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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934 (Amendment No. 1 )*
THE IMMUNE RESPONSE CORPORATION
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(Name of Issuer)
COMMON STOCK
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(Title of Class of Securities)
45252T106
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(CUSIP Number)
Dennis J. Carlo, Ph.D.
P.O. Box 1176
Rancho Santa Fe, CA 92067
(760) 431-7080
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(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
WITH A COPY TO:
Thomas E. Sparks, Jr.
Pillsbury Madison & Sutro LLP
P.O. Box 7880
San Francisco, CA 94120-7880
(415) 983-1000
April 17, 1997
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box / /.
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom
copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
(CONTINUED ON FOLLOWING PAGE(S))
Page 1 of 7 Pages
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CUSIP No. 45252T106
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(1) Names of Reporting Persons. S.S. or I.R.S. Identification Nos. of Above
Persons: Dennis J. Carlo, Ph.D.
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(2) Check the Appropriate Box if a Member (a) / /
of a Group* (b) / /
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(3) SEC Use Only
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(4) Source of Funds* 00
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(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) / /
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(6) Citizenship or Place of Organization USA
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Number of Shares (7) Sole Voting
Beneficially Owned Power 1,056,895 (see Item 5)
by Each Reporting --------------------------------------------------
Person With (8) Shared Voting
Power 248,872 (see Item 5)
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(9) Sole Dispositive
Power 1,056,895 (see Item 5)
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(10) Shared Dispositive
Power 248,872 (see Item 5)
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(11) Aggregate Amount Beneficially Owned by Each Reporting Person
1,305,767 (see Item 5)
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(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
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(13) Percent of Class Represented by Amount in Row (11)
5.6% (see Item 5)
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(14) Type of Reporting Person IN
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Page 2 of 7 Pages
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ITEM 1. SECURITY AND ISSUER.
The class of equity securities to which this statement relates is the
common stock, par value $.0025 per share (the "Common Stock") of The Immune
Response Corporation, a Delaware corporation (the "Issuer"). The Issuer's
principal executive offices are located at 5935 Darwin Court, Carlsbad,
California 92008.
ITEM 2. IDENTITY AND BACKGROUND.
(a) The person filing this Schedule is Dennis J. Carlo, Ph.D.
(b) Dr. Carlo's address is P.O. Box 1176, Rancho Santa Fe, California
92067.
(c) The principal occupation of Dr. Carlo is President, Chief
Executive Officer and Director of the Issuer. The principal business of the
Issuer is biopharmaceutical research and the development and licensing of
potential immune-based therapies and potential gene therapies. The Issuer's
address is listed in Item 1 above.
(d)-(e) At no time during the last five years was Dr. Carlo convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors) or
a party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities law or finding any
violation with respect to such laws.
(f) Dr. Carlo is a citizen of the United States of America.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to a Loan Agreement dated April 15, 1997 by and between Kevin
B. Kimberlin and Dr. Carlo, Mr. Kimberlin agreed to loan to Dr. Carlo the
principal sum of $1,999,998 (the "Loan") for the purpose of purchasing up to
256,410 units of Common Stock and warrants issued by the Issuer. Each unit is
comprised of one share of Common Stock and a warrant to purchase one share of
Common Stock (a "Unit"). The Loan is evidenced by a promissory note from
Dr. Carlo to Mr. Kimberlin dated April 17, 1997 and payable in three (3) years.
The principal sum of the Loan has been or will be distributed to
Dr. Carlo in the manner set forth below. First, $494,744.25 was distributed on
April 17, 1997 and, at Dr. Carlo's request, was wired directly to the Issuer as
partial consideration for the issuance to Dr. Carlo of 253,715 Units (the
"Purchased Units"). The balance of the consideration for the Purchased Units
was a promissory note by Dr. Carlo in the principal amount of $1,484,232.75, due
September 30, 1997 and payable to the Issuer. Second, $1,484,232.75 will be
distributed on September 30, 1997 for payment of the principal amount of the
promissory note from Dr. Carlo to the Issuer. Finally, the issuer has requested
approval from the National Association of Securities Dealers, Inc. ("NASD") to
sell and issue to Dr. Carlo, in accordance with NASD rules, 2,695 additional
Units (the "Additional Units"). In the event that such approval is received by
the Issuer on or before May 27, 1997, $21,021 will be distributed to Dr. Carlo
under the Loan for the purpose of purchasing the Additional Units within five
(5) business days after receipt of approval.
Page 3 of 7 Pages
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ITEM 4. PURPOSE OF TRANSACTION.
Dr. Carlo has acquired beneficial ownership of shares of Common Stock
for the purpose of investment.
Except as set forth above, Dr. Carlo has no present plans or proposals
which relate to, or would result in: the acquisition by any person of
additional securities of the Issuer; an extraordinary corporate transaction,
such as a merger, reorganization or liquidation, involving the Issuer or any of
its subsidiaries; a sale or transfer of a material amount of assets of the
Issuer or any of its subsidiaries; a change in the present board of directors or
management of the Issuer, including plans or proposals to change the number or
term of directors or to fill any existing vacancies on the board; a material
change in the present capitalization or dividend policy of the Issuer or any
other material change in the Issuer's business or corporate structure; a change
in the Issuer's certificate of incorporation or bylaws or other actions which
might impede the acquisition of control of the Issuer by any person; causing a
class of securities of the issuer being delisted from a national securities
exchange or ceasing to be authorized to be quoted in an inter-dealer quotation
system of a registered national securities association; a class of equity
securities of the Issuer becoming eligible for termination of registration
pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934; or any
action similar to any of those enumerated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Prior to the transaction which is the subject of this statement,
Dr. Carlo beneficially owned 784,241 shares of Common Stock representing 3.8% of
the issued and outstanding shares of Common Stock. This figure includes options
to acquire 589,908 shares of Common Stock and 73,755 shares of Common Stock held
in trusts for the benefit of Dr. Carlo's family, as to which he maintains shared
voting and investment power with his wife, Jean M. Carlo. Ms. Carlo also has
the right to exercise options to acquire up to 175,117 of the 589,908 shares of
Common Stock referenced in the preceding sentence; this right expires ratably
between December 3, 2000 and May 2, 2005.
As a result of his purchase of the Purchased Units, Dr. Carlo acquired
direct ownership of 253,715 shares of Common Stock and a warrant to purchase
253,715 shares of Common Stock. Dr. Carlo is deemed to have beneficial
ownership of the number of shares subject to the warrant. Thus, on a fully
diluted basis, Dr. Carlo beneficially owned 1,291,883 shares of Common Stock
representing 5.6% of the Common Stock issued and outstanding as of April 17,
1997. This figure includes options to acquire 590,120 shares of Common Stock, a
warrant to acquire 253,715 shares of Common Stock and 73,755 shares of Common
Stock held in trusts for the benefit of Dr. Carlo's family. (Note that on the
same day that Dr. Carlo acquired the Purchased Units, the Issuer sold and issued
to a third party 1,776,004 shares of Common Stock and a warrant to purchase
1,776,004 shares of Common Stock.)
In the event that Dr. Carlo acquires the Additional Units, he would have
beneficial ownership of 1,305,767 shares of Common Stock representing 5.6% of
the Common Stock then issued and outstanding, assuming there were no other
changes in holdings of Common Stock by other stockholders. This figure includes
options to acquire 598,614 shares of Common Stock, warrants to acquire 256,410
shares of Common Stock and 73,755 shares of Common Stock held in trusts for the
benefit of Dr. Carlo's family.
Page 4 of 7 Pages
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(b) Dr. Carlo has the sole power to vote or direct the disposition of
up to 1,043,011 shares of Common Stock. In the event that Dr. Carlo acquires
the Additional Units, he will have the sole power to vote or direct the
disposition of up to 1,056,895 shares of Common Stock.
As indicated in Item 5(a), Dr. Carlo shares the power to vote or direct
the disposition of up to 175,117 shares of Common Stock which may be acquired
through the exercise of options and 73,755 shares of Common Stock which are held
in trusts for the benefit his family.
The power to vote or direct the disposition of the 175,117 shares of
Common Stock which may be acquired through the exercise of options
and the 73,755 shares of Common Stock which are held in trusts for
the benefit of Dr. Carlo's family is shared with Jean M. Carlo.
Ms. Carlo's address is 840 Cofair Court, Solana Beach, California
92075.
Ms. Carlo is currently not employed.
At no time during the last five years was Ms. Carlo convicted in a
criminal proceeding (excluding traffic violations or similar
misdemeanors) or a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities law or finding any violation
with respect to such laws.
Ms. Carlo is a citizen of the United States of America.
(c) No transactions of Common Stock were effected by Dr. Carlo during
the past 60 days.
(d) No person other than Dr. Carlo herein has the right to receive or
the power to direct the receipt of dividends or the proceeds from the sale of
the securities being reported herein.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Except as described in Items 3 and 5, Dr. Carlo has no contract,
arrangement, understanding or relationship (legal or otherwise) with any person
with respect to any security of the Issuer, including, but not limited to,
transfer or voting of any securities, finder's fees, joint ventures, loan or
option arrangements, puts or calls, guarantees of profits, division of profits
or losses, or the giving or withholding of proxies.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS.
** Exhibit A: Loan Agreement dated April 15, 1997 by and between
Kevin B. Kimberlin and Dennis J. Carlo.
Page 5 of 7 Pages
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** Exhibit B: Promissory Note dated April 17, 1997 for the amount of
$1,999,998 payable to Kevin B. Kimberlin by Dennis J.
Carlo.
Exhibit C: Trust Agreements dated May 22, 1988 for the benefit of
Angela Carlo, David C. Carlo, Deborah Carlo, Eric J.
Carlo and Gretchen Carlo.
Exhibit D: Promissory Note dated April 17, 1997 for the amount of
$1,484,232.75 payable to The Immune Response
Corporation by Dennis J. Carlo, Ph.D.
** Previously filed on April 25, 1997
Page 6 of 7 Pages
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: May 1, 1997
/S/ DENNIS J. CARLO
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Dennis J. Carlo
Page 7 of 7 Pages
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Exhibit C
TRUST AGREEMENT
ANGELA CARLO TRUST
This Trust Agreement is entered into as of May 22, 1988, by DENNIS J. CARLO
and JEAN M. CARLO as trustors and as trustees
This trust is established for the benefit of the daughter of DENNIS J.
CARLO, ANGELA CARLO, and may be referred to as The Angela Carlo Trust. The
trustors have transferred and delivered to the trustees, without any
consideration on the trustees' part, the property described in the attached
Schedule A. Said property, together with any other property that may later
become subject to this trust, shall constitute the trust estate, and shall be
held, administered and distributed as hereinafter provided.
SECTION 1: ADDITION OF PROPERTY.
In their discretion, the trustees may accept additions to the trust from
the trustors, or either of them, the estate of either trustor, or any other
donor. Such additions shall be irrevocable.
SECTION 2: POWER TO WITHDRAW.
2.1 NOTICE OF TRANSFERS AND THE BENEFICIARY'S RIGHT TO WITHDRAW ASSETS.
Within five (5) days of receipt of any property transferred into the trust
(including the initial funding), the trustees shall notify ANGELA CARLO, if she
is then living, otherwise each beneficiary then entitled to receive
distributions of income either directly or in the discretion of the trustees
(collectively, the "Beneficiary") of the value of the property received; during
any period that the Beneficiary lacks legal capacity, the trustees shall instead
notify the Beneficiary's guardian (or natural parent of a minor beneficiary for
whom no guardian has been appointed). As to each transfer into the trust, the
person so notified by the trustee may, at any time within the "withdrawal
period" (Section 2.2 below), demand in writing the distribution of trust assets
equal to the "withdrawal value" (paragraph 2.3 below).
2.2 WITHDRAWAL PERIOD. Written demand hereunder may be made at any time
within thirty (30) days of the date of notification (Section 2.1) of any
transfer into the trust (including the initial funding) but in any event not
later than December 31 of the year in which the transfer is made.
2.3 WITHDRAWAL VALUE. Subject to Section 2.6, as to each transfer, the
value of trust assets subject to withdrawal by the person notified hereunder
shall be the lesser of:
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(a) An amount equal to the annual exclusion allowed under
Internal Revenue Code Section 2503 as it exists on the date the notice required
by Section 2.1 is given; or
(b) An amount equal to the fair market value (at the time of
transfer) of the property transferred.
2.4 TRUSTEES' DUTY TO DISTRIBUTE ASSETS ON DEMAND. Upon receipt of such
written demand, the trustees shall, as soon as practical, distribute to the
person making the demand all amounts so demanded (subject to all the provisions
of this Section 2), provided that the trustee shall make all such distributions
no later than December 31 of the year in which the property is transferred into
trust. Distributions may be in cash or in kind. Any property so distributed to
a Beneficiary's guardian shall be held by such guardian for the Beneficiary's
benefit and use.
2.5 ASSETS SUBJECT TO WITHDRAWAL. Any asset of the trust estate may be
used to satisfy a demand for withdrawal hereunder.
2.6 RESTRICTIONS AND LIMITATIONS ON WITHDRAWAL RIGHT.
2.6.1 The right of withdrawal granted hereunder is noncumulative and,
to the extent that the withdrawal power granted hereunder has not been exercised
by the end of the thirty (30) day period (or the end of the calendar year if
sooner) as provided above, it shall lapse.
2.6.2 Notwithstanding the number or value of transfers made by any one
transferror in any calendar year, the cumulative withdrawals of a Beneficiary
(or guardian) in said calendar year with respect to transfers made by that
transferror shall not exceed the amount allowed as an annual exclusion under
Internal Revenue Code Section 2503.
SECTION 3: DISTRIBUTION OF INCOME AND PRINCIPAL.
The trustees shall hold, manage, invest and reinvest the principal of the
trust and shall collect and receive the current income therefrom, and, after
deducting all necessary expenses, costs and taxes incident to the administration
of the trust which are a charge against income, shall distribute the income and
principal as follows:
3.1 DISCRETIONARY INCOME AND PRINCIPAL DURING MINORITY. While ANGELA
CARLO is under the age of twenty-one (21), the trustees shall pay to her or
apply for her benefit as much of the net income and principal of the trust as
the trustees in the trustees' discretion deem necessary for her proper support,
health, maintenance, and education, after taking into consideration, to the
extent the trustees deem advisable, any other income of ANGELA CARLO known to
the trustees and
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reasonably available for these purposes. Any income not so distributed shall be
accumulated and added to principal.
3.2 MANDATORY INCOME AND DISCRETIONARY PAYMENT OF PRINCIPAL. When ANGELA
CARLO attains the age of twenty-one (21), the trustees shall thereafter pay to
or apply for her benefit, quarter-annually or more frequently, the entire net
income of the trust. If the trustees deem the income to be insufficient, the
trustees may also pay to her or apply for her benefit as much of the principal
of the trust as the trustees in the trustees' discretion deem necessary for her
proper support, health, maintenance, and education, after taking into
consideration, to the extent the trustees deem advisable, any income or other
resources of ANGELA CARLO, outside the trust, known to the trustees and
reasonably available for these purposes.
3.3 POWER TO WITHDRAW. At any time after attaining age twenty-five (25),
ANGELA CARLO may, by written instrument filed with the trustees, require the
trustees to distribute to her not to exceed one-half (1/2) of the trust as
constituted at the time of withdrawal.
3.4 DISTRIBUTION OF TRUST ESTATE. When ANGELA CARLO attains age thirty
(30), the trustees shall distribute to her the entire undistributed balance of
the trust (including both principal and accrued and undistributed income).
3.5 DEATH PRIOR TO DISTRIBUTION. Upon the death of ANGELA CARLO any share
then held for her benefit (including both principal and accrued and
undistributed income) shall be distributed to such one or more persons or
entities including ANGELA CARLO, her creditors, her estate or creditors of her
estate, either outright or in trust, as she shall appoint by the last dated
instrument delivered to the trustees including a will (whether or not admitted
to probate) specifically referring to and exercising this power of appointment.
If or to the extent that ANGELA CARLO shall have failed to exercise this power
of appointment, or an attempted exercise of this power shall have been invalid
or ineffective for any reason, or ANGELA CARLO shall have released or renounced
this power, the property subject to it shall be distributed to ANGELA CARLO's
then living issue, upon the principle of representation (subject, however, to
the provisions of Section 3.6 below), or if there is none then living, said
property shall be distributed to GRETCHEN CARLO and DEBORAH CARLO (daughters of
DENNIS J. CARLO), and if either of them is not then living, her share shall be
distributed to her then living issue, upon the principle of representation
(subject to Section 3.6 below). Notwithstanding the foregoing, however, if a
share is distributable to a beneficiary for whom a trust created by the trustors
is then being maintained under this instrument or another similar instrument,
such share shall be added to that trust to be held, administered and distributed
as a part thereof.
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3.6 TRUST FOR BENEFICIARY UNDER AGE 21. Notwithstanding any provision
hereof to the contrary, any share of the trust estate distributable to a
beneficiary (other than ANGELA CARLO) under age twenty-one (21) under the
foregoing provisions shall be held and administered for his or her benefit while
he or she is under age twenty-one (21) and the trustees shall apply so much of
the net income and principal thereof as the trustees, in the trustees'
discretion, deem necessary for such beneficiary's reasonable health,
maintenance, support and education, and the trustees shall accumulate for the
benefit of such beneficiary any income not so applied or paid. When such
beneficiary attains age twenty-one (21), any of such part then held for such
beneficiary shall be distributed to him or her, and in case of his or her death
prior thereto, shall be distributed to his or her estate.
3.7 ULTIMATE DISTRIBUTION. Any of the trust estate not disposed of under
the foregoing provisions shall be distributed in two equal shares, one share to
the heirs at law of DENNIS J. CARLO and one share to the heirs at law of JEAN M.
CARLO. The identity and respective shares of such heirs shall be determined in
all respects as though the trustors' deaths had occurred immediately following
the happening of the event requiring such distribution, and according to the
laws of California then in force relating to the succession of separate property
not acquired from a predeceased spouse.
SECTION 4: TRUSTEES' POWERS.
To carry out the purposes of the trust and subject to any limitations
stated elsewhere herein, the trustees are vested with the following powers, in
addition to those now or hereafter conferred by law, affecting the trust and
trust estate:
4.1 RETAIN ASSETS. To continue to hold any property, as long as the
trustees deem advisable.
4.2 MANAGE GENERALLY. To acquire, manage, control, grant options on, sell
(for cash or on deferred payments), convey, exchange, partition, divide, improve
and repair trust property.
4.3 LEASE. To lease trust property for terms within or beyond the term of
the trust and for any purpose.
4.4 BORROW. To borrow money and to encumber or hypothecate trust property
by mortgage, deed of trust, pledge, or otherwise; to borrow money on behalf of
one trust from any other trust created hereunder.
4.5 OBTAIN INSURANCE. To carry, at the expense of the trust, insurance of
such kinds and in such amounts as the trustees deem advisable to protect the
trust estate and the trustees against any hazard.
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4.6 LITIGATE. To commence or defend such litigation with respect to the
trust or any property of the trust estate as the trustees deem advisable, at the
expense of the trust.
4.7 COMPROMISE. To compromise or otherwise adjust any claims or
litigation against or in favor of the trust.
4.8 PERMISSIBLE INVESTMENTS. To invest and reinvest the trust estate in
every kind of property, real, personal, or mixed and every kind of investment,
specifically including, but not by way of limitation, corporation obligations of
every kind, stocks, preferred or common, shares of investment trusts, investment
companies, common trust funds, mutual funds, and mortgage participations, which
men of prudence, discretion and intelligence acquire for their own account. The
trustees shall maintain sufficient liquidity to permit making the distributions
contemplated by Section 3, when and as required.
4.9 MARGIN ACCOUNTS. To buy, sell or trade in securities of any nature
(including short sales) on margin and for such purposes maintain and operate
margin accounts with brokers and pledge any securities held or purchased by the
trustees with such brokers as security for loans and advances made to the
trustees.
4.10 POWERS RE SECURITIES. With respect to securities held in the trust,
to have all the rights, powers and privileges of an owner, including, but not by
way of limitation, the power to vote, give proxies and pay assessments, to
participate in voting trusts, pooling agreements, foreclosures, reorganizations,
consolidations, mergers, liquidations, sales and leases, and incident to such
participation to deposit securities with and transfer title to any protective or
other committee on such terms as the trustee may deem advisable; and to exercise
or sell stock subscription or conversion rights.
4.11 EMPLOY AGENTS AND OTHERS. To appoint, employ and pay such agents and
employees as the trustees deem necessary or advisable, including (without
limiting the generality of the foregoing) accountants, attorneys, investment
counselors, banks to act as custodians for custodial accounts and other
custodians of the trust property.
4.12 HOLDING PROPERTY IN OTHERS' NAMES. To hold securities or other
property in the trustees' own names or in the name of a nominee of the trustees,
or in the name of a qualified depository without disclosing any fiduciary
relationship.
4.13 DISCRETION RE PRINCIPAL AND INCOME. Except as otherwise specifically
provided herein, the trustees shall have the power, exercisable in the trustees'
discretion, to determine what is principal or income of the trust estate and to
apportion and allocate receipts and expenses and other charges between
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these accounts. Insofar as the trustees shall exercise this discretion, and
except as otherwise provided in this instrument, matters relating to principal
and income shall be governed by the provisions of the California Principal and
Income Law from time to time existing.
4.14 ADDITIONAL POWERS OF TRUSTEES. The enumeration of certain powers of
the trustees shall not limit the trustees' general or implied powers, and the
trustees, subject always to the discharge of their fiduciary obligations, are
vested with and shall have all the rights, powers and privileges which an
absolute owner of the same property would have; provided, however, that no
provision contained herein may be construed to give the trustors any of the
following powers:
4.14.1 To purchase, exchange or otherwise deal with or dispose of
corpus or income of the trusts established hereunder for less than adequate
consideration in money or money's worth.
4.14.2 To borrow the corpus or income of the trusts, directly or
indirectly, without adequate interest or security.
SECTION 5: GENERAL PROVISIONS.
The following provisions shall govern each trust created hereunder:
5.1 SPENDTHRIFT PROVISION. The interests of beneficiaries in principal or
income shall not be subject to claims of their creditors or others, nor to legal
process, and may not be voluntarily or involuntarily alienated or encumbered.
5.2 DEFINITION OF EDUCATION. Whenever provision is made in this trust for
payment for the "education" of a beneficiary, the term "education" shall be
construed to include all levels of public, semi-private or private schools
including, but not limited to, nursery, pre-school, primary, and secondary
schools; college and post-graduate study; vocational school; music and art
schools, lessons and programs; religious school; computer or related training;
and both formal and informal cultural enrichment and travel programs and
activities so long as in the sole judgment of the trustees such study, program
or activity is pursued to advantage by the beneficiary, and at the beneficiary's
choice. In determining payments to be made for such education, the trustees
shall take into consideration the beneficiary's related travel and living
expenses, and such other expenses as the trustees, in the trustees' sole
discretion, determine are reasonable, including but not limited to, the cost of
clothing, musical instruments, educational tools, medical needs, etc.
5.3 PERPETUITIES SAVINGS CLAUSE. Unless sooner terminated in accordance
with other provisions, this trust, or any trust
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created hereunder, shall terminate twenty-one (21) years after the death of
ANGELA CARLO. All principal and undistributed income of any trust so terminated
shall be distributed to the then income beneficiaries of that trust in the
proportions in which they are, at the time of termination, entitled to receive
the income; provided, however, that if the rights to income are not then fixed
by the terms of the trust, distribution under this clause shall be made in equal
shares to those beneficiaries who are then entitled or authorized to receive
income payments.
5.4 NOTICE OF RIGHT TO PAYMENT. Until the trustees shall receive from
some person interested in this trust written notice of any birth, marriage,
death, or other event upon which the right to payments from this trust may
depend, the trustees shall incur no liability to persons whose interests may
have been affected by that event for disbursements made in good faith
5.5 TRUST DISTRIBUTIONS UNAVAILABLE TO DISCHARGE LEGAL OBLIGATIONS. Any
other provisions of this instrument to the contrary notwithstanding, income or
principal of a trust established hereunder shall not be used to discharge in
whole or in part any person's legal obligations, from time to time existing,
including but not by way of limitation, any person's obligation to support any
of the beneficiaries of the trust. When determining the legal obligation of any
person to support any of the beneficiaries of the trust, the existence of the
trust and funds made available by it shall not be taken into consideration.
5.6 PAYMENTS TO DISABLED BENEFICIARIES. The trustees, in the trustees'
discretion, may make payments to a minor or other beneficiary under disability
by making payments to the guardian of his or her person or to any suitable
person with whom he or she resides, or the trustees may apply payments directly
for the beneficiary's benefit. However, the trustees may not make payments to
the parent of a minor beneficiary for the minor's account, unless the parent
shall first agree with the trustees in writing that he or she will not use the
payments to discharge his or her legal obligation to support the minor under the
laws of the state of his or her domicile. The trustees, in the trustees'
discretion, may make payments directly to a minor if, in the trustees' judgment,
the minor is of sufficient age and maturity to spend the money properly.
5.7 SEGREGATION OF TRUST. There need be no physical segregation or
division of the various trusts established hereunder, except as segregation or
division may be required by the termination of any of the trusts but the trustee
shall keep separate accounts for the different undivided interests.
SECTION 6: PROVISIONS RELATING TO TRUSTEE.
6.1 APPOINTMENT OF SUCCESSOR TRUSTEES. If for any reason either of DENNIS
J. CARLO or JEAN M. CARLO shall cease to act as trustee, the other shall act as
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<PAGE>
sole trustee. If both of them cease to act as trustees, DARLA OLESON shall act
as trustee.
6.2 REPLACEMENT OF TRUSTEES. If neither DENNIS J. CARLO nor JEAN M. CARLO
is acting as trustee, ANGELA CARLO, upon attaining age twenty-one (21) shall
have the right to change the trustee, by giving thirty (30) days' written notice
to the trustee. Any successor trustee or trustees shall succeed as trustees
with like effect as though originally named as such herein. All authority and
powers conferred upon the original trustees hereunder shall pass to any
successor trustee.
6.3 RELEASE OF LIABILITY. Any successor trustee shall not be responsible
for any acts or omissions of any preceding trustee in connection with or
relating to any acts or transactions regarding the trust estate and shall not be
responsible for any assets not registered in the trust name.
6.4 TRUSTEES' COMPENSATION. The trustees hereunder shall be entitled to
reasonable compensation for services as such, and to reimbursement for any
expenses incurred in the performance of duties as such.
6.5 BOND. No bond shall be required of any individual trustee named in
this instrument. Bond for any other individual nominated as trustee under
Section 6.1 shall be required in the amount, if any, directed by the person or
persons making such nomination.
6.6 RIGHT TO RESIGN. Any trustee shall have the right to resign this
trusteeship at any time. Upon such resignation, to the extent that a successor
is not appointed hereunder, a successor shall be appointed by a Court of
competent jurisdiction upon petition of either the resigning trustee or any
person interested in these trusts.
SECTION 7: REVOCATION.
7.1 IRREVOCABILITY. This Agreement is irrevocable and may not be altered
or amended in any respect, and may not be terminated except through
distributions permitted by this instrument.
7.2 RELINQUISHMENT OF RIGHTS. All of the terms of the trust
notwithstanding, the trustors expressly relinquish any and all interest,
including any reversionary interest, the trustors may have in this trust or the
property subject hereto, whether said interest is expressed by the terms of this
trust or arises by operation of law.
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<PAGE>
SECTION 8: MISCELLANEOUS.
8.1 AGREEMENT BINDING. This Agreement is binding on the heirs, executors
and administrators of the trustors and upon the trustees and the beneficiaries
of this trust.
8.2 FAILURE OF PROVISION. If any provision of this instrument is
unenforceable, the remaining provisions shall nevertheless be carried into
effect.
8.3 CALIFORNIA LAW APPLICABLE. This Agreement will be administered in the
State of California and its validity and construction shall be controlled by the
laws of the State of California.
8.4 "ISSUE" AND "CHILD." As used in this Trust Agreement, the term
"issue" shall refer to lineal descendants of all degrees and the class terms
"child," "children" and "issue" shall include persons adopted into the class and
shall include persons adopted out of the class.
8.5 "TRUSTEE." As used in this Trust Agreement, the term trustee shall
also refer to co-trustees.
8.6 SIGNIFICANCE OF HEADINGS. Titles and headings contained herein are
used for ease of reference only and shall not be deemed to govern, limit, modify
or in any manner affect the scope, meaning or intent of the provisions herein.
The trustors and trustees have executed this Trust Agreement on the day and
year first above written.
/s/ DENNIS J. CARLO
-----------------------------------
DENNIS J. CARLO
Trustor and Trustee
/s/ JEAN M. CARLO
-----------------------------------
JEAN M. CARLO
Trustor and Trustee
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<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )
On this the 27th day of May, 1988, before me, Valerie G. Stevens, the
undersigned Notary Public, personally appeared DENNIS J. CARLO and JEAN M.
CARLO,
/X/ personally known to me
/ / proved to me on the basis of satisfactory evidence
to be the persons whose names are subscribed to the within instrument, and
acknowledged that they executed it.
/s/ VALERIE G. STEVENS
-----------------------------------
Notary's Signature
(S E A L)
<PAGE>
TRUST AGREEMENT
ANGELA CARLO TRUST
MAY 22, 1988
SCHEDULE A
50,000 shares, The Immune Response Corporation, common stock.
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<PAGE>
TRUST AGREEMENT
DAVID C. CARLO TRUST
This Trust Agreement is entered into as of May 25, 1988, by DENNIS J. CARLO
and JEAN M. CARLO as trustors and as trustees.
This trust is established for the benefit of the trustors' son, DAVID C.
CARLO, and may be referred to as The David C. Carlo Trust. The trustors have
transferred and delivered to the trustees, without any consideration on the
trustees' part, the property described in the attached Schedule A. Said
property, together with any other property that may later become subject to this
trust, shall constitute the trust estate, and shall be held, administered and
distributed as hereinafter provided.
SECTION 1: ADDITION OF PROPERTY.
In their discretion, the trustees may accept additions to the trust from
the trustors, or either of them, the estate of either trustor, or any other
donor. Such additions shall be irrevocable.
SECTION 2: POWER TO WITHDRAW.
2.1 NOTICE OF TRANSFERS AND THE BENEFICIARY'S RIGHT TO WITHDRAW ASSETS.
Within five (5) days of receipt of any property transferred into the trust
(including the initial funding), the trustees shall notify DAVID C. CARLO, if he
is then living, otherwise each beneficiary then entitled to receive
distributions of income either directly or in the discretion of the trustees
(collectively, the "Beneficiary") of the value of the property received; during
any period that the Beneficiary lacks legal capacity, the trustees shall instead
notify the Beneficiary's guardian (or natural parent of a minor beneficiary for
whom no guardian has been appointed). As to each transfer into the trust, the
person so notified by the trustee may, at any time within the "withdrawal
period" (Section 2.2 below), demand in writing the distribution of trust assets
equal to the "withdrawal value" (paragraph 2.3 below).
2.2 WITHDRAWAL PERIOD. Written demand hereunder may be made at any time
within thirty (30) days of the date of notification (Section 2.1) of any
transfer into the trust (including the initial funding) but in any event not
later than December 31 of the year in which the transfer is made.
2.3 WITHDRAWAL VALUE. Subject to Section 2.6, as to each transfer, the
value of trust assets subject to withdrawal by the person notified hereunder
shall be the lesser of:
An amount equal to the annual exclusion allowed under Internal Revenue
Code Section 2503 as it exists on the date the notice required by Section 2.1 is
given; or
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<PAGE>
An amount equal to the fair market value (at the time of transfer) of
the property transferred.
2.4 TRUSTEES' DUTY TO DISTRIBUTE ASSETS ON DEMAND. Upon receipt of such
written demand, the trustees shall, as soon as practical, distribute to the
person making the demand all amounts so demanded (subject to all the provisions
of this Section 2), provided that the trustee shall make all such distributions
no later than December 31 of the year in which the property is transferred into
trust. Distributions may be in cash or in kind. Any property so distributed to
a Beneficiary's guardian shall be held by such guardian for the Beneficiary's
benefit and use.
2.5 ASSETS SUBJECT TO WITHDRAWAL. Any asset of the trust estate may be
used to satisfy a demand for withdrawal hereunder.
2.6 RESTRICTIONS AND LIMITATIONS ON WITHDRAWAL RIGHT.
2.6.1 The right of withdrawal granted hereunder is noncumulative and, to
the extent that the withdrawal power granted hereunder has not been exercised by
the end of the thirty (30) day period (or the end of the calendar year if
sooner) as provided above, it shall lapse.
2.6.2 Notwithstanding the number or value of transfers made by any one
transferror in any calendar year, the cumulative withdrawals of a Beneficiary
(or guardian) in said calendar year with respect to transfers made by that
transferror shall not exceed the amount allowed as an annual exclusion under
Internal Revenue Code Section 2503.
SECTION 3: DISTRIBUTION OF INCOME AND PRINCIPAL.
The trustees shall hold, manage, invest and reinvest the principal of the
trust and shall collect and receive the current income therefrom, and, after
deducting all necessary expenses, costs and taxes incident to the administration
of the trust which are a charge against income, shall distribute the income and
principal as follows:
3.1 DISCRETIONARY INCOME AND PRINCIPAL DURING MINORITY. While DAVID C.
CARLO is under the age of twenty-one (21), the trustees shall pay to him or
apply for his benefit as much of the net income and principal of the trust as
the trustees in the trustees' discretion deem necessary for his proper support,
health, maintenance, and education, after taking into consideration, to the
extent the trustees deem advisable, any other income of DAVID C. CARLO known to
the trustees and reasonably available for these purposes. Any income not so
distributed shall be accumulated and added to principal.
3.2 MANDATORY INCOME AND DISCRETIONARY PAYMENT OF PRINCIPAL. When
DAVID C. CARLO attains the age of twenty-one
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<PAGE>
(21), the trustees shall thereafter pay to or apply for his benefit, quarter-
annually or more frequently, the entire net income of the trust. If the
trustees deem the income to be insufficient, the trustees may also pay to him or
apply for his benefit as much of the principal of the trust as the trustees in
the trustees' discretion deem necessary for his proper support, health,
maintenance, and education, after taking into consideration, to the extent the
trustees deem advisable, any income or other resources of DAVID C. CARLO,
outside the trust, known to the trustees and reasonably available for these
purposes.
3.3 POWER TO WITHDRAW. At any time after attaining age twenty-five (25),
DAVID C. CARLO may, by written instrument filed with the trustees, require the
trustees to distribute to him not to exceed one-half (1/2) of the trust as
constituted at the time of withdrawal.
3.4 DISTRIBUTION OF TRUST ESTATE. When DAVID C. CARLO attains age thirty
(30), the trustees shall distribute to him the entire undistributed balance of
the trust (including both principal and accrued and undistributed income).
3.5 DEATH PRIOR TO DISTRIBUTION. Upon the death of DAVID C. CARLO any
share then held for his benefit (including both principal and accrued and
undistributed income) shall be distributed to such one or more persons or
entities including DAVID C. CARLO, his creditors, his estate or creditors of his
estate, either outright or in trust, as he shall appoint by the last dated
instrument delivered to the trustees including a will (whether or not admitted
to probate) specifically referring to and exercising this power of appointment.
If or to the extent that DAVID C. CARLO shall have failed to exercise this power
of appointment, or an attempted exercise of this power shall have been invalid
or ineffective for any reason, or DAVID C. CARLo shall have released or
renounced this power, the property subject to it shall be distributed to
DAVID C. CARLO's then living issue, upon the principle of representation
(subject, however, to the provisions of Section 3.6 below), or if there is none
then living, said property shall be distributed to the trustor's son, ERIC J.
CARLO, if he is then living, otherwise to his then living issue, upon the
principle of representation (subject to Section 3.6 below). Notwithstanding the
foregoing, however, if a share is distributable to a beneficiary for whom a
trust created by the trustors is then being maintained under this instrument or
another similar instrument, such share shall be added to that trust to be held,
administered and distributed as a part thereof.
3.6 TRUST FOR BENEFICIARY UNDER AGE 21. Notwithstanding any provision
hereof to the contrary, any share of the trust estate distributable to a
beneficiary (other than DAVID C. CARLO) under age twenty-one (21) under the
foregoing provisions shall be held and administered for his or her benefit while
he
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<PAGE>
or she is under age twenty-one (21) and the trustees shall apply so much of the
net income and principal thereof as the trustees, in the trustees' discretion,
deem necessary for such beneficiary's reasonable health, maintenance, support
and education, and the trustees shall accumulate for the benefit of such
beneficiary any income not so applied or paid. When such beneficiary attains
age twenty-one (21), any of such part then held for such beneficiary shall be
distributed to him or her, and in case of his or her death prior thereto, shall
be distributed to his or her estate.
3.7 ULTIMATE DISTRIBUTION. Any of the trust estate not disposed of under
the foregoing provisions shall be distributed in two equal shares, one share to
the heirs at law of DENNIS J. CARLO and one share to the heirs at law of JEAN M.
CARLO. The identity and respective shares of such heirs shall be determined in
all respects as though the trustors' deaths had occurred immediately following
the happening of the event requiring such distribution, and according to the
laws of California then in force relating to the succession of separate property
not acquired from a predeceased spouse.
SECTION 4: TRUSTEES' POWERS.
To carry out the purposes of the trust and subject to any limitations
stated elsewhere herein, the trustees are vested with the following powers, in
addition to those now or hereafter conferred by law, affecting the trust and
trust estate:
4.1 RETAIN ASSETS. To continue to hold any property, as long as the
trustees deem advisable.
4.2 MANAGE GENERALLY. To acquire, manage, control, grant options on, sell
(for cash or on deferred payments), convey, exchange, partition, divide, improve
and repair trust property.
4.3 LEASE. To lease trust property for terms within or beyond the term of
the trust and for any purpose.
4.4 BORROW. To borrow money and to encumber or hypothecate trust property
by mortgage, deed of trust, pledge, or otherwise; to borrow money on behalf of
one trust from any other trust created hereunder.
4.5 OBTAIN INSURANCE. To carry, at the expense of the trust, insurance of
such kinds and in such amounts as the trustees deem advisable to protect the
trust estate and the trustees against any hazard.
4.6 LITIGATE. To commence or defend such litigation with respect to the
trust or any property of the trust estate as the trustees deem advisable, at the
expense of the trust.
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<PAGE>
4.7 COMPROMISE. To compromise or otherwise adjust any claims or
litigation against or in favor of the trust.
4.8 PERMISSIBLE INVESTMENTS. To invest and reinvest the trust estate in
every kind of property, real, personal, or mixed and every kind of investment,
specifically including, but not by way of limitation, corporation obligations of
every kind, stocks, preferred or common, shares of investment trusts, investment
companies, common trust funds, mutual funds, and mortgage participations, which
men of prudence, discretion and intelligence acquire for their own account. The
trustees shall maintain sufficient liquidity to permit making the distributions
contemplated by Section 3, when and as required.
4.9 MARGIN ACCOUNTS. To buy, sell or trade in securities of any nature
(including short sales) on margin and for such purposes maintain and operate
margin accounts with brokers and pledge any securities held or purchased by the
trustees with such brokers as security for loans and advances made to the
trustees.
4.10 POWERS RE SECURITIES. With respect to securities held in the trust,
to have all the rights, powers and privileges of an owner, including, but not by
way of limitation, the power to vote, give proxies and pay assessments, to
participate in voting trusts, pooling agreements, foreclosures, reorganizations,
consolidations, mergers, liquidations, sales and leases, and incident to such
participation to deposit securities with and transfer title to any protective or
other committee on such terms as the trustee may deem advisable; and to exercise
or sell stock subscription or conversion rights.
4.11 EMPLOY AGENTS AND OTHERS. To appoint, employ and pay such agents and
employees as the trustees deem necessary or advisable, including (without
limiting the generality of the foregoing) accountants, attorneys, investment
counselors, banks to act as custodians for custodial accounts and other
custodians of the trust property.
4.12 HOLDING PROPERTY IN OTHERS' NAMES. To hold securities or other
property in the trustees' own names or in the name of a nominee of the trustees,
or in the name of a qualified depository without disclosing any fiduciary
relationship.
4.13 DISCRETION RE PRINCIPAL AND INCOME. Except as otherwise specifically
provided herein, the trustees shall have the power, exercisable in the trustees'
discretion, to determine what is principal or income of the trust estate and to
apportion and allocate receipts and expenses and other charges between these
accounts. Insofar as the trustees shall exercise this discretion, and except as
otherwise provided in this instrument, matters relating to principal and income
shall be governed by
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<PAGE>
the provisions of the California Principal and Income Law from time to time
existing.
4.14 ADDITIONAL POWERS OF TRUSTEES. The enumeration of certain powers of
the trustees shall not limit the trustees' general or implied powers, and the
trustees, subject always to the discharge of their fiduciary obligations, are
vested with and shall have all the rights, powers and privileges which an
absolute owner of the same property would have; provided, however, that no
provision contained herein may be construed to give the trustors any of the
following powers:
4.14.1 To purchase, exchange or otherwise deal with or dispose of corpus
or income of the trusts established hereunder for less than adequate
consideration in money or money's worth.
4.14.2 To borrow the corpus or income of the trusts, directly or
indirectly, without adequate interest or security.
SECTION 5: GENERAL PROVISIONS.
The following provisions shall govern each trust created hereunder:
5.1 SPENDTHRIFT PROVISION. The interests of beneficiaries in principal or
income shall not be subject to claims of their creditors or others, nor to legal
process, and may not be voluntarily or involuntarily alienated or encumbered.
5.2 DEFINITION OF EDUCATION. Whenever provision is made in this trust for
payment for the "education" of a beneficiary, the term "education" shall be
construed to include all levels of public, semi-private or private schools
including, but not limited to, nursery, pre-school, primary, and secondary
schools; college and post-graduate study; vocational school; music and art
schools, lessons and programs; religious school; computer or related training;
and both formal and informal cultural enrichment and travel programs and
activities so long as in the sole judgment of the trustees such study, program
or activity is pursued to advantage by the beneficiary, and at the beneficiary's
choice. In determining payments to be made for such education, the trustees
shall take into consideration the beneficiary's related travel and living
expenses, and such other expenses as the trustees, in the trustees' sole
discretion, determine are reasonable, including but not limited to, the cost of
clothing, musical instruments, educational tools, medical needs, etc.
5.3 PERPETUITIES SAVINGS CLAUSE. Unless sooner terminated in accordance
with other provisions, this trust, or any trust created hereunder, shall
terminate twenty-one (21) years after the death of DAVID C. CARLO. All
principal and undistributed income of any trust so terminated shall be
distributed to the then income beneficiaries of that trust in the proportions in
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<PAGE>
which they are, at the time of termination, entitled to receive the income;
provided, however, that if the rights to income are not then fixed by the terms
of the trust, distribution under this clause shall be made in equal shares to
those beneficiaries who are then entitled or authorized to receive income
payments.
5.4 NOTICE OF RIGHT TO PAYMENT. Until the trustees shall receive from
some person interested in this trust written notice of any birth, marriage,
death, or other event upon which the right to payments from this trust may
depend, the trustees shall incur no liability to persons whose interests may
have been affected by that event for disbursements made in good faith.
5.5 TRUST DISTRIBUTIONS UNAVAILABLE TO DISCHARGE LEGAL OBLIGATIONS. Any
other provisions of this instrument to the contrary notwithstanding, income or
principal of a trust established hereunder shall not be used to discharge in
whole or in part any person's legal obligations, from time to time existing,
including but not by way of limitation, any person's obligation to support any
of the beneficiaries of the trust. When determining the legal obligation of any
person to support any of the beneficiaries of the trust, the existence of the
trust and funds made available by it shall not be taken into consideration.
5.6 PAYMENTS TO DISABLED BENEFICIARIES. The trustees, in the trustees'
discretion, may make payments to a minor or other beneficiary under disability
by making payments to the guardian of his or her person or to any suitable
person with whom he or she resides, or the trustees may apply payments directly
for the beneficiary's benefit. However, the trustees may not make payments to
the parent of a minor beneficiary for the minor's account, unless the parent
shall first agree with the trustees in writing that he or she will not use the
payments to discharge his or her legal obligation to support the minor under the
laws of the state of his or her domicile. The trustees, in the trustees'
discretion, may make payments directly to a minor if, in the trustees' judgment,
the minor is of sufficient age and maturity to spend the money properly.
5.7 SEGREGATION OF TRUSTS. There need be no physical segregation or
division of the various trusts established hereunder, except as segregation or
division may be required by the termination of any of the trusts but the trustee
shall keep separate accounts for the different undivided interests.
SECTION 6: PROVISIONS RELATING TO TRUSTEE.
6.1 APPOINTMENT OF SUCCESSOR TRUSTEE. If for any reason either of
DENNIS J. CARLO or JEAN M. CARLO shall cease to act as trustee, the other shall
act as sole trustee. If both of them cease to act as trustees, RICHARD MARCHESE
and CALIFORNIA FIRST BANK shall act as co-trustees. If RICHARD MARCHESE fails
to act
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<PAGE>
as co-trustee, VICTORIA M. O'NEILL shall act as co-trustee in his place.
6.2 REPLACEMENT OF TRUSTEES. If neither DENNIS J. CARLO nor JEAN M. CARLO
is acting as trustee, DAVID C. CARLO, upon attaining age twenty-one (21) shall
have the right to change the trustees, by giving thirty (30) days' written
notice to the trustees. However, unless either of DENNIS J. CARLO or JEAN M.
CARLO is acting as trustee, there shall always be two co-trustees, one of which
shall be a corporate trustee licensed to do business at the situs of the trust.
Any successor trustees shall succeed as trustees with like effect as though
originally named as such herein. All authority and powers conferred upon the
original trustees hereunder shall pass to any successor trustee.
6.3 RELEASE OF LIABILITY. Any successor trustee shall not be responsible
for any acts or omissions of any preceding trustee in connection with or
relating to any acts or transactions regarding the trust estate and shall not be
responsible for any assets not registered in the trust name.
6.4 TRUSTEES' COMPENSATION. The trustees hereunder shall be entitled to
reasonable compensation for services as such, and to reimbursement for any
expenses incurred in the performance of duties as such.
6.5 BOND. No bond shall be required of any individual trustee named in
this instrument. Bond for any other individual nominated as trustee under
Section 6.1 shall be required in the amount, if any, directed by the person or
persons making such nomination.
6.6 RIGHT TO RESIGN. Any trustee shall have the right to resign this
trusteeship at any time. Upon such resignation, to the extent that a successor
is not appointed hereunder, a successor shall be appointed by a Court of
competent jurisdiction upon petition of either the resigning trustee or any
person interested in these trusts.
SECTION 7: REVOCATION.
7.1 IRREVOCABILITY. This Agreement is irrevocable and may not be altered
or amended in any respect, and may not be terminated except through
distributions permitted by this instrument.
7.2 RELINQUISHMENT OF RIGHTS. All of the terms of the trust
notwithstanding, the trustors expressly relinquish any and all interest,
including any reversionary interest, the trustors may have in this trust or the
property subject hereto, whether said interest is expressed by the terms of this
trust or arises by operation of law.
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<PAGE>
SECTION 8: MISCELLANEOUS.
8.1 AGREEMENT BINDING. This Agreement is binding on the heirs, executors
and administrators of the trustors and upon the trustees and the beneficiaries
of this trust.
8.2 FAILURE OF PROVISION. If any provision of this instrument is
unenforceable, the remaining provisions shall nevertheless be carried into
effect.
8.3 CALIFORNIA LAW APPLICABLE. The Agreement will be administered in the
State of California and its validity and construction shall be controlled by the
laws of the State of California.
8.4 "ISSUE" AND "CHILD." As used in this Trust Agreement, the term
"issue" shall refer to lineal descendants of all degrees and the class terms
"child," "children" and "issue" shall include persons adopted into the class and
shall include persons adopted out of the class.
8.5 "TRUSTEE." As used in this Trust Agreement, the term trustee shall
also refer to co-trustees.
8.6 SIGNIFICANCE OF HEADINGS. Titles and headings contained herein are
used for ease of reference only and shall not be deemed to govern, limit, modify
or in any manner affect the scope, meaning or intent of the provisions herein.
The trustors and trustees have executed this Trust Agreement on the day and
year first above written.
/s/ DENNIS J. CARLO
-----------------------------------
DENNIS J. CARLO
Trustor and Trustee
/s/ JEAN M. CARLO
-----------------------------------
JEAN M. CARLO
Trustor and Trustee
-9-
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )
On this the 27th day of May, 1988, before me, Valerie G. Stevens, the
undersigned Notary Public, personally appeared DENNIS J. CARLO and JEAN M.
CARLO,
/X/ personally known to me
/ / proved to me on the basis of satisfactory evidence
to be the persons whose names are subscribed to the within instrument, and
acknowledged that they executed it.
/s/ VALERIE G. STEVENS
-----------------------------------
Notary's Signature
(SEAL)
<PAGE>
TRUST AGREEMENT
DAVID C. CARLO TRUST
May 25, 1988
SCHEDULE A
50,000 shares, The Immune Response Corporation, common stock.
-1-
<PAGE>
TRUST AGREEMENT
DEBORAH CARLO TRUST
This Trust Agreement is entered into as of May 24, 1988, by DENNIS J. CARLO
and JEAN M. CARLO as trustors and as trustees.
ThiS trust is established for the benefit of the daughter of DENNIS J.
CARLO, DEBORAH CARLO, and may be referred to as The Deborah Carlo Trust. The
trustors have transferred and delivered to the trustees, without any
consideration on the trustees' part, the property described in the attached
Schedule A. Said property, together with any other property that may later
become subject to this trust, shall constitute the trust estate, and shall be
held, administered and distributed as hereinafter provided.
SECTION 1: ADDITION OF PROPERTY.
In their discretion, the trustees may accept additions to the trust from
the trustors, or either of them, the estate of either trustor, or any other
donor. Such additions shall be irrevocable.
SECTION 2: POWER TO WITHDRAW.
2.1 NOTICE OF TRANSFERS AND THE BENEFICIARY'S RIGHT TO WITHDRAW ASSETS.
Within five (5) days of receipt of any property transferred into the trust
(including the initial funding), the trustees shall notify DEBORAH CARLO, if she
is then living, otherwise each beneficiary then entitled to receive
distributions of income either directly or in the discretion of the trustees
(collectively, the "Beneficiary") of the value of the property received; during
any period that the Beneficiary lacks legal capacity, the trustees shall instead
notify the Beneficiary's guardian (or natural parent of a minor beneficiary for
whom no guardian has been appointed). As to each transfer into the trust, the
person so notified by the trustee may, at any time within the "withdrawal
period" (Section 2.2 below), demand in writing the distribution of trust assets
equal to the "withdrawal value" (paragraph 2.3 below).
2.2 WITHDRAWAL PERIOD. Written demand hereunder may be made at any time
within thirty (30) days of the date of notification (Section 2.l) of any
transfer into the trust (including the initial funding) but in any event not
later than December 31 of the year in which the transfer is made.
2.3 WITHDRAWAL VALUE. Subject to Section 2.6, as to each transfer, the
value of trust assets subject to withdrawal by the person notified hereunder
shall be the lesser of:
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<PAGE>
(a) An amount equal to the annual exclusion allowed under
Internal Revenue Code Section 2503 as it exists on the date the notice
required by Section 2.1 is given; or
(b) An amount equal to the fair market value (at the time of
transfer) of the property transferred.
2.4 TRUSTEES' DUTY TO DISTRIBUTE ASSETS ON DEMAND. Upon receipt of such
written demand, the trustees shall, as soon as practical, distribute to the
person making the demand all amounts so demanded (subject to all the provisions
of this Section 2), provided that the trustee shall make all such distributions
no later than December 31 of the year in which the property is transferred into
trust. Distributions may be in cash or in kind. Any property so distributed to
a Beneficiary's guardian shall be held by such guardian for the Beneficiary's
benefit and use.
2.5 ASSETS SUBJECT TO WITHDRAWAL. Any asset of the trust estate may be
used to satisfy a demand for withdrawal hereunder.
2.6 RESTRICTIONS AND LIMITATIONS ON WITHDRAWAL RIGHT.
2.6.1 The right of withdrawal granted hereunder is noncumulative and, to
the extent that the withdrawal power granted hereunder has not been exercised by
the end of the thirty (30) day period (or the end of the calendar year if
sooner) as provided above, it shall lapse.
2.6.2 Notwithstanding the number or value of transfers made by any one
transferror in any calendar year, the cumulative withdrawals of a Beneficiary
(or guardian) in said calendar year with respect to transfers made by that
transferror shall not exceed the amount allowed as an annual exclusion under
Internal Revenue Code Section 2503.
SECTION 3: DISTRIBUTION OF INCOME AND PRINCIPAL.
The trustees shall hold, manage, invest and reinvest the principal of the
trust and shall collect and receive the current income therefrom, and, after
deducting all necessary expenses, costs and taxes incident to the administration
of the trust which are a charge against income, shall distribute the income and
principal as follows:
3.1 DISCRETIONARY INCOME AND PRINCIPAL DURING MINORITY. While DEBORAH
CARLO is under the age of twenty-one (21), the trustees shall pay to her or
apply for her benefit as much of the net income and principal of the trust as
the trustees in the trustees' discretion deem necessary for her proper support,
health, maintenance, and education, after taking into consideration, to the
extent the trustees deem advisable, any other income of DEBORAH CARLO known to
the trustees and
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reasonably available for these purposes. Any income not so distributed shall be
accumulated and added to principal.
3.2 MANDATORY INCOME AND DISCRETIONARY PAYMENT OF PRINCIPAL. When DEBORAH
CARLO attains the age of twenty-one (21), the trustees shall thereafter pay to
or apply for her benefit, quarter-annually or more frequently, the entire net
income of the trust. If the trustees deem the income to be insufficient, the
trustees may also pay to her or apply for her benefit as much of the principal
of the trust as the trustees in the trustees' discretion deem necessary for her
proper support, health, maintenance, and education, after taking into
consideration, to the extent the trustees deem advisable, any income or other
resources of DEBORAH CARLO, outside the trust, known to the trustees and
reasonably available for these purposes.
3.3 POWER TO WITHDRAW. At any time after attaining age twenty-five (25),
DEBORAH CARLO may, by written instrument filed with the trustees, require the
trustees to distribute to her not to exceed one-half (1/2) of the trust as
constituted at the time of withdrawal.
3.4 DISTRIBUTION OF TRUST ESTATE. When DEBORAH CARLO attains age thirty
(30), the trustees shall distribute to her the entire undistributed balance of
the trust (including both principal and accrued and undistributed income).
3.5 DEATH PRIOR TO DISTRIBUTION. Upon the death of DEBORAH CARLO any
share then held for her benefit (including both principal and accrued and
undistributed income) shall be distributed to such one or more persons or
entities including DEBORAH CARLO, her creditors, her estate or creditors of her
estate, either outright or in trust, as she shall appoint by the last dated
instrument delivered to the trustees including a will (whether or not admitted
to probate) specifically referring to and exercising this power of appointment.
If or to the extent that DEBORAH CARLO shall have failed to exercise this power
of appointment, or an attempted exercise of this power shall have been invalid
or ineffective for any reason, or DEBORAH CARLO shall have released or renounced
this power, the property subject to it shall be distributed to DEBORAH CARLO's
then living issue, upon the principle of representation (subject, however, to
the provisions of Section 3.6 below), or if there is none then living, said
property shall be distributed in equal parts to GRETCHEN CARLO and ANGELA CARLO
(daughters of DENNIS J. CARLO), and if either of them is not then living, her
share shall be distributed to her then living issue, upon the principle of
representation (subject to Section 3.6 below). Notwithstanding the foregoing,
however, if a share is distributable to a beneficiary for whom a trust created
by the trustors is then being maintained under this instrument or another
similar instrument, such share shall be added to that
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trust to be held, administered and distributed as a part thereof.
3.6 TRUST FOR BENEFICIARY UNDER AGE 21. Notwithstanding any provision
hereof to the contrary, any share of the trust estate distributable to a
beneficiary (other than DEBORAH CARLO) under age twenty-one (21) under the
foregoing provisions shall be held and administered for his or her benefit while
he or she is under age twenty-one (21) and the trustees shall apply so much of
the net income and principal thereof as the trustees, in the trustees'
discretion, deem necessary for such beneficiary's reasonable health,
maintenance, support and education, and the trustees shall accumulate for the
benefit of such beneficiary any income not so applied or paid. When such
beneficiary attains age twenty-one (21), any of such part then held for such
beneficiary shall be distributed to him or her, and in case of his or her death
prior thereto, shall be distributed to his or her estate.
3.7 ULTIMATE DISTRIBUTION. Any of the trust estate not disposed of under
the foregoing provisions shall be distributed in two equal shares, one share to
the heirs at law of DENNIS J. CARLO and one share to the heirs at law of JEAN M.
CARLO. The identity and respective shares of such heirs shall be determined in
all respects as though the trustors' deaths had occurred immediately following
the happening of the event requiring such distribution, and according to the
laws of California then in force relating to the succession of separate property
not acquired from a predeceased spouse.
SECTION 4: TRUSTEES' POWERS.
To carry out the purposes of the trust and subject to any limitations
stated elsewhere herein, the trustees are vested with the following powers, in
addition to those now or hereafter conferred by law, affecting the trust and
trust estate:
4.1 RETAIN ASSETS. To continue to hold any property, as long as the
trustees deem advisable.
4.2 MANAGE GENERALLY. To acquire, manage, control, grant options on, sell
(for cash or on deferred payments), convey, exchange, partition, divide, improve
and repair trust property.
4.3 LEASE. To lease trust property for terms within or beyond the term of
the trust and for any purpose.
4.4 BORROW. To borrow money and to encumber or hypothecate trust property
by mortgage, deed of trust, pledge, or otherwise; to borrow money on behalf of
one trust from any other trust created hereunder.
4.5 OBTAIN INSURANCE. To carry, at the expense of the trust, insurance of
such kinds and in such amounts as the
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trustees deem advisable to protect the trust estate and the trustees against any
hazard.
4.6 LITIGATE. To commence or defend such litigation with respect to the
trust or any property of the trust estate as the trustees deem advisable, at the
expense of the trust.
4.7 COMPROMISE. To compromise or otherwise adjust any claims or
litigation against or in favor of the trust.
4.8 PERMISSIBLE INVESTMENTS. To invest and reinvest the trust estate in
every kind of property, real, personal, or mixed and every kind of investment,
specifically including, but not by way of limitation, corporation obligations of
every kind, stocks, preferred or common, shares of investment trusts, ivestment
companies, common trust funds, mutual funds, and mortgage participations, which
men of prudence, discretion and intelligence acquire for their own account. The
trustees shall maintain sufficient liquidity to permit making the distributions
contemplated by Section 3, when and as required.
4.9 MARGIN ACCOUNTS. To buy, sell or trade in securities of any nature
(including short sales) on margin and for such purposes maintain and operate
margin accounts with brokers and pledge any securities held or purchased by the
trustees with such brokers as security for loans and advances made to the
trustees.
4.10 POWERS RE SECURITIES. With respect to securities held in the trust,
to have all the rights, powers and privileges of an owner, including, but not by
way of limitation, the power to vote, give proxies and pay assessments, to
participate in voting trusts, pooling agreements, foreclosures, reorganizations,
consolidations, mergers, liquidations, sales and leases, and incident to such
participation to deposit securities with and transfer title to any protective or
other committee on such terms as the trustee may deem advisable; and to exercise
or sell stock subscription or conversion rights.
4.11 EMPLOY AGENTS AND OTHERS. To appoint, employ and pay such agents and
employees as the trustees deem necessary or advisable, including (without
limiting the generality of the foregoing) accountants, attorneys, investment
counselors, banks to act as custodians for custodial accounts and other
custodians of the trust property.
4.12 HOLDING PROPERTY IN OTHERS' NAMES. To hold securities or other
property in the trustees' own names or in the name of a nominee of the trustees,
or in the name of a qualified depository without disclosing any fiduciary
relationship.
4.13 DISCRETION RE PRINCIPAL AND INCOME. Except as otherwise specifically
provided herein, the trustees shall have
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the power, exercisable in the trustees' discretion, to determine what is
principal or income of the trust estate and to apportion and allocate receipts
and expenses and other charges between these accounts. Insofar as the trustees
shall exercise this discretion, and except as otherwise provided in this
instrument, matters relating to principal and income shall be governed by the
provisions of the California Principal and Income Law from time to time
existing.
4.14 ADDITIONAL POWERS OF TRUSTEES. The enumeration of certain powers of
the trustees shall not limit the trustees' general or implied powers, and the
trustees, subject always to the discharge of their fiduciary obligations, are
vested with and shall have all the rights, powers and privileges which an
absolute owner of the same property would have; provided, however, that no
provision contained herein may be construed to give the trustors any of the
following powers:
4.14.1 To purchase, exchange or otherwise deal with or dispose of corpus or
income of the trusts established hereunder for less than adequate consideration
in money or money's worth.
4.14.2 To borrow the corpus or income of the trusts, directly or
indirectly, without adequate interest or security.
SECTION 5: GENERAL PROVISIONS.
The following provisions shall govern each trust created hereunder:
5.1 SPENDTHRIFT PROVISION. The interests of beneficiaries in principal or
income shall not be subject to claims of their creditors or others, nor to legal
process, and may not be voluntarily or involuntarily alienated or encumbered.
5.2 DEFINITION OF EDUCATION. Whenever provision is made in this trust for
payment for the "education" of a beneficiary, the term "education" shall be
construed to include all levels of public, semi-private or private schools
including, but not limited to, nursery, pre-school, primary, and secondary
schools; college and post-graduate study; vocational school; music and art
schools, lessons and programs; religious school; computer or related training;
and both formal and informal cultural enrichment and travel programs and
activities so long as in the sole judgment of the trustees such study, program
or activity is pursued to advantage by the beneficiary, and at the beneficiary's
choice. In determining payments to be made for such education, the trustees
shall take into consideration the beneficiary's related travel and living
expenses, and such other expenses as the trustee, in the trustees' sole
discretion, determine are reasonable, including but not limited to, the cost of
clothing, musical instruments, educational tools, medical needs, etc.
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5.3 PERPETUITIES SAVINGS CLAUSE. Unless sooner terminated in accordance
with other provisions, this trust, or any trust created hereunder, shall
terminate twenty-one (21) years after the death of DEBORAH CARLO. All principal
and undistributed income of any trust so terminated shall be distributed to the
then income beneficiaries of that trust in the proportions in which they are, at
the time of termination, entitled to receive the income; provided, however, that
if the rights to income are not then fixed by the terms of the trust,
distribution under this clause shall be made in equal shares to those
beneficiaries who are then entitled or authorized to receive income payments.
5.4 NOTICE OF RIGHT TO PAYMENT. Until the trustees shall receive from
some person interested in this trust written notice of any birth, marriage,
death, or other event upon which the right to payments from this trust may
depend, the trustees shall incur no liability to persons whose interests may
have been affected by that event for disbursements made in good faith.
5.5 TRUST DISTRIBUTIONS UNAVAILABLE TO DISCHARGE LEGAL OBLIGATIONS. Any
other provisions of this instrument to the contrary notwithstanding, income or
principal of a trust established hereunder shall not be used to discharge in
whole or in part any person's legal obligations, from time to time existing,
including but not by way of limitation, any person's obligation to support any
of the beneficiaries of the trust. When determining the legal obligation of any
person to support any of the beneficiaries of the trust, the existence of the
trust and funds made available by it shall not be taken into consideration.
5.6 PAYMENTS TO DISABLED BENEFICIARIES. The trustees, in the trustees'
discretion, may make payments to a minor or other beneficiary under disability
by making payments to the guardian of his or her person or to any suitable
person with whom he or she resides, or the trustees may apply payments directly
for the beneficiary's benefit. However, the trustees may not make payments to
the parent of a minor beneficiary for the minor's account, unless the parent
shall first agree with the trustees in writing that he or she will not use the
payments to discharge his or her legal obligation to support the minor under the
laws of the state of his or her domicile. The trustees, in the trustees'
discretion, may make payments directly to a minor if, in the trustees' judgment,
the minor is of sufficient age and maturity to spend the money properly.
5.7 SEGREGATION OF TRUSTS. There need be no physical segregation or
division of the various trusts established hereunder, except as segregation or
division may be required by the termination of any of the trusts but the trustee
shall keep separate accounts for the different undivided interests.
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SECTION 6: PROVISIONS RELATING TO TRUSTEE.
6.1 APPOINTMENT OF SUCCESSOR TRUSTEE. If for any reason either of
DENNIS J. CARLO or JEAN M. CARLO shall cease to act as trustee, the other shall
act as sole trustee. If both of them cease to act as trustees, KAREN CAPPER
shall act as trustee.
6.2 REPLACEMENT OF TRUSTEES. If neither DENNIS J. CARLO nor JEAN M. CARLO
is acting as trustee, DEBORAH CARLO, upon attaining age twenty-one (21) shall
have the right to change the trustee, by giving thirty (30) days' written notice
to the trustee. Any successor trustee or trustees shall succeed as trustees
with like effect as though originally named as such herein. All authority and
powers conferred upon the original trustees hereunder shall pass to any
successor trustee.
6.3 RELEASE OF LIABILITY. Any successor trustee shall not be responsible
for any acts or omissions of any preceding trustee in connection with or
relating to any acts or transactions regarding the trust estate and shall not be
responsible for any assets not registered in the trust name.
6.4 TRUSTEES' COMPENSATION. The trustees hereunder shall be entitled to
reasonable compensation for services as such, and to reimbursement for any
expenses incurred in the performance of duties as such.
6.5 BOND. No bond shall be required of any individual trustee named in
this instrument. Bond for any other individual nominated as trustee under
Section 6.1 shall be required in the amount, if any, directed by the person or
persons making such nomination.
6.6 RIGHT TO RESIGN. Any trustee shall have the right to resign this
trusteeship at any time. Upon such resignation, to the extent that a successor
is not appointed hereunder, a successor shall be appointed by a Court of
competent jurisdiction upon petition of either the resigning trustee or any
person interested in these trusts.
SECTION 7: REVOCATION.
7.1 IRREVOCABILITY. This Agreement is irrevocable and may not be altered
or amended in any respect, and may not be terminated except through
distributions permitted by this instrument.
7.2 RELINQUISHMENT OF RIGHTS. All of the terms of the trust
notwithstanding, the trustors expressly relinquish any and all interest,
including any reversionary interest, the trustors may have in this trust or the
property subject hereto, whether said interest is expressed by the terms of this
trust or arises by operation of law.
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<PAGE>
SECTION 8: MISCELLANEOUS.
8.1 AGREEMENT BINDING. This Agreement is binding on the heirs, executors
and administrators of the trustors and upon the trustees and the beneficiaries
of this trust.
8.2 FAILURE OF PROVISION. If any provision of this instrument is
unenforceable, the remaining provisions shall nevertheless be carried into
effect.
8.3 CALIFORNIA LAW APPLICABLE. The Agreement will be administered in the
State of California and its validity and construction shall be controlled by the
laws of the State of California.
8.4 "ISSUE" AND "CHILD." As used in this Trust Agreement, the term
"issue" shall refer to lineal descendants of all degrees and the class terms
"child," "children," and "issue" shall include persons adopted into the class
and shall include persons adopted out of the class.
8.5 "TRUSTEE." As used in this Trust Agreement, the term trustee shall
also refer to co-trustees.
8.6 SIGNIFICANCE OF HEADINGS. Titles and headings contained herein are
used for ease of reference only and shall not be deemed to govern, limit, modify
or in any manner affect the scope, meaning or intent of the provisions herein.
The trustors and trustees have executed this Trust Agreement on the day and
year first above written.
/s/ DENNIS J. CARLO
-----------------------------------
DENNIS J. CARLO
Trustor and Trustee
/s/ JEAN M. CARLO
-----------------------------------
JEAN M. CARLO
Trustor and Trustee
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<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )
On this the 27th day of May, 1988, before me, Valerie G. Stevens, the
undersigned Notary Public, personally appeared DENNIS J. CARLO and JEAN M.
CARLO,
/X/ personally known to me
/ / proved to me on the basis of satisfactory evidence
to be the persons whose names are subscribed to the within instrument, and
acknowledged that they executed it.
/s/ VALERIE G. STEVENS
-----------------------------------
Notary's Signature
(S E A L)
<PAGE>
TRUST AGREEMENT
DEBORAH CARLO TRUST
MAY 24, 1988
SCHEDULE A
50,000 shares, The Immune Response Corporation, common stock.
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TRUST AGREEMENT
ERIC J. CARLO TRUST
This Trust Agreement is entered into as of May 26, 1988, by DENNIS J. CARLO
and JEAN M. CARLO as trustors and as trustees.
This trust is established for the benefit of the trustors' son, ERIC J.
CARLO, and may be referred to as The Eric J. Carlo Trust. The trustors have
transferred and delivered to the trustees, without any consideration on the
trustees' part, the property described in the attached Schedule A. Said
property, together with any other property that may later become subject to this
trust, shall constitute the trust estate, and shall be held, administered and
distributed as hereinafter provided.
SECTION 1: ADDITION OF PROPERTY.
In their discretion, the trustees may accept additions to the trust from
the trustors, or either of them, the estate of either trustor, or any other
donor. Such additions shall be irrevocable.
SECTION 2: POWER TO WITHDRAW.
2.1 NOTICE OF TRANSFERS AND THE BENEFICIARY'S RIGHT TO WITHDRAW ASSETS.
Within five (5) days of receipt of any property transferred into the trust
(including the initial funding), the trustees shall notify ERIC J. CARLO, if he
is then living, otherwise each beneficiary then entitled to receive
distributions of income either directly or in the discretion of the trustees
(collectively, the "Beneficiary") of the value of the property received; during
any period that the Beneficiary lacks legal capacity, the trustees shall instead
notify the Beneficiary's guardian (or natural parent of a minor beneficiary for
whom no guardian has been appointed). As to each transfer into the trust, the
person so notified by the trustee may, at any time within the "withdrawal
period" (Section 2.2 below), demand in writing the distribution of trust assets
equal to the "withdrawal value" (paragraph 2.3 below).
2.2 WITHDRAWAL PERIOD. Written demand hereunder may be made at any time
within thirty (30) days of the date of notification (Section 2.1) of any
transfer into the trust (including the initial funding) but in any event not
later than December 31 of the year in which the transfer is made.
2.3 WITHDRAWAL VALUE. Subject to Section 2.6, as to each transfer, the
value of trust assets subject to withdrawal by the person notified hereunder
shall be the lesser of:
(a) An amount equal to the annual exclusion allowed under Internal Revenue
Code Section 2503 as it exists on the date the notice required by Section 2.1 is
given; or
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(b) An amount equal to the fair market value (at the time of transfer) of
the property transferred.
2.4 TRUSTEES' DUTY TO DISTRIBUTE ASSETS ON DEMAND. Upon receipt of such
written demand, the trustees shall, as soon as practical, distribute to the
person making the demand all amounts so demanded (subject to all the provisions
of this Section 2), provided that the trustee shall make all such distributions
no later than December 31 of the year in which the property is transferred into
trust. Distributions may be in cash or in kind. Any property so distributed to
a Beneficiary's guardian shall be held by such guardian for the Beneficiary's
benefit and use.
2.5 ASSETS SUBJECT TO WITHDRAWAL. Any asset of the trust estate may be
used to satisfy a demand for withdrawal hereunder.
2.6 RESTRICTIONS AND LIMITATIONS ON WITHDRAWAL RIGHT.
2.6.1 The right of withdrawal granted hereunder is noncumulative and, to
the extent that the withdrawal power granted hereunder has not been exercised by
the end of the thirty (30) day period (or the end of the calendar year if
sooner) as provided above, it shall lapse.
2.6.2 Notwithstanding the number or value of transfers made by any one
transferror in any calendar year, the cumulative withdrawals of a Beneficiary
(or guardian) in said calendar year with respect to transfers made by that
transferror shall not exceed the amount allowed as an annual exclusion under
Internal Revenue Code Section 2503.
SECTION 3: DISTRIBUTION OF INCOME AND PRINCIPAL.
The trustees shall hold, manage, invest and reinvest the principal of the
trust and shall collect and receive the current income therefrom, and, after
deducting all necessary expenses, costs and taxes incident to the administration
of the trust which are a charge against income, shall distribute the income and
principal as follows:
3.1 DISCRETIONARY INCOME AND PRINCIPAL DURING MINORITY. While ERIC J.
CARLO is under the age of twenty-one (21), the trustees shall pay to him or
apply for his benefit as much of the net income and principal of the trust as
the trustees in the trustees' discretion deem necessary for his proper support,
health, maintenance, and education, after taking into consideration, to the
extent the trustees deem advisable, any other income of ERIC J. CARLO known to
the trustees and reasonably available for these purposes. Any income not so
distributed shall be accumulated and added to principal.
3.2 MANDATORY INCOME AND DISCRETIONARY PAYMENT OF PRINCIPAL. When ERIC J.
CARLO attains the age of twenty-one
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(21), the trustees shall thereafter pay to or apply for his benefit, quarter-
annually or more frequently, the entire net income of the trust. If the
trustees deem the income to be insufficient, the trustees may also pay to him or
apply for his benefit as much of the principal of the trust as the trustees in
the trustees' discretion deem necessary for his proper support, health,
maintenance, and education, after taking into consideration, to the extent the
trustees deem advisable, any income or other resources of ERIC J. CARLO, outside
the trust, known to the trustees and reasonably available for these purposes.
3.3 POWER TO WITHDRAW. At any time after attaining age twenty-five (25),
ERIC J. CARLO may, by written instrument filed with the trustees, require the
trustees to distribute to him not to exceed one-half (1/2) of the trust as
constituted at the time of withdrawal.
3.4 DISTRIBUTION OF TRUST ESTATE. When ERIC J. CARLO attains age thirty
(30), the trustees shall distribute to him the entire undistributed balance of
the trust (including both principal and accrued and undistributed income).
3.5 DEATH PRIOR TO DISTRIBUTION. Upon the death of ERIC J. CARLO any
share then held for his benefit (including both principal and accrued and
undistributed income) shall be distributed to such one or more persons or
entities including ERIC J. CARLO, his creditors, his estate or creditors of his
estate, either outright or in trust, as he shall appoint by the last dated
instrument delivered to the trustees including a will (whether or not admitted
to probate) specifically referring to and exercising this power of appointment.
If or to the extent that ERIC J. CARLO shall have failed to exercise this power
of appointment, or an attempted exercise of this power shall have been invalid
or ineffective for any reason, or ERIC J. CARLO shall have released or renounced
this power, the property subject to it shall be distributed to ERIC J. CARLO's
then living issue, upon the principle of representation (subject, however, to
the provisions of Section 3.6 below), or if there is none then living, said
property shall be distributed to the trustor's son, DAVID C. CARLO, if he is
then living, otherwise to his then living issue, upon the principle of
representation (subject to Section 3.6 below). Notwithstanding the foregoing,
however, if a share is distributable to a beneficiary for whom a trust created
by the trustors is then being maintained under this instrument or another
similar instrument, such share shall be added to that trust to be held,
administered and distributed as a part thereof.
3.6 TRUST FOR BENEFICIARY UNDER AGE 21. Notwithstanding any provision
hereof to the contrary, any share of the trust estate distributable to a
beneficiary (other than ERIC J. CARLO) under age twenty-one (21) under the
foregoing provisions shall be held and administered for his or her benefit while
he or she
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is under age twenty-one (21) and the trustees shall apply so much of the net
income and principal thereof as the trustees, in the trustees' discretion, deem
necessary for such beneficiary's reasonable health, maintenance, support and
education, and the trustees shall accumulate for the benefit of such beneficiary
any income not so applied or paid. When such beneficiary attains age twenty-one
(21), any of such part then held for such beneficiary shall be distributed to
him or her, and in case of his or her death prior thereto, shall be distributed
to his or her estate.
3.7 ULTIMATE DISTRIBUTION. Any of the trust estate not disposed of under
the foregoing provisions shall be distributed in two equal shares, one share to
the heirs at law of DENNIS J. CARLO and one share to the heirs at law of JEAN M.
CARLO. The identity and respective shares of such heirs shall be determined in
all respects as though the trustors' deaths had occurred immediately following
the happening of the event requiring such distribution, and according to the
laws of California then in force relating to the succession of separate property
not acquired from a predeceased spouse.
SECTION 4: TRUSTEES' POWERS.
To carry out the purposes of the trust and subject to any limitations
stated elsewhere herein, the trustees are vested with the following powers, in
addition to these now or hereafter conferred by law, affecting the trust and
trust estate:
4.1 RETAIN ASSETS. To continue to hold any property, as long as the
trustees deem advisable.
4.2 MANAGE GENERALLY. To acquire, manage, control, grant options on, sell
(for cash or on deferred payments), convey, exchange, partition, divide, improve
and repair trust property.
4.3 LEASE. To lease trust property for terms within or beyond the term of
the trust and for any purpose.
4.4 BORROW. To borrow money and to encumber or hypothecate trust property
by mortgage, deed of trust, pledge, or otherwise; to borrow money on behalf of
one trust from any other trust created hereunder.
4.5 OBTAIN INSURANCE. To carry, at the expense of the trust, insurance of
such kinds and in such amounts as the trustees deem advisable to protect the
trust estate and the trustees against any hazard.
4.6 LITIGATE. To commence or defend such litigation with respect to the
trust or any property of the trust estate as the trustees deem advisable, at the
expense of the trust.
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4.7 COMPROMISE. To compromise or otherwise adjust any claims or
litigation against or in favor of the trust.
4.8 PERMISSIBLE INVESTMENTS. To invest and reinvest the trust estate in
every kind of property, real, personal, or mixed and every kind of investment,
specifically including, but not by way of limitation, corporation obligations of
every kind, stocks, preferred or common, shares of investment trusts, investment
companies, common trust funds, mutual funds, and mortgage participations, which
men of prudence, discretion and intelligence acquire for their own account. The
trustees shall maintain sufficient liquidity to permit making the distributions
contemplated by Section 3, when and as required.
4.9 MARGIN ACCOUNTS. To buy, sell or trade in securities of any nature
(including short sales) on margin and for such purposes maintain and operate
margin accounts with brokers and pledge any securities held or purchased by the
trustees with such brokers as security for loans and advances made to the
trustees.
4.10 POWERS RE SECURITIES. With respect to securities held in the
trust, to have all the rights, powers and privileges of an owner, including, but
not by way of limitation, the power to vote, give proxies and pay assessments,
to participate in voting trusts, pooling agreements, foreclosures,
reorganizations, consolidations, mergers, liquidations, sales and leases, and
incident to such participation to deposit securities with and transfer title to
any protective or other committee on such terms as the trustee may deem
advisable; and to exercise or sell stock subscription or conversion rights.
4.11 EMPLOY AGENTS AND OTHERS. To appoint, employ and pay such agents
and employees as the trustees deem necessary or advisable, including (without
limiting the generality of the foregoing) accountants, attorneys, investment
counselors, banks to act as custodians for custodial accounts and other
custodians of the trust property.
4.12 HOLDING PROPERTY IN OTHERS' NAMES. To hold securities or other
property in the trustees' own names or in the name of a nominee of the trustees,
or in the name of a qualified depository without disclosing any fiduciary
relationship.
4.13 DISCRETION RE PRINCIPAL AND INCOME. Except as otherwise
specifically provided herein, the trustees shall have the power, exercisable in
the trustees' discretion, to determine what is principal or income of the trust
estate and to apportion and allocate receipts and expenses and other charges
between these accounts. Insofar as the trustees shall exercise this discretion,
and except as otherwise provided in this instrument, matters relating to
principal and income shall be governed by
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<PAGE>
the provisions of the California Principal and Income Law from time to time
existing.
4.14 ADDITIONAL POWERS OF TRUSTEES. The enumeration of certain powers
of the trustees shall not limit the trustees' general or implied powers, and the
trustees, subject always to the discharge of their fiduciary obligations, are
vested with and shall have all the rights, powers and privileges which an
absolute owner of the same property would have; provided, however, that no
provision contained herein may be construed to give the trustors any of the
following powers:
4.14.1 To purchase, exchange or otherwise deal with or dispose of corpus
or income of the trusts established hereunder for less than adequate
consideration in money or money's worth.
4.14.2 To borrow the corpus or income of the trusts, directly or
indirectly, without adequate interest or security.
SECTION 5: GENERAL PROVISIONS.
The following provisions shall govern each trust created hereunder:
5.1 SPENDTHRIFT PROVISION. The interests of beneficiaries in principal or
income shall not be subject to claims of their creditors or others, nor to legal
process, and may not be voluntarily or involuntarily alienated or encumbered.
5.2 DEFINITION OF EDUCATION. Whenever provision is made in this trust for
payment for the "education" of a beneficiary, the term "education" shall be
construed to include all levels of public, semi-private or private schools
including, but not limited to, nursery, pre-school, primary, and secondary
schools; college and post-graduate study; vocational school; music and art
schools, lessons and programs; religious school; computer or related training;
and both formal and informal cultural enrichment and travel programs and
activities so long as in the sole judgment of the trustees such study, program
or activity is pursued to advantage by the beneficiary, and at the beneficiary's
choice. In determining payments to be made for such education, the trustees
shall take into consideration the beneficiary's related travel and living
expenses, and such other expenses as the trustees, in the trustees' sole
discretion, determine are reasonable, including but not limited to, the cost of
clothing, musical instruments, educational tools, medical needs, etc.
5.3 PERPETUITIES SAVINGS CLAUSE. Unless sooner terminated in accordance
with other provisions, this trust, or any trust created hereunder, shall
terminate twenty-one (21) years after the death of ERIC J. CARLO. All principal
and undistributed income of any trust so terminated shall be distributed to the
then income beneficiaries of that trust in the proportions in
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which they are, at the time of termination, entitled to receive the income;
provided, however, that if the rights to income are not then fixed by the terms
of the trust, distribution under this clause shall be made in equal shares to
those beneficiaries who are then entitled or authorized to receive income
payments.
5.4 NOTICE OF RIGHT TO PAYMENT. Until the trustees shall receive from
some person interested in this trust written notice of any birth, marriage,
death, or other event upon which the right to payments from this trust may
depend, the trustees shall incur no liability to persons whose interests may
have been affected by that event for disbursements made in good faith.
5.5 TRUST DISTRIBUTIONS UNAVAILABLE TO DISCHARGE LEGAL OBLIGATIONS. Any
other provisions of this instrument to the contrary notwithstanding, income or
principal of a trust established hereunder shall not be used to discharge in
whole or in part any person's legal obligations, from time to time existing,
including but not by way of limitation, any person's obligation to support any
of the beneficiaries of the trust. When determining the legal obligation of any
person to support any of the beneficiaries of the trust, the existence of the
trust and funds made available by it shall not be taken into consideration.
5.6 PAYMENTS TO DISABLED BENEFICIARIES. The trustees, in the trustees'
discretion, may make payments to a minor or other beneficiary under disability
by making payments to the guardian of his or her person or to any suitable
person with whom he or she resides, or the trustees may apply payments directly
for the beneficiary's benefit. However, the trustees may not make payments to
the parent of a minor beneficiary for the minor's account, unless the parent
shall first agree with the trustees in writing that he or she will not use the
payments to discharge his or her legal obligation to support the minor under the
laws of the state of his or her domicile. The trustees, in the trustees'
discretion, may make payments directly to a minor if, in the trustees' judgment,
the minor is of sufficient age and maturity to spend the money properly.
5.7 SEGREGATION OF TRUSTS. There need be no physical segregation or
division of the various trusts established hereunder, except as segregation or
division may be required by the termination of any of the trusts but the trustee
shall keep separate accounts for the different undivided interests.
SECTION 6: PROVISIONS RELATING TO TRUSTEE.
6.1 APPOINTMENT OF SUCCESSOR TRUSTEE. If for any reason either of
DENNIS J. CARLO or JEAN M. CARLO shall cease to act as trustee, the other shall
act as sole trustee. If both of them cease to act as trustees, RICHARD MARCHESE
and CALIFORNIA FIRST BANK shall act as co-trustees. If RICHARD MARCHESE fails
to act
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as co-trustee, VICTORIA M. O'NEILL shall act as co-trustee in his place.
6.2 REPLACEMENT OF TRUSTEES. If neither DENNIS J. CARLO nor JEAN M. CARLO
is acting as trustee, ERIC J. CARLO, upon attaining age twenty-one (21) shall
have the right to change the trustees, by giving thirty (30) days' written
notice to the trustees. However, unless either of DENNIS J. CARLO or JEAN M.
CARLO is acting as trustee, there shall always be two co-trustees, one of which
shall be a corporate trustee licensed to do business at the situs of the trust.
Any successor trustees shall succeed as trustees with like effect as though
originally named as such herein. All authority and powers conferred upon the
original trustees hereunder shall pass to any successor trustee.
6.3 RELEASE OF LIABILITY. Any successor trustee shall not be responsible
for any acts or omissions of any preceding trustee in connection with or
relating to any costs or transactions regarding the trust estate and shall not
be responsible for any assets not registered in the trust name.
6.4 TRUSTEES' COMPENSATION. The trustees hereunder shall be entitled to
reasonable compensation for services as such, and to reimbursement for any
expenses incurred in the performance of duties as such.
6.5 BOND. No bond shall be required of any individual trustee named in
this instrument. Bond for any other individual nominated as trustee under
Section 6.1 shall be required in the amount, if any, directed by the person or
persons making such nomination.
6.6 RIGHT TO RESIGN. Any trustee shall have the right to resign this
trusteeship at any time. Upon such resignation, to the extent that a successor
is not appointed hereunder, a successor shall be appointed by a Court of
competent jurisdiction upon petition of either the resigning trustee or any
person interested in these trusts.
SECTION 7: REVOCATION.
7.1 IRREVOCABILITY. This Agreement is irrevocable and may not be altered
or amended in any respect, and may not be terminated except through
distributions permitted by this instrument.
7.2 RELINQUISHMENT OF RIGHTS. All of the terms of the trust
notwithstanding, the trustors expressly relinquish any and all interest,
including any reversionary interest, the trustors may have in this trust or the
property subject hereto, whether said interest is expressed by the terms of this
trust or arises by operation of law.
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SECTION 8: MISCELLANEOUS.
8.1 AGREEMENT BINDING. This Agreement is binding on the heirs, executors
and administrators of the trustors and upon the trustees and the beneficiaries
of this trust.
8.2 FAILURE OF PROVISION. If any provision of this instrument is
unenforceable, the remaining provisions shall nevertheless be carried into
effect.
8.3 CALIFORNIA LAW APPLICABLE. The Agreement will be administered in the
State of California and its validity and construction shall be controlled by the
laws of the State of California.
8.4 "ISSUE" AND "CHILD." As used in this Trust Agreement, the term
"issue" shall refer to lineal descendants of all degrees and the class terms
"child," "children" and "issue" shall include persons adopted into the class and
shall include persons adopted out of the class.
8.5 "TRUSTEE." As used in this Trust Agreement, the term trustee shall
also refer to co-trustees.
8.6 SIGNIFICANCE OF HEADINGS. Titles and headings contained herein are
used for ease of reference only and shall not be deemed to govern, limit, modify
or in any manner affect the scope, meaning or intent of the provisions herein.
The trustors and trustees have executed this Trust Agreement on the day and
year first above written.
/s/DENNIS J. CARLO
-----------------------------------
DENNIS J. CARLO
Trustor and Trustee
/s/JEAN M. CARLO
-----------------------------------
JEAN M. CARLO
Trustor and Trustee
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<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )
On this the 27th day of May, 1988, before me, Valerie G. Stevens, the
undersigned Notary Public, personally appeared DENNIS J. CARLO and JEAN M.
CARLO,
/X/ personally known to me
/ / proved to me on the basis of satisfactory evidence
to be the persons whose names are subscribed to the within instrument, and
acknowledged that they executed it.
/s/VALERIE G. STEVENS
-----------------------------------
Notary's Signature
(SEAL)
<PAGE>
TRUST AGREEMENT
ERIC J. CARLO TRUST
May 26, 1988
SCHEDULE A
50,000 shares, The Immune Response Corporation, common stock.
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TRUST AGREEMENT
GRETCHEN CARLO TRUST
This Trust Agreement is entered into as of May 23, 1988, by DENNIS J. CARLO
and JEAN M. CARLO as trustors and as trustees.
This trust is established for the benefit of the daughter of DENNIS J.
CARLO, GRETCHEN CARLO, and may be referred to as The Gretchen Carlo Trust. The
trustors have transferred and delivered to the trustees, without any
consideration on the trustees' part, the property described in the attached
Schedule A. Said property, together with any other property that may later
become subject to this trust, shall constitute the trust estate, and shall be
held, administered and distributed as hereinafter provided.
SECTION 1: ADDITION OF PROPERTY.
In their discretion, the trustees may accept additions to the trust from
the trustors, or either of them, the estate of either trustor, or any other
donor. Such additions shall be irrevocable.
SECTION 2: POWER TO WITHDRAW.
2.1 NOTICE OF TRANSFERS AND THE BENEFICIARY'S RIGHT TO WITHDRAW ASSETS.
Within five (5) days of receipt of any property transferred into the trust
(including the initial funding), the trustees shall notify GRETCHEN CARLO, if
she is then living, otherwise each beneficiary then entitled to receive
distributions of income either directly or in the discretion of the trustees
(collectively, the "Beneficiary") of the value of the property received; during
any period that the Beneficiary lacks legal capacity, the trustees shall instead
notify the Beneficiary's guardian (or natural parent of a minor beneficiary for
whom no guardian has been appointed). As to each transfer into the trust, the
person so notified by the trustee may, at any time within the "withdrawal
period" (Section 2.2 below), demand in writing the distribution of trust assets
equal to the "withdrawal value" (paragraph 2.3 below).
2.2 WITHDRAWAL PERIOD. Written demand hereunder may be made at any time
within thirty (30) days of the date of notification (Section 2.1) of any
transfer into the trust (including the initial funding) but in any event not
later than December 31 of the year in which the transfer is made.
2.3 WITHDRAWAL VALUE. Subject to Section 2.6, as to each transfer, the
value of trust assets subject to withdrawal by the person notified hereunder
shall be the lesser of:
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(a) An amount equal to the annual exclusion allowed under
Internal Revenue Code Section 2503 as it exists on the date the notice
required by Section 2.1 is given; or
(b) An amount equal to the fair market value (at the time of
transfer) of the property transferred.
2.4 TRUSTEES' DUTY TO DISTRIBUTE ASSETS ON DEMAND. Upon receipt of such
written demand, the trustees shall, as soon as practical, distribute to the
person making the demand all amounts so demanded (subject to all the provisions
of this Section 2), provided that the trustee shall make all such distributions
no later than December 31 of the year in which the property is transferred into
trust. Distributions may be in cash or in kind. Any property so distributed to
a Beneficiary's guardian shall be held by such guardian for the Beneficiary's
benefit and use.
2.5 ASSETS SUBJECT TO WITHDRAWAL. Any asset of the trust estate may be
used to satisfy a demand for withdrawal hereunder.
2.6 RESTRICTIONS AND LIMITATIONS ON WITHDRAWAL RIGHT.
2.6.1 The right of withdrawal granted hereunder is noncumulative and,
to the extent that the withdrawal power granted hereunder has not been exercised
by the end of the thirty (30) day period (or the end of the calendar year if
sooner) as provided above, it shall lapse.
2.6.2 Notwithstanding the number or value of transfers made by any
one transferror in any calendar year, the cumulative withdrawals of a
Beneficiary (or guardian) in said calendar year with respect to transfers made
by that transferror shall not exceed the amount allowed as an annual exclusion
under Internal Revenue Code Section 2503.
SECTION 3: DISTRIBUTION OF INCOME AND PRINCIPAL.
The trustees shall hold, manage, invest and reinvest the principal of the
trust and shall collect and receive the current income therefrom, and, after
deducting all necessary expenses, costs and taxes incident to the administration
of the trust which are a charge against income, shall distribute the income and
principal as follows:
3.1 DISCRETIONARY INCOME PRINCIPAL DURING MINORITY. While GRETCHEN CARLO
is under the age of twenty-one (21), the trustees shall pay to her or apply for
her benefit as much of the net income and principal of the trust as the trustees
in the trustees' discretion deem necessary for her proper support, health,
maintenance, and education, after taking into consideration, to the extent the
trustees deem advisable, any other income of GRETCHEN CARLO known to the
trustees and
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reasonably available for these purposes. Any income not so distributed shall be
accumulated and added to principal.
3.2 MANDATORY INCOME AND DISCRETIONARY PAYMENT OF PRINCIPAL. When
GRETCHEN CARLO attains the age of twenty-one (21), the trustees shall thereafter
pay to or apply for her benefit, quarter-annually or more frequently, the entire
net income of the trust. If the trustees deem the income to be insufficient,
the trustees may also pay to her or apply for her benefit as much of the
principal of the trust as the trustees in the trustees' discretion deem
necessary for her proper support, health, maintenance, and education, after
taking into consideration, to the extent the trustees deem advisable, any income
or other resources of GRETCHEN CARLO, outside the trust, known to the trustees
and reasonably available for these purposes.
3.3 POWER TO WITHDRAW. At any time after attaining age twenty-five (25),
GRETCHEN CARLO may, by written instrument filed with the trustees, require the
trustees to distribute to her not to exceed one-half (1/2) of the trust as
constituted at the time of withdrawal.
3.4 DISTRIBUTION OF TRUST ESTATE. When GRETCHEN CARLO attains age thirty
(30), the trustees shall distribute to her the entire undistributed balance of
the trust (including both principal and accrued and undistributed income).
3.5 DEATH PRIOR TO DISTRIBUTION. Upon the death of GRETCHEN CARLO any
share then held for her benefit (including both principal and accrued and
undistributed income) shall be distributed to such one or more persons or
entities including GRETCHEN CARLO, her creditors, her estate or creditors of her
estate, either outright or in trust, as she shall appoint by the last dated
instrument delivered to the trustees including a will (whether or not admitted
to probate) specifically referring to and exercising this power of appointment.
If or to the extent that GRETCHEN CARLO shall have failed to exercise this power
of appointment, or an attempted exercise of this power shall have been invalid
or ineffective for any reason, or GRETCHEN CARLo shall have released or
renounced this power, the property subject to it shall be distributed to
GRETCHEN CARLO's then living issue, upon the principle of representation
(subject, however, to the provisions of Section 3.6 below), or if there is none
then living, said property shall be distributed in equal parts to ANGELA CARLO
and DEBORAH CARLO (daughters of DENNIS J. CARLO), and if either of them is not
then living, her share shall be distributed to her then living issue, upon the
principle of representation (subject to Section 3.6 below). Notwithstanding the
foregoing, however, if a share is distributable to a beneficiary for whom a
trust created by the trustors is then being maintained under this instrument or
another similar instrument, such share shall be added to that trust to be held,
administered and distributed as a part thereof.
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3.6 TRUST FOR BENEFICIARY UNDER AGE 21. Notwithstanding any provision
hereof to the contrary, any share of the trust estate distributable to a
beneficiary (other than GRETCHEN CARLO) under age twenty-one (21) under the
foregoing provisions shall be held and administered for his or her benefit while
he or she is under age twenty-one (21) and the trustees shall apply so much of
the net income and principal thereof as the trustees, in the trustees'
discretion, deem necessary for such beneficiary's reasonable health,
maintenance, support and education, and the trustees shall accumulate for the
benefit of such beneficiary any income not so applied or paid. When such
beneficiary attains age twenty-one (21), any of such part then held for such
beneficiary shall be distributed to him or her, and in case of his or her death
prior thereto, shall be distributed to his or her estate.
3.7 ULTIMATE DISTRIBUTION. Any of the trust estate not disposed of under
the foregoing provisions shall be distributed in two equal shares, one share to
the heirs at law of DENNIS J. CARLO and one share to the heirs at law of JEAN M.
CARLO. The identity and respective shares of such heirs shall be determined in
all respects as though the trustors' deaths had occurred immediately following
the happening of the event requiring such distribution, and according to the
laws of California then in force relating to the succession of separate property
not acquired from a predeceased spouse.
SECTION 4: TRUSTEES' POWERS.
To carry out the purposes of the trust and subject to any limitations
stated elsewhere herein, the trustees are vested with the following powers, in
addition to those now or hereafter conferred by law, affecting the trust and
trust estate:
4.1 RETAIN ASSETS. To continue to hold any property, as long as the
trustees deem advisable.
4.2 MANAGE GENERALLY. To acquire, manage, control, grant options on,
sell (for cash or on deferred payments), convey, exchange, partition, divide,
improve and repair trust property.
4.3 LEASE. To lease trust property for terms within or beyond the term
of the trust and for any purpose.
4.4 BORROW. To borrow money and to encumber or hypothecate trust
property by mortgage, deed of trust, pledge, or otherwise; to borrow money on
behalf of one trust from any other trust created hereunder.
4.5 OBTAIN INSURANCE. To carry, at the expense of the trust, insurance
of such kinds and in such amounts as the trustees deem advisable to protect the
trust estate and the trustees against any hazard.
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4.6 LITIGATE. To commence or defend such litigation with respect to the
trust or any property of the trust estate as the trustees deem advisable, at the
expense of the trust.
4.7 COMPROMISE. To compromise or otherwise adjust any claims or
litigation against or in favor of the trust.
4.8 PERMISSIBLE INVESTMENTS. To invest and reinvest the trust estate in
every kind of property, real, personal, or mixed and every kind of investment,
specifically including, but not by way of limitation, corporation obligations of
every kind, stocks, preferred or common, shares of investment trusts, investment
companies, common trust funds, mutual funds, and mortgage participations, which
men of prudence, discretion and intelligence acquire for their own account. The
trustees shall maintain sufficient liquidity to permit making the distributions
contemplated by Section 3, when and as required.
4.9 MARGIN ACCOUNTS. To buy, sell or trade in securities of any nature
(including short sales) on margin and for such purposes maintain and operate
margin accounts with brokers and pledge any securities held or purchased by the
trustees with such brokers as security for loans and advances made to the
trustees.
4.10 POWERS RE SECURITIES. With respect to securities held in the trust,
to have all the rights, powers and privileges of an owner, including, but not by
way of limitation, the power to vote, give proxies and pay assessments, to
participate in voting trusts, pooling agreements, foreclosures, reorganizations,
consolidations, mergers, liquidations, sales and leases, and incident to such
participation to deposit securities with and transfer title to any protective or
other committee on such terms as the trustee may deem advisable; and to exercise
or sell stock subscription or conversion rights.
4.11 EMPLOY AGENTS AND OTHERS. To appoint, employ and pay such agents and
employees as the trustees deem necessary or advisable, including (without
limiting the generality of the foregoing) accountants, attorneys, investment
counselors, banks to act as custodians for custodial accounts and other
custodians of the trust property.
4.12 HOLDING PROPERTY IN OTHERS' NAMES. To hold securities or other
property in the trustees' own names or in the name of a nominee of the trustees,
or in the name of a qualified depository without disclosing any fiduciary
relationship.
4.13 DISCRETION RE PRINCIPAL AND INCOME. Except as otherwise specifically
provided herein, the trustees shall have the power, exercisable in the trustees'
discretion, to determine what is principal or income of the trust estate and to
apportion and allocate receipts and expenses and other charges between
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these accounts. Insofar as the trustees shall exercise this discretion, and
except as otherwise provided in this instrument, matters relating to principal
and income shall be governed by the provisions of the California Principal and
Income Law from time to time existing.
4.14 ADDITIONAL POWERS OF TRUSTEES. The enumeration of certain powers of
the trustees shall not limit the trustees' general or implied powers, and the
trustees, subject always to the discharge of their fiduciary obligations, are
vested with and shall have all the rights, powers and privileges which an
absolute owner of the same property would have; provided, however, that no
provision contained herein may be construed to give the trustors any of the
following powers:
4.14.1 To purchase, exchange or otherwise deal with or dispose of
corpus or income of the trusts established hereunder for less than adequate
consideration in money or money's worth.
4.14.2 To borrow the corpus or income of the trusts, directly or
indirectly, without adequate interest or security.
SECTION 5: GENERAL PROVISIONS.
The following provisions shall govern each trust created hereunder:
5.1 SPENDTHRIFT PROVISION. The interests of beneficiaries in principal
or income shall not be subject to claims of their creditors or others, nor to
legal process, and may not be voluntarily or involuntarily alienated or
encumbered.
5.2 Definition of Education. Whenever provision is made in this trust
for payment for the "education" of a beneficiary, the term "education" shall be
construed to include all levels of public, semi-private or private schools
including, but not limited to, nursery, pre-school, primary, and secondary
schools; college and post-graduate study; vocational school; music and art
schools, lessons and programs; religious school; computer or related training;
and both formal and informal cultural enrichment and travel programs and
activities so long as in the sole judgment of the trustees such study, program
or activity is pursued to advantage by the beneficiary, and at the beneficiary's
choice. In determining payments to be made for such education, the trustees
shall take into consideration the beneficiary' related travel and living
expenses, and such other expenses as the trustees, in the trustees' sole
discretion, determine are reasonable, including but not limited to, the cost of
clothing, musical instruments, educational tools, medical needs, etc.
5.3 PERPETUITIES SAVINGS CLAUSE. Unless sooner terminated in accordance
with other provisions, this trust, or
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any trust created hereunder, shall terminate twenty-one (21) years after the
death of GRETCHEN CARLO. All principal and undistributed income of any trust so
terminated shall be distributed to the then income beneficiaries of that trust
in the proportions in which they are, at the time of termination, entitled to
receive the income; provided, however, that if the rights to income are not then
fixed by the terms of the trust, distribution under this clause shall be made in
equal shares to those beneficiaries who are then entitled or authorized to
receive income payments.
5.4 NOTICE OF RIGHT TO PAYMENT. Until the trustees shall receive from
some person interested in this trust written notice of any birth, marriage,
death, or other event upon which the right to payments from this trust may
depend, the trustees shall incur no liability to persons whose interests may
have been affected by that event for disbursements made in good faith.
5.5 TRUST DISTRIBUTIONS UNAVAILABLE TO DISCHARGE LEGAL OBLIGATIONS. Any
other provisions of this instrument to the contrary notwithstanding, income or
principal of a trust established hereunder shall not be used to discharge in
whole or in part any person's legal obligations, from time to time existing,
including but not by way of limitation, any person's obligation to support any
of the beneficiaries of the trust. When determining the legal obligation of any
person to support any of the beneficiaries of the trust, the existence of the
trust and funds made available by it shall not be taken into consideration.
5.6 PAYMENTS TO DISABLED BENEFICIARIES. The trustees, in the trustees'
discretion, may make payments to a minor or other beneficiary under disability
by making payments to the guardian of his or her person or to any suitable
person with whom he or she resides, or the trustees may apply payments directly
for the beneficiary's benefit. However, the trustees may not make payments to
the parent of a minor beneficiary for the minor's account, unless the parent
shall first agree with the trustees in writing that he or she will not use the
payments to discharge his or her legal obligation to support the minor under the
laws of the state of his or her domicile. The trustees, in the trustees'
discretion, may make payments directly to a minor if, in the trustees' judgment,
the minor is of sufficient age and maturity to spend the money properly.
5.7 SEGREGATION OF TRUSTS. There need be no physical segregation or
division of the various trusts established hereunder, except as segregation or
division may be required by the termination of any of the trusts but the trustee
shall keep separate accounts for the different undivided interests.
SECTION 6: PROVISIONS RELATING TO TRUSTEE.
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6.1 APPOINTMENT OF SUCCESSOR TRUSTEE. If for any reason either of DENNIS
J. CARLO or JEAN M. CARLO shall cease to act as trustee, the other shall act as
sole trustee. If both of them cease to act as trustees, KAREN CAPPER shall act
as trustee.
6.2 REPLACEMENT OF TRUSTEES. If neither DENNIS J. CARLO nor JEAN M.
CARLO is acting as trustee, GRETCHEN CARLO, upon attaining age twenty-one (21)
shall have the right to change the trustee, by giving thirty (30) days' written
notice to the trustee. Any successor trustee or trustees shall succeed as
trustees with like effect as though originally named as such herein. All
authority and powers conferred upon the original trustees hereunder shall pass
to any successor trustee.
6.3 RELEASE OF LIABILITY. Any successor trustee shall not be responsible
for any acts or omissions of any preceding trustee in connection with or
relating to any acts or transactions regarding the trust estate and shall not be
responsible for any assets not registered in the trust name.
6.4 TRUSTEES' COMPENSATION. The trustees hereunder shall be entitled to
reasonable compensation for services as such, and to reimbursement for any
expenses incurred in the performance of duties as such.
6.5 BOND. No bond shall be required of any individual trustee named in
this instrument. Bond for any other individual nominated as trustee under
Section 6.1 shall be required in the amount, if any, directed by the person or
persons making such nomination.
6.6 RIGHT TO RESIGN. Any trustee shall have the right to resign this
trusteeship at any time. Upon such resignation, to the extent that a successor
is not appointed hereunder, a successor shall be appointed by a Court of
competent jurisdiction upon petition of either the resigning trustee or any
person interested in these trusts.
SECTION 7: REVOCATION.
7.1 IRREVOCABILITY. This Agreement is irrevocable and may not be altered
or amended in any respect, and may not be terminated except through
distributions permitted by this instrument.
7.2 RELINQUISHMENT OF RIGHTS. All of the terms of the trust
notwithstanding, the trustors expressly relinquish any and all interest,
including any reversionary interest, the trustors may have in this trust or the
property subject hereto, whether said interest is expressed by the terms of this
trust or arises by operation of law.
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SECTION 8: MISCELLANEOUS.
8.1 AGREEMENT BINDING. This Agreement is binding on the heirs, executors
and administrators of the trustors and upon the trustees and the beneficiaries
of this trust.
8.2 FAILURE OF PROVISION. If any provision of this instrument is
unenforceable, the remaining provisions shall nevertheless be carried into
effect.
8.3 CALIFORNIA LAW APPLICABLE. The Agreement will be administered in the
State of California and its validity and construction shall be controlled by the
laws of the State of California.
8.4 "ISSUE" AND "CHILD." As used in this Trust Agreement, the term
"issue" shall refer to lineal descendants of all degrees and the class terms
"child," "children" and "issue" shall include persons adopted into the class and
shall include persons adopted out of the class.
8.5 "TRUSTEE." As used in this Trust Agreement, the term trustee shall
also refer to co-trustees.
8.6 SIGNIFICANCE OF HEADINGS. Titles and headings contained herein are
used for ease of reference only and shall not be deemed to govern, limit, modify
or in any manner affect the scope, meaning or intent of the provisions herein.
The trustors and trustees have executed this Trust Agreement on the day and
year first above written.
/s/ DENNIS J. CARLO
-----------------------------------
DENNIS J. CARLO
Trustor and Trustee
/s/ JEAN M. CARLO
-----------------------------------
JEAN M. CARLO
Trustor and Trustee
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Exhibit D
Execution Copy
--------------
PROMISSORY NOTE
----------------
Loan Amount: $1,484,232.75 Carlsbad, California
Interest Rate: 5.73% April 17, 1997
FOR VALUE RECEIVED, the undersigned, DENNIS J. CARLO, Ph.D.
("Borrower"), hereby promises to pay to the order of THE IMMUNE RESPONSE
CORPORATION, a Delaware corporation ("Lender"), at 5935 Darwin Court, Carlsbad,
California, 92008 or such other place as Lender may designate by written notice
to Borrower, by wire transfer of immediately available funds, the principal sum
of ONE MILLION FOUR HUNDRED EIGHTY-FOUR THOUSAND TWO HUNDRED THIRTY-TWO AND
75/100 DOLLARS ($1,484,232.75), with interest, to be paid as set forth below.
1. PAYMENTS. The entire principal balance of this Promissory Note (this
"Note"), together with all accrued and unpaid interest thereon, shall be due and
payable on September 30, 1997 (the "Maturity Date"). Interest on the
outstanding principal balance hereunder shall accrue at the rate of 5.73% per
annum, calculated on the basis of a three hundred and sixty-five day year.
2. PURPOSE OF NOTE. Borrower acknowledges that the purpose of the loan
evidenced by this Note is to provide partial financing for the purchase of
253,715 shares of Lender's common stock and warrants to purchase 253,715 shares
of such common stock.
3. PREPAYMENT. Borrower may prepay all or any portion of this Note at
any time without penalty, fee or acceleration prior to the Maturity Date of this
Note.
4. SECURITY. This Note is a full-recourse note. Payment of this Note is
secured by a certain Stock Pledge Agreement (the "Pledge Agreement") of even
date herewith among Borrower, Lender, and Kevin B. Kimberlin, as Pledgor,
encumbering Pledgor's interest in certain shares of capital stock at such time
as permitted under that certain lock-up agreement to which Pledgor is a party
(described in EXHIBIT A hereto), and as more particularly described in the
Pledge Agreement.
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5. ACCELERATION OF DUE DATE. The entire unpaid principal balance of this
Note, together with all accrued and unpaid interest thereon, shall, at the
election of Lender, become immediately due and payable upon the occurrence of
any of the following, irrespective of the payment schedule set forth in
Paragraph 1 of this Note:
(a) Any failure on the part of Borrower to make any payment under this
Note when the same is due;
(b) Any failure on the part of Borrower to perform or observe any of his
obligations under the Pledge Agreement or any other security instrument
which secures this Note as and when performance is due;
(c) If at any time Borrower shall admit in writing his inability to pay
his debts as they become due, or shall make any assignment for the benefit
of any creditors, or shall file a petition seeking any reorganization,
arrangement, composition, readjustment or similar release under any present
or future statute, law or regulation, or on the filing or commencement of
any petition, action, case or proceeding, voluntary or involuntary, under
any state or federal law regarding bankruptcy or insolvency.
6. COLLECTION COSTS BORNE BY BORROWER. Borrower agrees to pay all costs
and expenses, including without limitation reasonable attorneys' fees, incurred
by Lender in any action brought to enforce the terms of this Note and/or to
collect this Note, and any appeal thereof.
7. MISCELLANEOUS.
(a) No delay or omission on the part of Lender in exercising any right
under this Note or under the Pledge Agreement or any other security agreement
given to secure this Note shall operate as a waiver of such right or of any
other right under this Note.
(b) In the event of default under this Note, Lender shall notify Borrower
and Pledgor and both Pledgor and Borrower shall have fifteen (15) days from the
date of notice of default and demand for payment in which to cure such default.
Such notice may be by written notice mailed to both Pledgor and Borrower at the
last address given to Lender by each and shall be deemed received three (3) days
after being mailed by certified, first-class mail, return receipt requested or
the next day mailed by overnight delivery.
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(c) Borrower hereby waives presentment for payment, demand, notice of
demand and of dishonor and non-payment of this Note, protest and notice of
protest, diligence in collecting, and the bringing of suit against any other
party. The pleading of any statute of limitations as a defense to any demand
against the Borrower, any endorsers, guarantors and sureties of this Note is
expressly waived by each and all of such parties to the extent permitted by law.
Time is of the essence under this Note, subject to Section 7(b).
(d) Any payment hereunder shall first be applied to any collection costs,
then against accrued and unpaid interest hereunder and then against the
outstanding principal balance of this Note.
8. LATE CHARGE. If payment of principal or interest under this Note
shall not be made within ten (10) days after the date due, Borrower agrees to
pay, in addition to the unpaid principal or interest, a sum equal to two percent
(2%) of the unpaid principal or interest, which sum Borrower agrees represents a
fair and reasonable estimate, considering all of the circumstances existing on
the date of this Note, of the costs and expenses incident to handling and
collecting such delinquent payment that will be sustained by Lender due to the
failure of Borrower to make timely payment. The parties further agree that
proof of actual damages would be costly and impracticable. Such charge shall be
paid without prejudice to the right of Lender to collect any other amounts
provided to be paid or to declare a default under this Note or under the Pledge
Agreement or from exercising any of the other rights and remedies of Lender.
9. GOVERNING LAW. This Note shall be governed by and interpreted in
accordance with the laws of the State of Delaware, except as they may be
preempted by federal law. In any action brought or arising out of this Note,
Borrower and Lender hereby consent to the jurisdiction of any federal or state
court having proper venue within the State of California and also consent to the
service of process by any means authorized by California or federal law.
10. DEFINITIONS.
BUSINESS DAY. As used in this Note the term "Business Day" shall mean
any day other than a Saturday, Sunday or a legal holiday observed by employees
of the State of California.
11. SUCCESSORS. This Note shall be binding upon Borrower and the personal
representatives, heirs, successors and assigns of Borrower.
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12. SEVERABILITY. If any part of this Note is determined to be illegal or
unenforceable, all other parts shall remain in full force and effect.
13. MAXIMUM INTEREST PAYABLE. All agreements between the undersigned
and the holder hereof, whether now existing or hereafter arising and whether
written or oral, are hereby limited so that in no contingency, whether by
reason of acceleration of the maturity hereof or otherwise, shall the
interest contracted for, charged, received, paid or agreed to be paid to the
holder hereof exceed the maximum amount permissible under applicable law.
If, from any circumstance whatsoever, interest would otherwise be payable to
the holder hereof in excess of the maximum lawful amount, the interest
payable to the holder hereof shall be reduced to the maximum amount permitted
under applicable law; and if from any circumstance the holder hereof shall
ever receive anything of value deemed interest by applicable law in excess of
the maximum lawful amount, an amount equal to any excessive interest shall be
applied to the reduction of the principal hereof and not to the payment of
interest, or if such excessive interest exceeds the unpaid balance of
principal hereof, such excess shall be refunded to the undersigned. All
interest paid or agreed to be paid to the holder hereof shall, to the extent
permitted by applicable law, be amortized, prorated, allocated, and spread
throughout the full period until payment in full of the principal (including
the period of any renewal or extension hereof) so that the interest hereon
for such full period shall not exceed the maximum amount permitted by
applicable law. This paragraph shall control all agreements between the
undersigned and the holder hereof.
/s/ DENNIS J. CARLO, Ph.D.
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Dennis J. Carlo, Ph.D.
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