<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sections 240.14a-11(c) or 240.14a-12
ENDOCARE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] Fee not required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
ENDOCARE, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 25, 2000
TO THE STOCKHOLDERS OF ENDOCARE, INC.:
The 2000 Annual Meeting of Stockholders (the "2000 Annual Meeting") of
Endocare, Inc. (the "Company" or "Endocare") will be held at 11:00 a.m., Pacific
Time, on Tuesday, April 25, 2000 at 7 Studebaker, Irvine, California 92618, for
the following purposes:
1. To elect six Directors to the Board of Directors of the Company to serve
during the ensuing year and until their successors are elected and
qualified.
2. To approve an amendment to the Company's Certificate of Incorporation to
increase the number of shares of the Company's common stock (the "Common
Stock") authorized for issuance thereunder by an additional 30,000,000
shares to a total of 50,000,000 shares of Common Stock.
3. To ratify the appointment of KPMG LLP as the Company's independent
auditors for the fiscal year ending December 31, 2000.
4. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only the stockholders of record at the close
of business on March 20, 2000 will be entitled to notice of and to vote at the
2000 Annual Meeting or any adjournment or postponement thereof.
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 1999 is being mailed with this Notice but is not to be
considered part of the proxy soliciting material.
By Order of the Board of Directors
/s/ PAUL W. MIKUS
--------------------------------------
Paul W. Mikus
Chairman, President and Chief
Executive Officer
March 27, 2000
Irvine, California
YOU ARE URGED TO VOTE UPON THE MATTERS PRESENTED AND TO SIGN, DATE AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. IT IS IMPORTANT FOR
YOU TO BE REPRESENTED AT THE MEETING. PROXIES ARE REVOCABLE AT ANY TIME AND THE
EXECUTION OF YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ARE
PRESENT AT THE MEETING.
REQUESTS FOR ADDITIONAL COPIES OF PROXY MATERIALS SHOULD BE ADDRESSED TO
WILLIAM R. HUGHES, CORPORATE SECRETARY, AT THE OFFICES OF THE COMPANY, 7
STUDEBAKER, IRVINE, CALIFORNIA 92618.
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<PAGE> 3
ENDOCARE, INC.
-------------------------------
PROXY STATEMENT
-------------------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Endocare, Inc., a Delaware
corporation (the "Company" or "Endocare"), for use at the 2000 Annual Meeting of
Stockholders (the "2000 Annual Meeting") to be held on Tuesday, April 25, 2000
at 11:00 a.m., Pacific Time, at 7 Studebaker, Irvine, California 92618, and any
adjournment or postponement thereof. This Proxy Statement and the form of proxy
to be utilized at the 2000 Annual Meeting were mailed or delivered to the
stockholders of the Company on or about March 30, 2000.
RECORD DATE AND VOTING
The Board has fixed the close of business on March 20, 2000 as the record
date (the "Record Date") for the determination of stockholders entitled to vote
at the 2000 Annual Meeting and any adjournment or postponement thereof. As of
the Record Date, there were outstanding 11,384,030 shares of the Company's
common stock (the "Common Stock").
QUORUM AND VOTING REQUIREMENTS
The holders of record of a majority of the outstanding shares of Common
Stock will constitute a quorum for the transaction of business at the 2000
Annual Meeting. As to all matters, each stockholder is entitled to one vote for
each share of Common Stock held. Abstentions and broker non-votes are counted
for purposes of determining the presence or absence of a quorum for the
transaction of business. The Director nominees who receive the greatest number
of votes at the 2000 Annual Meeting will be elected to the Board of the Company.
Stockholders are not entitled to cumulate votes. Votes against a candidate and
votes withheld have no legal effect. In matters other than the election of
Directors, abstentions are counted as negative votes in tabulations of the votes
cast on proposals presented to stockholders, whereas broker non-votes are not
counted for purposes of determining whether a proposal has been approved.
VOTING ELECTRONICALLY VIA THE INTERNET OR TELEPHONE
If your shares are registered in the name of a bank or brokerage firm, you
may be eligible to vote your shares electronically over the Internet or by
telephone. A large number of banks and brokerage firms are participating in the
ADP Investor Communication Services online program. This program provides
eligible stockholders who receive a paper copy of the Annual Report and Proxy
Statement the opportunity to vote via the Internet or by telephone. If your bank
or brokerage firm is participating in ADP's program, your voting form will
provide instructions. If your voting form does not reference Internet or
telephone information, please complete and return the paper Proxy in the
self-addressed postage paid envelope provided.
PROXIES
If the enclosed form of proxy is properly signed and returned, the shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If the proxy does not specify how the shares
represented thereby are to be voted, the proxy will be voted FOR the election of
the Directors proposed by the Board unless the authority to vote for the
election of such Directors is withheld and, if no contrary instructions are
given, the proxy will be voted FOR the approval of Proposals 2 and 3 described
in the accompanying Notice and Proxy Statement. You may revoke or change your
Proxy at any time before the Annual Meeting by filing with the Secretary of the
Company at the Company's principal executive offices a notice of revocation or
another signed Proxy with a later date. You may also revoke your Proxy by
attending the Annual Meeting and voting in person.
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PROPOSAL 1 -- ELECTION OF DIRECTORS
Six Directors are to be elected at the 2000 Annual Meeting to serve until
the next Annual Meeting of Stockholders and until their respective successors
have been elected and qualified. In the absence of instructions to the contrary,
proxies covering shares of Common Stock will be voted in favor of the election
of the persons listed below. In the event that any nominee for election as
Director should become unavailable to serve, it is intended that votes will be
cast, pursuant to the enclosed proxy, for such substitute nominee as may be
nominated by the Board. Management has no present knowledge that any of the
persons named will be unavailable to serve.
No arrangement or understanding exists between any nominee and any other
person or persons pursuant to which any nominee was or is to be selected as a
Director or nominee. None of the nominees has any family relationship to any
other nominee or to any Executive Officer of the Company.
INFORMATION CONCERNING INCUMBENT DIRECTORS AND NOMINEES TO BOARD OF DIRECTORS
Information is set forth below concerning the incumbent Directors, all of
whom are also nominees for election as Directors, and the year in which each
incumbent Director was first elected as a Director of the Company. Each nominee
has furnished the information as to his or her beneficial ownership of Common
Stock as of February 29, 2000 and, if not employed by the Company, the nominee's
principal occupation. Each nominee has consented to being named in this Proxy
Statement as a nominee for Director and has agreed to serve as a Director if
elected. Ages are shown as of February 29, 2000.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY DIRECTOR SINCE
---- --- ------------------------- --------------
<S> <C> <C> <C>
Paul W. Mikus 34 President, Chief Executive 1995
Officer,
Chairman of the Board of
Directors
Peter F. Bernardoni+* 40 Director 1995
Robert F. Byrnes+* 55 Director 1997
Benjamin Gerson, M.D.+* 52 Director 1997
Alan L. Kaganov, Sc.D 61 Director 1999
Michael J. Strauss, M.D. 46 Director 1999
</TABLE>
- ---------------
* Member of the Compensation Committee.
+ Member of the Audit Committee.
Paul W. Mikus has served as President, Chief Executive Officer, Chairman
and Director since November, 1995. From June, 1995 to October 1995, he was
President of Endocare when it was a division of Medstone International. Prior to
becoming President of Endocare, from October, 1994 to May, 1995, he managed
worldwide sales and marketing for Prosurg, Inc. From July, 1989 to September,
1994, he worked for Medstone International as Manager of Engineering where he
co-founded Endocare. Mr. Mikus has a BS degree in Electrical Engineering. He
serves on the Board of Directors of Sanarus Medical Inc.
Peter F. Bernardoni has served as a Director since November, 1995. Mr.
Bernardoni has been a Vice President of Technology Funding Inc. since 1991 and a
partner in Technology Funding Ltd. since 1994. Mr. Bernardoni has an MS in
Mechanical Engineering from Stanford University. He serves on the Board of
Directors of Urogen Corporation, PEP, Reflection Technology, Physiometrix,
Prolinx and Sanarus Medical Inc.
Robert F. Byrnes joined Endocare's Board of Directors in August, 1997.
Previously, Mr. Byrnes served in a number of top-level management positions in
the health care industry including Chairman and Chief Executive Officer of Tokos
Medical and President and Chief Executive Officer of Matria Healthcare, Inc. Mr.
Byrnes has a BS degree in Pharmacy from Ferris State University and a Masters of
Business Administration from Loyola University. He serves on the Board of
Directors of Tandem Medical, Advolife, Biomens and Pelvicare.
Benjamin Gerson, M.D. joined Endocare's Board of Directors in August, 1997.
Dr. Gerson is a Professor of Pathology and Laboratory Medicine and Professor of
Pharmacology and Experimental Therapeu-
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tics at Boston University School of Medicine. Dr. Gerson was previously a panel
member of the U.S. Food and Drug Administration (FDA) and had served as Chairman
of the Clinical Chemistry and Clinical Toxicology Devices Panel, Center for
Devices and Radiological Health. He obtained his M.D. from Thomas Jefferson
University.
Alan L. Kaganov, Sc.D. was appointed Director in January, 1999. Dr. Kaganov
has been a partner at U.S. Venture Partners since July, 1996. Dr. Kaganov
previously was Vice President of Business Development and led Strategic Planning
at Boston Scientific Corporation from 1993 to 1996. Prior to his role at BSC, he
served as President and CEO of EP Technologies and Vice President of Technology
and Business Development at Baxter International. Dr. Kaganov holds an Sc.D.
(Doctorate of Science) in Biomedical Engineering from Columbia University and a
Masters of Business Administration/Corporate Finance degree from New York
University. Dr. Kaganov also serves on the Board of Directors of Eclipse
Surgical Technologies, Inc.
Michael J. Strauss, M.D., M.P.H. was appointed Director in February, 1999.
He was a founder and officer of Covance Health Economics and Outcomes Services,
Inc. (formerly Health Technology Associates) from 1988 through 1999 and still
serves as a consultant to the company. Previously, Dr. Strauss served as Senior
Associate and Principal of Lewin and Associates. He obtained his M.D. at Duke
University Medical School and an M.P.H. from University of Washington School of
Public Health. He serves on the Board of Directors of Cyberonics, Inc., Kaiser's
mid-Atlantic Permanente Medical Group and the Medicare Program's Medical
Coverage Advisory Committee.
BOARD COMMITTEES
The Board of Directors established the Audit Committee to: (i) make
recommendations concerning the engagement of independent public accountants;
(ii) review with the independent public accountants the plans for, and scope of,
the audit procedures to be utilized and results of the audit; (iii) approve the
professional services provided by the independent public accountants; (iv)
review the independence of the independent public accountants; and (v) review
the adequacy and effectiveness of the Company's internal accounting controls.
Mr. Peter F. Bernardoni, Mr. Robert F. Byrnes and Dr. Benjamin Gerson are the
members of the Audit Committee. The Committee held one meeting in 1999.
The Board of Directors established the Compensation Committee which
consists of Mr. Peter F. Bernardoni, Mr. Robert F. Byrnes and Dr. Benjamin
Gerson, none of whom are employees of the Company. The Compensation Committee
determines the compensation of the Company's Executive Officers and administers
the 1995 Stock Plan and the 1995 Director Option Plan (the "Director Plan"). The
Committee held two meetings in 1999.
MEETINGS AND REMUNERATION
During fiscal 1999, the Board held 9 meetings and took various actions by
written consent. Each incumbent Director attended at least 75% of the aggregate
of: (i) the total number of meetings held by the Board during fiscal 1999; and
(ii) the total number of meetings held by all committees of the Board during
that period within which he was a member of such committee.
Each Director is elected to hold office until the next annual meeting of
stockholders and until his respective successor is elected and qualified. The
Company does not compensate its directors for their services as such. However,
Directors are reimbursed for their out-of-pocket expenses in attending Board
meetings, and each of the Company's non-employee Directors participates in the
Director Plan. In addition, non-employee Directors, Messrs. Byrnes and Kaganov,
perform certain consulting services for the Company apart from their services on
the Board of the Company. Their consulting services and the compensation they
receive for them are described in this Proxy Statement under the Section
entitled "Certain Transactions."
Under the automatic option grant program in effect under the Company's 1995
Director Option Plan, each individual who was serving as a non-employee Board
member (each, an "Outside Director") prior to June 4, 1998, was automatically
granted an option to purchase 10,000 fully vested shares of Common Stock upon
his or her initial election or appointment as an Outside Director. On June 4,
1998, at the 1998 annual meeting of stockholders, the Company's stockholders
approved an amendment to the Director
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Plan increasing the automatic option grant made to an Outside Director upon his
or her initial appointment or election to the Board to a 20,000 share option
grant which becomes exercisable in two equal annual installments over the
Director's first two years of Board service. In addition, under the Director
Plan, after such Director's initial appointment, he or she receives an automatic
option grant each January 1, or first trading day thereafter, to acquire 5,000
shares of Common Stock, provided that he or she has served on the Board for at
least six months. The 5,000 share annual option grants become fully vested and
exercisable on the first anniversary of the grant date, provided the Outside
Director continues in Board service through such date.
Outside Directors Messrs. Bernardoni, Byrnes and Gerson received the
automatic 5,000 share option grant as described above on January 4, 1999. In
addition, upon their respective appointment to the Board in January, 1999 and
February, 1999, Outside Directors Dr. Alan Kaganov and Dr. Michael Strauss each
received the automatic 20,000 share option grant described above. Most recently,
on January 3, 2000, each Outside Director received the automatic 5,000 share
option grant described above. All of the options granted to Outside Directors
were granted at an exercise price equal to the fair market value of the Common
Stock on the date the options were granted.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF EACH NOMINEE LISTED ABOVE.
PROPOSAL 2 -- APPROVAL OF AMENDMENT OF THE RESTATED CERTIFICATE OF INCORPORATION
The present capital structure of the Company authorizes 20,000,000 shares
of Common Stock and 1,000,000 shares of preferred stock each having a par value
of $.001 per share. The Board of Directors believes this capital structure is
inadequate for the present and future needs of the Company. Therefore, the Board
of Directors has unanimously approved the amendment of the Company's Restated
Certificate of Incorporation (the "Certificate") to increase the authorized
number of shares of Common Stock from 20,000,000 shares to 50,000,000 shares.
The Board believes this capital structure more appropriately reflects the
present and future needs of the Company and recommends such amendment to the
Company's stockholders for adoption. The undesignated preferred stock may be
issued from time to time in one or more series with such rights, preferences and
privileges as may be determined by the Board of Directors. On February 29, 2000,
11,297,531 shares of Common Stock were outstanding and no shares of preferred
stock were outstanding.
PURPOSE OF AUTHORIZING ADDITIONAL COMMON STOCK
Authorizing an additional 30,000,000 shares of Common Stock would give the
Board of Directors the express authority, without further action of the
stockholders, to issue such Common Stock from time to time as the Board of
Directors deems necessary. The Board of Directors believes it is necessary to
have the ability to issue such additional shares of Common Stock for general
corporate purposes. Potential uses of the additional authorized shares may
include acquisition transactions, equity financings and issuance of options
pursuant to the Company's 1995 Stock Plan without further action by the
stockholders, unless such action were specifically required by applicable law or
rules of any stock exchange on which the Company's securities may then be
listed.
The proposed increase in the authorized number of shares of Common Stock
could have a number of effects on the Company's stockholders depending upon the
exact nature and circumstances of any actual issuances of authorized but
unissued shares. The increase could have an anti-takeover effect, in that
additional shares could be issued (within the limits imposed by applicable law)
in one or more transactions that could make a change in control or takeover of
the Company more difficult. For example, additional shares could be issued by
the Company so as to dilute the stock ownership or voting rights of persons
seeking to obtain control of the Company. Similarly, the issuance of additional
shares to certain persons allied with the Company's
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management could have the effect of making it more difficult to remove the
Company's current management by diluting the stock ownership or voting rights of
persons seeking to cause such removal. In addition, an issuance of additional
shares by the Company could have an effect on the potential realizable value of
a stockholder's investment. In the absence of a proportionate increase in the
Company's earnings and book value, an increase in the aggregate number of
outstanding shares of the Company caused by the issuance of the additional
shares would dilute the book value per share of all outstanding shares of the
Company's Common Stock. If such factors were reflected in the price per share of
Common Stock, the potential realizable value of a stockholder's investment could
be adversely affected. The Common Stock carries no preemptive rights to purchase
additional shares.
The proposed amendment of the Company's Certificate of Incorporation was
approved by unanimous written consent of the directors of the Company on March
14, 2000.
STOCKHOLDER APPROVAL
The affirmative vote of a majority of the Company's outstanding voting
shares is required for approval of the amendment of the Company's Restated
Certificate of Incorporation authorizing 30,000,000 additional shares of Common
Stock.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
AMENDMENT OF THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION AUTHORIZING
30,000,000 ADDITIONAL SHARES OF COMMON STOCK.
PROPOSAL 3 -- RATIFICATION OF THE APPOINTMENT OF
KPMG LLP AS INDEPENDENT ACCOUNTANTS
The Board has selected KPMG LLP as independent public accountants to audit
the financial statements of the Company for fiscal 2000. KPMG LLP served as the
Company's independent public accountants for fiscal 1999. A member of that firm
is expected to be present at the 2000 Annual Meeting, will have an opportunity
to make a statement if so desired, and will be available to respond to
appropriate questions. If the stockholders do not ratify the selection of KPMG
LLP, if KPMG LLP should decline to act or otherwise become incapable of acting,
or if its employment is discontinued, the Audit Committee will appoint the
independent public accountants for fiscal 2000. Proxies solicited by the Board
will be voted in favor of ratification unless stockholders specify otherwise.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR THE FISCAL YEAR 2000.
OTHER BUSINESS
The Company is not aware of any other business to be presented at the 2000
Annual Meeting. All shares represented by Company proxies will be voted in favor
of the proposals of the Company described herein unless otherwise indicated on
the form of proxy. If any other matters properly come before the meeting,
Company proxy holders will vote thereon according to their best judgment.
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<PAGE> 8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of Endocare Common Stock owned as of February 29, 2000 by: (i) the
holders of more than 5% of Endocare Common Stock known to the Company; (ii) each
Director of the Company; (iii) each of Endocare's Named Executive Officers
(identified in the Summary Compensation Table herein); and (iv) all Directors
and Executive Officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL
TITLE OF CLASS OF BENEFICIAL OWNER(1) OWNERSHIP(2) PERCENT OF CLASS
- -------------- ---------------------- ----------------- ----------------
<S> <C> <C> <C>
Common Stock The Kaufmann Fund, Inc. 1,913,000 17%
140 E. 45th Street
New York, NY 10017
Peter F. Bernardoni(3) 766,107 6.8%
Technology Funding Inc.
2000 Alameda de las Pulgas
San Mateo, CA 94403
Brown Simpson Capital, LLC(4) 1,253,814 9.9%
Brown Simpson Asset
Management, LLC
Carnegie Hall Tower
152 West 57th Street, 40th Fl.
New York, NY 10019
Paul W. Mikus(5) 618,561(6) 5.2%
Vincent C. Cutarelli(5) 136,731(7) 1.2%
Jay J. Eum(5) 84,071(8) *
William R. Hughes(5) 154,592(9) 1.4%
Ralph L. Quigley(5) 119,071(10) 1%
Robert F. Byrnes 266,613(11) 2.3%
9505 Hillwood Dr.
Suite 100
Las Vegas, NV 89134
Benjamin Gerson, M.D. 25,000(12) *
70 Walnut Street
Wellesley, MA 02181
Alan L. Kaganov, Sc.D. 62,000(13) *
2180 Sand Hill Rd.
Menlo Park, CA 94025
Michael J. Strauss, M.D. 25,000(14) *
1100 New York Ave. NW
Washington, DC 20005-3934
All Executive Officers and 2,432,746 19.3%
Directors
as a group (11 persons)
</TABLE>
- ---------------
* Less than 1%.
(1) All such shares were held of record with sole voting and investment power,
subject to applicable community property laws, by the named individual
and/or by his wife, except as indicated in the following footnotes.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission") and generally
includes voting or investment power with respect to securities. Shares of
common stock relating to options or convertible securities currently
exercisable, or
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<PAGE> 9
exercisable within 60 days of February 29, 2000, are deemed outstanding for
computing the percentage of the person holding such securities but are not
deemed outstanding for computing the percentage of any other person.
(3) Includes 741,107 shares held by Technology Funding Partners III, L.P.,
Technology Funding Venture Partners IV, an Aggressive Growth Fund, L.P.,
Technology Funding Venture Partners V, an Aggressive Growth Fund, L.P., and
Technology Funding Medical Partners I, L.P. (collectively, the "Funds").
Mr. Bernardoni is an officer of Technology Funding Inc. and a partner of
Technology Funding Ltd., each a general partner of the Funds. Mr.
Bernardoni has sole voting and share investment power with respect to all
shares owned by the Funds, and therefore may be deemed to be beneficial
owner of such shares. Also includes 25,000 shares issuable with respect to
exercise of options.
(4) Each of Brown Simpson Strategic Growth Fund, L.P. ("BSSGF L.P.") and its
general partner, Brown Simpson Capital, LLC, may be deemed the benefical
owner of 453,711 shares held for the account of BSSGF L.P. This number
assumes the conversion of convertible debentures held for the account of
BSSGF L.P. into 453,711 shares. Each of Brown Simpson Strategic Growth
Fund, Ltd. ("BSSGF Ltd.") and Brown Simpson Asset Management, LLC, its
investment manager, may be deemed the beneficial owner of 800,103 shares
held for the account of BSSGF Ltd. This number assumes the conversion of
convertible debentures held for the account of BSSGF Ltd. into 800,103
shares.
(5) The address of such persons is 7 Studebaker, Irvine, California 92618.
(6) Includes 606,250 shares subject to options that are exercisable within 60
days after February 29, 2000.
(7) Includes 131,771 shares subject to options that are exercisable within 60
days after February 29, 2000.
(8) Includes 78,750 shares subject to options that are exercisable within 60
days after February 29, 2000.
(9) Includes 149,271 shares subject to options that are exercisable within 60
days after February 29, 2000.
(10) Includes 113,750 shares subject to options that are exercisable within 60
days after February 29, 2000.
(11) Includes 110,000 shares subject to options that are exercisable within 60
days after February 29, 2000.
(12) Represents 25,000 shares subject to options that are exercisable within 60
days after February 29, 2000.
(13) Includes 60,000 shares subject to options that are exercisable within 60
days after February 29, 2000.
(14) Includes 10,000 shares subject to options that are exercisable within 60
days after February 29, 2000.
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<PAGE> 10
EXECUTIVE OFFICERS, COMPENSATION AND OTHER INFORMATION
The Executive Officers of the Company and their ages as of February 29,
2000 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Paul W. Mikus 34 President, Chief Executive Officer, Chairman of the Board of Directors
Vincent C. Cutarelli 50 Senior Vice President, Regulatory Affairs/Quality Assurance
Jay J. Eum 35 Vice President, Research & Development
William R. Hughes 43 Senior Vice President and Chief Financial Officer
Ralph L. Quigley 56 Senior Vice President, Operations
</TABLE>
Paul W. Mikus has served as President, Chief Executive Officer, Chairman
and Director since November, 1995. From June, 1995 to October 1995, he was
President of Endocare when it was a division of Medstone International. Prior to
becoming President of Endocare, from October, 1994 to May, 1995, he managed
worldwide sales and marketing for Prosurg, Inc. From July, 1989 to September,
1994, he worked for Medstone International as Manager of Engineering where he
co-founded Endocare. Mr. Mikus has a BS degree in Electrical Engineering. He
serves on the Board of Directors of Sanarus Medical Inc.
Vincent C. Cutarelli, RAC, has served as Senior Vice President, Regulatory
Affairs/Quality Assurance since January, 1999 and previously served as Vice
President, Regulatory Affairs/Quality Assurance since September, 1996. He has
over 25 years experience in regulatory affairs, quality assurance, GMP/ISO
compliance and documentation control in the medical device industry. Most
recently, he served as the Director, Regulatory Affairs at both Allergan Optical
and Baxter Healthcare. After obtaining his Bachelor's degree in Chemistry and
Biology from Clark University, he went on to become an ASQC Certified Quality
Engineer and Regulatory Affairs Certified (RAC).
Jay J. Eum has served as Vice President of Research & Development since
January 1999 and previously served as Director of Research & Development from
September, 1996 to January, 1999. In February 1996, he began working for
Endocare as a Senior Engineer in the research and development department. Mr.
Eum previously served as Senior Engineer for Cardiac Science from October, 1994
to February, 1996. Prior to that time, he served as Senior Software Engineer for
Medstone International from September, 1991 to October, 1994. He has a BS degree
in Electrical Engineering from California State University, Fullerton and a
Masters degree in Electrical Engineering from Kansas State University.
William R. Hughes has served as Senior Vice President and Chief Financial
Officer since July 1997. With 20 years experience in public accounting and
industry, Mr. Hughes previously served as Controller and Chief Accounting
Officer for FileNet Corporation and was a partner in the accounting firm of KPMG
Peat Marwick. He obtained a BS degree in Economics from California State
University, San Luis Obispo and has been a Certified Public Accountant since
1981.
Ralph L. Quigley has served as Senior Vice President, Operations since
January, 1999 and previously served as Vice President, Operations since May,
1996. Prior to joining Endocare, Mr. Quigley served as Director of Operations
for Workstation Technologies, from 1993 to 1996. From 1991 to 1993, Mr. Quigley
was Vice President, Operations at L.H. Research, Inc., where he was responsible
for both domestic and international operations. Mr. Quigley served as Director
and Division General Manager at Everett-Charles Test Equipment Company from 1982
to 1988.
9
<PAGE> 11
EXECUTIVE COMPENSATION
The following table sets forth information regarding compensation earned by
the Chief Executive Officer and the four (4) other most highly compensated
Executive Officers whose salaries and bonus for the year ended December 31, 1999
was in excess of $100,000 (the "Named Executive Officers") for their services to
the Company for the years ended December 31, 1997, 1998 and 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
----------------------------------------- SECURITIES
OTHER UNDERLYING
NAME AND ANNUAL OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) COMPENSATION($) SARS(#)(2) COMPENSATION($)(4)
------------------ ---- --------- ----------- --------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Paul W. Mikus 1999 150,000 67,406 -- 40,000 3,729(3)
Chairman, 1998 150,000 75,000 -- 200,000 4,062
President, CEO 1997 132,500 42,000 -- -- 464
Vincent Cutarelli(5) 1999 140,000 50,330 -- 25,000 4,278(3)
Senior V.P., RA/QA 1998 105,000 45,000 -- 130,000 3,620
1997 100,000 17,500 -- -- 324
Jay J. Eum(6) 1999 135,000 42,466 -- 20,000 364(3)
Vice President, 1998 80,000 9,375 -- 50,000 229
Research & Dev. 1997 60,525 1,250 -- -- 152
William R. Hughes(7) 1999 150,000 67,406 -- 25,000 5,384(3)
Senior V.P., Chief 1998 140,000 70,000 -- 110,000 5,432
Financial Officer 1997 59,134 29,250 -- 140,000 151
Ralph L. Quigley 1999 135,000 42,466 -- 15,000 4,115(3)
Senior V.P., 1998 100,000 31,500 -- 75,000 3,683
Operations 1997 87,500 16,625 -- -- 394
</TABLE>
- ---------------
(1) Annual bonus amounts are earned and accrued for the fiscal year in which
reported, but are paid after the close of that fiscal year.
(2) The Company does not grant Stock Appreciation Rights.
(3) Represents group term life insurance payments.
(4) The 1998 and 1999 totals in the column reflect the value of the Company
contributions to each named executive under the Endocare, Inc. 401K Plan and
group term life insurance. These amounts for the 1998 and 1999 fiscal years,
respectively, were as follows: Paul W. Mikus: $3,792 and $270; $3,474 and
$255, Vincent Cutarelli: $3,063 and $557; $3,500 and $778, Jay J. Eum: $110
and $119; $120 and $244, William R. Hughes: $4,963 and $469; $5,000 and
$384, Ralph L. Quigley: $2,333 and $1,350; $2,700 and $1,415.
(5) Mr. Cutarelli joined the Company in September, 1996 and became an Executive
Officer of the Company in 1997.
(6) Mr. Eum joined the Company in February, 1996 and was first appointed an
Executive Officer in January, 1999.
(7) Mr. Hughes joined the Company and was first appointed an Executive Officer
in July, 1997.
10
<PAGE> 12
STOCK OPTIONS
The following table sets forth information concerning each grant of stock
options made during 1999 to each of the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------------------------------- ANNUAL RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SHARES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM($)(2)
OPTIONS EMPLOYEES PRICE PER EXPIRATION --------------------
NAME GRANTED(1) IN PERIOD SHARE DATE 5% 10%
---- ---------- ------------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Paul W. Mikus 40,000 8.2% $2.03 01/06/09 51,066 129,412
Vincent C. Cutarelli 25,000 5.1% $2.03 01/06/09 31,916 80,882
Jay J. Eum 20,000 4.1% $2.03 01/06/09 25,533 64,706
William R. Hughes 25,000 5.1% $2.03 01/06/09 31,916 80,882
Ralph L. Quigley 15,000 3.1% $2.03 01/06/09 19,150 48,530
</TABLE>
- ---------------
(1) All options become fully vested and exercisable upon the merger of the
Company with or into another corporation or the sale of substantially all of
the Company's assets. Prior to and in the absence of such merger or sale,
the options vest over a four-year period, with 25% to vest on the one year
anniversary date, and the remaining 75% to vest in equal monthly
installments thereafter over the following three years.
(2) The potential realizable value is calculated based on the term of the option
at its time of grant (ten years). It is calculated by assuming that the
stock price on the date of grant appreciates at the indicated annual rate,
compounded annually for the entire term of the option.
The following table sets forth the number and value as of December 31, 1999
of shares underlying unexercised options held by each of the Named Executive
Officers. No options were exercised during the 1999 fiscal year by any of the
Named Executive Officers.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AS OF
AS OF DECEMBER 31, 1999 DECEMBER 31, 1999($)(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Paul W. Mikus 577,083 162,917 4,631,862 968,790
Vincent Cutarelli 107,292 117,708 562,299 684,170
Jay J. Eum 66,250 53,750 507,457 331,368
William R. Hughes 120,625 154,375 695,727 911,244
Ralph L. Quigley 96,563 68,437 499,676 401,631
</TABLE>
- ---------------
(1) Based on the fair market value, computed using the average bid and ask
prices quoted on the NASDAQ SmallCap Market as of December 31, 1999 ($8.56
per share), less the exercise price payable upon exercise of such options.
INDEMNIFICATION AND EXCULPATION ARRANGEMENTS
The Restated Certificate of Incorporation of Endocare limits the liability
of Directors to Endocare or its stockholders to the fullest extent permitted by
the Delaware General Corporation Law (the "DGCL"). Accordingly, pursuant to the
provisions of the DGCL presently in effect, Directors of Endocare will not be
personally liable for monetary damages for breach of a Director's fiduciary duty
as a Director, except for liability: (i) for any breach of the Director's duty
of loyalty to the Company or its shareholders; (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) under
11
<PAGE> 13
Section 174 of the DGCL; or (iv) for any transaction from which the Director
derived an improper personal benefit. In addition, the bylaws of Endocare
require Endocare to indemnify its Directors and Officers to the fullest extent
permitted by the laws of the State of Delaware.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Messrs. Bernardoni, Byrnes
and Gerson, none of whom were at any time during fiscal 1999 or at any other
time an Officer or employee of the Company. Mr. Byrnes does, however, serve as a
consultant to the Company, and receives compensation for such services, as
discussed under Section entitled "Certain Transactions" herein. There are no
Compensation Committee interlocks between the Company and other entities
involving the Company's Executive Officers and Board members who serve as
Executive Officers or Board members of such other entities.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board is comprised of Messrs. Bernardoni,
Byrnes and Gerson, three non-employee Directors, who administer the Company's
executive compensation programs and policies. The Company's executive
compensation programs are designed to attract, motivate and retain the executive
talent needed to maximize stockholder value in a competitive environment. The
programs are intended to support the goal of increasing stockholder value while
facilitating the business strategies and long-range plans of the Company. The
following is the Compensation Committee's report submitted to the Board
addressing the compensation of the Company's Executive Officers for fiscal 1999.
COMPENSATION POLICY AND PHILOSOPHY
The Company's executive compensation policy is (i) designed to establish an
appropriate relationship between executive pay and the Company's annual
performance, its long-term growth objectives and its ability to attract and
retain qualified Executive Officers; and (ii) based on the belief that the
interests of the executives should be closely aligned with the Company's
stockholders. The Compensation Committee attempts to achieve these goals by
integrating competitive annual base salaries and incentive bonuses with stock
options granted under the 1995 Stock Plan. In support of this philosophy, a
meaningful portion of many executive's compensation is placed at-risk and linked
to the financial performance of the Company. The Compensation Committee believes
that cash compensation in the form of salary and incentive bonus provides
Company executives with short-term rewards for success in operations, and that
long-term compensation through the award of stock options encourages growth in
management stock ownership which leads to expansion of management's stake in the
long-term performance and success of the Company. The Compensation Committee
considers all elements of compensation and the compensation policy when
determining individual components of pay. The Compensation Committee is
responsible to the Board for ensuring that its Executive Officers are highly
qualified and that they are compensated in a manner that furthers the Company's
business strategies and which aligns their interests with those of the
stockholders.
EXECUTIVE COMPENSATION COMPONENTS
As discussed below, the Company's executive compensation package is
primarily comprised of base salary, incentive bonus and stock options.
BASE SALARY AND ANNUAL INCENTIVES. For fiscal 1999, the Compensation
Committee approved the base salaries of the Executive Officers based on salaries
paid to Executive Officers with comparable responsibilities employed by
companies with comparable businesses. The Executive Officer bonus program is
designed to reward executives for individual performance and contributions to
the success of and overall growth and progress of the Company. The Compensation
Committee reviews Executive Officer salaries and bonus programs annually and
exercises its judgment based on all the factors described above.
STOCK OPTIONS. Stock options encourage and reward effective management
which results in long-term corporate financial success, as measured by stock
price appreciation. Stock options covering 250,000 shares
12
<PAGE> 14
were granted to the Executive Officers of the Company and stock options covering
236,500 shares were granted to 24 other employees of the Company during 1999
under the Company's 1995 Stock Plan. The number of options that each Executive
Officer or employee was granted was based primarily on the executive's or
employee's ability to enhance the Company's long-term growth and profitability.
The Compensation Committee believes that option grants afford a desirable
long-term compensation method because they closely ally the interests of
management with stockholder value and that grants of stock options are the best
way to motivate Executive Officers to improve long-term stock market
performance. The vesting provisions of options granted under the 1995 Stock Plan
are designed to encourage longevity of employment with the Company and generally
extend over a four-year period.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Compensation Committee believes that Paul W. Mikus, the Company's Chief
Executive Officer, provides valuable services to the Company and his
compensation should therefore be competitive with that paid to executives at
comparable companies. Mr. Mikus was granted stock options covering 40,000 shares
in 1999. His annual base salary for fiscal 1999 was $150,000. In addition, Mr.
Mikus received an annual incentive bonus of $67,406 which was paid subsequent to
year-end. The factors which the Compensation Committee considered in setting his
annual base salary and incentive bonus were his individual performance while he
is President of the Company and pay practices of peer companies relating to
executives of similar responsibility.
INTERNAL REVENUE CODE SECTION 162(m)
Under Section 162 of the Internal Revenue Code of 1986, as amended (the
"Code"), the amount of compensation paid to certain executives that is
deductible with respect to the Company's corporate taxes is limited to
$1,000,000 annually. It is the current policy of the Compensation Committee to
maximize, to the extent reasonably possible, the Company's ability to obtain a
corporate tax deduction for compensation paid to Executive Officers of the
Company to the extent consistent with the best interests of the Company and its
stockholders.
COMPENSATION COMMITTEE
Peter F. Bernardoni
Robert F. Byrnes
Benjamin Gerson, M.D.
13
<PAGE> 15
COMPANY PERFORMANCE
The following graph shows a comparison of cumulative total returns for the
Company, the NASDAQ Stock Market -- U.S. Index and the Hambrecht & Quist
Healthcare-Excluding Biotechnology Index for the period during which the
Company's Common Stock has been registered under Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The comparison assumes
$100 invested on February 20, 1996 in the Common Stock with the reinvestment of
all dividends, if any. Total stockholder returns for the prior period is not an
indication of future returns.
COMPARISON OF 46 MONTH CUMULATIVE TOTAL RETURN*
AMONG ENDOCARE, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND HAMBRECHT & QUIST HEALTHCARE-EXCLUDING BIOTECHNOLOGY INDEX
<TABLE>
<CAPTION>
ENDOCARE, INC. NASDAQ STOCK HAMBRECHT & QUIST
-------------- MARKET (U.S.) HEALTHCARE E
------------- EXCLUDING
BIOTECHNOLOGY
-----------------
<S> <C> <C> <C>
2/20/1996 100 100 100
12/96 950 120 107
12/97 933 147 127
12/98 525 207 154
12/99 2250 374 135
</TABLE>
- ---------------
* $100 INVESTED ON 2/20/96 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings made under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings made by the Company under those statutes, neither the preceding Stock
Performance Graph nor the Compensation Committee Report is to be incorporated by
reference into any such prior filings, nor shall such graph or report be
incorporated by reference into any future filings made by the Company under
those statutes.
14
<PAGE> 16
CERTAIN TRANSACTIONS
RELATIONSHIP BETWEEN ENDOCARE AND TECHNOLOGY FUNDING
Peter F. Bernardoni has served on Endocare's Board of Directors since
November, 1995. He also is a partner of Technology Funding Ltd. and an officer
of Technology Funding Inc., a venture capital group. In August, 1996, Endocare
obtained a two year $1,500,000 borrowing facility from four partnerships managed
by Technology Funding Inc. The outstanding principal balance of $750,000 was
convertible and, at the option of the holders, was converted on January 27, 1997
into 300,000 shares of Endocare Common Stock at a conversion price of $2.50 per
share. Interest on the loan had accrued at a rate of 16% per year, and all
$50,000 of accrued interest was converted into 20,000 shares on that same date
at the same $2.50 per share. Also on January 27, 1997, the four partnerships
managed by Technology Funding Inc. received an additional 12,000 shares ($50,250
total market value) to induce conversion at that time. At Endocare's election,
the remaining borrowing facility was cancelled on that same date. In connection
with the loan, on August 26, 1996, the partnerships also received warrants for
the purchase of up to 150,000 shares of Endocare Common Stock at any time on or
before August 26, 2001, at a price of $3.00 per share, and the partnerships
received an origination fee of 10,000 shares of Common Stock on that same date.
On April 16, 1998 and April 24, 1998, investment funds managed by Technology
Funding Inc. acquired an aggregate for such two purchase dates combined of
142,857 shares of newly issued Common Stock of Endocare for $3.50 a share.
RELATIONSHIP BETWEEN ENDOCARE AND AMP
As of December 31, 1998, the Company had advanced $171,412 to Advanced
Medical Procedures LLC ("AMP"). The advances bore interest at prime plus 1% and
were originally repayable beginning September 30, 2000 in equal monthly
installments of principal and interest over a twelve month period. The advances
were secured by the assets of AMP and Robert F. Byrnes, a former member of AMP
and a member of Endocare's Board of Directors. AMP is a cryosurgical service
provider. In June 1999, Endocare acquired all of the outstanding units of
interest in AMP in exchange for 260,000 shares of Common Stock. Mr. Byrnes
received 102,413 shares of Common Stock for his ownership interest in AMP.
RELATIONSHIP BETWEEN ENDOCARE AND BROWN SIMPSON
On June 7, 1999 and July 30, 1999, the Company received $5,000,000 and
$3,000,000, respectively, from the sale of its 7% convertible debentures due in
three years (the "Debentures") to Brown Simpson Strategic Growth Fund, L.P. and
Brown Simpson Strategic Growth Fund, Ltd. (the "Purchasers"). Interest is
payable annually in cash or, at the Company's option, in Common Stock at a price
per share based on recent bid prices prior to the date interest is paid. Under
the financing arrangements, the Purchasers have options to purchase additional
debentures for the aggregate principal amounts of $5,000,000 and $3,000,000.
Under the circumstances described below, the Company may require the Purchasers
to exercise these purchase options. The $5,000,000 principal amount of the
Debentures must be repaid in full in cash on June 7, 2002, but may be converted
into the Company's Common Stock in whole or in part at the Purchasers' option at
any time on or prior to June 7, 2002 at a conversion price of $5.125 per share.
The $3,000,000 principal amount of the Debentures must be repaid in full in cash
on July 29, 2002, but may be converted into the Company's Common Stock in whole
or in part at the Purchasers' option at any time, subject to certain
restrictions, on or prior to July 29, 2002 at a conversion price of $6.00 per
share. The conversion prices are subject to certain anti-dilution adjustments.
In addition to the Purchasers' option to convert the $5,000,000 principal
amount of the Debentures, the Company may require that the Purchasers convert
the Debentures into Common Stock at a conversion price of $5.125 per share
(subject to certain anti-dilution adjustments) if the bid price for the Common
Stock as listed for quotation is above $8.00 per share for twenty (20) trading
days during a consecutive thirty (30) trading day period, and certain other
conditions are met. Subject to certain restrictions, the Company may also
require that the Purchasers convert the $3,000,000 principal amount of the
Debentures into Common Stock at a conversion price of $6.00 per share (subject
to certain anti-dilution adjustments) if the bid price for the Common Stock as
listed for the quotation is above
15
<PAGE> 17
$9.00 per share for twenty (20) trading days during a consecutive thirty (30)
trading day period, and certain other conditions are met.
Under a securities purchase agreement, the Purchasers have a call option
exercisable at any time prior to June 7, 2002 to require that the Company sell
to the Purchasers an additional $5,000,000 principal amount of debentures. The
additional debentures will mature three years from the date they are issued,
will bear interest at 7% per annum and will be convertible in whole or in part
at a conversion price of $6.75 per share (subject to certain anti-dilution
adjustments). The Company has a put option to require the Purchasers to buy the
$5,000,000 principal amount of additional debentures if the closing bid price
for the Common Stock as listed for quotation is more than $10.00 per share for
twenty (20) trading days in a consecutive thirty (30) trading day period and on
the date the Company elects to exercise the put option, and if certain other
conditions are met. The Purchasers also have a call option exercisable at any
time prior to July 29, 2002 to require that the Company sell to the Purchasers
an additional $3,000,000 principal amount of debentures. The additional
debentures will mature three years from the date they are issued, will bear
interest at 7% per annum and will be convertible in whole or in part at the
option of the Purchaser at any time prior to maturity into Common Stock at a
conversion price of $6.75 per share (subject to certain anti-dilution
adjustments). The Company has a put option to require the Purchasers to buy the
$3,000,000 principal amount of additional debentures if the closing bid price
for the Common Stock as listed for quotation is more than $9.00 per share for
twenty (20) trading days in a consecutive thirty (30) trading day period and on
the date the Company elects to exercise the put option, and certain other
conditions are met.
TRANSACTIONS WITH MANAGEMENT AND DIRECTORS
In November 1999, the Company received a full recourse promissory note for
$1,028,125 in connection with the sale of 175,000 shares of its Common Stock to
Jerry W. Anderson, the Company's Senior Vice President, Sales and Marketing. The
note bears interest at 5.99% per annum, payable annually, and the principal is
payable in September 2003. The stock was sold at the fair market value of the
Common Stock on the date of sale. As of December 31, 1999, the Company had loans
and related accrued interest due from various other Officers totaling $93,725.
The loans accrue interest at 5.41% and all interest and principal are payable on
August 25, 2000.
On January 6, 1999, Messrs. Kaganov and Byrnes were granted options for
70,000 and 50,000 shares, respectively, of the Company's Common Stock under the
Company's 1995 Stock Plan. The options were granted as consideration for
services to be provided in fiscal 1999 under various consulting agreements. Such
options generally vest over a period of time of up to one year or upon the
completion of a specific consulting project. All of the options have an exercise
price of $2.03 per share, the fair market value per share of the Common Stock on
the grant date.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's
Directors and certain of its Officers, and persons who own more than 10% of a
registered class of the Company's equity securities (collectively, "Insiders"),
to file reports of ownership and changes in ownership with the Commission.
Insiders are required by Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file. Based upon the copies of Section
16(a) reports which the Company received from such persons or written
representations from them regarding their transactions in the Company's Common
Stock, the Company believes that all reporting requirements under Section 16(a)
were met for 1999 for the Company's Directors, Officers and 10% or more
beneficial owners.
16
<PAGE> 18
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Any stockholder who wishes to present a proposal for action at the 2001
Annual Meeting and who wishes to have it set forth in the corresponding proxy
statement and identified in the corresponding form of proxy prepared by
management for such meeting must notify the Company no later than December 31,
2000 in such form as required under the rules and regulations promulgated by the
Commission.
ANNUAL REPORTS
A copy of the 1999 Annual Report to Stockholders is being mailed to each
stockholder of record together with this Proxy Statement. The Company has also
filed with the Commission its Annual Report on Form 10-K (the "Report") for the
fiscal year ended December 31, 1999. This Report contains information concerning
the Company and its operations. A COPY OF THIS REPORT WILL BE FURNISHED TO
STOCKHOLDERS WITHOUT CHARGE UPON REQUEST IN WRITING TO WILLIAM R. HUGHES AT 7
STUDEBAKER, IRVINE, CALIFORNIA 92618. Such reports are not a part of the
Company's soliciting material.
PROXIES AND SOLICITATION
Proxies for the 2000 Annual Meeting are being solicited by mail directly
and through brokerage and banking institutions. The Company will pay all
expenses in connection with the solicitation of proxies. Proxies may also be
solicited by Directors, Officers and regular employees of the Company
personally, by e-mail or by telephone. In addition, the Company has retained
Corporate Investor Communications, Inc. to aid in the solicitation of proxies at
a fee estimated to be $5,000, plus expenses. The Company will reimburse banks,
brokers custodians, nominees and fiduciaries for any reasonable expenses in
forwarding proxy materials to beneficial owners.
All stockholders are urged to complete, sign and promptly return the
enclosed proxy card.
By Order of the Board of Directors
/s/ WILLIAM R. HUGHES
--------------------------------------
William R. Hughes
Secretary
March 27, 2000
Irvine, California
17
<PAGE> 19
PROXY
ENDOCARE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Paul W. Mikus and William R. Hughes, and each of
them, proxies with full power of substitution, to vote all shares of Common
Stock of Endocare, Inc. (the "Company") held of record by the undersigned as of
March 20, 2000, the record date with respect to this solicitation, of the Annual
Meeting of Stockholders of the Company to be held at 7 Studebaker, Irvine,
California 92618, beginning at 11:00 a.m., Pacific Time, on Tuesday, April 25,
2000, and at any adjournments thereof, upon the following matters:
The Board of Directors Recommends a vote FOR the following proposals:
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below (except as noted below) [ ] WITHHOLD
AUTHORITY to vote for all nominees listed below
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, LINE THROUGH OR
OTHERWISE STRIKE OUT THE NOMINEE'S NAME BELOW.)
Paul W. Mikus Peter F. Bernardoni Robert F. Byrnes Benjamin Gerson,
M.D.
Alan L. Kaganov, Sc.D. Michael J. Strauss, M.D.
2. APPROVAL OF THE AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE THEREUNDER
BY AN ADDITIONAL 30,000,000 SHARES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 20
3. RATIFICATION OF THE SELECTION OF KPMG LLP AS INDEPENDENT AUDITORS FOR THE
COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. OTHER MATTERS
In their discretion, Paul W. Mikus and William R. Hughes are authorized to
vote upon such other business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR
THE NOMINEES NAMED IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3 ABOVE. IF ANY NOMINEE
DECLINES OR IS UNABLE TO SERVE AS A DIRECTOR, THEN THE PERSONS NAMED AS PROXIES
SHALL HAVE FULL DISCRETION TO VOTE FOR ANY OTHER PERSON DESIGNATED BY THE BOARD
OF DIRECTORS.
Dated: , 2000
------------------------
(Signature)
------------------------
(Signature)
Please sign exactly
as your name appears
herein. Joint owners
should each sign. When
signing as attorney,
executor, administrator,
trustee, guardian or
corporate officer,
please give full title
as such.
The signees hereby
revokes all proxies
heretofore given by the
signor to vote at said
meeting or any
adjournments thereof.
