raise additional money for a company that went
public through a reverse takeover transaction. Therefore, the
reverse takeover strategy is most appropriate in cases where
the purpose for establishing a public trading market is not
related to a perceived short-term need for additional capital.
If a privately-held company believes that substantial
additional capital will be required within the next 6 to 12
months, a reverse takeover transaction may not be the best
alternative.
While the business combination transaction contemplated
by the Plan may be structured as a merger or consolidation,
Capston believes that the reverse takeover format will be most
attractive to potential acquisition targets. Accordingly,
Capston is seeking prior stockholder authorization for a
reverse takeover transaction that will involve up to 4,500,000
shares of Common Stock. In the event that a proposed business
combination will involve the issuance of less than 4,500,000
shares to the owners of the privately-held company, then
Capston will be authorized to conclude the business
combination without first seeking the approval of the
Stockholders. If, on the other hand, the proposed business
combination transaction will involve the issuance of more than
4,500,000 shares to the owners of the privately-held company,
then Capston will seek prior stockholder approval of the
proposed transaction, without regard to whether such
stockholder approval might be required under Delaware law.
In connection with a business combination transaction, it
is almost certain that management of the acquisition target
will require the Company to change its name to one selected by
the Board of Directors or stockholders of the acquisition
target. Since it is also almost certain that the stockholders
of the acquisition target will possess sufficient voting power
to cause the Company to change its name after the acquisition,
Capston is seeking prior stockholder authorization for a
change in the Company's name that is (i) a negotiated element
of a business combination transaction of the type contemplated
by the Plan, and (ii) communicated to all Stockholders of the
Company as soon as possible following the consummation of the
Plan.
Stockholders Entitled to Vote and Vote Required.
Authorization of Stock Issuance. The affirmative vote of
the holders of a majority of all shares of Common Stock
entitled to vote and represented in person or by proxy at the
Meeting is required to authorize the issuance of up to
4,500,000 shares of Common Stock to unrelated third in
connection with a business combination transaction of the type
contemplated by the Plan. In conformity with Article II,
Section 11 of the Company's amended by-laws, the failure to
appear in person or by proxy and vote on matters presented to
the Meeting will be treated as a vote FOR all proposals unless
the holders of least 10% of the Company's outstanding Common
Stock appear in person or by proxy and vote AGAINST the
proposal. Executed proxies that are marked "Abstain" and
broker non-votes will be counted as votes against the
proposal.
Authorization of Name Change. The affirmative vote of the
holders of a majority of all shares of Common Stock entitled
to vote and represented in person or by proxy at the Meeting
is required to authorize an amendment to the Company's
Certificate of Incorporation to effect a Change in the
Company's name that is (i) a negotiated element of a business
combination transaction of the type contemplated by the Plan,
and (ii) communicated to all Stockholders of the Company as
soon as possible following the consummation of the Plan. In
conformity with Article II, Section 11 of the Company's
amended by-laws, the failure to appear in person or by proxy
and vote on matters presented to the Meeting will be treated
as a vote FOR all proposals unless the holders of least 10% of
the Company's outstanding Common Stock appear in person or by
proxy and vote AGAINST the proposal. Executed proxies that are
marked "Abstain" and broker non-votes will be counted as votes
against the proposal.
CAPSTON ASKS ALL STOCKHOLDERS TO APPROVE EACH OF THE FOREGOING
PROPOSALS. THE PROXY ENCLOSED HEREWITH WILL BE VOTED FOR EACH
PROPOSAL UNLESS THE STOCKHOLDER SPECIFICALLY VOTES AGAINST ONE
OR MORE PROPOSAL OR EXPRESSLY ABSTAINS FROM VOTING. SINCE
CAPSTON HAS PROPOSED THE PLAN AS AN INTEGRATED WHOLE, CAPSTON
INTENDS TO ABANDON THE PLAN IN ITS ENTIRETY IF ALL ELEMENTS OF
THE PLAN ARE NOT APPROVED BY THE STOCKHOLDERS.
Increase in Authorized Capitalization.
The authorized capitalization of the Company is presently
fixed at 20,000,000 shares of Common Stock and 1,000,000
shares of Preferred Stock. At December 31, 1988, the Company
had 9,176,554 shares of Common Stock issued and outstanding.
Thus, at December 31, 1988, there were approximately
10,823,446 authorized shares of Common Stock that were both
unissued and not reserved for future issuance.
Since the Company's business plan contemplates the
issuance of up to 4,500,000 shares of Common Stock to the
current owners of an unidentified business or businesses, and
Capston believes that the Company is likely to need
substantial additional financing in the future, although the
amount and timing of the Company's future financing
requirements is not presently ascertainable, Capston believes
that an increase in the authorized capitalization of the
Company is desirable to facilitate the Company's future
financing activities. Accordingly, Capston proposes to
increase the authorized Common Stock of the Company from
20,000,000 shares to 25,000,000 shares. Under this proposal,
the relative rights and limitations of the holders of
Preferred and Common Stock would remain unchanged.
The proposed increase in the authorized capitalization of
the Company has been recommended by Capston to assure that an
adequate supply of authorized and unissued shares is available
to finance the acquisition of suitable business opportunities
and the future growth of the Company. In addition, the
proposed new shares could also be used for general corporate
purposes, such as future stock dividends or stock splits.
The issuance of additional shares of Common Stock may,
among other things, have a dilutive effect on earnings per
share and on the equity and voting power of existing holders
of Common Stock. Until the Board determines the specific
rights, preferences and limitations of any future series of
Preferred Stock, the actual effect on the holders of Common
Stock of the issuance of such shares cannot be ascertained.
However, such effects might include restrictions on dividends
on the Common Stock if dividends on the Preferred Stock are in
arrears, dilution of the voting power of the holders of Common
Stock to the extent that any series of Preferred Stock has
voting rights, and reduction of amounts available on
liquidation of the Company as a result of any liquidation
preference granted to the holders of any series of Preferred
Stock.
There are no current plans or arrangements relating to
the issuance of any additional shares of Common or Preferred
Stock proposed to be authorized. In addition, the Company has
no present intention to issue shares of Common or Preferred
Stock to any person in connection with any acquisition of
assets, merger, business combination, exchange of securities
or other similar transaction. The terms of any future offering
of Common or Preferred Stock will be largely dependent on
market conditions and other factors existing at the time of
issuance and sale.
If this proposal is approved by the stockholders, the
Board will be authorized to issue additional Common and/or
Preferred Stock, from time to time, within the limits
authorized by the proposal without further stockholder action,
except as may otherwise be provided by law or the Articles of
Incorporation as to holders of Preferred Stock. Such
additional shares may be issued for cash, property or
services, or any combination thereof, and at such price as the
Board deems reasonable under the circumstances. The increase
in authorized shares of Common Stock and Preferred Stock has
not been proposed for an anti-takeover-related purpose and the
Board and management have no knowledge of any current efforts
to obtain control of the Company or to effect large
accumulations of the Company's stock. Nevertheless, the
issuance of additional shares by the Company may potentially
have an anti-takeover effect by making it more difficult to
obtain stockholder approval of various actions, such as a
merger or removal of management.
Stockholders Entitled to Vote and Vote Required.
Increase in Common Stock. The affirmative vote of the
holders of a majority of all shares of Common Stock entitled
to vote and represented in person or by proxy at the Meeting
will be required to approve the proposed increase in the
Company's authorized Common Stock. In conformity with Article
II, Section 11 of the Company's amended by-laws, the failure
to appear in person or by proxy and vote on matters presented
to the Meeting will be treated as a vote FOR all proposals
unless the holders of least 10% of the Company's outstanding
Common Stock appear in person or by proxy and vote AGAINST the
proposal. Executed proxies that are marked "Abstain" and
broker non-votes will be counted as votes against the
proposal.
Increase in Preferred Stock. The affirmative vote of the
holders of a majority of all shares of Common Stock entitled
to vote and represented in person or by proxy at the Meeting
will be required to approve the proposed increase in the
Company's authorized Preferred Stock. In conformity with
Article II, Section 11 of the Company's amended by-laws, the
failure to appear in person or by proxy and vote on matters
presented to the Meeting will be treated as a vote FOR all
proposals unless the holders of least 10% of the Company's
outstanding Common Stock appear in person or by proxy and vote
AGAINST the proposal. Executed proxies that are marked
"Abstain" and broker non-votes will be counted as votes
against the proposal.
CAPSTON ASKS ALL STOCKHOLDERS TO APPROVE THE PROPOSED
INCREASES IN THE COMPANY'S AUTHORIZED COMMON AND PREFERRED
STOCK. THE PROXY ENCLOSED HEREWITH WILL BE VOTED IN FAVOR OF
BOTH PROPOSALS UNLESS THE STOCKHOLDER SPECIFICALLY VOTES
AGAINST THE PROPOSALS OR EXPRESSLY ABSTAINS FROM VOTING. SINCE
CAPSTON HAS PROPOSED THE PLAN AS AN INTEGRATED WHOLE, CAPSTON
INTENDS TO ABANDON THE PLAN IN ITS ENTIRETY IF ALL ELEMENTS OF
THE PLAN ARE NOT APPROVED BY THE STOCKHOLDERS.
ADDITIONAL INFORMATION
Additional materials enclosed herewith include copies of
the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, as filed with the Securities and Exchange
Commission on January 2, 1997 "Exhibit A" and the Company's
Amended By-Laws "Exhibit B." The Form 10-K and By-Laws
incorporated herein by this reference and all disclosures
herein relating to the Company and its management, business
and financial condition are qualified in their entirety by
reference to the Form 10-K.
This solicitation is being conducted by Capston Network
Company on behalf of BIO-RESPONSE, INC. The cost of soliciting
proxies in the accompanying form will be advanced by Capston
and reimbursed by the Company if, as and when a suitable
business combination transaction is effected. The cost of
solicitation including legal, accounting, printing, mailing
and other miscellaneous expenses are estimated at $12,000. To
date, Capston's out-of-pocket expenses have been approximately
$5,000. There is no known opposition to the solicitation. In
addition to solicitations by mail, directors, officers and
regular employees of Capston may solicit proxies by telephone,
telegram, fax or personnel solicitation. Brokers, nominees,
fiduciaries and other custodians will be instructed to forward
soliciting material to the beneficial owners of shares held of
record by them, and such custodians will be reimbursed for
their expenses.
The persons designated as proxies to vote shares at the
Meeting intend to exercise their judgment in voting such
shares on other matters that may properly come before the
Meeting. Capston does not expect that any matters other than
those referred to in this proxy statement will be presented
for action at the Meeting.
PROXY BIO-RESPONSE, INC. PROXY
This Proxy is Solicited by Capston Network Co. for the
Special Meeting of Stockholders to be Held on March 10, 1997
The undersigned hereby appoints John L. Petersen and Lisa
Duncan, and each of them, either one of whom may act without
joinder of the other, each with full power of substitution and
ratification, attorneys and proxies of the undersigned to vote
all shares of common stock of BIO-RESPONSE, INC. which the
undersigned is entitled to vote at a special meeting of
Stockholders to be held at 1:00 p.m. on Monday, March 10,
1997, in the Cardita Room of the Sheraton at Sand Key Resort,
1160 Gulf Blvd., Clearwater Beach, Florida, and at any and all
adjournments thereof:
1. FOR the ratification of all actions of Capston
Network Co. ("Capston") in (i) effecting a renewal,
revival and restoration of the Company's Certificate of
Incorporation; (ii) adopting amended by-laws to govern
the business affairs of the Company, and (iii) filing
the reports and other documents necessary to bring the
Company current with respect to its reporting
obligations under the Securities Exchange Act of 1934
nFOR nAGAINST nABSTAIN
2. FOR the election of Sally A. Fonner to serve as
the sole member of the Board of Directors until the
1998 annual Meeting of stockholders, or until her
successor is elected and qualified
nFOR nAGAINST nABSTAIN
3. PROPOSED AMENDMENTS TO ARTICLES OF INCORPORATION.
(a) To effect a reverse split of all issued and
outstanding shares of Common Stock in the ratio of
one (1) share of new Common Stock for each 30.5885
shares presently outstanding so that immediately
thereafter the Company will have a total of 300,000
shares issued and outstanding
nFOR nAGAINST nABSTAIN
(b) To increase the authorized Common Stock of the
Company to 25,000,000 shares.
nFOR nAGAINST nABSTAIN
(c) To increase the authorized Preferred Stock of
the Company to 5,000,000 shares.
nFOR nAGAINST nABSTAIN
4. PROPOSED COMPENSATION SHARE ISSUANCE. To approve
the issuance of 200,000 shares of Common Stock to
persons designated by Capston as compensation for
services rendered in connection with the implementation
of the Plan.
nFOR nAGAINST nABSTAIN
5. TO consider and vote upon a proposal which will give
the Board of Directors authority to pay an in-kind
Finder's Fee to unrelated third party finders. who
introduce the Company to a suitable acquisition
prospect.
nFOR nAGAINST nABSTAIN
6. PROPOSED AUTHORIZATION OF STOCK ISSUANCE. To
authorize the Board of Directors to (i) change the
Company's name and (ii) issue up to 4,500,000 shares of
Common Stock to unrelated third parties, all without
prior stockholder approval, in connection with a
business combination transaction of the type
contemplated by the Plan.
nFOR nAGAINST nABSTAIN
7. IN their discretion Upon such other matters which
may properly come before the meeting and any
adjournment thereof.
nFOR nAGAINST nABSTAIN
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN. UNLESS OTHERWISE SPECIFIED, THE SHARES WILL
BE VOTED FOR THE DIRECTOR NOMINEE AND FOR ALL PROPOSALS.
The undersigned hereby revokes any Proxy previously
given in respect of the Annual Meeting.
Dated: _____________________, 1997 _______________________________________
Signature of Stockholder(s)Note:
Signature should agree with the
name on stock certificate as
printed thereon.
Executors, administrators and
other fiduciaries should so
indicate when signing.
n I Plan to personally attend the Special Meeting of the
Stockholders
PLEASE DATE, SIGN AND RETURN THIS PROXY TO CAPSTON
IN THE ENCLOSED ENVELOPE. THANK YOU.
