Exhibit 1.1
AMENDED AND RESTATED
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INVESTMENT BANKING AGREEMENT
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THIS AMENDED AND RESTATED INVESTMENT BANKING AGREEMENT (the
"AGREEMENT") is entered into as of December 11, 2003 and amends and restates
that certain Investment Banking Agreement, dated as of July 28, 2003, by and
between Entropin, Inc., a Delaware corporation (the "COMPANY"), and Invest Linc
Securities, LLC, a Delaware limited liability company (the "ADVISOR" or
"PLACEMENT AGENT").
The Company hereby engages Advisor to act as its business and financial
advisor upon the terms and conditions set forth in this Agreement. Advisor shall
act as Company's exclusive business and financial advisor in connection with
raising funds in either a public or private offering of the Company's equity or
debt securities, including the Offering (as hereinafter defined). Advisor shall
act as Company's non-exclusive business and financial advisor in connection with
any other Transaction. Advisor accepts this engagement. During the term of its
engagement, Advisor will advise and/or assist the Company in the following: (1)
evaluating the possible alternatives available to the Company in raising funds
either in a public or private offering of the Company's equity or debt
securities; (2) exploring strategic alternatives that may lead to a possible
transaction through sale, merger, joint venture or otherwise, whether effected
in a single transaction or series of related transactions in which 50% or more
of the voting power of the Company (other than through the Company's sale of the
Securities (as hereinafter defined) in the Offering) or all or substantially all
of its business or assets are combined with or transferred to another
unaffiliated strategic entity or company (a "STRATEGIC TRANSACTION") (2)
developing business plans, marketing plans, financial models and strategies, and
in providing such information regarding the Company to appropriate parties,
including potential underwriters, merger and acquisition candidates, potential
commercial, strategic and joint venture partners as well as other financial
sources of capital for the Company, and all other relevant consultants
("APPROPRIATE PARTIES"); (3) locating and/or securing potential board members,
advisory board members and management candidates; and (4) pursuing and
structuring, on behalf of the Company, commercial and strategic partnerships and
joint venture relationships (each a "TRANSACTION"). Advisor may perform other
services as agreed by the parties. The services rendered by Advisor to the
Company shall be subject to the following terms and conditions.
The Company proposes to offer and sell exclusively up to $3 million,
plus the Over-Allotment, (the "OFFERING") of its common stock, $0.0001 par value
per share (the "SECURITIES") either in a private placement to "accredited
investors," as such term is defined in Regulation D promulgated under the
Securities Act of 1933, as amended (the "ACT") or in a registered offering on
Form SB-2. If the Offering is a private placement, the Securities will be issued
as "restricted securities" and, as such will not be registered under the Act,
but the Company will register such Securities for resale under the Act as soon
as practicable after the Final Closing (as defined herein). All Securities are
offered subject to the right of the Company to reject any subscription for
Securities in whole or in part for any reason whatsoever or to sell to any
prospective investor less than the number of Securities subscribed for by such
prospective investor and subject to certain other conditions.
The Company has determined to use the services of the Placement Agent
as its exclusive agent to solicit subscriptions for the Securities in the
Offering on a "best efforts" basis as set forth in Section 3 (b), for as long as
the Offering continues or until the time period set forth in Section 4(b)
expires, whichever first occurs. The Placement Agent hereby agrees to act in
such capacity and to use its best efforts to find purchasers for the Securities
in accordance with the terms and conditions of this Agreement. Placement Agent
may engage other duly licensed agents to perform some or all of the Placement
Agent's duties hereunder ("PLACEMENT AGENT SYNDICATE MEMBERS"). In such event,
all arrangements as to compensation of other such Placement Agent Syndicate
Members shall be determined by Placement Agent and shall be chargeable against
the compensation due to Placement Agent from the Company. The Company shall be
advised of and shall have the right to approve any other Placement Agent
Syndicate Members.
As promptly as practicable following the execution of this Agreement by
the parties hereto, the Company shall prepare a Registration Statement on Form
SB-2 or a Confidential Private Placement Memorandum, as appropriate, with
subscription documents attached as an exhibit thereto (the "SUBSCRIPTION
DOCUMENTS") for use in conjunction with the offer and sale of the Securities.
Investors who subscribe for the Securities (the "SUBSCRIBERS") will be required
to complete the Subscription Documents and execute the Subscription Agreement.
Such Form SB-2 or Confidential Private Placement Memorandum (as either may be
supplemented or amended from time-to-time) together with the Subscription
Documents is herein called the "OFFERING MEMORANDUM".
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and covenants and agrees with, the Placement Agent,
as of the date hereof, that:
(a) The Company is a Corporation duly organized, validly
existing and in good standing under the laws of Delaware, and has the power and
authority to carry on its business as conducted or proposed to be conducted by
it and to hold title to its property, which business and property will be
described in the Offering Memorandum. The Company has the corporate power and
authority to execute and deliver this Agreement, to conduct such business and to
perform its obligations hereunder and consummate the transactions contemplated
by each Subscription Document tendered by a Subscriber that is accepted by the
Company.
(b) The Offering Memorandum will not include any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(c) Except as will be disclosed in the Offering Memorandum,
there are no actions, suits, proceedings or investigations pending or, to the
best of the Company's knowledge, threatened against or affecting the Company.
(d) Except as will be disclosed in the Offering Memorandum,
all requisite authorizations, approvals or orders from any court, governmental
or regulatory official or body necessary to permit the Company to conduct its
business as will be described in the Offering Memorandum will have been obtained
or are in the process of being applied for prior to the Closing Date (as defined
in Section 4 below). All requisite authorizations, approvals or orders from any
court or any governmental or regulatory official or body necessary for the
consummation by the Company of the transactions contemplated by this Agreement
will have been obtained or are in the process of being applied for prior to the
Closing Date (as defined in Section 4 below).
(e) This Agreement has been duly and validly authorized,
executed and delivered by the Company and constitutes the valid and binding
agreement of the Company, enforceable in accordance with its terms, except that
(i) such enforcement may be subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar
laws relating to or affecting creditors' rights generally and general principals
of equity (regardless of whether such enforcement is considered in a proceeding
in equity or at law) and (ii) the indemnification provisions of this Agreement
may be held to violate public policy (under either federal or state law) in the
context of the offer or sale of securities.
(f) The Company's execution and delivery of this Agreement,
the fulfillment of the terms set forth herein and the consummation of the
transactions contemplated herein will not conflict with or constitute a breach
of, or default under (i) the Company's certificate of incorporation or by-laws,
(ii) any material agreement, indenture or instrument by which the Company is
bound, or (iii) any law, administrative regulation or court decree .
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(g) It is the Company's present intention to utilize the
proceeds from the sale of the Securities substantially in the manner as will be
set forth in the Offering Memorandum. Further, the Company has no present
intention to make any material changes in its business as it will be described
in the Offering Memorandum.
(h) On the date hereof, and at the Closing Date (as defined in
Section 4 below), the Company is not or will not be an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(i) Any written or oral information provided to prospective
purchasers of Securities by authorized representatives of the Company other than
the Placement Agent ("AUTHORIZED PERSONS") will not contain any untrue statement
of a material fact or, when taken together with the information set forth in the
Offering Memorandum, omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(j) The sale of the Securities has been duly and validly
authorized by the Company. There are no outstanding options, warrants or other
rights to purchase or otherwise acquire any Securities of the Company or any
security convertible into such Securities, except as will be described in the
Offering Memorandum.
(k) The Company agrees to indemnify the Placement Agent with
respect to any claim for finder's fees made by persons other than the Placement
Agent in connection with the Offering. No director or principal shareholder of
the Company is a member of a broker-dealer registered with the National
Association of Securities Dealers, Inc. (the "NASD") or an employee or
associated member of a broker-dealer registered with the NASD.
(l) Any financial statements and related notes that may be
included in the Offering Memorandum will fairly represent the financial position
and results of the operations of the Company at the dates and for the periods to
which they relate. Said financial statements and related notes have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved and comply with the
requirements of the Securities Act of 1933, as amended, and any financial
information to be set forth in the Offering Memorandum will fairly present the
financial condition of the Company and will have been prepared on a basis
consistent with such financial statements or the books of the Company.
(m) Subsequent to the respective dates of which information is
given in the Offering Memorandum and prior to the closing date of the Offering;
(i) the Company will not incur or will not have incurred any material
liabilities or obligations, direct or contingent, or entered into any material
transactions, not in the ordinary course of business; (ii) the Company will not
have paid or declared any dividends or other distributions on its capital stock;
and (iii) there will not be and not have been any material change in the capital
stock or outstanding indebtedness of the Company, or any material adverse change
or development involving a prospective material adverse change in or affecting
the business, business prospects, financial condition, or results of operations,
present or prospective, or the Company.
(n) The Company has filed all necessary federal, state and
foreign income and franchise tax returns and has paid all taxes shown as due
thereon, all tax liabilities have been adequately provided for on the books of
the Company; and the Company has no knowledge of any tax proceeding or action
pending or threatened against the Company which might materially adversely
affect the business, business prospects, financial condition or results of
operation, present or prospective, of the Company or the respective businesses
or properties of the Company.
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2. REPRESENTATIONS AND WARRANTIES OF THE PLACEMENT AGENT. The Placement
Agent hereby represents and warrants to, and covenants and agrees with, the
Company, as of the date hereof, that:
(a) The Placement Agent is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with the limited liability company power and authority to conduct its
business, to execute and deliver this Agreement, and to perform the obligations
contemplated herein. The Placement Agent is an "accredited investor," as such
term is defined in Regulation D promulgated under the Act.
(b) This Agreement has been duly and validly authorized,
executed and delivered by the Placement Agent and constitutes the valid, binding
and enforceable agreement of the Placement Agent, except to the extent that (i)
such enforcement may be subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting the rights of creditors generally and general
principles of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law), and (ii) the indemnification provisions of this
Agreement may be held to violate public policy (under either federal or state
law) in the context of the offer or sale of securities.
(c) The Placement Agent's execution and delivery of this
Agreement, and the performance of its obligations hereunder, will not result in
a breach or violation of any of the terms and provisions of, or constitute a
default under, its articles of organization or operating agreement, any
agreement or instrument to which it is a party or by which it is bound, or any
judgment, decree, order or, to its knowledge, any statute, rule or regulation
applicable to Placement Agent.
(d) As of the date of the Offering Memorandum, the information
contained in the Offering Memorandum relating to the Placement Agent, if any,
will not include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(e) The Placement Agent is (i) a broker-dealer duly registered
pursuant to the provisions of the Exchange Act; (ii) a member in good standing
of the NASD; and (iii) duly registered as a broker-dealer under the applicable
statutes and regulations of each state in which the Securities will be offered
and sold, except such states in which the Placement Agent is exempt from
registration or such registration is not otherwise required.
(f) Except as will be disclosed in the Offering Memorandum,
there are no actions, suits, proceedings or investigations pending or, to the
best of the Placement Agent's knowledge, threatened against or affecting the
Placement Agent.
(g) All requisite authorizations, approvals or orders from any
court or any governmental or regulatory official or body necessary for the
consummation by the Placement Agent of the transactions contemplated by this
Agreement will have been obtained or are in the process of being applied for
prior to the Closing Date (as defined in Section 4 below).
(h) Any written or oral information provided to prospective
purchasers of Securities by authorized representatives of the Placement Agent or
Placement Agent Syndicate Members will not contain any untrue statement of a
material fact or, when taken together with the information set forth in the
Offering Memorandum, omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
3. SALE OF THE SECURITIES BY THE PLACEMENT AGENT. The Company and the
Placement Agent hereby agree as follows:
(a) To the extent required under the Act and applicable state
Blue Sky laws:
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(i) The Offering will be made within the United
States exclusively to accredited investors in reliance upon the exemption from
registration under section 4(2) of the Act and the provisions of Regulation D,
and as permitted in the jurisdictions in which the Securities are to be offered.
(ii) The Placement Agent and the Company shall make
reasonable inquiry to determine whether an accredited investor is purchasing for
its own account or if it is purchasing for the account of others.
(iii) In the case of any purchaser acting on behalf
of one or more third parties, the Placement Agent and the Company shall make
reasonable inquiry to determine that each such third party is an accredited
investor.
(b) The Company hereby appoints the Placement Agent as its
exclusive selling agent to solicit prospective purchasers of the Securities and
as such to effect sales of the Securities, on a best efforts basis, under the
terms and conditions of this Agreement. The Company may terminate the Placement
Agent's agency hereunder immediately upon written notice to the Placement Agent
in the event of the Placement Agent's failure to perform its obligations
hereunder in any material respect, upon the Placement Agent's material breach of
any of its representations and warranties contained herein or upon the Placement
Agent's gross negligence or willful misconduct. Subject to the terms and
conditions and upon the basis of the representations and warranties herein set
forth, the Placement Agent accepts such appointment and agrees to use its best
efforts to find prospective purchasers for the Securities in accordance with the
terms and conditions of this Agreement. Either party may terminate the Agreement
upon thirty (30) days written notice to the other party.
(c) Each person desiring to purchase Securities will be
required to complete and execute the Subscription Documents. Each Subscriber
will deliver payment by wire transfer or by check payable to the order of the
Company or the appointed "Escrow Agent," in the amount of the aggregate purchase
price of the Securities subscribed for. Each Subscriber will return to the
Placement Agent or the Company such Subscription Documents together with such a
check (or wire transfer) and any other documents that may be required under
state securities laws or by the Company. Neither the Placement Agent nor any
investment advisor is permitted to sign any Subscription Documents for any
Investor.
(d) Upon receipt of a Subscriber's Subscription Documents, the
Company will determine promptly whether it wishes to accept the proposed
purchaser as a holder of Securities in the Company, it being understood that the
Company reserves the right to reject the tender of any Subscription Document
before the end of the second business day following the Company's receipt of the
Subscription Document; provided, however, the Company may subsequently reject
the tender of any Subscription Documents in the event that at least $500,000 in
tendered purchase price has not been tendered by the end of the Minimum Offering
Period (as hereinafter defined). Should the Company determine to reject the
tender, it will promptly notify the Placement Agent of such determination. The
Placement Agent will notify the Subscriber of such determination, and the
Company will issue and mail (or wire transfer) (or cause the appointed Escrow
Agent to issue and mail (or wire transfer)) to the Subscriber, a check in an
amount equal to the tendered purchase price of the Securities.
4. CLOSING DATES.
(a) The Company will hold the closing of this Offering (the
"FIRST CLOSING") at any time in its discretion on or before February 13, 2004
upon receipt of at least $500,000 in tendered purchase price in accordance with
Section 3 above. Thereafter, the Offering will be sold until the Final Closing,
which will occur on the earlier of April 13, 2004 or the sale of the maximum
placement, as described in the following paragraph (the "FINAL CLOSING"). The
First Closing, Final Closing and any additional closing in connection with the
Over-Allotment are each referred to as a "Closing."
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(b) The time limit for the minimum placement of $500,000 shall
be February 13, 2004 (the "MINIMUM OFFERING PERIOD"). If the minimum has not
been reached within the Minimum Offering Period either party may terminate this
Agreement by written notice to the other party. Upon completion of the minimum
placement within the Minimum Offering Period, Placement Agent shall have up to
the date of the Final Closing in which to complete the maximum placement, which
shall be $3,000,000, subject to the Over-Allotment (defined below). If By mutual
consent, any of the above time periods may be extended or shortened; provided,
however, that no extension of the Minimum Offering Period may be made without
the written consent of all Subscribers who have then executed Subscription
Documents and tendered the purchase price for such securities.
(c) If the maximum placement of $3,000,000 is reached by the
Final Closing, then the Company agrees that it will, for a period of up to 30
days, sell up to an additional $300,000 of Securities to investors previously
contacted by the Placement Agent (the "OVER-ALLOTMENT").
5. COMPENSATION.
(a) For the services of the Placement Agent in soliciting and
obtaining purchasers of the Securities in the Offering, the Company agrees to
pay the Placement Agent (i) a fifteen thousand dollar ($15,000) non-refundable
retainer fee at the signing of this Agreement, and twenty thousand dollars
($20,000) of restricted, unregistered shares of Company Common Stock at signing;
the number of shares shall be determined by dividing $20,000 by $0.70 and such
shares shall be registered for resale under the Act as soon as practicable after
the Final Closing; (ii) a selling commission equal to eight percent (8%) of the
aggregate proceeds received from the sale of Securities at each particular
Closing (the "SELLING COMMISSION"), payable at each particular Closing; and
(iii) one Placement Agent warrant entitling Placement Agent or its designees to
purchase seven percent (7%) of the number of shares of Company Common Stock sold
directly by the Placement Agent at each particular Closing ("PLACEMENT AGENT
WARRANT"), payable at each particular Closing, which Placement Agent Warrant
will be exercisable at the price of the Securities sold in the Offering, subject
to cashless exercise rights.
(b) Each Placement Agent Warrant shall have cashless exercise
rights, but will otherwise be identical in all respects to those offered by the
Company through the Placement Agent, including anti-dilution protection,
piggy-back and demand registration rights. Placement Agent shall pay $10.00 for
the Placement Agent Warrant. Notwithstanding any provision to the contrary,
should the Company elect not to issue any warrants as part of the Offering, then
Placement Agent and Company shall mutually negotiate the terms of a Warrant
prior to the start of the Offering which will be exercisable at the price of the
securities sold in the Offering and have a five-year exercise period.
(c) For the services of the Placement Agent in connection with
any Strategic Transaction with any person or entity (or an affiliate thereof)
with whom the Company had substantive discussions about a potential Strategic
Transaction and which was contacted by Advisor during the term of this
Agreement, Company agrees to pay Advisor a success fee, upon closing of a
Strategic Transaction in which of 1% of all Consideration received by the
Company and/or its stockholders initially and subsequently, including without
limitation contingent Consideration and other post-closing payments.
"Consideration" will be deemed to include extraordinary dividends, forgiveness
of debt, and other consideration paid in connection with the transaction
including any indebtedness for borrowed money directly or indirectly assumed in
connection with a transaction, but shall not include amounts payable under
consulting, non-competition, employment, severance or other similar agreements.
This fee will be due when the consideration is received by the Company or its
stockholders, as applicable, and will be payable in cash at closing (except as
otherwise provided herein). The value of any Consideration received in the form
of securities will be determined based on the average of the closing daily sales
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prices of such securities on the primary exchange on which they are traded for
the ten trading days ending two trading days prior to the transaction closing.
Should the Company request that Advisor provide an opinion as to the fairness of
the financial Consideration to be received by stockholders of the Company (a
"Fairness Opinion"), the request to Advisor must be made at least 30 days prior
to the delivery date, and $75,000 will be due upon delivery of the Fairness
Opinion. This amount will be credited against the success fee which will be due
when the Consideration is received, directly or in escrow. The Fairness Opinion
may be included in any disclosure document filed by the Company with the
Securities and Exchange Commission with respect to such proposed transaction or
in any disclosure document disseminated to the Company's stockholders to obtain
the stockholders' consent to the transaction, provided that it is reproduced in
full, and that any description of or reference to Advisor or summary of the
Fairness Opinion in the disclosure document is in a form reasonably acceptable
to Advisor and its counsel.
6. PAYMENT OF FEES DURING TAIL PERIOD.
A contingent fee equal to eight percent (8%) of the aggregate proceeds
received from the sale of Securities to a Contact (as defined herein) shall be
payable with respect to any funding/capitalization transaction completed (or,
for which there is a firm unconditional commitment to complete) during (i) the
term of this Agreement, or (ii) the twelve (12) month period (the "TAIL PERIOD")
immediately following the earlier of the expiration of the Minimum Offering
Period or the termination of this Agreement, with any person or entity (or an
affiliate thereof) with whom the Company had substantive discussions about a
potential investment and (a) which was contacted by the Company or Placement
Agent during the term of this Agreement, or (b) which reviewed any information,
valuation or other written materials prepared by Placement Agent or Company
concerning the Company, whether during or subsequent to the term of this
Agreement (collectively, "CONTACTS"). Upon the expiration of the Minimum
Offering Period or the termination of this Agreement,, Placement Agent shall
promptly, but in no event later than three (3) business days thereafter,
identify in writing all entities which were contacted by Placement Agent for
purposes of the Tail Period provision in part (ii) above, and upon written
request by Placement Agent, the Company shall identify in writing all entities
which contacted or were contacted by the Company during the term of the
Agreement. Nevertheless, the failure of the Company or Placement Agent to
identify an entity shall not preclude Placement Agent from providing sufficient
proof at a later date that one or more entities should have been included on the
Company's or the Placement Agent's list of Contacts.
7. FURTHER AGREEMENTS OF THE COMPANY.
(a) The Company covenants and agrees that it will pay or cause
to be paid (i) all of the Placement Agent's pre-approved expenses associated
with the soliciting and obtaining of purchasers of the Securities including
travel expenses in connection with investor presentations, (ii) all expenses and
fees in connection with the preparation, printing, filing, delivery and shipping
of the Offering Memorandum (and all other exhibits to the Offering Memorandum
and any amendments or supplements thereto, but not including the preparation or
negotiation of this Agreement); (iii) filing fees required in connection for
offering and sale by the Placement Agent under the securities or Blue Sky laws
of the states and other jurisdictions where necessary; and (iv) all reasonable
fees and expenses of Placement Agent's counsel for its review of the Offering
Memorandum and work related thereto, not to exceed $10,000 without prior
approval by the Company.
(b) If at any time when an Offering Memorandum relating to the
Securities is required to be delivered under the Act, any event will have
occurred as a result of which, in the opinion of counsel for the Company or the
Placement Agent, the Offering Memorandum includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or if it is necessary at any time to amend
the Offering Memorandum to comply with the Act, the Company promptly will
prepare an appropriate supplement or amendment thereto, and will deliver to the
Placement Agent such number of copies thereof as the Placement Agent may
reasonably request.
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(c) To the extent required under the Act and applicable state
Blue Sky laws:
(i) The Company will furnish to the Placement Agent
promptly as soon as the same shall be filed copies of all filings by the Company
on Form D for the Offering.
(ii) The Company and all affiliates will not take any
action in connection with the Offering, which would cause the Offering not to
comply with Section 4(2) of the Act.
(iii) The Company will not sell Securities to any
person if the Company has reason to believe that material information supplied
or representations or warranties made by that person are not fully accurate and
unless immediately prior to making such sale the Company reasonably believes
that such person is an "accredited investor" within the meaning of Regulation D.
(iv) The Company shall exercise reasonable care to
assure the Subscribers are not underwriters within the meaning of Section 2(11)
of the Act, shall take all actions required by Regulation D and shall place a
legend on each certificate which is provided to the purchasers stating that the
Securities have not been registered under the Act and, where applicable, state
securities laws, and setting forth or referring to the restrictions on
transferability and sale of the Securities.
(v) The Company will duly and timely file (i) with
the Commission all required reports, including on Form D, with respect to the
sale of the Securities and (ii) all reports required to be filed under
applicable state securities laws and regulations and by the regulatory agencies
charged with enforcement thereof.
(d) The Company agrees that it will furnish or make available
to the Placement Agent or the Placement Agent's counsel any and all
documentation reasonably requested in connection with the Placement Agent's due
diligence efforts regarding information in the Offering Memorandum.
(e) The Company shall make available to each offeree and any
individual advising such offeree the opportunity to ask questions and receive
answers concerning the Company and the terms and conditions of the Offering, and
to obtain any additional information, to the extent that such information is in
the possession of the Company or can be acquired by any of it without
unreasonable effort or expense, necessary to verify the accuracy of the
information contained in the Offering Memorandum.
(f) The Company will notify the Placement Agent immediately
upon receipt thereof and confirm the notice in writing of the issuance by the
Commission or any state securities administrator of any stop order suspending
the effectiveness of any qualification of the Securities for sale or enjoining
the sale of the Securities or of the initiation of any proceeding for that
purpose. The Company will make every reasonable effort to prevent the issuance
of any stop order and, if any stop order shall be issued, to obtain the lifting
of the stop order at the earliest possible time.
(g) The Company, at Company expense, shall establish an escrow
account which fulfills Agent's obligations as promulgated under Rule 15(c)2-4 of
the Securities Exchange Act of 1934, as amended. Such escrow account may be
established at a mutually acceptable national bank or as such other place as may
be agreed upon.
(h) After the execution of this Agreement and upon the
commencement of the Placement Agent conducting further due diligence on the
Company and the Offering, the Company agrees to execute the Due Diligence
Certificate attached hereto to as Exhibit "A".
8. FURTHER AGREEMENTS OF THE PLACEMENT AGENT.
(a) The Placement Agent agrees (on behalf of itself and the
other Placement Agent Syndicate Members) that it will accept subscriptions only
from investors who have received a copy of the Offering Memorandum, who have
fully completed and executed the appropriate Subscription Documents. The
Placement Agent agrees (on behalf of itself and the other Placement Agent
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Syndicate Members) not to publish, circulate or use any other advertisement or
solicitation material without the prior written approval of the Company or
otherwise conduct the offering in a manner which would be deemed to be a public
offering where this would violate any federal or state securities laws
applicable to the Offering.
(b) The Placement Agent agrees (on behalf of itself and the
other Placement Agent Syndicate Members) to solicit Subscribers only in the
states and other jurisdictions that such solicitation can be made in accordance
with any limitations described therein and in the states and jurisdictions in
which the Placement Agent (or any Placement Agent Syndicate Members) is licensed
or qualified to make offers and sales of the Securities. The Placement Agent
agrees (on behalf of itself and the other Placement Agent Syndicate Members) not
to make offers and sales to residents of foreign countries.
(c) To the extent required under the Act and applicable state
Blue Sky laws:
(i) The Placement Agent (on behalf of itself and the
other Placement Agent Syndicate Members) agrees not to take any action in
connection with the Offering, which would cause the Offering not to comply with
Section 4(2) of the Act.
(ii) The Placement Agent (on behalf of itself and the
other Placement Agent Syndicate Members) agrees not to offer Securities to any
person if the Placement Agent has reason to believe that material information
supplied or representations or warranties made by that person are not fully
accurate and unless immediately prior to making such offer the Placement Agent
reasonably believes that such person is an "accredited investor" within the
meaning of Regulation D.
(d) The Placement Agent (on behalf of itself and the other
Placement Agent Syndicate Members) agrees to keep confidential and not provide
any information to prospective purchasers of Securities or other persons not
contained in the Offering Memorandum or publicly disclosed and available.
9. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless
Placement Agent and each person who controls Placement Agent within the meaning
of the Act (collectively, the "PLACEMENT AGENT INDEMNIFIED PARTIES") against any
losses, claims, damages or liabilities, joint or several (including, without
limitation, any legal or other expenses reasonably incurred by such Placement
Agent Indemnified Party in connection with investigating or defending any such
claim, liability or action), to which such Placement Agent Indemnified Party may
become subject under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of a material fact
contained (A) in the Offering Memorandum or any amendment or supplement thereof
or thereto, as applicable, or (B) in any Blue Sky application or other document
executed by the Company specifically for that purpose or based upon written
information furnished by the Company filed in any state or other jurisdiction in
order to qualify any or all of the Securities under the securities laws thereof
(any such application, document or information being hereinafter called a "BLUE
SKY APPLICATION"); (ii) the omission or alleged omission to state in the
Offering Memorandum or any amendment or supplement thereof or thereto, as
applicable, or in any Blue Sky Application, a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; or (iii) any
misrepresentation, breach of warranty or nonfulfillment of any agreement or
covenant on the part of the Company under this Agreement, or from any
misrepresentation in or omission from any certificate, agreement, schedule,
statement, document or instrument furnished to the Placement Agent pursuant
hereto; provided, however, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage or liability (x) arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by the Placement Agent specifically for use
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with reference to the Placement Agent in the preparation of the Offering
Memorandum or any such Blue Sky Application or any such amendments or
supplements thereto or (y) is primarily the result of the Placement Agent's
willful misconduct or gross negligence. This indemnity agreement will be in
addition to any liability which the Company may otherwise have.
(b) The Placement Agent agrees to indemnify and hold harmless
the Company and each of its directors, officers, employees, agents and
representatives (collectively, the "COMPANY INDEMNIFIED PARTIES") against any
losses, claims, damages or liabilities, joint or several (including, without
limitation, any legal or other expenses reasonably incurred by such Company
Indemnified Party in connection with investigating or defending any such claim,
liability or action), to which such Company Indemnified Party may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of a material fact contained
based upon written information supplied by the Placement Agent regarding the
Placement Agent (A) in the Offering Memorandum or any amendment or supplement
thereof or thereto, as applicable, regarding the Placement Agent or (B) in any
Blue Sky Application; (ii) the omission or alleged omission to state in the
Offering Memorandum or any amendment or supplement thereof or thereto, as
applicable, or in any Blue Sky Application, a material fact regarding the
Placement Agent required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; or (iii) any misrepresentation, breach of warranty or
nonfulfillment of any agreement or covenant on the part of the Placement Agent
under this Agreement, or from any misrepresentation in or omission from any
certificate, agreement, schedule, statement, document or instrument furnished to
the Company pursuant hereto.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying party
under this Section 9, notify in writing the indemnifying party of the
commencement thereof; and the omission so to notify the indemnifying Party will
relieve it from any liability under this Section 9 as to the particular item for
which indemnification is then being sought, but not from any other liability
that it may have to any indemnified party. The indemnifying party shall, upon
the request of the indemnified party, retain counsel reasonably satisfactory to
the indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceedings and shall pay as incurred
the reasonable fees and expenses of such counsel related to such proceeding. In
no event shall the indemnifying party be liable for the fees and expenses of
more than one counsel for all indemnified parties in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances (other
than such local counsel as may be employed by counsel to the indemnified parties
to render legal advice with respect to the laws of, or legal services in, states
or jurisdictions other than those states and jurisdictions in which counsel to
the indemnified parties is admitted to practice law.) In any such proceeding,
any indemnified party shall cooperate in the defense and shall have the right to
retain its own counsel at its own expense. In case any such action is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and, to the extent that it may wish, jointly with any other
indemnifying party, similarly notified, to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 9 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof. In the event that the
indemnified party assumes the defense of such action or proceeding, the
indemnified party will keep the indemnifying party reasonably informed of the
progress of any defense, compromise or settlement and will cooperate and consult
with the indemnifying party and its counsel in connection therewith. No
indemnifying party will enter into any comprise or settlement of any claim or
action without the consent of the indemnified party. Likewise, No indemnified
party will enter into any comprise or settlement of any claim or action without
the consent of the indemnifying party.
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10. EFFECTIVE DATE. Upon the execution and delivery of this Agreement
by all of the parties hereto, this Agreement will become effective upon the date
specified on the signature page hereto. The Offering shall become effective at
such time a the Company informs the Placement Agent that the Offering has been
approved by the Company's Board of Directors and indicating that the Offering
Memorandum is released for distribution.
11. SURVIVAL OF INDEMNITIES, WARRANTIES AND REPRESENTATIONS. The
respective indemnity agreements of the Company and Placement Agent contained in
Section 9 hereof, and the representations and warranties of the Company and
Placement Agent set forth herein, will remain operative and in full force and
effect, regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of the Company or Placement Agent, or any
controlling person referred to in Section 9, and will survive the delivery of
and payment for the Securities, and any successor of the Placement Agent or the
Company or of any such controlling person or any legal representative of any
such controlling person, as the case may be, will be entitled to the benefit of
the respective indemnity agreements.
12. CREDIT. Upon Closing of any Offering, Placement Agent may, at its
own expense, place announcements in financial and other newspapers and
periodicals (such as customary "tombstone" advertisement) describing its
services in connection therewith. Notwithstanding, Placement Agent is hereby
authorized to include the Company on its publicly disclosed list of clients.
13. NOTICES. Except as is otherwise provided in this Agreement, (a)
whenever notice is required by the Provisions of this Agreement or otherwise to
be given to the Company, such notice will be in writing addressed to the Company
at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇; and (b)
whenever notice is required by the provisions of this Agreement or otherwise to
be given to Placement Agent, such notice will be in writing addressed to the
Placement Agent at ▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇. ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇ ▇. Paris, II. Any notice referred to herein may be given in writing or by
telecopy or telephone and if by telecopy or telephone will be immediately
confirmed in writing. Notice (unless actual) will be effective upon mailing or
telecopy transmission, as the case may be.
14. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement is made
solely for the benefit of Placement Agent, the Company and the controlling
persons referred to in Section 9 hereof, and their respective successors and
assigns, and no other person will acquire or have any right by virtue or this
Agreement, and the term "successors and assigns," as used in this Agreement,
will not include any Purchaser.
15. DISPUTE RESOLUTION. (a) If a dispute arises out of or relates to
this Agreement, the parties agree first to try in good faith to settle the
dispute by mediation before resorting to arbitration or litigation. The parties
agree that the mediator shall be chosen no later than thirty (30) days after the
submission of a claim by either party, and that the mediation process shall be
concluded no later than thirty (30) days after selection of the mediator. If the
parties cannot agree on the selection of a mediator, one shall be selected by
the American Arbitration Association ("AAA"). The fees and expenses of the
mediator shall be borne equally by the parties. (b) If the controversy is not
resolved through mediation pursuant to Paragraph (a) above, the parties agree
that any controversy or claim arising out of or relating to this Agreement shall
be determined by binding arbitration. This transaction involves commerce, and
the arbitration is subject to and shall be conducted by a single arbitrator in
accordance with the United States Arbitration Act notwithstanding any choice of
law provision in this Agreement, and under the Commercial Arbitration Rules of
the AAA. The arbitrator shall have authority to award damages and grant other
relief he deems appropriate. The arbitrator shall give effect to statues of
limitation in determining any claim. Any controversy concerning whether an issue
is arbitrable, shall be determined by the arbitrator. Judgment upon the
arbitration award may be entered in any court having jurisdiction. The fees and
expenses of the arbitrator and AAA shall be borne equally by the parties. Any
mediation or arbitration under this Section 15 shall be held in California.
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16. GOVERNING LAW. This Agreement is to be governed by and construed in
accordance with the laws of the State of Illinois, without regard to principles
of conflicts of law.
17. COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, any one of which need not contain the signatures of more
than one party, but all such counterparts taken together shall constitute one
and the same Agreement.
18. ENTIRE AGREEMENT. This Agreement, including all exhibits and
schedules, sets forth the entire agreement of the Placement Agent and the
Company with respect to the subject matter hereof and terminates and supersedes
all prior agreements and understandings between or among the Placement Agent and
the Company with respect to the subject matter hereof.
19. HEADINGS. The descriptive headings in this Agreement have been
inserted for convenience only and do not constitute a part of this Agreement.
IN WITNESS WHEREOF, the parties have entered into this Agreement
effective as of the as of the date first set forth above.
ENTROPIN, INC.
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Ph.D.
/S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, PH.D.
--------------------------------
Title: President & CEO
Date: December 11, 2003
INVESTLINC CAPITAL
By: /S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Date: December 11, 2003
INVEST LINC SECURITIES, LLC
By: ▇▇▇▇▇ ▇. PARIS, II
---------------------------------------
▇▇▇▇▇ ▇. Paris, II, CEO
Date: December 11, 2003
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