Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 14a-12
IMMUNE RESPONSE, INC.
---------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate Box:)
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11:(1) N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
- ----------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
O-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: N/A
(2) Form, Schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
<PAGE>
IMMUNE RESPONSE, INC.
7315 East Peakview Avenue
Englewood, Colorado 80111
(303) 796-8940
-----------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on February 10, 1997
-----------------------------------------------------------------
January 9, 1997
TO ALL SHAREHOLDERS OF IMMUNE RESPONSE, INC.
An Annual Meeting of Shareholders of Immune Response, Inc., a Colorado
corporation (the "Company") will be held at the Company's offices at 7315 East
Peakview Avenue, Englewood, Colorado 80111, on February 10, 1997, at 10:00 a.m.
local time, to consider and take action on the following matters:
1. The election of three directors to serve until the next annual
meeting of shareholders and until their successors have been
elected and qualified.
2. Approval of two proposals, each to be voted on separately, to
adopt the following amendments or additions to the Company's
Articles of Incorporation, as amended (the "Articles"), to be
included in the Company's Amended and Restated Articles of
Incorporation:
(a) An amendment to the Articles to effect a one-for-100
reverse stock split and to reduce the number of authorized
shares of common stock of the Company (the "Common Stock")
from 950,000,000 shares to 25,000,000 shares as permitted
under Section 7-106-105 of the Colorado Business Corporation
Act. Fractional shares resulting from the reverse stock split
will be rounded to the closest whole share of Common Stock;
and
(b) An amendment to the Articles to indemnify the directors,
officers, employees, fiduciaries, and agents of the Company to
the full extent permitted by Colorado law and to limit the
personal liability of the Company's directors for monetary
damages for certain breaches of the fiduciary duty of care as
permitted under Section 7-108-402 of the Colorado Business
Corporation Act.
3. Such other business as may properly come before the meeting,
or any adjournment or adjournments thereof.
<PAGE>
Shareholders holding shares of Common Stock of record at the closing of
business on December 2, 1996, will be entitled to receive notice of and vote at
the meeting.
Shareholders, whether or not they expect to be present at the meeting, are
requested to sign and date the enclosed proxy and return it promptly in the
envelope enclosed for that purpose. Any person giving a proxy has the power to
revoke it at any time by following the instructions provided in the Proxy
Statement.
By Order of the Board of Directors:
Joseph W. Hovorka, President
PLEASE DATE, SIGN AND PROMPTLY RETURN YOUR PROXY SO THAT YOUR SHARES MAY BE
VOTED IN ACCORDANCE WITH YOUR WISHES. THE GIVING OF SUCH PROXY DOES NOT AFFECT
YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
YOUR VOTE IS IMPORTANT
<PAGE>
IMMUNE RESPONSE, INC.
7315 East Peakview Avenue
Englewood, Colorado 80111
(303) 796-8940
-----------------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 10, 1997
-----------------------------------------------
To Our Shareholders:
This Proxy Statement (the "Proxy Statement") is furnished to shareholders
of Immune Response, Inc., a Colorado corporation (the "Company") in connection
with the solicitation of proxies by and on behalf of the Company's Board of
Directors (the "Board") for use at the Annual Meeting of Shareholders of the
Company (the "Meeting") to be held on February 10, 1997 at the Company's offices
located at 7315 East Peakview Avenue, Englewood, Colorado 80111, at the time and
for the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders. This Proxy Statement, the accompanying proxy card and the Notice
of Annual Meeting (collectively, the "Proxy Materials") will be first sent to
shareholders on or about January 9, 1997.
GENERAL INFORMATION
As of the close of business on December 2, 1996, the record date for
entitlement to notice of and vote at the Annual Meeting, the Company had
outstanding 294,970,000 shares of common stock, $.0001 par value per share (the
"Common Stock"). The presence, in person or by proxy, of holders of a majority
of the shares of Common Stock entitled to vote at the Meeting constitutes a
quorum for the transaction of business at the Meeting.
Each share of Common Stock outstanding on the record date is entitled to
one vote on each matter presented at the Meeting. To be elected as a director, a
nominee must have more shares cast in his favor than shares for which voting
authority is withheld.
Abstentions will be treated as shares present or represented and entitled
to vote for purposes of determining the presence of a quorum, but will not be
considered as votes cast in determining whether a matter has been approved by
the shareholders. As to any shares a broker indicates on its proxy that it does
not have the authority to vote on any particular matter because it has not
received direction from the beneficial owner thereof, said shares will not be
counted as voting on a particular matter.
<PAGE>
A stockholder who gives his proxy may revoke it at any time before it is
voted by giving notice of the revocation thereof to the Secretary of the
Company, by filing another proxy with the Secretary or by attending the Meeting
and voting in person. All properly executed and unrevoked proxies delivered
pursuant to this solicitation, if received in time, will be voted in accordance
with the instructions of the beneficial owners contained thereon.
The Company will bear the cost of the solicitation. In addition to
solicitation by mail, the Company will request banks, brokers and other
custodian nominees and fiduciaries to supply proxy materials to the beneficial
owners of the Company's Common Stock for whom they hold shares and will
reimburse them for their reasonable expenses in so doing.
PROPOSAL 1 - ELECTION OF DIRECTORS
The following three persons are nominated as directors of the Company for a
term of one year and until the election and qualification of their successors:
Joseph W. Hovorka, Thomas B. Olson and R. Andrew Girardot, Jr., D.D.S. These
three directors will constitute the entire Board of Directors. The person named
in the proxy intends to vote for Messrs. Hovorka, Olson and Girardot who have
been recommended for election by the Board of Directors of the Company unless a
stockholder withholds authority to vote for any or all of the nominees. If any
nominee is unable to serve or, for good cause, will not serve, the person named
in the proxy reserves the right to substitute another person of his choice as
nominee in such nominee's place. Each of the nominees has agreed to serve, if
elected. The following table sets forth the names and ages of the nominees and
the executive offices held by each such person. The Company has no other
officers. These officers serve at the pleasure of the Board of Directors.
<TABLE>
<CAPTION>
First Year
Name Age Offices held Elected Director
- ---- --- ------------ ----------------
<S> <C> <C> <C>
Joseph W. Hovorka 66 President, Treasurer 1987
and Director
Thomas B. Olson 30 Secretary and Director 1990
R. Andrew Girardot, Jr. 53 Director 1996
</TABLE>
The directors of the Company are elected to hold office until the next
annual meeting of the shareholders and until their respective successors have
been elected and qualified. Officers of the Company are elected by the Board of
Directors and hold office until their successors are duly elected and qualified.
-2-
<PAGE>
No arrangement exists between any of the above officers and directors
pursuant to which any one of those persons was elected to such office or
position.
JOSEPH W. HOVORKA. Mr. Hovorka has served as the Company's President since
February 1990 and has been a Vice President, Treasurer and a director since
September 1987. Mr. Hovorka has been President, Chief Executive Officer,
Treasurer and a director of ProConnextions, Inc. since August 1990 and the
Treasurer and a director of Sports Card Connection, Inc., a wholly-owned
subsidiary of ProConnextions, Inc., since November 1990. ProConnextions, Inc.
and Sports Card Connection, Inc. are privately-held companies which were formed
to buy, trade and sell sports memorabilia. From 1989 to 1993, Mr. Hovorka served
as President, Chief Operating Officer, and Treasurer and was a director of
William's Controls, Inc., a publicly-held manufacturer of pneumatic, electronic
and hydraulic controls for trucks, buses, mining, construction and refuse
collection vehicles. Mr. Hovorka also served as President and was a director of
Enercorp, Inc., a publicly-held business development company from July 1986
until June 1993. From September 1990 until June 1993 Mr. Hovorka served as
President and was a director of Ajay Sports, Inc., a publicly-traded
manufacturer of golf bags and accessories. Mr. Hovorka had been engaged in
commercial and business banking for over 30 years. Mr. Hovorka devotes only such
time as is necessary to the affairs of the Company.
THOMAS B. OLSON. Mr. Olson has been a Director since 1988 and has been
Secretary of the Company since 1994. Since 1988, Mr. Olson has been Secretary of
Equitex, Inc., a publicly-held business development company which is a
shareholder of the Company. Mr. Olson has attended Arizona State University and
the University of Colorado at Denver. Mr. Olson devotes only such time as is
necessary to the affairs of the Company.
R. ANDREW GIRARDOT, JR., D.D.S. Dr. Girardot became a director of the
Company in November 1996. Since 1972, Dr. Girardot has been President of his
solo orthodontic practice, R. Girardot, Jr., D.D.S., P.C. in Denver, Colorado.
Dr. Girardot is also currently serving the cleft palate clinic at the Children's
Hospital in Denver, Colorado. Dr. Girardot graduated from the University of
California Orthodontic School in 1972 and is a member of the American
Association of Orthodontists, the American Dental Society, The Foundation for
Orthodontic Research, the American Equilibration Society, The Angle Society and
the Foundation for Advanced Continuing Education.
There are no family relationships between any Director, Executive Officer
or Nominees for director of the Company.
-3-
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
- --------------------------
The following table sets forth a summary of the compensation paid to the
current executive officers listed above for each of the last three fiscal years.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (g) (i)
Name & Other All
Principal Annual Options Other
Position Year Salary Bonus Compensation & SARs Compensation
($) ($) ($) ($) (#)($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Joseph W. Hovorka 1996 18,000(1) 0 0 0 0
President,
Treasurer
Principal
Executive
Officer and
Accounting
Officer
Joseph W. Hovorka 1995 18,000(1) 0 0 0 0
Joseph W. Hovorka 1994 18,000(1) 0 0 0 0
</TABLE>
(1) Although Mr. Hovorka is to receive a salary of $18,000 per year, Mr. Hovorka
has agreed to suspend payment or accrual of such salary.
The Company has no stock options or SARs outstanding and no restricted
stock award or long term incentive plans.
Compensation of Directors
- -------------------------
Each member of the Company's Board of Directors, Messrs. Joseph W. Hovorka,
Thomas B. Olson and R. Andrew Girardot, Jr., receive $400 for each Board of
Director's meeting attended. For the year ended December 31, 1995, Messrs.
Hovorka and Olson each were eligible to receive $1,600 for the four meetings
held. Payment is made to directors as cash flow permits. Each member of the
Board of Directors also receives reimbursement for expenses incurred in
attending board meetings.
-4-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
and Security Ownership of Management.
- -----------------------------------------------
The following table contains information as of December 10, 1996, as to the
beneficial ownership of shares of the Company's Common Stock by each person who,
to the knowledge of the Company at that date, was (i) the beneficial owner of
five percent or more of the outstanding shares of the class, (ii) each person
who is a director or nominee for director of the Company, (iii) each person who
is an executive officer of the Company, and (iv) all persons as a group who are
officers and directors of the Company, and as to the percentage of outstanding
shares so held by them on December 10, 1996.
<TABLE>
<CAPTION>
Name and address Amount and Nature of Percent
of beneficial owner Beneficial Ownership of Class
- ------------------- -------------------- --------
<S> <C> <C>
Joseph W. Hovorka -0- 0.0%
7315 East Peakview Avenue
Englewood, Colorado 80111
Thomas B. Olson 10,000,000(1) 3.4%
7315 East Peakview Avenue
Englewood, Colorado 80111
R. Andrew Girardot, Jr., D.D.S. -0- 0.0%
4380 South Syracuse Circle
Suite 501
Denver, Colorado 80237
Henry Fong 47,750,000(2) 16.2%
7315 East Peakview Avenue
Englewood, Colorado 80111
All executive officers and 10,000,000(1) 3.4%
directors as a group (three
persons)
</TABLE>
The beneficial owners exercise sole voting and investment power.
(1) Includes 10,000,000 shares owned by Equitex, Inc. of which Mr. Olson is the
Secretary. Mr. Olson disclaims beneficial ownership of these securities.
(2) Included 10,000,000 shares owned by Equitex, Inc. of which Mr. Fong is the
President. Mr. Fong disclaims beneficial ownership of these securities.
-5-
<PAGE>
Compliance with Section 16 of the Securities Act of 1934
- --------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 ("Section 16")
requires the Company's officers, directors and persons who own more than ten
percent of the Company's voting securities to file reports of their ownership
and changes in such ownership with the Securities and Exchange Commission (the
"Commission"). Commission regulations also require that such persons provide the
Company with copies of all Section 16 reports they file.
Based solely on review of the copies of such forms furnished to the
Company, or written representations of the reporting persons, the Company has
determined that all required reports were timely filed during the year.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others
- ---------------------------------------
The Company currently utilizes approximately 150 square feet of office
space in Greenwood Executive Park, 6400 South Quebec, Englewood, Colorado, from
Equitex, Inc., a shareholder of the Company, on a rent free month-to-month
basis. The Company's Secretary and a Director, Mr. Olson, is also Secretary of
Equitex, Inc.
During the year ended December 31, 1995 as in previous years, Equitex,
Inc., a significant shareholder of the Company of which the Company's Secretary
is also an officer, loaned $10,000 to the Company. When added to the previous
years' balance, the total loans outstanding at December 31, 1995 were $76,100.
These loans are due on demand and carry an interest rate of 10% per annum. Total
interest due at December 31, 1995 on these loans was $35,703. To date, none of
the total outstanding loans or interest due has been repaid.
During the year ended December 31, 1994 as in previous years, the Company
incurred legal costs from an attorney who was a former officer and director of
the Company in the amount of $1,823 for 1994 and $11,025 for 1993. The aggregate
amount due to the former officer and director for legal fees at December 31,
1995 was $52,062. The entire amount was repaid during the first quarter of 1996.
Audit, Nominating and Compensation Committees
- ---------------------------------------------
The Company does not have a standing audit, nominating or compensation
committees of the Board of Directors, or any other committees performing similar
functions.
Meetings of the Board of Directors
- ----------------------------------
During the last full fiscal year, the Company had four meetings of the
board of directors.
-6-
<PAGE>
PROPOSAL 2
ADOPT THE AMENDED AND RESTATED ARTICLES OF INCORPORATION
The Board of Directors has approved and recommends that the shareholders
approve the following amendments to the Company's Articles of Incorporation, as
amended (the "Articles"). It is the Company's intent to incorporate all of the
amendments set forth in this proposal which are approved by the shareholders
into Amended and Restated Articles of Incorporation of the Company (the
"Restated Articles") to be filed with the Colorado Secretary of State.
The amendments proposed are (1) to effect a one-for-100 reverse stock split
and to reduce the number of authorized shares of Common Stock from 950,000,000
shares to 25,000,000 shares as permitted under Section 7-106-105 of the Colorado
Business Corporation Act; and (2) to indemnify the directors, officers,
employees, fiduciaries, and agents of the Company to the full extent permitted
by Colorado law and to limit the personal liability of the Company's directors
for monetary damages for certain breaches of the fiduciary duty of care as
permitted under Section 7-108-402 of the Colorado Business Corporation Act.
The following discussion is qualified in its entirety by the text of the
proposed Restated Articles attached hereto as Exhibit A. If any of the
amendments proposed herein are not approved by the shareholders, prior to filing
the Restated Articles with the Colorado Secretary of State, the Company will
revise the Restated Articles to reflect the comparable provision of its current
Articles of Incorporation.
A. AN AMENDMENT TO ARTICLE V OF THE COMPANY'S ARTICLES TO
EFFECT A ONE-FOR-100 REVERSE STOCK SPLIT AND TO REDUCE THE
NUMBER OF AUTHORIZED SHARES FROM 950,000,000 SHARES TO
25,000,000 SHARES
The Board of Directors has adopted a resolution, pursuant to Section
7-106-105(6)(a) of the Colorado Business Corporation Act, recommending an
amendment to Article V of the Articles to effect a one-for-100 reverse stock
split of the presently issued and outstanding shares of the Common Stock (the
"Reverse Stock Split"), as permitted under Section 7-106-105 of the Colorado
Business Corporation Act. Pursuant to the terms of the Reverse Stock Split, each
holder of record of Common Stock on the effective date of the Reverse Stock
Split will thereafter be deemed to hold one share of Common Stock for every 100
shares of presently issued and outstanding of Common Stock held of record on
that date. Fractional shares resulting from the Reverse Stock Split will be
rounded to the closest whole share of Common Stock. In connection with the
Reverse Stock Split, the authorized shares of the Company would be reduced from
950,000,000 to 25,000,000.
-7-
<PAGE>
Text of the Amendment
- ---------------------
The Articles shall be amended by replacing in its entirety the current text
of Article V so that there appears the following text:
ARTICLE V
CAPITAL STOCK
The aggregate number of shares and the amount of total
authorized capital of the Company shall consist of 950,000,000 shares
of $.0001 par value common stock.
As of the date upon which these Amended and Restated Articles
of Incorporation become effective, each 100 shares of authorized $.0001
par common stock, whether or not issued and outstanding, shall be
converted into one share of $.0001 par common stock. Fractional shares
resulting from the Reverse Stock Split will be rounded to the closest
whole share of Common Stock. Following this reverse stock split the
number of shares of $.0001 par common stock which the Company shall be
authorized to issue shall be 25,000,000.
The holders of Common Stock shall have and possess all rights
as shareholders of the corporation.
The capital stock, after the amount of the subscription price
has been paid in, shall not be subject to assessment or any other
liability to pay the debts of the corporation.
Any stock of the corporation may be issued for money,
property, services rendered, labor done, cash advances for the
corporation, for any other assets of value in accordance with the
action of the Board of Directors, or other consideration permitted
under the Colorado Business Corporation Act. The judgment of the Board
of Directors as to value received in return for the issuance of shares
shall be conclusive and said shares, when issued, shall be fully paid
and nonassessable.
Purpose of the Reverse Stock Split
- ----------------------------------
The Board of Directors believes that the Reverse Stock Split is advisable
and in the best interests of the Company and its shareholders. In discussions
between the Company's executive officers with members of the brokerage and
investment banking industries, the Company has been advised that brokerage firms
might be more willing to evaluate the Company's securities as a possible
investment opportunity for their clients and may be more willing to act as a
market maker in the Company's securities if the price range for the Common Stock
were higher. Management believes that additional interest by the investment
-8-
<PAGE>
community in the Common Stock, of which there can be no assurance, is desirable
and could result in a more stable trading market for the Common Stock.
The Company also believes that existing low trading prices of the Common
Stock may have an adverse impact on the current efficient level of the trading
market for the Common Stock. In particular, brokerage firms often charge higher
commissions for transactions involving low-priced stocks than they would for the
same dollar amount of securities with a higher per share price. Some brokerage
firms will not recommend purchases of low-priced stocks to their clients or make
a market in such stocks, which tendencies may adversely affect the liquidity for
current shareholders and Company's ability to obtain additional equity
financing.
There can be no assurance that the Reverse Stock Split will not adversely
impact the market price of the Common Stock, that the marketability of the
Common Stock will improve as a result of the Reverse Stock Split, or that the
Reverse Stock Split will otherwise have any of the effects described herein.
Effect of the Reverse Stock Split
- ---------------------------------
The principal effect of the Reverse Stock Split will be to decrease the
number of issued and outstanding shares of the Common Stock from 294,970,000 to
approximately 3,000,000 shares. The Common Stock issued pursuant to the Reverse
Stock Split will be fully paid and nonassessable. The voting rights and other
rights that accompany the Common Stock prior to the Reverse Stock Split will not
be altered by the Reverse Stock Split.
Certificates and Fractional Shares
- ----------------------------------
The certificates currently representing issued and outstanding shares of
Common Stock will be deemed to represent 100 the number of shares of Common
Stock after the effective date of the Reverse Stock Split. New shares of Common
Stock, par value $.0001, will be issued in due course as old shares are tendered
to the transfer agent for exchange or transfer. Fractional shares resulting from
the Reverse Stock Split will be rounded to the closest whole share of Common
Stock.
Shareholders are not required to exchange their certificate(s) of pre-split
Common Stock for post-split Common Stock. Shareholders may, however, exchange
their certificates for shares of post-split Common Stock by surrendering their
old certificates representing shares of pre-split Common Stock to the Company's
transfer agent. Upon surrender to the transfer agent of the share certificate(s)
representing shares of pre-split Common Stock and the applicable transfer fee,
which presently is $12.00 per certificate, the holder will receive a share
certificate representing the appropriate number of shares of post-split Common
Stock.
-9-
<PAGE>
Effective Date of the Reverse Stock Split
- -----------------------------------------
The Reverse Stock Split will become effective on the effective date of the
Amendment to the Articles, which is expected to be filed as soon as practicable
after the annual shareholders' meeting (the "Effective Date"). Holders of record
of the Common Stock at the close of business on the Effective Date will be
entitled to receive one share of Common Stock for 100 shares then held.
Transfer Agent
- --------------
The transfer agent for the Common Stock is Corporate Stock Transfer, Inc.
Federal Income Tax Consequences of the Reverse Stock Split
- ----------------------------------------------------------
Any tax liability to shareholders resulting from the Reverse Stock Split
will likely not be substantial. The shares of Common Stock received in the
Reverse Stock Split should not result in any taxable gain or loss to
shareholders for federal income tax purposes. The tax basis of the Common Stock
received by shareholders as a result of the Reverse Stock Split will be equal,
in the aggregate, to the basis of the shares exchanged for the Common Stock. For
tax purposes, the holding period of the shares immediately prior to the
effective date of the Reverse Stock Split will be included in the holding period
of the Common Stock received as a result of the Reverse Stock Split.
Votes Required and Recommended
- ------------------------------
Approval of the proposal for the Company to amend the Articles to effect
the Reverse Stock Split and to reduce the number of authorized shares from
950,000,000 shares to 25,000,000 shares requires the affirmative vote of
two-thirds of the outstanding shares of the Company's Common Stock. THE BOARD OF
DIRECTORS OF THE COMPANY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL FOR
THE COMPANY TO AMEND THE ARTICLES TO EFFECT THE REVERSE STOCK SPLIT AND TO
REDUCE THE NUMBER OF AUTHORIZED SHARES FROM 950,000,000 SHARES TO 25,000,000
SHARES. Unless otherwise specified, the enclosed proxy will be voted "FOR" the
approval of the amendment.
B. AN AMENDMENT TO THE ARTICLES TO LIMIT THE PERSONAL LIABILITY OF THE
COMPANY'S DIRECTORS FOR MONETARY DAMAGES FOR CERTAIN BREACHES OF THE
FIDUCIARY DUTY OF CARE AS PERMITTED UNDER SECTION 7-108-402 OF THE
COLORADO BUSINESS CORPORATION ACT AND TO INDEMNIFY THE OFFICERS AND
DIRECTORS TO THE FULL EXTENT PERMITTED BY THE COLORADO BUSINESS
CORPORATION ACT
The Board of Directors has adopted a resolution to add Articles XIII and
XIV to the Articles, or, in order to indemnify directors, officers, employees,
fiduciaries, and agents of the Company to the full extent permitted by Colorado
-10-
<PAGE>
law (the "Indemnity Amendment") and to limit the personal liability of the
Company's directors for monetary damages for certain breaches of the fiduciary
duty of care as permitted under Section 7-108-402 of the Colorado Business
Corporation Act (the "Liability Amendment"). The Colorado Business Corporation
Act permits a Colorado corporation the power to indemnify a director, officer,
employee, fiduciary, or agent of the corporation provided that (1) the person
conducted himself in good faith and (2) the person was acting in his official
capacity with the corporation and reasonably believed his conduct was at least
not opposed to the corporation's best interests. The Colorado Business
Corporation Act also permits a Colorado corporation to limit or eliminate the
personal monetary liability of its directors to the corporation or its
shareholders by reason of their breach of the fiduciary duty of care as
directors, including liability for negligence, and gross negligence, by
including a provision to this effect in its Articles.
Text of the Indemnity and Liability Amendments
The Articles shall be amended by adding Articles XIII and XIV so that there
appears the following text:
ARTICLE XIII
INDEMNIFICATION OF DIRECTORS
OFFICERS, EMPLOYEES, FIDUCIARIES AND AGENTS
To the fullest extent provided by applicable state law,
including, but not limited to, the Colorado Business Corporation Act,
each director, officer, employee, fiduciary or agent of the Corporation
(and his heirs, executors and administrators) shall be indemnified by
the Corporation against expenses reasonably incurred by or imposed upon
him in connection with or arising out of any action, suit or proceeding
in which he may be involved or to which he may be made a party by reason
of his being or having been a director, officer, employee, fiduciary or
agent of the Corporation, or at its request of any other corporation of
which it is a shareholder or creditor and from which he is not entitled
to be indemnified (whether or not he continues to be a director,
officer, employee, fiduciary or agent at the time of imposing or
incurring such expenses). The foregoing right of indemnification shall
not be exclusive of other rights to which he may be entitled under
applicable state law.
ARTICLE XIV
LIMITATIONS OF LIABILITY
A director of the corporation shall not be personally liable
to the corporation or its shareholders for monetary damages for breach
of fiduciary duty
-11-
<PAGE>
as a director; except that this provision shall not eliminate or limit
the liability of a director to the corporation or its shareholders for
monetary damages otherwise existing for (i) any breach of the
director's duty of loyalty to the corporation or its shareholders;
(ii) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (iii) acts specified in
Section 7-108-403 of the Colorado Business Corporation Act; or (iv)
any transaction from which the director directly or indirectly derived
any improper personal benefit. If the Colorado Business Corporation
Act is hereafter amended to eliminate or limit further the liability
of a director, then, in addition to the elimination and limitation of
liability provided by the preceding sentence, the liability of each
director shall be eliminated or limited to the fullest extent
permitted by the Colorado Business Corporation Act as so amended. Any
repeal or modification of this Article XIV by the shareholders of the
corporation shall not adversely affect any right or protection of a
director of the corporation under this Article XIV, as in effect
immediately prior to the repeal or modification, with respect to any
liability that would have accrued, but for this Article XIV, prior to
the repeal or modification.
The Indemnity Amendment
The Colorado Business Corporation Act provides for a corporation to
indemnify and advance expenses to its directors and officers under certain
circumstances, as described more fully below, unless limited by the
corporation's articles of incorporation. In addition, the Colorado Business
Corporation Act specifies that a corporation may evidence the extent of its
intent to indemnify or advance expenses to directors and officers in its
articles of incorporation, bylaws, a resolution of its directors or shareholders
or in a contract; provided, however, that the indemnification of or advancement
of expenses to directors and officers shall be valid only if and to the extent
such is consistent with the Colorado Business Corporation Act and the
corporation's articles of incorporation, to the extent limited therein.
The Colorado Business Corporation Act requires that a corporation indemnify
a director or officer who is wholly successful, on the merits or otherwise, in
defense of any Proceeding (as defined below), to which he is a party, against
reasonable expenses, including attorney fees, incurred by him in connection with
the proceeding. A "Proceeding" means any threatened, pending or completed
action, suit, or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal.
In addition, the Colorado Business Corporation Act permits a corporation to
indemnify a director against Liability (as defined below) incurred in any
Proceeding to which the director is made a party because he is or was a director
if the director: (a) conducted himself in good faith; (b) reasonably believed
that (i) if the conduct was in his official capacity with the corporation, that
said conduct was in the corporation's best interest, or (ii) if the conduct was
not in his official capacity with the corporation, that said conduct was at
least not opposed to the corporation's best interests; and (c) had no reasonable
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cause to believe his conduct was unlawful if the Proceeding is criminal in
nature. "Liability" means the obligation to pay a judgment, settlement, penalty,
fine (including an excise tax assessed with respect to an employee benefit
plan), and reasonable expenses, including attorney fees, incurred with respect
to the Proceeding.
The Colorado Business Corporation Act also provides circumstances under
which a corporation may not indemnify its directors and officers. A corporation
may not indemnify a director or officer in connection with any proceeding (a) by
or in the right of the corporation in which the director or officer is adjudged
liable to the corporation, or (b) charging improper personal benefit to the
director or officer, whether or not involving action in his official capacity,
in which the director or officer is adjudged liable on the basis that personal
benefit was improperly received by him.
Under the Colorado Business Corporation Act, a corporation may pay for or
reimburse the reasonable expenses incurred by a director or officer who is a
party to a Proceeding in advance of the final disposition of the Proceeding if
the director or officer (a) furnishes the corporation a written affirmation of
his good faith belief that, with respect to the conduct subject of the
Proceeding, he conducted himself in good faith; (b) furnishes the corporation
with a written undertaking to repay the advance if it is determined that he did
not meet such standard of conduct (i.e. he did not act in good faith); and (c) a
determination is made that the facts then known to those making the
determination would not preclude indemnification under the Colorado Business
Corporation Act.
The Liability Amendment
In performing their duties, the Company's directors are scrutinized under
the "business judgment rule" which stipulates the fiduciary duties of care and
loyalty imposed upon directors. Under the business judgment rule, a director is
required to perform his duties as a director in good faith, in a manner he
reasonably believes to be in the best interests of the corporation, and with
such care as an ordinarily prudent person in a like position would use under
similar circumstances.
The "duty of care" requires that each director act in a manner which, after
a reasonable investigation, he believes in good faith to be in the best
interests of the Company and all of its shareholders and requires that each
director, in the performance of his corporate responsibilities, exercise the
care that an ordinary prudent person would exercise under similar circumstances.
The "duty of loyalty" prohibits faithlessness and self-dealing by directors and
prohibits directors from using their corporate position to make a personal
profit or gain other personal advantage.
In recent years, litigation seeking to impose liability on directors and
officers of publicly-held corporations for violations of the duty of care has
become commonplace. To avoid liability, the director is required to show that he
conducted himself in strict compliance with the duty of care as set forth in the
business judgment rule. In practice, the application of this duty varies widely
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among the courts, leaving directors with little guidance and certainty as to
what constitutes adequate care under a given set of circumstances. Compounding
this uncertainty, in several decisions, courts imposed a clairvoyant duty upon
directors, despite the fact that the actions of the directors in exercising
reasonable care are supposed to be judged as of the time and under the
circumstances existing at the time the decision was made.
This type of litigation is expensive to defend, with costs frequently
amounting to hundreds of thousands, and sometimes millions of dollars. In many
cases, costs of defense exceed the means of individual defendants, even if
ultimately they are vindicated on the issue of individual liability or
wrongdoing. In addition, in view of the costs and uncertainties of litigation,
it is often prudent to settle such claims. While settlements frequently are for
only a fraction of the amount claimed, the settlement amount may well exceed the
financial resources of individual defendants. In summary, without the benefit of
protective measures such as indemnification and limitation of liability as
permitted under the Colorado Business Corporation Act, exposure to the costs and
risks of claims of personal liability for corporate directors may exceed any
benefit to them of serving as a director of a public corporation.
The risks of personal liability for directors has traditionally been
mitigated through directors' and officers' liability insurance ("D&O
Insurance"). Changes in the market for D&O Insurance during recent years have
resulted in meaningful coverage becoming unavailable for directors and officers
of many corporations. Insurance carriers have in certain cases declined to renew
existing directors' and officers' liability policies, or have increased
premiums, thereby making the cost of obtaining such insurance prohibitive.
Moreover, policies often exclude coverage for areas where the service of
qualified independent directors is most needed. For example, many policies do
not cover liabilities or expenses arising from directors' and officers'
activities in response to attempted takeovers of a corporation.
In response to the above developments regarding litigation against
directors and the general unavailability of meaningful D&O Insurance, the
Colorado legislature adopted Section 7-108-402 of the Colorado Business
Corporation Act which permits a corporation to limit or eliminate the personal
monetary liability of a director for certain breaches of the duty of care.
Effectively, the limitation acts as a substitute for, or a supplement to, D&O
Insurance coverage.
In the opinion of the Board of Directors, inclusion of a provision for
limitation of liability and continuation of the Company's policy of entering
into indemnification agreements with its directors will best position the
Company to attract and retain qualified candidates to serve as its directors.
Although the Company has not experienced difficulty finding qualified candidates
to serve on its Board of Directors to date, it believes that it may experience
difficulty in the future if protective measures are not taken.
This provision will prevent the Company and its shareholders, but not third
parties, from bringing actions for monetary damages based upon a director's
negligent or grossly negligent business decisions, including those related to
attempts to change control of the Company, to the benefit of the Board and at
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the expense of the shareholders. Thus, under the Liability Amendment, the
Company or a shareholder will be able to prosecute an action against a director
for monetary damages for breach of fiduciary duty only if it can be shown that
such damages have been caused by a breach of the duty of loyalty, a failure to
act in good faith, intentional misconduct, a knowing violation of law, a direct
or indirect improper personal benefit, or an illegal distribution. It would not
limit or eliminate the right of the Company or any shareholder to seek an
injunction or any other non-monetary relief if a director breaches his duty of
care. Although equitable remedies remain available, they may be inadequate as a
practical matter.
The provision for the limitation of liability proposed to be included in
the Articles is intended to be effective only against actions by the Company and
its shareholders. Third party plaintiffs, such as creditors, will not be
prevented from recovering damages on the basis of the provision. In addition,
the provision would apply only to claims against a director arising out of his
status as a director and would not apply to claims arising from his status as an
officer or his status in any other capacity; nor would it apply to a director's
responsibilities under any other law, such as the federal securities laws. If
this proposed provision is approved, changes in Colorado law further limiting or
eliminating personal liability of directors automatically will be applicable
without further shareholder approval.
Neither the Board of Directors nor any of its members have experienced any
recent litigation which would have been affected by the above provision had it
been in effect previously. The Liability Amendment is not the result of any
pending or threatened litigation against any member of the Company's Board of
Directors.
The Liability Amendment will NOT permit any limitation upon the liability
of a director for: (i) any breach of his duty of loyalty to the Company and its
shareholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) assenting to an
unlawful distribution made in violation of section 7-106-401 of the Colorado
Business Corporation Act or the Articles, or (iv) any transaction from which he
directly or indirectly derived an improper personal benefit. Accordingly, the
provisions limiting or eliminating the potential monetary liability of directors
permitted by the Colorado Business Corporation Act apply only to the "duty of
care" of directors. The provision is not retroactive to limit liability for acts
or omissions occurring prior to the date of its adoption by shareholders.
Votes Required and Recommended
- ------------------------------
Approval of the Liability Amendment and the Indemnity Amendment requires
the affirmative vote of two-thirds of the outstanding shares of the Company's
Common Stock. THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE LIABILITY AMENDMENT AND INDEMNITY AMENDMENT. Unless otherwise
specified, the enclosed proxy will be voted "FOR" the approval of the
amendments.
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INDEPENDENT PUBLIC ACCOUNTANTS
The Company's financial statements for the fiscal year ended December 31,
1995 were audited by Davis & CO., CPA's, P.C. ("Davis"). The Board of Directors
has selected Davis as the Company's independent public accountants for the year
ending December 31, 1996. Representatives of Davis are expected to be present at
the Meeting and will have an opportunity to make a statement if they desire to
do so, and to be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
All proposals of shareholders intended to be included in the proxy
statement to be presented at the next annual meeting of shareholders must be
received at the Company's corporate offices at 7315 East Peakview Avenue,
Englewood, Colorado 80111, Attention: Corporate Secretary, on or before May 15,
1997.
OTHER BUSINESS
Management of the Company knows of no other matter which may come before
the Annual Meeting. However, if any additional matters are properly presented at
the Annual Meeting, it is intended that the person named in the enclosed Proxy
Statement, or his substitute, will vote such Proxy in accordance with his
judgment on such matters.
By Order of the Board of
Directors:
IMMUNE RESPONSE, INC.
Date: January 9, 1997 Joseph W. Hovorka, President
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- ------------------------------------------------------------------------------
PROXY
- ------------------------------------------------------------------------------
IMMUNE RESPONSE, INC.
7315 East Peakview Avenue
Englewood, Colorado 80111
(303) 796-8940
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 10, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
KNOW ALL MEN BY THESE PRESENTS: That the undersigned shareholder of Immune
Response, Inc., a Colorado corporation (the "Company"), hereby constitutes and
appoints Joseph W. Hovorka with the power to appoint his substitute, to appear,
attend and vote all of the shares of the Common Stock of the Company standing in
the name of the undersigned at the Annual Meeting of Shareholders to be held at
the Company's offices at 7315 East Peakview, Avenue Englewood, Colorado 80111,
on February 10, 1997, at 10:00 a.m., Mountain Time, and at any postponements or
adjournments thereof on the following matters.
1. ELECTION OF DIRECTORS
__ FOR the nominees listed below __ WITHHOLD AUTHORITY to vote
(EXCEPT AS MARKET TO THE CONTRARY) for nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR EITHER INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW)
Nominees: Joseph W. Hovorka * Thomas B. Olson * R. Andrew Girardot, Jr. D.D.S.
2. The following amendments to the Company's Articles of
Incorporation to be included in the Company's Amended and Restated Articles of
Incorporation.
(a) To effect a one-for-100 reverse stock split and to reduce the
number of authorized shares of the common stock of the Company
(the "Common Stock") from 950,000,000 shares to 25,000,000
shares, as permitted under Section 7-106-105 of the Colorado
Business Corporation Act. Fractional shares resulting from the
reverse stock split will be rounded to the closest whole share
of Common Stock.
FOR _______ AGAINST _______ ABSTAIN _______
<PAGE>
(b) To indemnify the directors, officers, employees, fiduciaries,
and agents of the Company to the full extent permitted by
Colorado law and to limit the personal liability of the
Company's directors for monetary damages for certain breaches
of the fiduciary duty of care as permitted under Section
7-108-402 of the Colorado Business Corporation Act.
FOR _______ AGAINST _______ ABSTAIN _______
3. To transact such other business as may properly come before
the Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR EACH NOMINEE SET FORTH IN PROPOSAL NO. 1, FOR PROPOSAL NO. 2(A) AND
FOR PROPOSAL NO. 2(B).
Please mark, date and sign your name exactly as it appears hereon and
return this Proxy in the enclosed envelope as promptly as possible. It is
important to return this Proxy properly signed in order to exercise your right
to vote if you do not attend the meeting and vote in person. When signing as
agent, partner, attorney, administrator, guardian, trustee or in any other
fiduciary or official capacity, please indicate your title. If stock is held
jointly, each joint owner must sign.
Date: ____________, 1997
----------------------------------------
Signature(s)
Address if different from that on label:
----------------------------------------
Street Address
----------------------------------------
City, State and Zip Code
----------------------------------------
Number of shares
Please check if you intend to be present at the meeting: ______
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
IMMUNE RESPONSE, INC.
These Amended and Restated Articles of Incorporation were approved by the
shareholders of IMMUNE RESPONSE, INC. on February 7, 1997 and the number of
shares voted for these Amended and Restated Articles of Incorporation votes was
sufficient for approval. From this date forward these Amended and Restated
Articles of Incorporation shall supersede the original Articles of Incorporation
and all amendments and supplements thereto. These Amended and Restated Articles
of Incorporation correctly set forth the provisions of the Articles of
Incorporation, as amended.
ARTICLE I
NAME
----
The name of the corporation shall be Immune Response, Inc.
ARTICLE II
DURATION
--------
The period of duration of the Corporation shall be perpetual.
ARTICLE III
(ELIMINATED)
------------
ARTICLE IV
PURPOSE AND POWERS
------------------
The purpose for which this Corporation is organized is to transact any
lawful business or businesses for which corporations may be incorporated
pursuant to the Colorado Business Corporation Act. In furtherance of the
foregoing purpose, this Corporation shall have and may exercise any and all of
the powers now or hereafter conferred upon corporations incorporated pursuant to
the Colorado Business Corporation Act.
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<PAGE>
ARTICLE V
CAPITAL STOCK
-------------
The aggregate number of shares and the amount of total authorized capital
of the Company shall consist of 950,000,000 shares of $.0001 par value common
stock.
As of the date upon which these Amended and Restated Articles of
Incorporation become effective, each 100 shares of authorized $.0001 par common
stock, whether or not issued and outstanding, shall be converted into one share
of $.0001 par common stock. Fractional shares resulting from the Reverse Stock
Split will be rounded to the closest whole share of Common Stock. Following this
reverse stock split the number of shares of $.0001 par common stock which the
Company shall be authorized to issue shall be 25,000,000.
The holders of Common Stock shall have and possess all rights as
shareholders of the corporation.
The capital stock, after the amount of the subscription price has been paid
in, shall not be subject to assessment or any other liability to pay the debts
of the corporation.
Any stock of the corporation may be issued for money, property, services
rendered, labor done, cash advances for the corporation, for any other assets of
value in accordance with the action of the Board of Directors, or other
consideration permitted under the Colorado Business Corporation Act. The
judgment of the Board of Directors as to value received in return for the
issuance of shares shall be conclusive and said shares, when issued, shall be
fully paid and nonassessable.
ARTICLE VI
CUMULATIVE VOTING
-----------------
The Shareholders shall not be entitled to cumulative voting.
ARTICLE VII
PREEMPTIVE RIGHTS
-----------------
No holder of any stock of the Corporation shall be entitled, as a matter of
right, to purchase, subscribe for or otherwise acquire any new or additional
shares of stock of the Corporation of any class, or any options or warrants to
purchase, subscribe for or otherwise acquire any such new or additional shares,
or any shares, bonds, notes, debentures or other securities convertible into or
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<PAGE>
carrying options or warrants to purchase, subscribe for or otherwise acquire any
such new or additional shares.
ARTICLE VIII
SHARE TRANSFER RESTRICTIONS
---------------------------
This Corporation shall have the right to impose restrictions upon the
transfer of any of its authorized shares or any interest therein. The Board of
Directors is hereby authorized on behalf of this Corporation to exercise this
Corporation's right to so impose such restrictions.
ARTICLE IX
(ELIMINATED)
------------
ARTICLE X
BOARD OF DIRECTORS
------------------
The number of Directors shall be fixed in accordance with the Bylaws.
ARTICLE XI
AMENDMENT OF BYLAWS
-------------------
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter or repeal the
Bylaws of the Corporation.
ARTICLE XII
ELECTION OF DIRECTORS
---------------------
Election of Directors need not be by written ballot unless the Bylaws of
the Corporation shall so provide.
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<PAGE>
ARTICLE XIII
INDEMNIFICATION OF DIRECTORS
OFFICERS, EMPLOYEES, FIDUCIARIES AND AGENTS
-------------------------------------------
To the fullest extent provided by applicable state law, including, but not
limited to, the Colorado Business Corporation Act, each director, officer,
employee, fiduciary or agent of the Corporation (and his heirs, executors and
administrators) shall be indemnified by the Corporation against expenses
reasonably incurred by or imposed upon him in connection with or arising out of
any action, suit or proceeding in which he may be involved or to which he may be
made a party by reason of his being or having been a director, officer,
employee, fiduciary or agent of the Corporation, or at its request of any other
corporation of which it is a shareholder or creditor and from which he is not
entitled to be indemnified (whether or not he continues to be a director,
officer, employee, fiduciary or agent at the time of imposing or incurring such
expenses). The foregoing right of indemnification shall not be exclusive of
other rights to which he may be entitled under applicable state law.
ARTICLE XIV
LIMITATIONS OF LIABILITY
------------------------
A director of the Corporation shall not be personally liable to the
Corporation or its Shareholders for monetary damages for breach of fiduciary
duty as a director; except that this provision shall not eliminate or limit the
liability of a director to the Corporation or its Shareholders for monetary
damages otherwise existing for (i) any breach of the director's duty of loyalty
to the Corporation or its Shareholders; (ii) acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law; (iii)
acts specified in Section 7-108-403 of the Colorado Business Corporation Act; or
(iv) any transaction from which the director directly or indirectly derived any
improper personal benefit. If the Colorado Business Corporation Act is hereafter
amended to eliminate or limit further the liability of a director, then, in
addition to the elimination and limitation of liability provided by the
preceding sentence, the liability of each director shall be eliminated or
limited to the fullest extent permitted by the Colorado Business Corporation Act
as so amended. Any repeal or modification of this Article XIV by the
Shareholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation under this Article XIV, as in effect
immediately prior to the repeal or modification, with respect to any liability
that would have accrued, but for this Article XIV, prior to the repeal or
modification.
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<PAGE>
On behalf of IMMUNE RESPONSE, INC., the undersigned, by their signatures
below, do hereby confirm, under penalties of perjury, that the foregoing Amended
and Restated Articles of Incorporation of IMMUNE RESPONSE, INC. constitute the
act and deed of IMMUNE RESPONSE, INC. and the facts stated herein are true.
IMMUNE RESPONSE, INC.
By___________________________
Joseph W. Hovorka, President
[SEAL]
By______________________________
Thomas B. Olson, Secretary
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