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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 26, 1996
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ENDOCARE, INC.
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 0-27212 33-0618093
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(State or other (Commission (I.R.S. Employer
jurisdiction of incorporation) File Number) Identification No.)
18 Technology Drive, Suite 134, Irvine, California 92618
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(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (714) 450-1410
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Not Applicable
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
Endocare, Inc., a Delaware corporation (the "Company"), issued and sold
in a private placement to four limited partnerships managed by Technology
Funding, Ltd. (the "Purchasers") Convertible Secured Promissory Notes in an
aggregate principal amount of $1,500,000 due August 26, 1998 (the "Notes") and
warrants for the purchase of up to 150,000 shares of Common Stock of the Company
(the "Warrants"). The Company borrowed an aggregate of $750,000 under the Notes
on August 26, 1996. The remaining $750,000 may be borrowed by the Company under
the Notes at any time prior to maturity if the Company meets certain financial
requirements set forth in the Notes. The Notes accrue interest at an annual
rate of 16% which is due and payable in arrears on the maturity date. The
principal amount of the Notes and the accrued interest may be converted, in
whole or in part, into shares of Common Stock of the Company at any time at the
Purchasers' option. At any time on or after August 26, 1997, the Company can
convert an amount up to $750,000, together with accrued interest thereon, into
Common Stock of the Company, if the Purchasers have not exercised their right to
convert on or before such date. The conversion price is $2.50 per share,
subject to adjustment for certain stock splits, recapitalizations or similar
changes in the Common Stock of the Company. All of the obligations under the
Notes are secured by a security interest in all present and after acquired
personal property of the Company.
The Warrants entitle the Purchasers to purchase an aggregate of up to
150,000 shares of Common Stock of the Company at any time before 5:00 p.m.
California time on August 26, 2001 at an exercise price of $3.00 per share,
subject to adjustment for certain stock splits, recapitalizations or similar
changes in the Common Stock of the Company. In lieu of exercising the Warrants,
the Purchasers have the right to convert the Warrants, or any portion of them,
into Common Stock of the Company based on a net exercise price formula contained
in the Warrants. All of the shares of Common Stock owned by the Purchaser upon
conversion of the Notes or upon exercise or conversion of the Warrants are
entitled to unlimited piggyback registration rights. These registration rights
are exercisable if the Company registers under the Securities Act of 1933, as
amended, any of its Common Stock for its own account or for the account of any
of its security holders, other than a registration relating to employee benefit
plans, registrations on Form S-8 or Form S-4 or a transaction under Rule 145.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
<TABLE>
<CAPTION>
Exhibit No. Description
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<S> <C>
10.8 Form of Convertible Secured Promissory Note
10.9 Form of Warrant
</TABLE>
2.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: September 9, 1996
ENDOCARE, INC.,
a Delaware corporation
By: /s/ PAUL W. MIKUS
--------------------------
Paul W. Mikus
President and Chief
Executive Officer
3.
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ENDOCARE, INC. 8-K
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.8 Form of Convertible Secured Promissory Note
10.9 Form of Warrant
</TABLE>
4.
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EXHIBIT 10.8
FORM OF CONVERTIBLE SECURED PROMISSORY NOTE
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED
OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144
UNDER THE ACT, OR ENDOCARE, INC. RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER
OF THESE SECURITIES REASONABLY SATISFACTORY TO ENDOCARE, INC. STATING THAT SUCH
SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT.
ENDOCARE, INC.
CONVERTIBLE SECURED PROMISSORY NOTE
$_________ San Mateo, California
August 26, 1996
FOR VALUE RECEIVED, and subject to the conversion provisions set forth
below, the undersigned, Endocare, Inc., a Delaware corporation ("Borrower"),
hereby promises to pay to __________________________________________________, a
______________________________, or order ("Lender"), at such place or places as
Lender may from time to time designate in writing, the principal amount of this
Note and accrued interest thereon, as provided herein.
A. Payment Schedule.
1. Interest. Interest shall accrue with respect to the outstanding
unpaid principal sum hereunder at the annual rate of sixteen percent (16%).
However, if an Event of Default, as defined herein, occurs, then interest shall
accrue on the outstanding unpaid principal sum hereunder at the rate per annum
of eighteen percent (18%) (the "Default Rate") from the date of the Event of
Default. Interest shall be calculated on the basis of a three hundred sixty
(360) day year for actual days elapsed. Interest shall be due and payable in
arrears on the Maturity Date, as defined herein.
2. Principal. The initial principal amount of ______________________
______________________ Dollars ($_______) (the "Initial Principal Amount") may
be increased by an additional amount of up to _________________________ Dollars
($__________) (the "Additional Principal Amount"), up to a maximum principal
amount of ____________________________________________ Dollars ($_________)
(the "Maximum Principal Amount"), (a) by Lender, at any time prior to the
Maturity Date with the consent of
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Borrower, upon delivery to Borrower of a notice of increase and additional
funds in the amount of such Additional Principal Amount, or (b) by Borrower, at
any time before the Maturity Date, upon delivery to Lender of a certificate of
Borrower's chief executive officer or chief financial officer certifying that
Borrower's net revenue for the six (6) consecutive months ending with the most
recent month for which financial statements are available (the "Test Period")
equals or exceeds two million seven hundred fifty thousand dollars ($2,750,000)
and (ii) Borrower has positive net income for the Test Period as a whole and
for each of the three most recent months of the Test Period, in each case as
reported in or calculated from Borrower's most recent Quarterly Reports on Form
10-Q or Annual Report on Form 10-K filed with the Securities and Exchange
Commission (to the extent reported therein or calculable therefrom), whereupon
Lender shall make such Additional Principal Amount available to Borrower.
Lender's obligation to lend the Initial Principal Amount and any Additional
Principal Amount is subject to, and conditioned upon, the issuance and delivery
by Borrower to Lender of an Endocare, Inc. Warrant in substantially the form
annexed hereto.
3. Maturity Date. All principal indebtedness shall be due and payable
on August 26, 1998 (the "Maturity Date").
4. Application of Payments. Each payment received from Borrower shall
be applied first to accrued interest and then to the principal amount then
outstanding.
5. Prepayment. Borrower shall have the right to prepay, in whole or
in part, the principal outstanding under this Note and/or any interest accrued
thereon. In the event of a prepayment prior to the first anniversary of the date
of this Note, in addition to all other amounts due and payable hereunder,
Borrower shall pay to Lender a prepayment fee equal to the product of (i) the
interest rate in effect on the prepayment date pursuant to paragraph 2 hereof
and (ii) the amount of principal included in such prepayment and (iii) a
fraction, the numerator of which shall be the number of days between such
prepayment date and such anniversary date and the denominator of which shall be
360.
6. Origination Fee. Upon delivery of this Note, Borrower shall pay to
Lender an origination fee (the "Origination Fee") in an amount equal to the sum
of (a) two percent (2%) of the Maximum Principal Amount and (b) the legal fees
and expenses, up to an aggregate amount of Seven Thousand Five Hundred Dollars
($7,500), of Technology Funding, Inc. in connection with this Note and the other
Convertible Secured Promissory Notes issued by Borrower on the date hereof and
the transactions related thereto. The Origination Fee shall be paid, at
Borrower's option, in cash or in the form of shares of common stock, par value
$.001 per share, of Borrower ("Common Stock"), priced (solely for purposes of
this provision) at $3 per share.
7. Form of Payment. Principal and interest and all other amounts due
hereunder are to be paid in lawful money of the United States of America in
federal or other immediately available funds or, to the extent set forth in this
Note, in Common Stock of Borrower.
2.
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B. Subordination.
The indebtedness hereunder is subordinate and junior to the prior
payment in full of all indebtedness (including indebtedness for money borrowed
from banks, insurance companies and other financial institutions, and all
extensions and renewals thereof) incurred by Borrower in the ordinary course of
Borrower's business, up to a maximum principal amount of Twenty Five Thousand
Dollars ($25,000) in any single transaction, whether outstanding on the date
hereof or hereafter created (the "Senior Indebtedness"). Senior Indebtedness
does not include indebtedness as to which the instrument creating or evidencing
the same states that such indebtedness is not superior in right of payment (or
is subordinate or junior) to this Note. With Lender's prior written consent
(which consent shall not be unreasonably withheld), the indebtedness hereunder
may be made subordinate and junior to the prior payment in full of other
indebtedness of Borrower.
C. Conversion.
At Lender's option, the outstanding unpaid principal hereunder,
together with accrued interest thereon, may be converted, in whole or in part,
into fully paid and nonassessable shares of Common Stock at any time and from
time to time. At Borrower's option, an amount up to the Initial Principal
Amount, together with accrued interest thereon, may be converted, in whole or in
part, into fully paid and nonassessable shares of Common Stock at any time on or
after August 26, 1997 if Lender has not exercised its right to convert on or
before such date.
1. Conversion Price. The conversion price shall be $2.50 per share,
subject to adjustment from time to time as set forth herein (as so adjusted, the
"Conversion Price"). If Borrower at any time shall, by subdivision,
stock-split, stock dividend, reverse stock-split, combination, recapitalization,
reclassification or otherwise, change any of the securities to which conversion
rights hereunder exist into the same or a different number or type of securities
of any class or classes, this Note shall thereafter be convertible into such
number and kind of securities as would have been issuable as the result of such
change with respect to the securities which were subject to the conversion
rights under this Note immediately prior to such subdivision, stock-split, stock
dividend, reverse stock-split, combination, recapitalization, reclassification
or other action. If the outstanding shares of Borrower Common Stock are split,
subdivided, recapitalized, reclassified, or combined into a greater or smaller
number of shares, or a stock dividend is declared or paid on such shares, the
Conversion Price shall be proportionately reduced (in the case of actions
resulting in a greater number of outstanding shares) or proportionately
increased (in the case of actions resulting in a smaller number of outstanding
shares), in both cases by the ratio which the total number of shares outstanding
immediately after such event bears to the total number of shares immediately
prior to such event. If any event shall occur as to which the foregoing
provisions are not strictly applicable but the failure to make any adjustment
would not fairly protect the conversion rights represented by this Note in
accordance with the essential intent and principles hereof, then, in each such
case, Lender and Borrower shall appoint a firm of independent public accountants
of recognized national standing, which shall give its opinion upon the
adjustment, if any, on a basis consistent with the essential
3.
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intent and principles established herein necessary to preserve, without
dilution, the conversion rights represented by this Note. Upon receipt of such
opinion, Borrower shall promptly cause the adjustments described therein to
become effective as of the occurrence of such event. Borrower shall not, by
amendment of its charter or through any consolidation, merger, reorganization,
transfer of assets, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Note, but shall at all times in good faith assist in
carrying out all such terms and in taking all such action as may be necessary
or appropriate in order to protect Lender's rights against dilution or other
impairment. Notwithstanding the foregoing, no adjustment to the Conversion
Price shall be made for: (a) the issuance of any shares of Common Stock,
options to purchase, or other securities convertible or exchangeable into,
shares of Common Stock, or any issuance of shares of Common Stock upon
exercise, conversion or exchange or such securities (each a "Convertible
Security"), to any employee, director, consultant or other agent of Borrower
pursuant to any incentive plan, licensing agreement, compensation arrangement,
bonus, award, purchase plan, stock option, or other similar arrangement, in
each case adopted by the Board of Directors of Borrower; or (b) any other
issuance of Common Stock or Convertible Securities in an amount not to exceed
an additional 3,000,000 shares of Common Stock of Borrower (not including any
shares of Common Stock issuable pursuant to the provisions of these Notes or
the related Warrants), and subject to adjustment of such number for events that
would adjust the Conversion Price as set forth in this paragraph B.1.
2. Conversion Procedures. Conversion shall be made (i) by Lender
upon surrender of this Note to Borrower at its principal executive office
accompanied by a written notice of election to convert, and (ii) by Borrower by
written notice of conversion to Lender in accordance with paragraph F.4 hereof.
Borrower shall thereupon issue and deliver to Lender a certificate or
certificates representing the shares of Borrower Common Stock into which this
Note has been converted, together (in the case of a partial conversion) with a
replacement note, in form substantially identical to this Note, for the
unconverted unpaid principal amount. No fractional share shall be issued in
connection with the conversion of this Note, but in lieu of such fractional
share, Borrower shall pay Lender an amount equal to the product of such
fractional share (calculated to the nearest 1/1000 of a share) and the
Conversion Price. Payment of such amount shall be made in cash or by check
payable to the order of Lender.
3. Borrower's Representations, Warranties and Covenants. Borrower
represents and warrants that all shares of Common Stock issued upon conversion
of this Note shall, when issued, be duly authorized, validly issued, fully paid,
and nonassessable, and that the delivery of certificates for such shares to
Lender in the manner provided herein will transfer to Lender good and valid
title to such shares, free and clear of all Liens. Borrower shall, from time to
time, increase its number of authorized shares of Common Stock so as to maintain
at all times a number of such shares sufficient to permit the conversion of this
Note and shall reserve, free from preemptive rights, out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of this Note, sufficient shares to provide for the conversion of this
Note.
4.
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4. Registration Rights. If Borrower at any time determines to
register under the Securities Act of 1933, as amended (the "Securities Act"),
any of its Common Stock, either for its own account or for the account of one or
more security holders, other than a registration relating solely to (i) employee
benefit plans or on Form S-8 or (ii) a transaction under SEC Rule 145 or on Form
S-4, Borrower shall promptly give Lender written notice thereof and shall
include in such registration (and any related qualification under blue sky laws
or other compliance) the shares of Common Stock received by Lender upon such
conversion and/or in payment of the Origination Fee (the "Shares") specified in
a written request from Lender made within thirty (30) days after the receipt of
such notice by Lender (provided, however, that for purposes of the registration
rights set forth in this paragraph C.4, Shares shall cease to be registrable
under this paragraph C.4 when (i) a registration statement covering such Shares
shall have become effective under the Securities Act and such Shares shall have
been disposed of in accordance with such registration statement, (ii) such
Shares shall have been distributed to the public pursuant to Rule 144 or Rule
144A (or any successor provisions) under the Securities Act or (iii) such Shares
shall have ceased to be outstanding). Borrower may effect the registration of
the Shares under the Securities Act of 1933 on any suitable registration form
permitted by the Securities and Exchange Commission ("SEC"), including Form S-3,
provided that such form is reasonably acceptable to Lender to permit the
disposition of the Shares in accordance with the intended method of disposition
specified by Lender in its request for registration. Borrower shall provide
Lender with copies of all correspondence with the SEC related to such
registration and reasonable opportunity to review and comment on drafts of the
registration statement and responses to comments and correspondence of the SEC.
No information relating to Lender shall be included in any registration
statement or other documents filed with the SEC or any other governmental
authority without Lender's consent, except that Borrower may file this Note and
disclose related information if required by applicable law, rule, regulation or
order of any jurisdiction, governmental authority, securities exchange or court
of competent jurisdiction. Without limiting the generality of the foregoing,
Borrower shall (x) notify Lender promptly of all action by the SEC relating to
the registration statement and the registration of the Shares; (y) furnish to
Lender such opinions of Borrower's counsel and comfort letters of Borrower's
independent auditors as Lender reasonably requests; and (z) furnish Lender with
sufficient copies of the registration statement, each amendment and supplement
thereto, all exhibits and documents incorporated by reference, and prospectuses
to facilitate the disposition of the Shares. Nothing herein shall require
Borrower to qualify generally to do business as a foreign corporation in any
jurisdiction where it would not otherwise be required to qualify or to subject
itself to taxation in any such jurisdiction, or to consent to general service of
process in any such jurisdiction. Borrower shall indemnify Lender, each of its
officers, directors, partners and affiliates, and each person controlling such
persons (each an "Indemnified Party"), against all expenses, claims, losses,
damages or liabilities (or actions in respect thereof), including any of the
foregoing incurred in settlement with the prior written consent of Borrower
(which consent shall not be unreasonably withheld) of any litigation, threatened
or pending, arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement or
prospectus, or any omission (or alleged omission) to state therein a material
fact required (or alleged to be required) to be stated therein to make the
statements not misleading, or any violation by Borrower of the Securities Act of
1933 or any rule thereunder. Notwithstanding the foregoing, Borrower shall not
be liable to any Indemnified Party for any
5.
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expense, claim, loss, damage or liability (or action in respect thereof) to the
extent that it arises from or is based upon (i) information relating to such
Indemnified Party furnished for use in connection with such registration by
such Indemnified Party or its agents, (ii) any untrue statement or alleged
untrue statement of, or any omission or alleged omission to state therein, a
material fact contained in or omitted from any registration statement or
prospectus relating to the Shares delivered by such Indemnified Party after
Borrower notified such Indemnified Party that such registration statement or
prospectus contained such untrue statement, alleged untrue statement, omission
or alleged omission of a material fact or (iii) the failure of such Indemnified
Party to deliver any preliminary or final prospectus, or any amendments or
supplements thereto, required under applicable securities laws to be so
delivered. All information provided by Lender for use in any registration
statement hereunder shall be true and correct in all material respects and
shall not omit any material fact which is required to make such information not
false misleading.
D. Security Interest.
1. Grant of Security Interest. Borrower grants to Lender a security
interest in the Collateral, as defined herein, to secure the payment of all of
the indebtedness and obligations hereunder (the "Secured Obligations").
2. Representations and Warranties Regarding Collateral. Borrower
represents and warrants to Lender that (i) Borrower is or, to the extent that
the Collateral will be acquired after the date hereof, will be the true and
lawful owner of the Collateral, having good and marketable title thereto, or a
valid leasehold interest therein, free and clear of any and all Liens other than
the Lien granted to Lender hereunder and Permitted Liens, and (ii) Borrower has
the authority to grant the security interest in the Collateral, whether now in
existence or arising in the future. Without the consent of Lender (which shall
not be unreasonably withheld), Borrower shall not create or assume or permit to
exist any Lien on or against any of the Collateral except as created or
permitted by this Note and Permitted Liens, and Borrower shall promptly notify
Lender of any such other Lien against the Collateral and shall defend the
Collateral against, and take all such action as may be reasonably necessary to
remove or discharge, any such Lien if required by Lender.
3. Perfection of Security Interest. Borrower agrees to take all
actions requested by Lender and reasonably necessary to perfect, to continue the
perfection of, and to otherwise give notice of, the Lien granted hereunder,
including execution of financing statements.
E. Events of Default.
1. Definition of Event of Default. The occurrence of any one or more
of the following events shall constitute an "Event of Default" hereunder:
(a) Borrower's breach of the obligation to pay any amount payable
hereunder on the date that it is due and payable;
6.
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(b) Borrower's institution of proceedings against it, or Borrower's
filing of a petition or answer or consent seeking reorganization or release,
under the federal Bankruptcy Code, or any other applicable federal or state law
relating to creditor rights and remedies, or Borrower's consent to the filing of
any such petition or the appointment of a receiver, liquidator, assignee,
trustee or other similar official of Borrower or of any substantial part of its
property, or Borrower's making of an assignment for the benefit of creditors, or
the taking of corporate action in furtherance of such action.
2. Rights and Remedies on Event of Default. During the continuance of
an Event of Default, Lender shall have the right to accelerate the payment of
the principal, interest and charges owing hereunder and to enforce this Note by
exercise of the rights and remedies granted to it by applicable law.
F. Other Provisions.
1. Reporting. As long as any principal or interest hereunder remains
unpaid, Borrower shall promptly furnish Lender with (a) copies of all documents
filed by Borrower after the date hereof with the SEC (or substantially similar
information, at substantially similar intervals, if Borrower ceases to be a
reporting company under the Securities Exchange Act of 1934, as amended) and (b)
such other information regarding Borrower as Lender may from time to time
reasonably request.
2. Definitions. As used herein, the following terms shall have the
following meanings:
"Collateral": All of Borrower's present and hereafter acquired
personal property, wherever located, including, but not limited to, (1)
accounts, as defined by Section 9106 of the California Uniform Commercial Code
(or similar section of any applicable enactment of the Uniform Commercial Code);
(2) inventory, as defined by Section 9109(4) of the California Uniform
Commercial Code (or similar section of any applicable enactment of the Uniform
Commercial Code), including, but not by way of limitation, all raw materials,
work in process, finished goods, returned goods and materials and supplies of
any nature, kind and description which are or might be used or consumed in
Borrower's business or used in connection with the manufacture, packing,
shipping, advertising, selling or finishing of such goods, merchandise or such
other personal property and all documents of title representing the foregoing;
(3) contracts, contract rights, purchase orders, chattel paper, negotiable
documents, notes, drafts, documents, instruments, including, but not limited to,
checks, deposit accounts, cash, insurance policies of any nature and all credit
insurance, guaranties, and other security therefor, as well as all goods
returned to or reclaimed by such Borrower, (4) furniture and goods, (5)
fixtures, as defined by Section 9313(1) of the California Uniform Commercial
Code (or similar section of any applicable enactment of the Uniform Commercial
Code); (6) equipment, as defined by Section 9109(2) of the California Uniform
Commercial Code (or similar section of any applicable enactment of the Uniform
Commercial Code), including, without limitation, data processing hardware and
software, motor vehicles, aircraft, dies, tools, jigs, and office equipment as
well as all of such types of property leased by Borrower and all of Borrower's
rights and interest with
7.
<PAGE> 8
respect thereto under such leases (including, without limitation, options to
purchase), together with all present and future additions and accessions
thereto, replacements therefor, component and auxiliary parts and supplies used
or to be used in connection therewith, and all substitutes for any of the
foregoing, and all manuals, drawings, instructions, warranties and rights with
respect thereto; (7) general intangibles, as defined by Section 9106 of the
California Uniform Commercial Code (or similar section of any applicable
enactment of the Uniform Commercial Code), including, but not by way of
limitation, Borrower's name and goodwill, computer programs, disks and tapes,
trademarks, trade names, copyrights, patents, patent rights, patent
applications, licenses, permits, customer lists, blueprints, drawings, purchase
orders, literature, reports, catalogues, deposit accounts, life insurance and
other insurance policies, tax refunds, royalties, commissions and choses in
action; (8) all proceeds arising from or in connection with any sale, rental,
exchange or other disposal of the foregoing assets, whether voluntary or
involuntary, including insurance proceeds for loss due to casualty or any other
reason, all accessions and additions thereto, and any replacement of such
collateral and the proceeds of such collateral; (9) all products of the
foregoing; and (10) all books and records pertaining to all of the foregoing
and the equipment containing such books and records.
"Lien": any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, security interest, charge, claim
or other encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest) and any agreement to give or refrain from giving a lien,
mortgage, pledge, hypothecation, assignment, deposit arrangement, security
interest, charge, claim or other encumbrance of any kind.
"Permitted Liens": each and all of the following --
(a) liens for taxes or assessments and similar charges that are
either not yet due or delinquent or being contested by appropriate proceedings;
(b) statutory liens, including, but not limited to, mechanic's,
materialman's, warehouseman's and carrier's liens arising in the ordinary course
of business;
(c) encumbrances consisting of licenses, reservations,
provisions, covenants, conditions, waivers, restrictions on the use of property
or irregularities of title;
(d) liens or security interests securing conditional sale,
rental or purchase money obligations, but only in the property that is the
subject of such obligations;
(e) liens or security interests arising under or pursuant to
this Note or otherwise securing any of the Secured Obligations;
(f) liens, security interests and other encumbrances that by
their terms are junior to the liens arising under this Note pursuant to
subordination agreements reasonably acceptable to Lender;
8.
<PAGE> 9
(g) pledges or deposits made in the ordinary course of business
to secure payment of worker's compensation, or to participate in any fund in
connection with worker's compensation, unemployment insurance, old-age pensions,
or other social security programs;
(h) liens in connection with sale and leaseback transactions;
(i) liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(j) good faith deposits in connection with bids, tenders,
contracts (other than contracts for the repayment of borrowed money) or leases
entered into in the ordinary course of business; and
(k) liens in favor of employees, lessors, landlords, suppliers
or similar persons, incurred in the ordinary course of business for sums which
are not yet delinquent or are being contested in good faith by negotiations or
by appropriate proceedings and for which adequate reserves have been created.
3. Governing Law; Venue. This Note shall be deemed to have been made
in the State of California, and the validity of this Note, its construction,
interpretation and enforcement, and Lender's rights, shall be determined under,
governed by and construed in accordance with the laws of the State of
California. Borrower and Lender agree that all actions or proceedings arising
in connection with this Note shall be tried and litigated only in the state and
federal courts located in the City and County of San Mateo, State of California
or, at Lender's option, any court in which Lender determines it is necessary or
appropriate to initiate legal or equitable proceedings in order to exercise,
preserve, protect or defend any of its rights and remedies under this Note or
otherwise or to exercise, preserve, protect or defend its Lien, and the priority
thereof, against the Collateral, and which has subject matter jurisdiction over
the matter in controversy. Borrower waives any right it may have to assert the
doctrine of forum non conveniens or to object to such venue, and consents to any
court ordered relief. The choice of forum set forth herein shall not be deemed
to preclude the enforcement of any judgment obtained in such forum, or the
taking of any action under this Note to enforce the same, in any appropriate
jurisdiction.
4. Notices. Any notice or other communication required or desired to
be served, given or delivered hereunder shall be in the form and manner
specified below, and shall be addressed to the party to be notified as follows:
9.
<PAGE> 10
If to Lender:
Technology Funding
2000 Alameda de las Pulgas
San Mateo, California 94403
Telephone: (415) 345-2200
Facsimile: (415) 341-1400
Attention: Mr. Peter Bernardoni
with a copy to:
Gray Cary Ware & Freidenrich
400 Hamilton Avenue
Palo Alto, California 94301
Telephone: (415) 833-2496
Facsimile: (415) 327-3699
Attention: Rod J. Howard, Esq.
If to Borrower:
Endocare, Inc.
18 Technology Drive, Suite 134
Irvine, California 92618
Telephone: (714) 450-1410
Facsimile: (714) 450-1413
Attention: Mr. Paul Mikus, President and
Chief Executive Officer
with a copy to:
Riordan & McKinzie
695 Town Center Drive, Suite 1500
Costa Mesa, California 92626
Telephone: (714) 433-2900
Facsimile: (714) 549-3244
Attention: Elaine R. Levin, Esq.
or to such other address as each party designates to the other by notice in the
manner herein prescribed. Notice shall be deemed given hereunder if (i)
delivered personally or otherwise actually received, (ii) sent by overnight
delivery service, (iii) mailed by first-class United States mail, postage
prepaid, registered or certified, with return receipt requested, or (iv) sent
via telecopy machine with a duplicate signed copy sent on the same day as
provided in clause (ii) above. Notice mailed as provided in clause (iii) above
shall be effective upon the expiration of three (3) business days after its
deposit in the United States mail, and notice telecopied as provided in clause
(iv) above shall be effective upon receipt of such telecopy if the duplicate
signed copy is sent under clause (iv) above. Notice given in any other manner
described in this
10.
<PAGE> 11
section shall be effective upon receipt by the addressee thereof; provided,
however, that if any notice is tendered to an addressee and delivery thereof is
refused by such addressee, such notice shall be effective upon such tender
unless expressly set forth in such notice.
5. Lender's Rights; Borrower Waivers. Lender's acceptance of partial
or delinquent payment from Borrower hereunder, or Lender's failure to exercise
any right hereunder, shall not constitute a waiver of any Borrower obligation or
any Lender right hereunder, and shall not affect in any way the right to require
full performance at any time thereafter. Borrower waives presentment, diligence,
demand of payment, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note. In any action on this Note, Lender need not produce or file the
original of this Note, but need only file a photocopy of this Note certified by
Lender be a true and correct copy of this Note in all material respects. The
waiver of notice hereunder shall not apply to notices pursuant to paragraphs C.2
and C.4 hereof.
6. Enforcement Costs. Borrower shall pay all reasonable costs and
expenses, including reasonable attorneys' fees and expenses, Lender expends or
incurs in connection with the enforcement of this Note, the collection of any
sums due hereunder, any actions for declaratory relief in any way related to
this Note, or the protection or preservation of any rights of Lender hereunder,
including all costs and expenses incurred during a bankruptcy or similar
proceeding of Borrower.
7. Severability. Whenever possible each provision of this Note shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision is prohibited by or invalid under applicable law, it shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of the provision or the remaining provisions of this
Note.
8. Amendment. This Note may not be amended or modified, nor may any
of its terms be waived, except by written instruments signed by Borrower and
Lender.
9. Binding Effect. This Note shall be binding upon, and shall inure
to the benefit of, Borrower and Lender and their respective successors and
assigns; provided, however, that Borrower's rights and obligations shall not be
assigned or delegated without Lender's prior written consent, given in its sole
discretion, except to any successor of Borrower; and provided further, that
Lender's rights and obligations shall not be assigned, delegated or otherwise
transferred without Borrower's prior written consent (which consent shall not be
unreasonably withheld) to any person or entity Borrower reasonably determines
either is an actual or potential competitor or affiliate of such a competitor of
Borrower and in no event may the reporting obligations of Borrower set forth in
paragraph F.1(b) be assigned, delegated or transferred to any person not
affiliated with Lender, and any purported assignment or delegation without such
consent shall be void ab initio.
10. Time of Essence. Time is of the essence of each and every
provision of this Note.
11.
<PAGE> 12
11. Headings. Section headings used in this Note have been set forth
herein for convenience of reference only. Unless the contrary is compelled by
the context, everything contained in each section hereof applies equally to this
entire Note.
ENDOCARE, INC.
By:
----------------------------
Title:
------------------------
Accepted By Lender:
By:
--------------------------
Name:
---------------------
Title:
--------------------
12.
<PAGE> 1
EXHIBIT 10.9
FORM OF WARRANT
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED
OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144
UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF
THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT.
ENDOCARE, INC.
WARRANT
1. Number of Shares Subject to Warrant. FOR VALUE RECEIVED, on and
after the date of this Warrant, and subject to the terms and conditions herein,
______________________, a ______________________ (the "Holder") is entitled to
purchase from Endocare, Inc., a Delaware corporation (the "Company"), at any
time before 5:00 p.m. California time on August 26, 2001 at the Exercise Price
(as defined herein), ______________________________ (_____) shares of fully paid
and nonassessable shares of common stock, par value $.001 per share, of the
Company, subject to adjustment as set forth in Section 3 hereof.
2. Definitions. As used in this Warrant, the following terms shall
have the definitions ascribed to them below:
(a) "Company": Endocare, Inc., a Delaware corporation.
(b) "Common Stock": Common stock, par value $.001 per share, of
the Company.
(c) "Exercise Price": Three Dollars ($3), subject to adjustment
pursuant to Section 3 below.
(d) "Holder": ______________________________________________, a
____________________________, and its transferees and assigns.
(e) "Notes": the Convertible Secured Promissory Notes of even
date herewith in favor of the Holder and certain other persons. When used herein
in the singular, "Note" refers to the Convertible Secured Promissory Notes of
even date herewith in favor of the Holder.
(f) "Warrant Stock": Shares of Common Stock or other securities
purchasable upon exercise of this Warrant.
<PAGE> 2
3. Adjustment of Exercise Price and Number of Shares. The number of
shares of Warrant Stock issuable upon the exercise hereof and the Exercise Price
shall be subject to adjustment from time to time, and the Company agrees to
provide notice to the Holder upon the occurrence of certain events, as follows:
(a) Reclassification, etc. If the Company at any time, by
subdivision, combination or reclassification of securities or otherwise, changes
any of the securities to which purchase rights under this Warrant exist into the
same or a different number or type of securities of any class or classes, this
Warrant shall thereafter be to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities which were subject to the purchase rights under this Warrant
immediately prior to such subdivision, combination, reclassification or other
change. If shares of the Common Stock are split, subdivided, recapitalized,
reclassified or combined into a greater or smaller number of shares, the
Exercise Price shall be proportionately reduced (in the case of actions
resulting in a greater number of outstanding shares) or proportionately
increased (in the case of actions resulting in a smaller number of outstanding
shares), in both cases by the ratio which the total number of shares of Common
Stock outstanding immediately after such event bears to the total number of
shares of Common Stock outstanding immediately prior to such event.
(b) Merger, Sale of Assets, etc. If at any time the Company
proposes to consolidate with or merge with or be acquired by any other
corporation, the Company shall give the Holder thirty (30) days advance notice
of the effective date of such transaction. Such transactions shall not result
in termination of this Warrant, but this Warrant shall thereupon automatically
be exchanged for and converted into and become a warrant of the surviving or
acquiring corporation that shall entitle the Holder to acquire the number of
shares of stock or other property which the Holder would have been entitled to
receive under the terms of such transaction if the Holder had exercised or
converted this Warrant in full immediately prior to the effective time of such
transaction.
(c) Adjustment for Dividends in Stock. If at any time or from
time to time on or after the date hereof the holders of Common Stock receive, or
become entitled to receive, without payment therefor, other or additional
securities of the Company by way of dividend, then and in each case, the Holder
shall, upon the exercise hereof, be entitled to receive, in addition to the
number of shares of Warrant Stock receivable thereupon, and without payment of
any additional consideration therefor, the amount of such other or additional
securities of the Company which the Holder would hold on the date of such
exercise had it been the holder of record of such Warrant Stock on the date
hereof and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and/or all other
additional stock receivable by it as aforesaid during such period, giving effect
to all adjustments called for during such period by this paragraph (c).
(d) Other Dilutive Events. If any event shall occur as to
which the provisions of Sections 3(a), 3(b) or 3(c) are not strictly applicable
but the failure to make any adjustment would not fairly protect the purchase
rights represented by this Warrant in accordance with the essential intent and
principles of such sections, then, in each such case, the Company and the Holder
shall appoint a firm of independent public accountants of recognized national
-2-
<PAGE> 3
standing, which shall give its opinion upon the adjustment, if any, on a basis
consistent with the essential intent and principles established in Sections
3(a), 3(b) and 3(c), necessary to preserve, without dilution, the purchase
rights represented by this Warrant. Upon receipt of such opinion, the Company
shall promptly cause the adjustments described therein to become effective as
of the occurrence of such event. The Company shall not, by amendment of its
charter or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of
this Warrant, but shall at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the Holder's rights against dilution or other
impairment. Notwithstanding the foregoing, no adjustment to the number of
shares of Warrant Stock issuable upon the exercise hereof or the Exercise Price
shall be made for: (a) the issuance of any shares of Common Stock, options to
purchase, or other securities convertible or exchangeable into, shares of
Common Stock, or any issuance of shares of Common Stock upon exercise,
conversion or exchange of such securities (each a "Convertible Security"), to
any employee, director, consultant or other agent of the Company pursuant to
any incentive plan, licensing agreement, compensation arrangement, bonus,
award, purchase plan, stock option or other similar arrangement, in each case
adopted by the Board of Directors of the Company; or (b) any other issuance of
Common Stock or Convertible Securities in an amount not to exceed an additional
3,000,000 shares of Common Stock of the Company (not including any shares of
Common Stock issuable pursuant to the provisions of the Notes or any of the
related Warrants), and subject to adjustment of such number for events that
would adjust the number of shares of Warrant Stock issuable upon the exercise
hereof or Exercise Price as set forth in this Section 3.
4. No Shareholder Rights. This Warrant, by itself, as distinguished
from any shares purchased hereunder, shall not entitle the Holder to any of the
rights of a shareholder of the Company.
5. Reservation of Stock. On and after the date of this Warrant, the
Company shall reserve from its authorized and unissued shares of Common Stock a
sufficient number of shares to provide for the issuance of Warrant Stock upon
the exercise this Warrant.
6. Exercise of Warrant. This Warrant may be exercised in whole or
part by the Holder, at any time after the date hereof and prior to the
termination of this Warrant, by the surrender of this Warrant, together with the
Notice of Exercise and Investment Representation Statement attached hereto as
Attachments 1 and 3, respectively, duly completed and executed, at the Company's
principal office, accompanied by payment in full of the Exercise Price in cash
or by check with respect to the shares of Warrant Stock being purchased. This
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise, together with the payment in
full of the Exercise Price and documents as provided above, and the person
entitled to receive the shares of Warrant Stock issuable upon such exercises
shall be treated for all purposes as holder of such shares of record as of the
close of business on such date. As promptly as practicable after such date, the
Company shall issue and deliver to the person or persons entitled to receive the
same a certificate or certificates for the number of full shares of Warrant
Stock issuable upon such exercise.
-3-
<PAGE> 4
7. Conversion. In lieu of exercising this Warrant or any portion
hereof, the Holder shall have the right to convert this Warrant or any portion
hereof into Warrant Stock by executing and delivering to the Company at its
principal office the written notice of conversion in the form attached hereto as
Attachment 2, specifying the portion of the Warrant to be converted, and
accompanied by this Warrant. Except as provided below, the date of delivery of
such notice shall be the conversion date. The number of shares of Warrant Stock
to be issued upon such conversion shall be computed using the following formula:
X = (P)(Y)(A-B)/A
where X = the number of shares of Warrant Stock to be issued to
the Holder for the portion of the Warrant being converted.
P = the portion of the Warrant being converted.
Y = the total number of shares of Warrant Stock issuable
upon exercise of the Warrant in full.
A = the fair market value of one share of Warrant Stock,
which shall mean (i) the average of the daily closing sale
prices (or, if no sales are reported, the average of the
closing bid and asked prices) of the Common Stock for the
thirty (30) trading days before the conversion date or (ii)
in the absence of a public market for the Common Stock,
such other value as the Company and the Holder shall
mutually agree.
B = the Exercise Price on the conversion date.
Any portion of this Warrant that is converted shall be immediately canceled.
If, as of the last day of the exercise period, this Warrant has not been fully
exercised, then as of such date this Warrant shall be automatically converted,
in full, in accordance with this section, without any action or notice by the
Holder. For purposes of such automatic conversion, the date of automatic
conversion shall be the conversion date.
8. Certificate of Adjustment. Whenever the Exercise Price or number
or type of securities issuable upon exercise of this Warrant is adjusted, the
Company shall promptly deliver to the Holder a certificate of an officer of the
Company setting for the nature of such adjustment and a brief statement of the
facts requiring such adjustment.
9. Registration Rights. If the Company at any time determines to
register under the Securities Act of 1933, as amended (the "Securities Act") any
of its Common Stock, either for its own account or for the account of one or
more security holders, other than a registration relating solely to (i) employee
benefit plans or on Form S-8 or (ii) a transaction under SEC Rule 145 or on Form
S-4, the Company shall promptly give the Holder written notice thereof and shall
include in such registration (and any related qualification under blue sky laws
or other compliance) the Warrant Stock specified in a written request from the
Holder made
-4-
<PAGE> 5
within thirty (30) days after receipt of such notice by the Holder; provided,
however, that for purposes of the registration rights set forth in this Section
9, each share of Warrant Stock shall cease to be registrable under this Section
9 when (i) a registration statement covering such Warrant Stock shall have
become effective under the Securities Act, and such Warrant Stock shall have
been disposed of in accordance with such registration statement, (ii) such
Warrant Stock shall have been distributed to the public pursuant to Rule 144 or
Rule 144A (or any successor provisions) under the Securities Act or (iii) such
Warrant Stock shall have ceased to be outstanding. The Company may effect the
registration of the Warrant Stock under the Securities Act of 1933 on any
suitable registration form permitted by the Securities and Exchange Commission
("SEC"), including Form S-3, provided that such form is reasonably acceptable
to the Holder to permit the disposition of the Warrant Stock in accordance with
the intended method of disposition specified by the Holder in its request for
registration. The Company shall provide the Holder with copies of all
correspondence with the SEC related to such registration and reasonable
opportunity to review and comment on drafts of the registration statement and
responses to comments and correspondence of the SEC. No information relating
to the Holder shall be included in any registration statement or other document
filed with the SEC or any other governmental authority without the Holder's
consent, except that the Company may file this Warrant and disclose related
information if required by applicable law, rule, regulation or order of any
jurisdiction, governmental authority, securities exchange or court of competent
jurisdiction. Without limiting the generality of the foregoing, the Company
shall (x) notify the Holder promptly of all action by the SEC relating to the
registration statement and the registration of the Warrant Stock; (y) furnish
to the Holder such opinions of the Company's counsel and comfort letters of the
Company's independent auditors as the Holder may reasonably request; and (z)
furnish the Holder with sufficient copies of the registration statement, each
amendment and supplement thereto, all exhibits and documents incorporated by
reference, and prospectuses to facilitate the disposition of the Warrant Stock.
Nothing herein shall require the Company to qualify generally to do business as
a foreign corporation in any jurisdiction where it would not otherwise be
required to qualify or to subject itself to taxation in any such jurisdiction,
or to consent to general service of process in any such jurisdiction. The
Company shall indemnify the Holder, each of its officers, directors, partners
and affiliates, and each person controlling such persons (each, an "Indemnified
Party"), against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement with the prior written consent of the Company (which consent shall
not be unreasonably withheld) of any litigation, threatened or pending, arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement or prospectus, or any
omission (or alleged omission) to state therein a material fact required (or
alleged to be required) to be stated therein to make the statements not
misleading, or any violation by the Company of the Securities Act of 1933 or
any rule thereunder. Notwithstanding the foregoing, the Company shall not be
liable to any Indemnified Party for any expense, claim, loss, damage or
liability (or action in respect thereof) to the extent that it arises from or
is based upon (i) information relating to such Indemnified Party furnished for
use in connection with such registration by such Indemnified Party or its
agents, (ii) any untrue statement or alleged untrue statement of, or any
omission or alleged omission to state therein, a material fact contained in or
omitted from any registration statement or prospectus relating to the Warrant
Stock delivered by such Indemnified Party after the Company notified such
Indemnified Party that such registration statement or prospectus contained such
untrue statement, alleged untrue statement, omission or alleged omission or a
material fact or (iii) the failure of
-5-
<PAGE> 6
such Indemnified Party to deliver any preliminary or final prospectus, or any
amendments or supplements thereto, required under applicable securities laws to
be so delivered. All information provided by Holder for use in any
registration statement hereunder shall be true and correct in all material
respects and shall not omit any material fact which is required to make such
information not false misleading.
10. Transfer of Warrant. This Warrant may be transferred or assigned
by the Holder, in whole or in part, provided that (i) ten (10) days prior
written notice is given to the Company, and (ii) in the case of assignment or
transfer to a non-affiliate, the Holder provides, at the Company's request, an
opinion of counsel satisfactory to the Company that such transfer does not
require registration under the Act and the securities law applicable with
respect to any other jurisdiction, and (iii) the Company reasonably determines
that the transferee is not an actual or potential competitor or affiliate of
such a competitor of the Company.
11. Original Issue Discount. The Holder and the Company hereby
acknowledge and agree that this Warrant is part of an investment unit within the
meaning of Section 1273(c)(2) of the Internal Revenue Code which includes a Note
of even date herewith. The Holder and the Company further agree, as between the
Holder and the Company, that the fair market value of this Warrant is equal to
____________________ dollars ($_____) and that, pursuant to Treas. Reg. Section
1.1273-2(h), _________________________________ dollars ($_____) of the issue
price of the investment unit will be allocable to the Warrant and the balance
shall be allocable to the Note. The Holder and the Company agree to prepare
their federal income tax returns in a manner consistent with the foregoing
agreement and, pursuant to Treas. Reg. Section 1.1273, the original issue
discount on the Note shall be considered to be zero.
12. Termination. This Warrant shall terminate at 5:00 p.m, California
time, on August 26, 2001.
-6-
<PAGE> 7
13. Miscellaneous. This Warrant shall be governed by the laws of the
State of California, as such laws are applied to contracts to be entered into
and performed entirely in California by California residents. The headings
herein are for purposes of convenience and reference only, and shall not be
deemed to constitute a part hereof. The terms of this Warrant may not be
changed or waived orally, but only by an instrument in writing signed by the
Company and the Holder. All notices and other communications from the Company
to the Holder shall be delivered personally or mailed by first class mail,
postage prepaid, to the last address furnished to the Company in writing by the
Holder, and if mailed shall be deemed given three days after deposit in the
United States mail.
ISSUED: August 26, 1996
ENDOCARE, INC.
By:
---------------------------
Title:
------------------------
-7-
<PAGE> 8
ATTACHMENT 1
NOTICE OF EXERCISE
TO: ENDOCARE, INC.
1. The undersigned hereby elects to purchase _____________ shares of
the Warrant Stock of Endocare, Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price in full, together
with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares
of Warrant Stock in the name of the undersigned or in such other name as is
specified below:
------------------------------------------
(Name)
------------------------------------------
(Address)
- ----------------------- ---------------------------------------
(Date) (Name of Warrant Holder)
By:
------------------------------------
Title:
---------------------------------
(Name of purchaser, and title and
signature of authorized person)
-8-
<PAGE> 9
ATTACHMENT 2
NOTICE OF CONVERSION
TO: ENDOCARE, INC.
1. The undersigned hereby elects to acquire _______________________
shares of the Warrant Stock of Endocare, Inc. pursuant to the terms of the
attached Warrant, by conversion of ________ percent (___%) of the Warrant.
2. Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
------------------------------------------
(Name)
------------------------------------------
(Address)
- ------------------------- -------------------------------------------
(Date) (Name of Warrant Holder)
By:
----------------------------------------
Title:
-------------------------------------
(Name of purchaser, and title and
signature of authorized person)
-9-
<PAGE> 10
ATTACHMENT 3
INVESTMENT REPRESENTATION STATEMENT
Shares of the Warrant Stock
(as defined in the attached Warrant) of
ENDOCARE, INC.
In connection with the purchase of the above-listed securities, the undersigned
hereby represents to Endocare, Inc. (the "Company") as follows:
(a) The shares of Warrant Stock to be received upon the exercise of
the Warrant (the "Securities") will be acquired for investment for its own
account, not as a nominee or agent, and not with a view to the sale or
distribution of any part thereof, and the undersigned has no present intention
of selling, granting participation in or otherwise distributing the same, but
subject, nevertheless, to any requirement of law that the disposition of its
property shall at all times be within its control. By executing this Statement,
the undersigned further represents that it does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer, or
grant participations to such person or to any third person, with respect to any
Securities issuable upon exercise of this warrant.
(b) The undersigned understands that the Securities issuable upon
exercise of the Warrant at the time of issuance may not be registered under the
Securities Act of 1933, as amended (the "Act"), and applicable state securities
laws, on the ground that the issuance of such securities is exempt pursuant to
Section 4 (2) of the Act and state law exemptions relating to offers and sales
not by means of a public offering, and that the Company's reliance on such
exemptions is predicated on the undersigned's representations set forth herein.
(c) The undersigned agrees that in no event will it make a
disposition of any Securities acquired upon the exercise of the Warrant unless
and until (i) it shall have notified the Company of the proposed disposition and
shall have furnished the Company with a statement of the circumstances
surrounding the proposed disposition, and (ii) it shall have furnished the
Company with an opinion of counsel satisfactory to the Company and Company's
counsel to the effect that (A) appropriate action necessary for compliance with
the Act and any applicable state securities laws has been taken or an exemption
from the registration requirements of the Act and such laws is available, and
(B) that the proposed transfer will not violate any of said laws.
(d) The undersigned acknowledges that an investment in the Company is
highly speculative and represents that it is able to fend for itself in the
transactions contemplated by this Statement, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investments, and has the ability to bear the economic risks
(including the risk of a total loss) of its investment. The undersigned
represents that it has had the opportunity to ask questions of the Company
concerning the Company's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
amplify the Company's disclosures, and has had all questions which have been
asked by it satisfactorily answered by the Company.
-10-
<PAGE> 11
(e) The undersigned acknowledges that the Warrant Stock issuable upon
exercise of the Warrant must be held indefinitely unless subsequently registered
under the Act or an exemption from such registration is available. The
undersigned is aware of the provisions of Rule 144 promulgated under the Act
which permit limited resale of shares purchased in a private placement subject
to the satisfaction of certain conditions, including, among other things, the
existence of a public market for the shares, the availability of certain current
public information about the Company, the resale occurring not less than two
years after a party has purchased and paid for the security to be sold, the sale
being through a "broker's transaction" or in transactions directly with a
"market makers" (as provided by Rule 144(f)) and the number of shares being sold
during any three-month period not exceeding specified limitations.
Dated:
-----------------------
---------------------------------
(Signature)
---------------------------------
(Typed or Printed Name)
---------------------------------
(Title)
-11-
