COURT Case 2 : 04-cv RC Document 264 Filed 11/08 /20 NOV ^ [CENL-7'^AL

Transcription

1 Case 2 : 04-cv RC Document 264 Filed 11/08 /20 q@.^1wa7ict COURT NOV ^ [CENL-7'^AL CT F CALIFORNIA DEPUTY UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION Case No. CV RC IN RE ENTROPIN, INC. SECURITIES LITIGATION CLASS ACTION ORDER OF PRELIMINARY APPROVAL OF SETTLEMENT WHEREAS, a consolidated action is pending before the Court entitled In re Entropin, Inc. Securities Litigation, case No. CV RC (C.D. Cal.) (the "Action"); and WHEREAS, the Parties having made application, pursuant to Rule 23(e) of the Federal Rules of Civil Procedure, for an order preliminarily approving the Settlement of this Action in accordance with the Stipulation and Agreement of Settlement dated September 18, 2007 (the "Stipulation"), which together with the exhibits annexed thereto set forth the terms and conditions for a proposed Settlement of the Action and for dismissal of the Action with prejudice upon the terms and conditions set forth therein; and the Court having read and considered the Stipulation and the exhibits annexed thereto; IT IS HEREBY ORDERED: 1. The terms defined in the Stipulation are incorporated herein.' ' However, the correct case number for Moreland v. Neidiger, Tucker, Bruner, Inc., in the United States District Court for the District of Colorado, is case no. 05CV01002-PSF, rather than the case number set forth in the Stipulation.

2 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 2 of The Settlement of the Action, as set forth in the Stipulation, is preliminarily approved as fair, reasonable and adequate. 3. Pursuant to the Stipulation, the Court preliminarily finds that this Action meets the class certification requirements of Rule 23 of the Federal Rules of Civil Procedure and that the Class consists of. "all persons and entities that acquired (1) Entropin Units (a security consisting of one share of common stock ("Stock") and a warrant to purchase a common share ("Warrant") in a public offering on or about March 15, 2000 (the "Public Offering Class"), or (2) common stock of Entropin in a series of private placements from July through September 1999 (the "Private Placement Class"), or (3) warrants in the open market during the period from March 15, 2000, through May 15, 2001 (the "Warrant Class") (collectively the "Class") and were damaged thereby. Excluded from the Class are Defendants, members of the families of each of the individual Defendants, any parent, subsidiary, affiliate, partner, officer, executive, or director of any Defendant, any entity in which any excluded person has or had a controlling interest, and the legal representatives, heirs, successors, or assigns of any such excluded person or entity. Also excluded from the Class are those persons who file valid and timely requests for exclusion in accordance with this Order." 4. In preliminarily certifying this Class, the Court preliminarily concludes that: (a) the requirements of Fed. R. Civ. P. Rule 23(a) and 23(b)(3) are satisfied; (b) the Class is so numerous that joinder of all members is impractical; (c) there are questions of law and fact common to all members of the Class; (d) the claims of the Lead Plaintiffs are typical of the claims of the members of the Class; (e) Lead Plaintiffs will fairly and adequately protect the interests of the members of the Class; (f) Plaintiffs' Lead Counsel are qualified to represent the Class; (g) common questions of law and/or fact predominate over any such questions that may affect Class members individually; and (h) a class action is superior to all other available methods for the fair and efficient adjudication of this Action. 5. A hearing shall be held before this Court on March 26, 2008, at 9:30 a.m., in Courtroom 23, Third Floor of the United States District Court, Central District of California, 312 N. Spring Street, Los Angeles, CA 90012, to determine: (i) whether the proposed Settlement of the Action on the terms and conditions provided for in the Stipulation is fair, reasonable, and 2

3 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 3 of 37 adequate and should be approved by the Court; (ii) whether a Judgment as provided in paragraph J of the Stipulation should be entered herein; (iii) whether the plan of allocation of the Net Settlement Fund, as set forth in Schedule A of the Stipulation, should be approved; and (iv) whether the motion of Lead Plaintiffs' Counsel for the payment of attorney's fees and expenses is reasonable and should be approved. The Court may adjourn the hearing and later reconvene it without further notice to the members of the Class. 6. The Court approves, as to form and content, the Notice of Pendency and Settlement of Class Action (the "Notice "), the Summary Notice of Pendency and Settlement of Class Action ("Summary Notice"), and the Proof of Claim and Release form (the "Proof of Claim "), annexed as Exhibits A, B, and C hereto, and finds that the publication, mailing and distribution of the Notice and Summary Notice substantially in the manner and form set forth in this Order meets the requirements of Rule 23 of the Federal Rules of Civil Procedure, Section 21 (D)(a)(7) of the Exchange Act, 15 U. S.C. 78u-4(1)(7) as amended by the Private Securities Litigation Reform Act of 1995, and due process, and is the best notice practicable under the circumstances and shall constitute due and sufficient notice to all persons entitled thereto. Lead Plaintiffs ' Counsel is authorized to issue such Notices and Proof of Claim, in substantially their present form, to those members of the Class that can be identified through reasonable effort. 7. Lead Plaintiffs' Counsel are hereby authorized to retain the firm Strategic Claims Services (the "Claims Administrator") to supervise and administer the notice procedures and to process claims, as more fully set forth below: a. Not later than November 29, 2007, Lead Plaintiffs' Counsel shall cause a copy of the Notice and Proof of Claim, substantially in the form of Exhibits A and C annexed hereto, to be mailed by first-class mail to all Class members reasonably identified by the transfer records for both Entropin Stock and Warrants at the Class members' addresses listed on such transfer records (obtained in accordance with subparagraph (d) below). The date of such initial mailing shall be referred to as the "Notice Date"; b. Not later than November 29, 2007, Lead Plaintiffs ' Counsel shall cause a Summary Notice, substantially in the form annexed as Exhibit B hereto, to be published 3

4 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 4 of 37 once in Investor's Business Daily and shall cause a copy of the Summary Notice to be published electronically on either the PR Newswire or Business Wire; c. Lead Plaintiffs' Counsel shall also cause copies of the Notice and Proof of Claim to be mailed as soon as practicable to persons who indicate, in response to the Summary Notice or otherwise, that they acquired Entropin Stock in the July-September 1999 Private Placements or Units consisting of one share of stock and one warrant in the March 15, 2000 Public Offering or acquired Entropin Warrants during the period from March 15, 2000 through May 15, 2001; d. The Claims Administrator, under direction of Lead Plaintiffs' Counsel, shall use its best reasonable efforts to obtain from all banks, brokerage firms or other nominees (the "Nominees") shown by the transfer records of Entropin to be members of the Class, the names and addresses of their customers (for whom they held such Entropin Stock or Warrants as nominee) to cause a copy of the Notice (Exhibit A) and a copy of the Proof of Claim (Exhibit C) to be promptly mailed by first-class mail to each such customer whose name and address is provided by any Nominee. Alternatively, if any Nominee advises the Claims Administrator it will not provide the Claims Administrator with the names and addresses of its customers, and instead prefers to mail the documents to its customers itself, the Claims Administrator shall promptly provide the Nominee with copies of the Notice (Exhibit A) and copies of the Proof of Claim (Exhibit C) so the Nominee can mail these documents to its customers for whom it held such Entropin Stock or Warrants; and the Nominee shall, no later than ten (10) days after receipt of the documents from the Claims Administrator, submit a declaration or affidavit or other proof to the Claims Administrator detailing the date, time and method of mailing the documents to its customers; and e. No later than March 5, 2008, Lead Plaintiffs' Counsel shall serve on Defendants' Counsel and file with the Court proof, by affidavit or declaration under penalty of perjury, of such publication and mailing. 8. All reasonable costs incurred in identifying and notifying members of the Class and administering the Settlement shall be paid from the Notice and Administration Account, as 4

5 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 5 of 37 set forth in and subject to the provisions of the Stipulation. 9. All members of the Class shall be bound by all determinations and any Judgment in the Action concerning the Settlement, whether favorable or unfavorable. 10. Members of the Class who wish to participate in the Net Settlement Fund shall complete and submit Proofs of Claim in accordance with the instructions contained therein. All Proofs of Claim must be postmarked no later than February 26, For purposes of facilitating the processing of claims, Lead Plaintiffs' Counsel and/or the Claims Administrator shall lease and maintain a post office box. All Notices to Class members and other communications regarding the proposed Settlement of the Action shall designate the post office box as the return address. Lead Plaintiffs' Counsel and/or the Claims Administrator shall be responsible for preserving, for a period of two years from the date of distribution of the proceeds of the Net Settlement Fund, all Proofs of Claim and any and all other written communications from Class members or any other person in response to the Notice. Lead Plaintiffs' Counsel and/or the Claims Administrator shall be responsible for responding to inquiries mailed to said post office box, but copies of all written answers to such inquiries shall be maintained and made available for inspection by all counsel in this Action. 12. All members of the Class shall have the option to be excluded from the Class and thereby elect not to participate in the Net Settlement Fund. Such exclusions shall be made by mailing to the Claims Administrator, pursuant to the instructions set forth in the Notice, a timely and valid request for exclusion, postmarked no later than January 29, All persons who timely mail valid requests for exclusion from the Class shall not be Class members and shall have no rights with respect to the Settlement and have no interest in the Net Settlement Fund. Any member of the Class not mailing a valid and timely request for exclusion shall remain a member of the Class. 13. Lead Plaintiffs' Counsel shall promptly provide Defendants' Counsel and counsel for Defendants' insurer(s) with a copy of all communications and documentation relating to members of the Class who request exclusion therefrom. 14. Any member of the Class may enter an appearance in the Action, at his own expense, individually or through counsel of his own choice. If any member of the Class does not 5

6 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 6 of 37 enter an appearance, he, she or it will be represented by Lead Plaintiffs' Counsel. 15. Pending final determination of whether the Settlement should be approved, neither the Class Representatives nor any member of the Class, either directly, representatively, or in any other capacity, shall commence, maintain, or prosecute against any of the Released Parties any action or proceeding in any court or tribunal asserting any of the Settled Claims. 16. Pending final determination of whether the Settlement should be approved, all proceedings in the Action are stayed except for the proceedings relating to the Settlement. 17. Any member of the Class who has not requested exclusion may appear with or without counsel and show cause why the proposed Settlement of the Action should not be approved as fair, reasonable and adequate, or why a Judgment should not be entered thereon, or why attorney's fees and expenses should not be awarded to Lead Plaintiffs' Counsel in the amount requested or why the Plan of Allocation of the Net Settlement Fund should not be approved; provided that no later than January 29, 2008, such Class member: (i) has filed a written statement in objection, together with copies of any papers and briefs, with the Clerk of the United States District Court for the Central District of California, United States Courthouse, 312 N. Spring Street, Room G-8, Los Angeles, CA 90012, and (ii) has served copies of such papers personally or by mail upon: Kenneth Catanzarite, Esq. CATANZARITE LAW CORPORATION 2331 West Lincoln Avenue Anaheim, CA Lead Counsel for Plaintiffs Any member of the Class who does not make his, her or its objection in the manner provided above shall be deemed to have waived such objection and shall forever be foreclosed from making any objection to the fairness or adequacy of the proposed Settlement as incorporated in the Stipulation or any Judgment that may be entered, to the award of attorney's fees and expenses to Lead Plaintiffs' Counsel and to the Plan of Allocation. 18. Any response to any objection to the proposed Settlement or the motion for attorney's fees and expenses shall be filed no later than March 5, Upon the effective date, Lead Plaintiffs and each of the Class members on behalf 6

7 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 7 of 37 of themselves, their current and former heirs, executors, administrators, successors, attorneys, insurers and assigns, and any person they represent, shall, with respect to each and every Settled Claim, release and forever relinquish and discharge, and shall forever be enjoined from prosecuting, all Settled Claims and any and all claims arising out of, relating to, or in connection with the Settlement or resolution of the Action against the Released Parties (including Unknown Claims) whether or not such Class member executes and delivers the Proof of Claim and Release, except claims to enforce any of the terms of the Stipulation. Further, on the effective date, Lead Plaintiffs and all Class members on behalf of themselves, their current and former heirs, executors, administrators, successors, attorneys, insurers and assigns, shall expressly covenant not to assert any claim or action against any of the Released Parties derivatively on behalf of Entropin that (i) arises out of or relates to any of the acts, omissions, misrepresentations, facts, events, matters, transactions or occurrences referred to in the Action or otherwise alleged, asserted or contended in the Action or (ii) that could have been alleged, asserted or contended in any forum by the Class members or any of them against any of the Released Parties which arise out of, relate to, or are based upon the allegations, transactions, facts, matters or occurrences, representations or omissions involved, set forth, or referred to in the Complaint, and shall forever be enjoined from commencing, instituting or prosecuting any such claim. 20. All funds held by the Escrow Agents shall be deemed and considered to be in custodia legis of the Court in accordance with the Stipulation, and shall remain subject to the jurisdiction of the Court until such time as such funds shall be distributed pursuant to the Stipulation, Plan of Allocation and/or further Order of the Court. 21. The payment of the Gross Settlement Fund to the Escrow Agents in accordance with the terms and obligations of the Stipulation is approved. 22. Neither the Stipulation, nor any of its terms or provisions, nor any negotiations or proceedings connected with it, shall be construed as an admission or concession by any of the Defendants of the truth of any of the allegations in the Action, or of any liability, fault or wrongdoing of any kind. If the Settlement is disapproved, cancelled or terminated in accordance with the terms of the Stipulation, the Stipulation shall have no force or effect except as provided 7

8 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 8 of 37 in Paragraph L therein and all negotiations, proceedings and statements made in connection therewith shall be without prejudice to the right of any persons, and the Parties to the Action shall be restored to their prior respective positions. 23. All papers in support of the Settlement and any motion for attorney's fees and expenses shall be filed with the Court and served no later than March 5, Only Class members shall have any rights with respect to approval of, or objection to, the Settlement, the Plan of Allocation or the motion of Lead Plaintiffs' Counsel for the payment of attorney's fees and expenses and an award to Lead Plaintiffs. 25. The Court will determine whether the motion of Lead Plaintiffs' Counsel for an award of attorney's fees and expenses should be approved. 26. The Court reserves the right to adjourn the hearing without further notice to members of the Class, and the Court retains jurisdiction to consider all further applications arising out of, or connected with, the proposed Settlement. IT IS SO ORDERED, this 8th day of November, Is/ Rosalyn M. Chapman ROSALYN M. CHAPMAN UNITED STATES MAGISTRATE JUDGE case046\ /6/07 8

9 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 9 of 37 EXHIBIT A

10 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 10 of 37 UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION Case No. CV RC IN RE ENTROPIN, INC. SECURITIES LITIGATION CLASS ACTION NOTICE OF SETTLEMENT OF CLASS ACTION If you purchased or otherwise acquired: (1) common stock of Entropin, Inc. ("Entropin") in its July through September 1999 private placements (the "Private Placements"), or (2) common stock and warrants of Entropin as a unit at $7.25 per unit ($7.00/share and $0.25/warrant, the "Units") Offering"), or in Entropin's March 15, 2000 public offering (the "Public (3) publicly traded warrants of Entropin ("Warrants") after the March 15, 2000 public offering through May 15, 2001 (inclusive), you could get a payment from a class action settlement. Under law, a federal court has authorized this notice. The settlement will provide up to $4,500,000.00, plus interest, to pay claims of investors who purchased Entropin stock in the Private Placements, Units in the Public Offering, or Warrants prior to May 15, The settlement represents : ( 1) an average recovery of $0.61 per share of common stock purchased in the Private Placements (for the 711, 200 shares purchased in the Private 9

11 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 11 of 37 Placements), (2) an average recovery of $2.60 per Unit purchased in the Public Offering (for the estimated 1.55 million "damaged" Units, i.e. Units purchased in the Public Offering and held by Class Members through October 2, 2000, the date of the first stock price drop related to the alleged fraud), and (3) an average recovery of $0.03 per Warrant (for the estimated 1.28 million Warrants purchased by Class Members following the Public Offering and prior to May 15, 2001). For purposes of comparison, Lead Plaintiffs' Counsel estimates that maximum recoverable damages at trial if Plaintiffs prevail on all claims would be: (1) $4.00 per share of common stock (based on 711,200 damaged Private Placement shares), (2) $5.43 per Unit (based on 1.55 million damaged Units), and (3) $0.12 per Warrant (based on the statutory limit on damages for claims under 11 of the Securities Act of 1933). Defendants disagree with Lead Plaintiffs' Counsels' estimates as to the maximum amount of damages recoverable at trial. These averages are estimates and are before deduction of any Court-approved fees and expenses. Attorneys for the Lead Plaintiffs intend to ask the Court to award them fees of up to $1.9 million of the settlement and reimbursement of litigation expenses not to exceed $375, Collectively, the attorney's fees and expenses are estimated to average: (1) $.32 per share of common stock purchased in the Private Placements, (2) $1.37 per Unit purchased in the Public Offering, and (3) $.017 per Warrant purchased following the Public Offering. If approved by the Court, these amounts will be paid from the Settlement Fund. The approximate recovery, after deduction of attorney's fees and expenses approved by the Court, is an average of: (1) $.29 per share of common stock purchased in the Private Placements, (2) $1.23 per Unit purchased in the Public Offering, and (3) $.016 per Warrant purchased following the Public Offering. assumptions set forth in the preceding paragraph. These are estimates based on the Your actual recovery, if any, will vary 10

12 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 12 of 37 depending on your purchase price and sales price and the number of Proof of Claim forms filed. The settlement resolves lawsuits concerning whether, in violation of state and federal laws, Entropin and two of its principal officers misled investors concerning the effectiveness of Entropin's developmental drug candidate, Esterom, and the prospects for its commercialization. Defendants deny the allegations in the lawsuit and deny any wrongdoing. The parties disagree on liability and damages. Your legal rights will be affected whether you act or do not act. If you do not act, you may forfeit your right to recover forever on this claim. Therefore, read this notice carefully. YOUR LEGAL RIGHTS AND OPTIONS IN THIS SETTLEMENT SUBMIT A CLAIM FORM The only way to get a payment. NO LATER THAN FEBRUARY 26, 2008 EXCLUDE YOURSELF Get no payment. This is the only option that allows NO LATER THAN you to be part of any other lawsuit against Defendants JANUARY 29, 2008 about the legal claims in this case. OBJECT NO LATER THAN Write to the Court about why you do not like the JANUARY 29, 2008 settlement. GO TO A HEARING ON Speak in Court about the fairness of the settlement. MARCH 26, 2008 DO NOTHING Get no a ent. Give up ri ghts. INQUIRIES Please do not contact the Court regarding this notice. All inquiries concerning this Notice, the Proof of Claim form, or any other questions by Class members should be directed to: Entropin Securities Litigation Claims Administrator c/o Strategic Claims Services P.O. Box 230 Media, PA Tel: (866 )

13 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 13 of 37 COMMON QUESTIONS AND ANSWERS CONCERNING THE SETTLEMENT 1. Why did I get this Notice? You or someone in your family may have acquired Entropin common stock or warrants, either separately or in Units (together the "Entropin Securities"). 2. What is this lawsuit about? The case is known as In re Entropin, Inc. Securities Litigation, CV RC (C.D. Cal.) (the "Action"), and the Court in charge of the case is the United States District Court for the Central District of California. The lawsuit involves whether, in violation of federal and state laws, Entropin and two of its principal officers misled investors about the effectiveness of Entropin's developmental drug candidate, Esterom, and the prospects for its commercialization. Entropin, Inc., Higgins Bailey and Thomas Tachovsky are among the Defendants. All Defendants deny they did anything wrong. The Settlement resolves all of the claims in this lawsuit. 3. Why is this a class action? In a class action, one or more persons and/or entities, called Lead Plaintiffs, sue on behalf of all persons and/or entities who have similar claims. All of these persons and/or entities are referred to as a Class and individual persons and/or entities are known as Class members. One court resolves all of the issues for all Class members, except for those Class members who exclude themselves from the Class. 12

14 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 14 of Why is there a Settlement? Lead Plaintiffs and Defendants do not agree regarding the merits of Plaintiffs' allegations with respect to liability or the average amount of damages per share that would be recoverable if Lead Plaintiffs were to prevail at trial on each claim. The issues on which the parties disagree include: (1) whether Defendants made any materially false and misleading statements; (2) whether Defendants made the statements with the requisite knowledge; (3) whether the statements were the cause of the investors' alleged damages; (4) the amount of damages, if any, suffered by investors during the period from June 1, 1999, through May 15, 2001; and (5) whether Lead Plaintiffs' claims are barred by the statute of limitations. This matter has not gone to trial and the Court has not decided in favor of either Plaintiffs or Defendants. Instead, Plaintiffs and Defendants have agreed to settle the lawsuit. The Lead Plaintiffs and their Counsel believe the settlement is best for all Class members because Entropin is no longer operating as an active business and has virtually no assets to pay a Judgment if Plaintiffs win at trial. Moreover, even if Plaintiffs win at trial, and withstand Defendants' inevitable challenge on appeal, Plaintiffs would not be able to collect some, or all, of the Judgment. 5. How do I know if I am part of the Class settlement? To be a Class member, you must have purchased or otherwise acquired: (1) common stock of Entropin in a series of private placements from July through September 1999 (the "Private Placement Class"), or (2) Units at a price of $7.25 per Unit ($7.00 per common share and $0.25 per warrant) in the March 15, 2000 Public Offering (the "Public Offering Class"), or (3) Entropin warrants on the Nasdaq market during the period from March 15, 2000 through May 15, 2001 (the "Warrant Class"). 13

15 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 15 of Are there exceptions to being included? Yes. You are not a Class member if you are a Defendant, a member of the family of one of the individual Defendants, a parent, subsidiary, affiliate, partner, officer, executive, or director of any Defendant, an entity in which any excluded person has or had a controlling interest, or the legal representative, heir, successor, or assign of any such excluded person or entity. Also, if you exclude yourself from the Class, as described below, you are not a part of the Class. 7. What the Settlement provides? a. What is the Settlement Fund? The proposed Settlement calls for Defendants to create a Settlement Fund in the amount of $4,500, This $4,500, has been deposited into an interest bearing account, the "Gross Settlement Fund." Subject to the Court's approval, a portion of the Gross Settlement Fund also will be used to pay Lead Plaintiffs' attorney's fees and reasonable litigation expenses. A portion of the Gross Settlement Fund will also be used to pay taxes due on interest earned by the Gross Settlement Fund, if necessary, and any notice and claims administration expenses permitted by the Court or the Stipulation. After the foregoing deductions from the Gross Settlement Fund have been made, the amount remaining (the "Net Settlement Fund") will be distributed to Class members who submit valid claims. b. What can you expect to receive under the proposed Settlement? Your share of the Net Settlement Fund will or may depend on: (i) the number of claims filed; (ii) whether you purchased Units in the Public Offering, stock in the July through September 1999 Private Placements, or Warrants on the Nasdaq market; (iii) whether you sold your Entropin Securities or held your Entropin Securities through October 2, 2000, 14

16 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 16 of 37 and/or December 6, 2002; (iv) the amount of administrative costs, including the costs of notice; and (v) the amount awarded by the Court to Lead Plaintiffs for attorney's fees, costs and expenses. The Recognized Loss of each Authorized Claimant shall be calculated according to the following formula: 1. a. For each share of Stock purchased in the Public Offering, the difference between (a) $7.00 and (b) the sale price (if sold between October 2, 2000, and December 6, 2002), or $0.42 if held through December 6, 2002.' Each Public Offering Class member shall receive a maximum of 25% of his/her Recognized Loss, after payment of attorney's fees and expenses, with the possibility of a small pro rata upward adjustment to the extent the value of claims filed is less than $900, b. For each Warrant purchased by said member in the Public Offering, Recognized Loss is the difference between (a) $.25 and (b) the sales price (if sold at less than $.25 between October 2, 2000, and September 6, 2002), or $.13 if held through September 6, For each share of Stock purchased in a Private Placement, the difference between the purchase price and the sale price (if sold between October 2, 2000, and December 6, 2002) or $0.00 if held until December 9, Members of the Private Placement Class are not subject to any maximum payment on the amounts that they will receive, but the total available for distribution to the Private Placement Class and the Warrant Class will be $225,000.00, to be distributed pro rata. ' For Class members who conducted multiple transactions in Entropin Securities, the earliest subsequent sale shall be matched first against those Shares or Warrants in the Claimant's earliest opening position, and then matched chronologically thereafter against each subsequent purchase. 15

17 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 17 of For each Warrant purchased from March 15, 2000, through May 15, 2001, the difference between the purchase price of the Warrant and the sale price (if sold at less than $.25 between October 2, 2000, and September 6, 2002), or $0.13 if held until September 9, Members of the Warrant Class are not subject to any maximum payment on the amounts that they will receive, but the total available for distribution to the Private Placement Class and the Warrant Class will be $225,000.00, to be distributed pro rata. 8. How can I get a payment? To qualify for a payment, you must send in a Proof of Claim and Release form. claim form is attached to this Notice. This You may also obtain a claim form on the Internet at Read the instructions carefully, fill out the form, sign it in the two locations indicated, include all the documents the form asks for, and mail the claim form and documentation, postmarked no later than February 26, 2008, to: Entropin Securities Litigation Claims Administrator c/o Strategic Claims Services P.O. Box 230 Media, PA The Claims Administrator will process your claim and determine if you are an "Authorized Claimant" - meaning that your claim satisfies the requirements approved by the Court. 9. What am I giving up to get a payment or stay in the Class? Unless you exclude yourself, you will remain in the Class. That means that if the Settlement is approved, you and all Class members will release (cannot sue, continue to sue, or be part of any other lawsuit) all claims against Defendants and all other persons and entities in connection with your acquisition or sale of Entropin stock, Warrants or 16

18 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 18 of 37 Units at any time. It also means that all of the Court's orders will apply to you and legally bind you. If you sign the claim form, you are agreeing to a "Release of Claims," which will bar you from ever filing a lawsuit against any person or entity to recover losses from the acquisition or sale of Entropin stock, Warrants or Units at any time. That means you will accept a share in the Net Settlement Fund as sole compensation for any losses you have suffered in the acquisition and sale of Entropin stock, Warrants or Units at any time. 10. How do I get out of the Settlement? If you do not want to receive a payment from this Settlement, and you want to keep the right to sue or continue to sue Defendants on your own about the legal claims raised in this case, then you must take steps to get out of the Settlement. This is called excluding yourself -- or "opting out" of the Class. To exclude yourself from the Settlement, you must mail a letter stating you want to be excluded as a Class member from In re Entropin, Inc. Securities Liti agtion, CV RC (C.D. Cal.). Be sure to include your name, address, telephone number and your signature, along with a list of all of your purchases and sales in Entropin Securities in order to show your membership in the Class. You must mail your exclusion request, postmarked no later than January 29, 2008, to: Entropin Securities Litigation Claims Administrator c/o Strategic Claims Services P.O. Box 230 Media, PA You cannot exclude yourself by telephone or by . If you ask to be excluded, you will not receive a settlement payment, and you cannot object to the Settlement. You will not be legally bound by anything that happens in this lawsuit. 11. If I do not exclude myself, can I sue Defendants for the same thing later? No. Unless you exclude yourself, you give up any right to sue Defendants for the claims 17

19 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 19 of 37 that this Settlement resolves. If you have a pending lawsuit, speak to your lawyer in that case immediately, since you may have to exclude yourself from this Class to continue your own lawsuit. 12. Do I have a lawyer in this case? The Court appointed the Catanzarite Law Corporation to represent you and the other Class members. These lawyers are called Lead Plaintiffs' Counsel or Class Counsel. You will not be charged for these lawyers. If you want to be represented by your own lawyer, you may hire one at your own expense. 13. How will the lawyers be paid? Lead Plaintiffs' Counsel have expended considerable time litigating this Action on a contingent fee basis, and have advanced the expenses of the litigation with the expectation that if they are successful in recovering money for the Class, they will receive attorney's fees and be reimbursed for their expenses from the Settlement Fund, as is customary in this type of litigation. Therefore, Lead Plaintiffs' Counsel will file a motion asking the Court at the Fairness Hearing to make an award of attorney's fees in an amount not to exceed $1.9 million and for reimbursement of reasonable litigation expenses not to exceed $375, The Court may award less than these amounts. Any amounts awarded by the Court will come out of the Gross Settlement Fund. 14. How do I tell the Court that I do not like the Settlement? You can tell the Court you do not agree with the Settlement, any part of the Settlement, or Lead Plaintiffs' Counsels' motion for attorney's fees, and that you think the Court should not approve the Settlement, by mailing a letter stating you object to the Settlement in In re Entropin, Inc. Securities Liti agtion, CV RC (C.D. Cal.). Be sure to include your 18

20 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 20 of 37 name, address, telephone number, your signature, a list of your purchases and sales of Entropin Securities to show your membership in the Class, and all of the reasons you object to the Settlement. Be sure to mail the objections to the two different places listed below, postmarked no later than January 29, 2008, so the Court will consider your views: COURT CLASS COUNSEL Clerk of the Court Kenneth J. Catanzarite, Esq. United States District Court Catanzarite Law Corporation Central District of California 2331 West Lincoln Avenue 312 N. Spring Street, Room G-8 Anaheim, CA Los Angeles, CA What is the difference between objecting and requesting exclusion? Objecting is simply telling the Court you do not like something about the Settlement. You can object only if you stay in the Class. Requesting exclusion is telling the Court you do not want to be part of the Class and Settlement. If you exclude yourself, you cannot object to the Settlement because it no longer affects you. 16. When and where will the Court decide whether to approve the Settlement? The Court will hold a Fairness Hearing on March 26, 2008, at 9:30 a.m., at the United States District Court for the Central District of California, 312 N. Spring Street, Courtroom 23, Third Floor, Los Angeles, CA At this hearing, the Court will consider whether the Settlement is fair, reasonable, and adequate and whether to approve the Settlement. If there are objections, the Court will consider them, and the Court will listen to people who have asked to speak at the hearing. The Court may also decide how much to pay Lead Plaintiffs' Counsel for attorney's fees and expenses. 19

21 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 21 of Do I have to come to the hearing? No. Class Counsel will answer any questions the Court may have. However, you are welcome to attend at your own expense. If you send an objection, you do not have to come to Court to talk about it. As long as you mailed your written objection on time, the Court will consider it. 18. What happens if I do nothing at all? If you do nothing, you will not receive a payment from the Settlement. However, unless you exclude yourself, you will not be able to start a lawsuit, continue with a lawsuit, or be part of any other lawsuit against Defendants about the claims in this case ever again. DATED: November 8, 2007 /s/ Rosalyn M. Chapman ROSALYN M. CHAPMAN UNITED STATES MAGISTRATE JUDGE THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA CASE046\ /8/07 20

22 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 22 of 37 EXHIBIT B

23 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 23 of 37 UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION IN RE ENTROPIN, INC. SECURITIES LITIGATION Case No. CV RC CLASS ACTION SUMMARY NOTICE OF PENDENCY AND SETTLEMENT OF CLASS ACTION TO ALL PERSONS WHO ACQUIRED: COMMON STOCK OF ENTROPIN INC. IN ITS JULY 1999 THROUGH SEPTEMBER 1999 PRIVATE PLACEMENTS; OR COMMON STOCK AND WARRANTS AS A UNIT AT $7.25 PER UNIT ($7.00/SHARE AND $0.25/WARRANT) IN ENTROPIN INC.'S MARCH 15, 2000 PUBLIC OFFERING; OR WARRANTS OF ENTROPIN, INC. ON THE NASDAQ AFTER ENTROPIN'S MARCH 15, 2000 PUBLIC OFFERING THROUGH MAY 15, 2001 (INCLUSIVE). IF YOU ACQUIRED ANY OF THE ABOVE SECURITIES YOU ARE A MEMBER OF THE "CLASS " IN THIS FEDERAL COURT ACTION. YOU ARE HEREBY NOTIFIED, pursuant to Rule 23 of the Federal Rules of Civil Procedure and an Order of the above Court dated November 8, 2007, that a hearing will be held on March 26, 2008, at 9:30 a.m., in Courtroom 23, Third Floor, United States District Court for the Central District of California, 312 N. Spring Street, Los Angeles, CA 90012, to determine: (1) whether the proposed settlement (the "Settlement") of the above-captioned action ("Action") 21

24 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 24 of 37 for $4, 500, and accrued interest (the "Settlement Fund ") should be approved by the Court as fair, reasonable, and adequate ; (2) whether the motion of Lead Plaintiffs' Counsel for an award of attorney's fees and reimbursement of reasonable expenses should be approved; and (3) whether the Action should be dismissed with prejudice. If You Acquired Any Stock or Warrants of Entropin, Inc., During the Period Described Above, Your Rights May Be Affected by the Settlement of this Action. To share in the distribution of the Settlement Fund, you must establish your rights by mailing a Proof of Claim and Release form, postmarked no later than February 26, If you have not yet received the Notice of Pendency and Settlement of Class Action ("Notice and Settlement"), which more completely describes the Settlement and your rights thereunder, and a Proof of Claim and Release form, you may obtain copies of these documents by identifying yourself as a member of the Class and by writing to, telephoning, or going on the Internet at: Claims Administrator Entropin Securities Litigation c/o Strategic Claims Services P.O. Box 230 Media, PA Tel: (866) Inquiries should NOT be directed to Entropin, Inc. or the Clerk of the Court. If you desire to be excluded from the Class, you must submit a written request for exclusion, postmarked no later than January 29, 2008, in the manner and form explained in the Notice. All members of the Class who have not requested exclusion from the Class will be bound by the Settlement and any Judgment entered in the Action, even if they do not file a timely Proof of Claim and Release form. DATED: November 8, 2007 /s/ Rosalyn M. Chapman ROSALYN M. CHAPMAN UNITED STATES MAGISTRATE JUDGE THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA CASE046\ /8/07 22

25 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 25 of 37 EXHIBIT C

26 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 26 of 37 TO ALL ENTROPIN, INC. CLASS MEMBERS: 1. GENERAL INFORMATION AND INSTRUCTIONS A. Settlement Of Class Action Regarding Entropin Inc : There has been a Settlement in a case entitled "In re Entropin, Inc. Securities Litigation," case no. CV RC, pending in the United States District Court for the Central District of California. The case was brought on behalf of a Class consisting of: ALL PERSONS WHO ACQUIRED: (1) COMMON STOCK OF ENTROPIN IN ITS JULY 1999 THROUGH SEPTEMBER 1999 PRIVATE PLACEMENTS, OR (2) COMMON STOCK AND WARRANTS AS A UNIT IN ENTROPIN'S MARCH 15, 2000 PUBLIC OFFERING, OR (3) WARRANTS AFTER THE MARCH 15, 2000 PUBLIC OFFERING BUT NOT LATER THAN MAY 15, 2001 B. You May Be Entitled To A Recovery: What To Do To Get It : If you are a member of the Class, you are entitled to a recovery. In order to obtain your recovery, you must: 1. Complete and sign a Proof of Claim (provided below) and submit it on a timely basis. If you fail to do so, your claim may be rejected and you maybe precluded from any recovery. February 26, 2008, to: 2. Mail your completed and signed Proof of Claim, postmarked on or before Entropin Securities Litigation Claims Administrator c/o Strategic Claims Services P.O. Box 230 Media, PA C. How To Exclude Yourself From The Settlement : If you are a member of the Class and you do not want to participate in the Settlement, you 23

27 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 27 of 37 must submit a written request for exclusion, postmarked no later than January 29, 2008, to the Claims Administrator at the above address. If you do not do so, you will be bound by the terms of any Judgment entered in the case, even if you do not submit a proof of claim and release. II. CLAIMANT IDENTIFICATION. This information concerns Part I ofthe Proofof Claim. A. Explanation As To Whether You Are A Beneficial Purchaser Or Record Purchaser : If you purchased or otherwise acquired Entropin Stock or Warrants and held them in your name, you are the beneficial purchaser and the record-purchaser. If you purchased or otherwise acquired Entropin Stock or Warrants and they were registered in the name of a third party, such as a nominee or brokerage firm, you are the beneficial purchaser and the third party is the record purchaser. B. Beneficial Purchaser Or His/Her Legal Representative Must Submit Claim : Only the actual beneficial purchaser(s), or the legal representative of such purchaser(s), can submit a claim. C. Requirements For Joint Purchasers, Executors, Etc. : All joint purchasers must sign the claim form. Executors, administrators, guardians, conservators and trustees must complete and sign the claim form on behalf of persons represented by them, state their titles or capacities, and provide proof of their authority, which must accompany the claim form. The Social Security (or taxpayer identification) number and telephone number of the beneficial owner must be used in verifying the claim. III. DETAILS TO SUPPORT YOUR CLAIM. This information concerns Part II ofthe Proofof Claim. A. In Part II of the Proof of Claim, you should supply all required details of your transaction ( s) in Entropin Stock and Warrants. If you need more space or additional schedules, attach additional sheets giving all of the required information in substantially the same form. Print your name on each additional sheet and sign it, as well. B. On the schedules, provide all of the requested information with respect to all of 24

28 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 28 of 37 your purchases or acquisitions and all of your sales of Entropin Stock and Warrants which took place at any time, whether such transactions resulted in a profit or a loss. C. List each transaction separately and in chronological order by trade date, beginning with the earliest. You must accurately provide the month, day and year of each transaction you list. D. The term "Purchase Price" means the amount paid for the securities (excluding commissions and transfer taxes ) and the term "Sales Price" means the amount realized on the sale of the securities (excluding commissions and transfer taxes). The date of the purchase or sale is the "contract" or "trade" date as distinguished from the "settlement" or "payment" date. E. Broker confirmations or other documentation of your transactions in Entropin Stock and Warrants must be attached to your claim. 25

29 Case 2 : 04-cv RC Document 264 Filed 11/08/2007 Page 29 of 37 PROOF OF CLAIM In re Entropin, Inc. Securities Litigation, CV RC (C.D. Cal.) Must be Postmarked No Later Than February 26, 2008 Please Type or Print PART I: CLAIMANT IDENTIFICATION. Beneficial Owner's Name (First, Middle, Last) Record Owner's Name (if different from Beneficial Owner listed above) Street Address City State or Province Zip Code or Postal Code Country Social Security Number or Taxpayer Identification Number Individual Name Corporation/Other Name Area Code Telephone Number (work) Area Code Telephone Number (home) Area Code Facsimile Number Address 26

30 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 30 of 37 PART II: SCHEDULE OF TRANSACTIONS IN ENTROPIN STOCK AND WARRANTS. A. Number of shares of Entropin Stock held at the beginning of trading on July 1, 1999: B. Purchases or Acquisitions of Stock in the July 1999 through September 1999 Private Placements: Type of Entropin Security Trade Date Number of Total Purchase Purchased (Stock) Month Day Year Shares Price Stock Stock Stock Stock Purchased or Acquired IMPORTANT: Identify by number listed above all purchases in which you covered a "short sale": C. Purchases or Acquisitions of Units consisting of one common share and one warrant at $7.25 per Unit ($ 7.00/share and $0.25/warrant) in the March 15, 2000 Public Offering: Entropin Units Purchased or Trade Date Number of Total Purchase Acquired ($7.25/Unit, Stock at Month Day Year Units Purchased Price $7.00/share or Warrants at or Acquired $0.25/Warrant) 1. Units 2. Units 3. Units 4. Units $7.25/Unit $7.25/Unit $7.25/Unit $7.25/Unit 27

31 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 31 of 37 IMPORTANT: Identify by number listed above all purchases in which you covered a "short sale": D. Purchases or Acquisitions of Warrants and Stock from July 1, 1999 through and including December 6, 2002, other than identified above: Warrants and Stock Purchased on Trade Date Number of Total Purchase the Nasdaq Month Day Year Warrants or Price 1. Warrant 2. Warrant 3. Warrant 4. Warrant 5. Stock 6. Stock 7. Stock 8. Stock Stock Purchased or Acquired IMPORTANT: Identify by number listed above all purchases in which you covered a "short sale." E. Sales of Entropin Warrants and Stock at any time: Type of Entropin Security Sold Trade Date Number of Total Sale Price (Stock) Month Day Year Shares Sold 1. Warrant 2. Warrant 3. Warrant 4. Warrant 5. Stock 6. Stock 7. Stock 8. Stock 28

32 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 32 of 37 F. Number of shares of Entropin Stock and number of Warrants held at close of trading on December 6, 2002: Shares of Stock: Warrants: If you require additional space, attach extra schedules in the same format as above. your name on each additional page. Sign and print 29

33 Case 2:04-cv RC Document 264 Filed 11/08/2007 Page 33 of 37 YOU MUST READ THE FOLLOWING AGREEMENT TO SUBMIT TO JURISDICTION OF COURT AND ACKNOWLEDGMENTS AND SIGN RELEASE. V. AGREEMENT TO SUBMIT TO JURISDICTION OF COURT AND ACKNOWLEDGMENTS. I (we) submit this Proof of Claim and Release under the terms of the Stipulation of Settlement described in the Notice. I (we) also submit to the jurisdiction of the United States District Court for the Central District of California, with respect to my (our) claim(s) as Class member(s) and for purposes of enforcing the release set forth herein. I (we) further acknowledge that I am (we are) bound by and subject to the terms of any judgment that may be entered in the Litigation. I (we) agree to furnish additional information to support this claim if required to do so. I (we) have not submitted any other claim covering the same purchases or acquisitions of Entropin Stock or Warrants and know of no other Person having done so on my (our) behalf. VI. RELEASE. A. I (we), on behalf of myself (ourselves), and my (our) current and former heirs, executors, administrators, successors, attorneys, insurers and assigns, and any person I (we) represent, hereby release, and shall forever be enjoined from prosecuting, any and all known and unknown claims against any person or entity arising out of or relating in any way to the subject matter of In re Entropin, Inc. Securities Litigation. B. This release shall be of no force or effect unless and until the Court approves the Stipulation of Settlement and the Stipulation becomes effective on the Effective Date (as defined in the Stipulation). C. I (We) hereby warrant and represent that I (we) have not assigned or transferred or purported to assign or transfer, voluntarily or involuntarily, any matter released pursuant to this release or any other part or portion thereof. D. I (We) hereby warrant and represent that I (we) have included information about all of my (our) transactions in Entropin Stock and Warrants which occurred between July 1, 1999 and 30