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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement.
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2)).
[ ] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14a-12
ENDOCARE, INC.
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(Name of Registrant as Specified In Its Charter)
COMMITTEE TO REVITALIZE ENDOCARE
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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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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[ ] 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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PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
PRELIMINARY PROXY MATERIALS DATED MAY _, 2003
SUBJECT TO COMPLETION
____________ MEETING OF THE STOCKHOLDERS
OF
ENDOCARE, INC.
---------------------
PROXY STATEMENT
OF
COMMITTEE TO REVITALIZE ENDOCARE
---------------------
We are sending this proxy statement to you as a holder of common stock,
$0.001 par value per share, of Endocare, Inc. ("Endocare" or the "Company"), a
Delaware corporation, in connection with our solicitation of your proxy for use
at the 2003 Annual Meeting of Stockholders and at any Special Meeting of the
Stockholders of Endocare scheduled for _______A.M., local time, on _______ ___,
2003, at ___________________ and at any adjournments or postponements thereof.
We are the Committee to Revitalize Endocare. We are sophisticated
business leaders with substantial expertise in healthcare, finance, marketing
and management. Our committee includes (a) Douglas O. Chinn, M.D. ("Dr. Chinn"
or "Douglas O. Chinn, M.D."), record and beneficial owner of approximately
50,083 shares of Endocare's common stock, (b) Solana Capital Partners, Inc., a
California corporation, record and beneficial owner of 1,000 shares of
Endocare's common stock, and (c) David Eller, record and beneficial owner of
1,000 shares of Endocare's common stock. Our Committee to Revitalize Endocare
also includes William A. Barry, Joseph L. D'Angelo, Robert P. Fry, M.D., J.D.,
Kurt Landgraf and John R. Queen.
We are soliciting your proxy to vote at the 2003 Annual Meeting of
Stockholders or at any Special Meeting of the Stockholders of Endocare for the
election of our nominees, William A. Barry, Douglas O. Chinn, M.D., David Eller,
Robert P. Fry, M.D., J.D., Kurt Landgraf and John R. Queen (collectively, the
"Nominees"), as directors of Endocare for a term continuing until the first
Annual Meeting of Stockholders after the meeting of stockholders at which the
Nominees are elected.
This proxy statement and the GOLD proxy card are first being furnished
to stockholders on or about May ___, 2003.
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WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED GOLD PROXY CARD IN FAVOR OF
THE ELECTION OF OUR NOMINEES DESCRIBED IN THIS PROXY STATEMENT.
IF YOU HAVE ALREADY SENT A [BLUE] PROXY CARD TO THE ENDOCARE DIRECTORS, YOU MAY
REVOKE THAT PROXY AND VOTE AGAINST THE ELECTION OF ENDOCARE'S NOMINEES BY
SIGNING, DATING AND RETURNING THE ENCLOSED GOLD PROXY CARD. THE LATEST DATED
PROXY IS THE ONLY ONE THAT COUNTS. ANY PROXY MAY BE REVOKED AT OR PRIOR TO THE
2003 ANNUAL MEETING OF STOCKHOLDERS OR AT OR PRIOR TO ANY SPECIAL MEETING OF THE
STOCKHOLDERS OF ENDOCARE BY DELIVERING A WRITTEN NOTICE OF REVOCATION OR A LATER
DATED PROXY.
TO SEND US YOUR PROXY OR TO REVOKE A PROXY PREVIOUSLY GRANTED TO ENDOCARE OR
ANOTHER PERSON, YOU MAY:
(1) DELIVER THE GOLD PROXY CARD OR A REVOCATION OF PROXY TO:
MACKENZIE PARTNERS
105 MADISON AVENUE
NEW YORK, NEW YORK 10016
OR:
(2) VOTE IN PERSON AT THE 2003 ANNUAL MEETING OF STOCKHOLDERS OR AT ANY
SPECIAL MEETING OF THE STOCKHOLDERS OF ENDOCARE.
SEE "VOTING PROCEDURES" ON PAGE 23.
3
REASONS FOR OUR SOLICITATION
ENDOCARE'S PERFORMANCE HAS, IN OUR OPINION,
BEEN DISASTROUS FOR STOCKHOLDERS
When measured by virtually any financial, operational or other
yardstick, Endocare's performance has, in our opinion, been disastrous for the
Company's stockholders.
DISASTROUS PERFORMANCE
- Tumbling Stock Price. Endocare's common stock price has lost nearly 80%
of its value in the last year alone, declining from $19.19 on April 30,
2002 to $4.00 on April 30, 2002.
- No Financial Statements. Endocare has no audited financial statements
since the end of 2000 and has not issued any financial statements since
July 24, 2002.
- No Guidance. Endocare has refused to provide any guidance on its future
prospective financial performance.
- Unreliable Information. KPMG LLP ("KPMG"), Endocare's former auditor,
has publicly announced that in its view the 2001 and 2002 financial
statements should not be relied upon.
- Old Data. The most recent accurate and reliable financial statements
are over two years old, which is inadequate to provide stockholders or
potential investors with a current picture of Endocare's health or
sustainability.
- Stock Delisted. Endocare's stock has been delisted from the NASDAQ.
- SEC & Department of Justice Investigations. Endocare is being
investigated by the Securities & Exchange Commission ("SEC") and the
United States Department of Justice ("DOJ").
- Stockholders Suing. Endocare's Board and senior management are being
sued in several class action securities lawsuits brought by
stockholders.
- 57% of Cash Gone in 15 Months. At December 31, 2001, Endocare had cash
and cash equivalents of $83,239,000. On the Endocare April 2, 2003
Conference Call, Endocare's Chief Financial Officer announced that
Endocare has cash and cash equivalents of approximately $36,000,000,
which is a decline of approximately 57% of Endocare's cash in just 15
months. It appears to us that during a period when Endocare reported no
reliable information to stockholders, Endocare's apparent cash burn was
an average of approximately $3 million per month.
HERE IS WHAT WE BELIEVE HAPPENED TO ENDOCARE
We do not believe that Endocare's management or Board of Directors have
come close to explaining what has gone wrong at Endocare or the reasons for
their choices in dealing with Endocare's problems. We believe that Endocare's
infrequent disclosures about its troubles have been cryptic and spare. For those
of you confounded by how Endocare got to where it is, we will attempt to trace
Endocare's problems based on available public information.
June, 2001 John Cracchiolo ("Cracchiolo") joins Endocare as Chief
Financial Officer, Chief Operating Officer and Secretary.
March 29, 2002 Endocare files its amended Annual Report on Form 10-K and
reports $83,239,000 in cash and cash equivalents as of
December 31, 2001.
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May 6, 2002 In Endocare's proxy materials for the June 11, 2002 Annual
Meeting of Stockholders, Endocare claims that the Audit
Committee members have the specific responsibility to "ensure
that management has the proper review system in place to
ensure that [the] Corporation's financial statements, reports
and other financial information disseminated to governmental
organizations, and the public satisfy legal requirements."
July 24, 2002 Endocare reports Q2 2002 results.
This is the last time Endocare disclosed its financial
statements.
October 24, 2002 Endocare projects Q3 2002 results.
This is the last time Endocare provided guidance on its
projected financial performance.
October 24, 2002 Endocare's then-current Vice President of Finance, Joseph A.
Hafermann ("Hafermann"), reports to a director his concerns
regarding accounting for "several transactions" and "other
matters," according to KPMG's letter to the SEC attached to
Endocare's Current Report on Form 8-K, dated March 14, 2003
("KPMG's SEC Letter").
Endocare makes no disclosure.
October 24, 2002 Endocare's Audit Committee directs Brobeck Phleger & Harrison
("Brobeck"), the Company's former outside legal counsel, to
investigate the accounting concerns, according to KPMG's SEC
Letter.
Endocare makes no disclosure.
October 29, 2002 KPMG informed of Hafermann complaints and Brobeck engagement,
according to KPMG's SEC Letter.
Endocare makes no disclosure.
October 29, 2002 Audit Committee engaged Deloitte & Touche ("Deloitte") to
investigate Hafermann complaints, according to KPMG's SEC
Letter.
Endocare makes no disclosure.
October 29, 2002 Brobeck and Deloitte "perform several investigations" of the
Hafermann complaints and "other matters that were raised
through the investigations," according to KPMG's SEC Letter.
October 30, 2002 Endocare postpones release of Q3 2002 results but does not
say why and does not disclose the Brobeck or Deloitte
investigations.
November 14, 2002 Endocare again delays reporting Q3 2002 results but does not
say why or when it will report.
Endocare does not disclose problems or investigations.
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November 14, 2002 Endocare discloses that it and certain of its officers and
directors were named in securities law class action lawsuits.
Endocare does not identify the nature of claims in the
lawsuits.
November 20, 2002 Endocare discloses NASDAQ notification of potential
delisting.
November 20, 2002 Endocare announces KPMG's withdrawal of its audit report for
2001 financials because (according to KPMG) those financials
and the Q1 and Q2 2002 financials cannot be relied on and
KPMG does not have confidence in management's
representations.
December 11, 2002 According to KPMG's SEC Letter, KPMG notifies the Audit
Committee that, based on their SAS No. 71 review and the
investigations by Deloitte and Brobeck, "information came to
[KPMG's] attention that led [KPMG] to conclude that [they]
were unable to rely on the representations of
management...that it was apparent to [KPMG] that management
prepared financial statements for the quarterly and annual
periods in 2002 and 2001 based on information and
representations provided to [KPMG] did not reflect the actual
facts or substance of the transactions, and in several cases
[KPMG] received inconsistent representations from management
in relation to the transactions...[KPMG] further informed the
Audit Committee that no single transaction or
misrepresentation formed the basis for [KPMG's] conclusion,
but rather it was the totality of information and weight of
the issues that came into [KPMG's] possession."
December 12, 2002 NASDAQ halts trading in Endocare stock.
Endocare does not bother to announce the trading halt until
over one month later on January 15, 2003.
December 19, 2002 Endocare announces that it has terminated Joseph Hafermann,
its "Vice President of Finance," for cause because "the
Company [determined] that Mr. Hafermann had engaged in
misconduct which was demonstrably and materially injurious to
the Company."
Endocare does not provide the factual basis for Hafermann's
termination.
December 20, 2002 Endocare files a lawsuit against Hafermann demanding secret
arbitration to adjudicate its claims against Hafermann.
January 23, 2003 We obtain reason to believe that Endocare learned of federal
investigations by the United States Department of Justice,
United States Postal Inspectors and/or the SEC at least as
early as January 23, 2003.
Endocare does not disclose any of these investigations until
April 1, 2003.
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March 2, 2003 John Cracchiolo, Endocare's Chief Operating Officer and Chief
Financial Officer during the period in which all of the
above-described problems occurred and then came to light, is
appointed President of the Interventional Radiology business
unit and enters into a new employment agreement with
Endocare.
Some of the terms of Cracchiolo's Employment Agreement
include:
- a salary of $220,000;
- the opportunity to negotiate salary increases after 6
months;
- an annual bonus of $88,000;
- the opportunity to negotiate bonus increases after 6
months;
- all of Cracchiolo's previous options, many of which
had a strike price of $13.75 per share, will be
replaced with options for the same number of shares as
his previous options, but which are immediately
exercisable upon issuance. These options will be
granted between the 6th month and the 8th month of his
Employment Agreement and will be fully vested and
exercisable when granted;
- the Board must require any person or entity who
desires to acquire Endocare to either honor or replace
Cracchiolo's options;
- if Cracchiolo is terminated by the Company without
cause (which does not include bad performance or any
events known to Endocare prior to March 3, 2003) or if
he quits during the thirty days after the six month
"Access Period" at the beginning of his new Employment
Agreement (or longer if the Access Period is extended)
Cracchiolo gets:
- 200% of his base salary and bonus ($616,000); and
- $50,000 relocation payment plus payment for his
taxes on the $50,000 payment.
Endocare did not disclose the terms of this agreement until
April 8, 2003.
March 4, 2003 We learn of the appointment of William Nydam as Endocare's
President through Nydam's informal email broadcast of his new
position.
Endocare does not disclose the appointment until March 12,
2003.
March 7, 2003 Endocare dismisses KPMG.
Encocare does not announce its dismissal of KPMG until March
14, 2003.
March 10, 2003 Douglas O. Chinn, M.D., a stockholder of Endocare, sends a
letter to Endocare's Board stating his concerns with
Endocare's Board and
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management. Although Dr. Chinn refers to government
investigations in his March 10, 2003 letter, Endocare makes
no disclosure about the investigations or about Dr. Chinn's
letter.
March 11, 2003 Endocare announces that "an independent review and
investigation of its accounts and accounting practices has
been completed and the Audit Committee and its advisors have
determined that there is no indication of fraud or
intentional wrong-doing by management."
Endocare does not identify the accounting and legal advisors
engaged to assist in the investigation.
March 12, 2003 Endocare announces appointment of William Nydam as Chief
Operating Officer and Katherine Greenberg as Chief Financial
Officer and states that "[Chairman and Chief Executive
Officer] Mikus plans to focus on the strategic direction of
the company in the continuing role of Chairman of the Board
of Directors and will vacate the title of Chief Executive
Officer, a position that will remain open until a later
date."
Endocare announces appointment of John Cracchiolo as
President of Endocare's International Urology Business Group.
March 14, 2003 Endocare discloses that effective March 7, 2003 it dismissed
KPMG. Mikus is still referred to as "Chairman and CEO,"
notwithstanding the assertion to the contrary on March 12th.
Endocare does not name a replacement auditor. Endocare also
says the "company completed the review [by the Audit
Committee] in March," but KPMG told the SEC that Brobeck and
Deloitte completed their investigations for the Audit
Committee on December 4th in KPMG's SEC Letter.
March 14, 2003 Endocare files Form 8-K disclosing the March 7, 2003
dismissal of KPMG and attaching KPMG's SEC Letter. The March
14, 2003 Form 8-K is Endocare's first public disclosure that
KPMG does not agree with Endocare's description of the
disagreement between KPMG and Endocare and the first
disclosure of an on-going disagreement with KPMG.
March 27, 2003 Endocare files an 8-K reporting the appointment of Nydam and
Greenberg. Nydam is now identified as President and Chief
Operating Officer.
Some of the terms of Nydam's employment agreement include:
- an initial salary of $240,000;
- an annual bonus of 40% of his salary;
- a cash signing bonus of $15,000;
- a cash performance bonus of $10,000 after Endocare is
in full compliance with its obligations under the
Securities Exchange Act of 1934;
8
- two options to purchase an aggregate of 750,000 shares
of stock at fair market value on the day of the grant
($2.25 per share); and
- if Nydam is terminated without "Cause" or he
terminates his employment for "Good Reason," then
Endocare must pay his salary for 12 months, and his
option for 500,000 shares will vest immediately.
Some of the terms of Greenberg's employment agreement
include:
- an initial salary of $185,000;
- an annual bonus of 40% of her salary;
- options to purchase an aggregate of 250,000 shares of
stock at fair market value on the day of the grant
($2.25 per share); and
- if Greenberg is terminated without "Cause" or she
terminates her employment for "Good Reason," then
Endocare must pay her salary for 12 months.
April 1, 2003 Endocare press release announces appointment of Ernst & Young
as Endocare's auditor. The chairman of Endocare's Audit
Committee says: "The Board of Directors and management
currently project filing the new [financial] reports in June,
2003 ..."
Endocare announces for the first time that the SEC and DOJ
are investigating Endocare, but omits disclosure that the DOJ
investigation is being coordinated with the United States
Postal Inspectors.
April 2, 2003 Endocare's Form 8-K discloses "SEC and DOJ are conducting
ongoing investigations into the Company's accounting
practices in connection with its 2001 and 2002 financial
statements."
April 2, 2003 Endocare management conducts a webcast conference call "to
provide a company update to shareholders."
Endocare's management refuses to discuss Endocare's financial
results since the end of 2000, guidance on expected
operational or financial performance, general financial or
operational metrics, results of the internal investigation by
the audit committee or its cash burn rate.
Endocare's management did make the following disclosures:
- Endocare's new CFO admits that Endocare has approximately
$36 million in cash and cash equivalents (down from more
than $83 million as of December 31, 2001).
- Chairman Paul Mikus admitted that a significant portion
of Endocare's cash was spent on legal fees and
accountants. Chairman Mikus said "you also have to be
mindful of the
9
fact that over the past six months we've had, you know,
I'd say significant expenses associated with the process
that we've been through...so, you know, the internal
review process and the legal fees, all of those were, you
know, significant issues for us."
- When asked why Endocare's management is not in a position
to comment on the Company's burn rate given that the
Audit Committee just completed a review of its
financials, Endocare's CFO stated that the "focus wasn't
on overall financial results. It was on specific
transactions."
- When asked about Endocare's cash burn rate, Endocare's
CFO said as follows: "I'm not sure we're in a position to
talk about that at this point...we'll be able to give you
more specific details ... as soon as the Ernst & Young
numbers are final...we're going to make sure that those
numbers are going to stick."
April 7, 2003 Endocare announces the sale of its prosthesis unit for $2
million to American Medical Systems, Inc.
Dr. Chinn sends a demand to Endocare to inspect Endocare's
books and records, in accordance with his rights under
Section 220 of the Delaware General Corporation Law.
April 8, 2003 Endocare files Report on Form 8-K containing Cracchiolo's
employment agreement.
April 15, 2003 Endocare announces the sale of its cardiac-related product
manufacturing operations and the licensing of its related
intellectual property to CryoCath Technologies, Inc.
Dr. Chinn files a lawsuit in Delaware Chancery Court to
enforce his rights as a stockholder of Endocare to inspect
the Company's books and records.
April 28, 2003 Endocare's counsel discloses to Delaware Chancery Court that
Endocare's Board of Directors had tentatively designated
September 30, 2003 as the date of Endocare's 2003 Annual
Meeting of Stockholders, even though Endocare held its last
annual meeting of stockholders nearly one year ago on
June 11, 2002.
May 1, 2003 Endocare files an amended Report on Form 8-K discussing the
ten major concerns of KPMG, Endocare's former auditor, about
Endocare's revenue recognition and expense recognition.
10
HERE IS WHAT WE WOULD HAVE DONE DIFFERENTLY
We would have operated Endocare very differently and more effectively,
we believe, than Endocare's current Board and management.
1. Financial Statements and Financial Controls.
- We would have carefully reviewed Endocare's financial controls and
accounting methods together with Endocare's sales practices before
problems emerged.
- We would have conducted internal audits of Endocare's financial data
to enable us, as the managers of the Company, to provide guidance to
the markets.
- We would have coordinated Endocare's accounting methods with its
business plan and revenue models.
- We would have provided results of Endocare's financial performance
to the public markets at the end of each quarter and fiscal year.
- We would have immediately explained the facts behind the internal
investigation and the specific results of the investigation.
2. Cash Flow Management.
- We would have maintained constant vigilance on Endocare's monthly
and periodic cash burn from operations and been able to explain it
to ourselves and to the markets.
- We would have proactively explained a reduction in cash and cash
equivalents from $83 million to approximately $36 million in less
than 15 months.
3. Public Disclosure.
- We would have announced NASDAQ's halt of trading in Endocare's stock
immediately.
- We would have asked NASDAQ to halt trading in Endocare's stock
immediately upon receipt of KPMG's notification that it had pulled
its audit reports, instead of waiting for NASDAQ to halt trading
three weeks later while unwitting investors bought Endocare stock.
We would deem it a derogation of our duties to stockholders to
permit trading in Endocare's stock based on inaccurate financial
information.
- We would have promptly addressed Endocare's lack of financial
disclosures and clearly articulated to the public markets Endocare's
plans for release of revised or accurate financial statements,
compliance with NASDAQ listing and resolution of federal
investigations.
- We would have provided stockholders with reasonable financial
guidance on Endocare's expected operational and financial
performance.
- We would have scheduled and held public calls and meetings to keep
the markets apprised of the nature of the allegations and the
progress of the investigation and Endocare's efforts to resolve any
problems.
- We would have explained the reasons why Mr. Hafermann was
terminated.
- We would have immediately disclosed federal investigations into
Endocare's activities.
- We would have publicly released the specific conclusions of the
internal accounting investigation.
- We would have explained the reasons behind substantial business
decisions, such as acquisitions and divestitures.
4. Executive Compensation.
- We would not have made John Cracchiolo a combined COO and CFO,
because we believe that management of operations and finance should
be separated to ensure checks and balances regarding accounting
treatment of sales and transactions.
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- We would have seriously reconsidered retaining Cracchiolo given that
as COO and CFO, he was specifically responsible for supervision and
leadership of sales, recognition of revenue, preparation of
financial statements, financial controls and financial audits, all
of which have been, in our opinion, dismal.
- We are particularly outraged by the terms of Cracchiolo's employment
agreement given that he has the opportunity to negotiate upward both
his salary and bonus and that if Cracchiolo is terminated for poor
performance or mismanagement, Endocare will still have to pay him
$616,000 plus a $50,000 relocation allowance and any taxes he has to
pay on that money. We would never have granted John Cracchiolo, or
any other officer, regardless of track record or talent, the right
to demand such a large severance payment even if fired for poor
performance; we do not believe that is proper or in the best
interests of stockholders.
- We would have prescribed exercise prices for Cracchiolo's, Nydam's
and Greenberg's options once market price reflects publicly
available information and required disclosures.
5. Accountability and Respect for Stockholders.
- We would have provided Dr. Chinn, a stockholder of Endocare, with
access to Endocare's books and records, rather than forcing him to
resort to filing a suit against the Company to enforce his statutory
rights.
- We would have kept the stockholders informed of our progress and
offered them the information and tools to keep us accountable for
our actions.
- We would have realized that the stewards of such a decline in
Endocare's fortunes should be replaced and new leadership brought in
to effect real change.
A DRASTIC CHANGE IS NEEDED
Based upon what we believe to be their chronic missteps and failures,
we lack confidence in the ability and commitment of Endocare's current
management and Board of Directors to maximize stockholder value. Based upon
their record, we also question the Board's commitment to take tangible steps to
improve the performance of the Company. Endocare's current management and Board
of Directors has failed, in our opinion, to articulate any coherent strategy to
address its many problems and desperately needs new leadership. The Board of
Directors and management have failed to adequately communicate with its existing
stockholders, attract new stockholders and obtain Wall Street analyst coverage.
IT IS TIME FOR CHANGE.
HERE IS WHAT WE WILL DO AS DIRECTORS AND MANAGERS OF ENDOCARE
We are appalled by the direction of Endocare and the Board's and
management's seeming inability to fix Endocare's problems. Endocare's failure or
refusal to provide any current information to the markets on its operations or
financial position impedes an in depth and critical analysis of Endocare's
business and prospects. However, based on our examination of Endocare's public
documents, we know that after our election as directors of Endocare, we intend
to do all of the following:
1. Financial Statements and Financial Controls.
- Release financial statements which accurately reflect Endocare's
financial position and results of operations.
- Create, review and maintain Endocare's financial controls and
accounting methods together with Endocare's sales practices.
- Conduct internal audits of Endocare's financial statements and use
the auditors to verify independently our work, rather than relying
on the auditors to tell us what the numbers are.
2. Cash Flow Management.
- Maintain constant vigilance on the cash burn rate from operations.
- Closely monitor inventory levels and accounts receivable to more
effectively manage working capital needs.
3. Public Disclosure.
- Promptly release financial statements as required by applicable SEC
and NASDAQ rules.
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- Provide stockholders with periodic and reasonable financial guidance
on Endocare's expected operational and financial performance.
- Keep the markets informed of each noteworthy development in
Endocare's financial results, operations, executive employment and
legal issues.
- Explain the reasoning behind substantial business decisions such as
acquisitions and divestitures and changes to revenue models.
4. Executive Compensation.
- Provide to management incentive based options only after Endocare
has provided adequate financial disclosure.
- Design executive compensation which is reasonable, comparable to
executives in similarly-situated companies, and performance based.
5. Accountability and Respect for Stockholders.
- Take steps to restore confidence in Endocare from investors, clients
and the medical community.
- Permit stockholders access to Endocare's books and records upon
their request.
- Keep the stockholders informed of our progress and offer them the
information and tools to keep us accountable for our actions.
- Demand that Endocare immediately begin to act like a public company
that is responsible and responsive to its stockholders.
6. Business Strategy and Management of Operations.
- Focus on cryosurgery, Endocare's core competency.
- Expand potential cryosurgical markets by increasing channels to
medical markets, including access to the radiology, oncology and
cardiology sectors of the medical community.
- Conduct review of procedures-based business model to determine
feasibility, profitability, and complimentary sales and products
opportunities.
- Determine the need and source of funds for execution and expansion
of Endocare's revenue models.
- Ensure that the Company undergoes a thorough and comprehensive
strategic review of opportunities to maximize stockholder value.
- Ensure that the Company undertakes a line-by-line review of
opportunities to cut costs and reduce overhead.
- Explore using third party sources of cash to finance physician
possession of cryosurgical equipment.
- Determine opportunities for outsourcing products or components of
Endocare products to contain costs.
- Improve physician support for procedures, physician training,
technology and updates to products.
- Expand markets for Endocare products in Europe and Asia.
- Work closely with physicians and patient advocates to ensure
current, effective and accurate data is collected and analyzed to
encourage the publication of studies on cryosurgical procedures.
As stockholders, our interests are clearly aligned with yours. We want
to maximize value for all Endocare stockholders. We seek the opportunity for our
Nominees to participate constructively as directors and officers, and
particularly with respect to maximizing value for all stockholders.
13
QUESTIONS AND ANSWERS ABOUT THIS PROXY SOLICITATION
Q: WHO IS SOLICITING YOUR PROXY?
A: We are the Committee to Revitalize Endocare ("CRE"). As of the date of
this proxy statement, we beneficially own 52,083 shares of Endocare
common stock, representing approximately .2% of the outstanding shares.
For more information on the participants in our proxy solicitation,
please see "Election of Directors" on page 16, "The Participants" on
page 16, "Biographical Information Of Our Nominees And Other
Participants" on page 17 and "Certain Information Concerning The
Participants" on page 19.
Q: WHO ARE OUR NOMINEES?
A: Our Nominees are William A. Barry, Douglas O. Chinn, M.D., David Eller,
Robert Paul Fry, M.D., J.D., Kurt Landgraf and John R. Queen, each of
whom is a very sophisticated and experienced businessman. Please see
"Biographical Information Of Our Nominees And Other Participants" on
page 17 for the background of each Nominee. If elected to the Endocare
Board, each Nominee would act in accordance with his or her fiduciary
duties to Endocare stockholders with respect to any action that he or
she takes as a director. We have no reason to believe that any of our
Nominees will be disqualified or unable or unwilling to serve if
elected. However, if any of our Nominees is unable to serve or for good
cause will not serve, proxies may be voted for another person nominated
by us to fill the vacancy.
Q: WHO CAN VOTE AT THE 2003 ANNUAL MEETING OR SPECIAL MEETING OF
STOCKHOLDERS?
A: If you owned Endocare shares of common stock on ___________ (the
"Record Date"), you have the right to vote at the 2003 Annual Meeting
or Special Meeting of Stockholders. As of the close of business on the
Record Date, we believe that there were approximately 24,279,229 shares
of common stock of Endocare issued and outstanding and entitled to
vote. Stockholders have one vote for each share of common stock they
own with respect to all matters to be considered at the applicable
meeting.
Q: WHAT SHOULD YOU DO TO VOTE?
A: Sign, date and return the enclosed GOLD proxy card TODAY in the
envelope provided. For more information on how to vote your shares,
please see "Voting Procedures" on page 23.
Q: WHOM DO YOU CALL IF YOU HAVE QUESTIONS ABOUT THE SOLICITATION?
A: Please call MacKenzie Partners & Co., Inc., toll free at
(800) 322-2885.
14
IMPORTANT
Please review this document and the enclosed materials carefully. YOUR
VOTE IS VERY IMPORTANT, no matter how many or how few shares you own.
- If your shares are registered in your own name, please sign, date and
mail the enclosed GOLD proxy card to MacKenzie Partners ("MacKenzie"),
in the postage-paid envelope provided with this Proxy Statement.
- If you have previously signed and returned a [BLUE] proxy card to
Endocare, you have every right to change your vote. Only your latest
dated card will count. You may revoke any [BLUE] proxy card already
sent to Endocare by signing, dating and mailing the enclosed GOLD proxy
card in the postage-paid envelope provided. Any proxy may be revoked at
any time prior to the 2003 Annual Meeting or Special Meeting of
Stockholders by delivering a written notice of revocation or a later
dated proxy for the 2003 Annual Meeting or Special Meeting of
Stockholders to MacKenzie, or by voting in person at the 2003 Annual
Meeting or Special Meeting of Stockholders.
- If your shares are held in the name of a brokerage firm, bank nominee
or other institution, only it can sign a GOLD proxy card with respect
to your shares and only after receiving your specific instructions.
Accordingly, please sign, date and mail the enclosed GOLD proxy card in
the postage-paid envelope provided, and to ensure that your shares are
voted, you should also contact the person responsible for your account
and give instructions for a GOLD proxy card to be issued representing
your shares.
- After signing the enclosed GOLD proxy card, do not sign or return the
[BLUE] proxy card unless you intend to change your vote, because only
your latest dated proxy card will be counted.
If you have any questions about giving your proxy or require
assistance, please call
MACKENZIE PARTNERS, INC.
105 MADISON AVE.
NEW YORK, NY 10016
CALL TOLL-FREE: 1-800-322-2885
15
ELECTION OF DIRECTORS
We are soliciting your proxy for the election of the Nominees of the
Committee to Revitalize Endocare as directors of the Company to serve until the
Annual Meeting of Stockholders following the meeting at which our Nominees are
elected to the Board of Endocare and until their successors are duly elected and
qualified.
In accordance with Endocare's Restated Certificate of Incorporation and
By-laws and the Delaware Business Corporation Act, Endocare's Board of Directors
is to consist of not less than three and not more than seven directors, the
exact number to be specified by the Board. Based on information contained in
reports filed by the Company with the SEC, six directors currently serve on the
Endocare Board. If any additional directorships are to be voted upon at any
meeting of Stockholders held in 2003, we reserve the right to nominate
additional persons to fill such positions. We do not expect that the CRE
Nominees will be unable to stand for election but, in the event that any CRE
Nominee is unable to do so, shares represented by GOLD proxy cards will be voted
for the other CRE Nominees. In addition, CRE reserves the right to nominate
substitute or additional persons if the Company makes or announces any changes
to its By-laws or takes or announces any other action that has, or if
consummated would have, the effect of disqualifying any of the CRE Nominees.
Our Nominees, if elected, will constitute all of the members of the
Board. If the CRE Nominees are elected and take office as directors, they intend
to discharge their duties as directors of the Company in compliance with all
applicable legal requirements, including the general fiduciary obligations
imposed upon corporate directors.
Each of our Nominees has consented to serve as a director until the
expiration of his or her respective term and until such Nominee's successor has
been elected and qualified or until the earlier resignation or removal of such
Nominee. We have no reason to believe that any of our Nominees named above will
be disqualified or unable or unwilling to serve if elected. However, if any of
the Nominees are unable to serve or for good cause will not serve, proxies may
be voted for another person nominated by CRE to fill the vacancy.
The CRE Nominees understand that, if elected as directors of Endocare,
each of them will have an obligation under Delaware law to discharge his or her
duties as a director in good faith, consistent with his or her fiduciary duties
to Endocare and its Stockholders.
THE PARTICIPANTS
The following persons and entities may be deemed to be "participants"
(as defined in instruction 3 to Item 4 of Rule 14a-10l of the Exchange Act) in
this proxy solicitation: William A. Barry, Douglas O. Chinn, M.D., Joseph L.
D'Angelo, David Eller, Robert Paul Fry, M.D., J.D., Kurt Landgraf, John R. Queen
and Solana Capital Partners, Inc., a California corporation.
Information relating to the beneficial ownership of common stock of
Endocare by the participants in this solicitation and certain other information
relating to the participants is set forth below. Other than Douglas O. Chinn,
M.D., none of the participants in this solicitation are party to any commercial
dealings with Endocare or its subsidiaries required to be discussed pursuant to
Schedule 14A promulgated under the Exchange Act, which governs the disclosure
contained in this proxy statement.
16
The share ownership of CRE and each of the persons listed below is as
of April 1, 2003.
NUMBER OF SHARES
NAME AND BUSINESS ADDRESS(3) BENEFICIALLY OWNED PERCENT OF CLASS
------------------------- ------------------ ----------------
Douglas O. Chinn, M.D. 50,083(1) *
65 N. First Avenue Suite 102
Arcadia California 91006
Solana Capital Partners, Inc. 1,000(2) *
990 Highland Drive, Suite 314, Solana
Beach, California 92075
David Eller 1,000 *
2401 Fountain View, #416
Houston, TX 77057
CERTAIN INTERESTS IN THE PROPOSALS
(1) Does not include 3,020 shares of Endocare common stock owned by Dr. Chinn's
spouse and children, of which Dr. Chinn disclaims beneficial ownership.
(2) Does not include 17,000 shares of Endocare common stock owned by an officer
and stockholder of Solana Capital Partners, Inc., of which Solana Capital
Partners, Inc. disclaims beneficial ownership.
(3) The business addresses for the participants not listed in the table above
are as follows: William A. Barry 37, Greenway, Letchworth, Herts. SG6 3UG,
England; Joseph L. D'Angelo 1335 Oakwood Drive, Arcadia, CA 91006; Robert R.
Fry, M.D., J.D. 22109 East Costilla Drive, Aurora, CO 80016; John R. Queen
17660 La Bajada, Rancho Santa Fe, CA 92067.
* Less than 5%.
BIOGRAPHICAL INFORMATION OF OUR NOMINEES AND OTHER PARTICIPANTS
The information below sets forth the name, age (as of April 30, 2003),
principal occupation and directorships of each of our nominees:
1. OUR NOMINEES.
KURT LANDGRAF. Mr. Landgraf, 56, currently serves as
President and Chief Executive Officer of Educational Testing Service.
Mr. Landgraf formerly served as Chairman and Chief Executive Officer of
Dupont Pharmaceuticals Company (a subsidiary of the DuPont Company),
Executive Vice President and Chief Operating Officer and Chief
Financial Officer of E.I. Dupont De Nemours, President and Chief
Executive Officer of The Dupont Merck Pharmaceuticals Company, and
Manager, Marketing Analysis and Planning of The Upjohn Company, among
other positions. Mr. Landgraf currently serves on the Boards of
Directors of Ikon Office Solutions, AAI Pharma and NDC Health Care. Mr.
Landgraf has extensive experience in finance, accounting, marketing and
management of all aspects of medical, pharmaceutical and educational
companies, both in for-profit and not-for-profit companies. In
addition, Mr. Landgraf has lectured in academic settings in economics,
labor-relations management and marketing. Mr. Landgraf earned a
Bachelor of Science degree from Wagner College, a Masters of Arts
degree in Economics from Pennsylvania State University, a Masters in
Education degree from Rutgers University, a Masters in Science degree
from Western Michigan University and completed the Advanced Management
Program at
17
Harvard Business School. Mr. Landgraf was an officer in the United
States Navy and member of the United States Naval Reserve. We intend to
nominate Mr. Landgraf to serve as a director and as Chairman of the
Board.
DAVID ELLER. Mr. Eller, 64, currently serves as President of
Eller Holding Company. Mr. Eller formerly served as President of DuPont
Pharmaceuticals Company - Europe, and its six European operating
subsidiaries. He also served as a strategic advisor to the Chief
Operating Officer of The DuPont Company and to the Chairman and Chief
Executive Officer of Europe, Africa and Asia for The DuPont Company. In
addition, Mr. Eller has over 25 years of senior management and
executive level experience with substantial expertise and experience in
life sciences, biosciences, and pharmaceutical, as well as oil and gas
exploration and production companies. Mr. Eller has served as Chairman
of the Board of Regents of the Texas A&M University System, holding the
position of Chancellor, as well. Mr. Eller has also served as a
director of the Baylor College of Medicine. He earned a Bachelor of
Science degree in Engineering from Texas A&M University, attended the
Graduate School of Business at Stanford University and completed the
Advanced Management Program at the Harvard Business School. In
addition, Mr. Eller served as an officer of the United States Army. We
intend to nominate Mr. Eller to serve as a director and to appoint him
to serve as Chief Executive Officer.
WILLIAM A. BARRY. Mr. Barry, 59, currently serves as a
consultant to Bristol-Myers Squibb which acquired DuPont
Pharmaceuticals Company in October 2001 in a $7.2 billion transaction.
Mr. Barry formerly served as Vice President of Finance and Managing
Director of the European Headquarters of DuPont Pharmaceuticals Company
(a subsidiary of the DuPont Company) retiring in January 2002. Mr.
Barry's career with DuPont spanned over 30 years with substantial
experience in finance, operations, audit and management for chemicals,
pharmaceuticals and medical imaging companies. We intend to nominate
Mr. Barry to serve as a director and to appoint him as Chief Financial
Officer.
DOUGLAS O. CHINN, M.D. Dr. Chinn, 52, is a urologist in
private practice and has been performing cryosurgery since 1993. From
1996 through 2002, he served as a consultant and leading proctor to
Endocare. He continues to license his patented technology on
temperature monitoring and cryosurgery to Endocare and has developed or
assisted in the development of Endocare products and training
materials. Dr. Chinn has extensive experience in product development
and education in cryosurgery. He is co-author of several publications
on cryosurgery, and has trained physicians in the United States and
world-wide. His B.S. and M.D. degrees are from the University of
Southern California. We intend to nominate Dr. Chinn to serve as a
director and to appoint him as Chief Medical Officer.
ROBERT PAUL FRY, M.D., JD. Dr. Fry, 78, practiced nine years
as an anesthesiologist and another 20 years as a medical malpractice
and product liability attorney. Dr. Fry has been retired for the past
five years. Dr. Fry earned an undergraduate degree from Georgetown
University, his Medical Degree from Temple University, and his law
degree from the University of Southern California. In addition, Dr. Fry
served as a Captain in the United States Air Force. Dr. Fry is
currently retired. We intend to nominate Dr. Fry to serve as a
director.
JOHN R. QUEEN. Mr. Queen, 63, retired after 35 years in the
securities industry of which 34 were spent with Merrill Lynch, Pierce,
Fenner & Smith. He has substantial experience in the management and
development of businesses. Prior to retiring, he served as District
Director and Senior Vice President of Merrill Lynch's Retail District
which encompassed most of Southern California. Mr. Queen also helped
found and served on the Board of the Long Beach Grand Prix for 25
years. Mr. Queen serves on the board of several philanthropic
organizations and is Chairman elect of the San Diego Symphony
Orchestra. He earned a Bachelor of Science degree in Economics from St.
Mary's College of California. Mr. Queen also served in the United
States Navy. We intend to nominate Mr. Queen to serve as a director.
2. OTHER PARTICIPANTS.
SOLANA CAPITAL PARTNERS, INC.. Solana Capital Partners, Inc.,
a California corporation, is a privately funded venture capital firm
that provides investments to information-technology,
manufacturing/distribution and medical-device manufacturing companies.
Solana Capital Partners, based in Solana Beach, California,
18
was formed in 1999 to invest in sustainable companies with long-term
potential for success. Solana Capital focuses on companies requiring
investments that may not meet the minimums of many venture capital
firms, generally in investments up to $2 million for second-stage and
later-stage companies seeking to finance targeted expansion efforts. A
principal officer and stockholder of Solana Capital Partners, Inc. is
currently disputing a 1996 censure and $50,000 fine from the National
Association of Securities Dealers related to his refusal to disclose
the identity of clients on whose behalf he was trading securities.
Solana Capital Partners has and intends to provide all of the
financing for this proxy statement and for any future efforts by the
participants in any later filed proxy materials.
JOSEPH L. D'ANGELO. Mr. D'Angelo, 66, currently serves as the
Chief Financial Officer of Glesener Pharmacy, Inc. Previously, Mr.
D'Angelo was the founder of ten state-licensed board and care
facilities and a chain of photography retail establishments. In
addition, Mr. D'Angelo has substantial expertise and experience in
management and operations of residential care facilities and was a
research chemist. Mr. D'Angelo earned a Bachelor of Science degree from
the Philadelphia College of Pharmacy and Science. We intend to nominate
Mr. D'Angelo to serve as a director. If we are successful at electing
our Nominees to the Board of Directors of Endocare, we intend to expand
the Board to seven members, which is expressly permitted by the
Endocare Bylaws, and appoint Mr. D'Angelo to serve as a director.
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
1. Except for the legal action described in the next paragraph, no CRE
Nominee is involved in any material pending legal proceedings with respect to
the Company.
A. 220 LAWSUIT. On April 7, 2003, Douglas O. Chinn presented
Endocare with a demand to inspect materials identifying Endocare's
stockholders ("Stocklist Materials") and certain of Endocare's books
and records ("Books and Records") pursuant to Section 220 of the
Delaware General Corporation Law. Because Endocare failed to respond,
Dr. Chinn filed a lawsuit against Endocare in Delaware Chancery Court
to enforce his April 7, 2003 demand on April 15, 2003. On April 28,
2003, Dr. Chinn, Endocare and Vice Chancellor Lamb of the Delaware
Chancery Court held a conference to determine the schedule of hearings
and deliveries in the lawsuit. At the conclusion of the conference,
Chancellor Lamb ruled that Dr. Chinn must be given access to Stocklist
Materials. In addition, Chancellor Lamb scheduled a June 2, 2003 trial
to determine whether Dr. Chinn should be given access to certain books
and records of Endocare.
2. Except for the Consulting Agreement discussed in the next paragraph,
there is no arrangement or understanding between any CRE Nominee and any other
person pursuant to which he was or is to be selected as a CRE Nominee or
director.
A. CONSULTING AGREEMENT. Solana Capital Partners, Inc.
("Solana") has entered into a Consulting Agreement, dated as of March
4, 2003, with David Eller and William Barry. Mr. Eller and Mr. Barry
provided consulting services including assistance in assessing
Endocare's current management team, operations and business potential.
This Consulting Agreement contained a term of one (1) month and
terminated as of April 4, 2003. Under this Consulting Agreement, Mr.
Eller and Mr. Barry each received $10,000 for their consulting
services. In addition, Mr. Eller and Mr. Barry received reimbursement
for their reasonable out-of-pocket expenses incurred in their
performance under this Consulting Agreement. This Consulting Agreement
also permitted the use of Mr. Eller and Mr. Barry's names as potential
nominees for election as directors and officers of Endocare, in the
event that the participants to this Schedule 14A endeavored to nominate
candidates for election as directors of Endocare, subject to the
execution of agreements containing mutually acceptable terms, between
Endocare and Mr. Barry and Mr. Eller. In addition, Solana Capital and
Messrs. Eller and Barry currently anticipate extending the term of the
Consulting Agreement or entering into another consulting relationship.
3. None of the CRE Nominees currently holds any position or office with
the Company or has ever served previously as a director of the Company.
19
4. Other than the option and warrant described below, to the best
knowledge of the participants and their associates, none has been, within the
past year, a party to any contract, arrangement or understanding with any person
with respect to any securities of the Company, including but not limited to
joint ventures, loan or option arrangements, puts or calls, guarantees against
loss or guarantees of profits, division of losses or profits, or the giving or
withholding of proxies.
A. 1999 OPTION. On January 27, 1999, Endocare issued to Dr.
Chinn an option to purchase 25,000 shares of Endocare common stock at
an exercise price of $3.00 per share pursuant to the terms of a Stock
Option Agreement, dated January 27, 1999, between Endocare and Dr.
Chinn. This non-statutory stock option commenced vesting on January 27,
1999; twenty-five percent (25%) of the shares subject to this option
vested twelve (12) months after January 27, 1999 and 1/48th of the
shares vested each month thereafter until all of the shares subject to
this option were vested. Dr. Chinn exercised 21,875 shares under this
option and as of the date hereof holds 14,583 shares issued pursuant to
this option. By its terms, this option terminated on March 1, 2003,
which was sixty (60) days after the termination of Dr. Chinn's
consulting relationship with Endocare.
B. 2000 WARRANT. On January 3, 2000, Endocare issued to Dr.
Chinn a warrant to purchase 20,000 shares of Endocare common stock at
an exercise price of $9.00 per share pursuant to a warrant agreement
between Endocare and Dr. Chinn. This warrant became exercisable with
respect to 5,000 shares as of each of January 3, 2001, January 3, 2002
and January 3, 2003 and will be exercisable with respect to 5000 shares
as of January 3, 2004. Dr. Chinn exercised 15,000 shares under this
warrant and as of the date hereof holds 5,000 shares issued pursuant to
this warrant. This warrant will expire by its terms on January 3, 2005.
In addition, this warrant will terminate on the date on which the
License Agreement, dated February 14, 1997 between Endocare and Dr.
Chinn is terminated, and only the number of shares available prior to
the termination of that License Agreement will remain exercisable after
such termination date until the ultimate expiration of this warrant on
January 3, 2005.
5. None of the participants and none of their associates has any
arrangement or understanding with any person with respect to (i) any future
employment with the Company or its affiliates or (ii) any future transactions to
which the Company or any of its affiliates may be a party.
6. Other than the option and warrant described in Sections 4(A) and 4(B)
above and as set forth below, since the beginning of the Company's last fiscal
year, none of the CRE Nominees or any member of their immediate families had any
material interest in any transaction, or has any material interest in a proposed
transaction, to which the Company or any subsidiary of the Company was or is to
be a party.
A. DR. CHINN'S CONSULTING AGREEMENT. Endocare entered into a
Consulting Agreement, dated as of January 17, 2000, with Dr. Chinn and
Mahlon Chinn, M.D. (collectively, the "Consultants"). Under this
Consulting Agreement the Consultants were engaged to assist Endocare in
its product development for Endocare's Cryocare System and related
technology. Pursuant to a letter dated December 20, 2002 from Endocare
to the Consultants, this Consulting Agreement expired at the end of
2002, and Dr. Chinn determined not to extend the Consulting Agreement.
Dr. Chinn's determination to not extend the Consulting Agreement was
made as a result of Dr. Chinn's dissatisfaction with Endocare's
management. Under this Consulting Agreement the Consultants agreed, at
all times during the term of this Consulting Agreement and thereafter,
to keep in confidence all confidential information received from
Endocare and to not directly or indirectly use or exploit any such
confidential information other than in the course of performing the
Consultants' duties under this Consulting Agreement. The Consultants
further agreed to use their best efforts to ensure that such
confidential information, and any records or documents containing such
information, are not exposed to theft, embezzlement or unauthorized
reproduction or disclosure. Dr. Chinn believes that his participation
in the events surrounding this proxy statement and the preparation or
filing of this proxy statement do not abrogate his confidentiality
obligations under this Consulting Agreement. Under this and previous
consulting agreements, Endocare has paid Dr. Chinn an aggregate amount
of $581,069.91 since 1996.
B. DR. CHINN'S LICENSE AGREEMENT. Dr. Chinn entered into a
License Agreement, dated as of February 14, 1997, pursuant to which Dr.
Chinn granted to Endocare a license to certain of Dr. Chinn's
20
proprietary technology and information. This License Agreement is
currently in full force and effect. Pursuant to this License Agreement,
Endocare has paid to Dr. Chinn an aggregate amount of $77,987.45 and
issued to Dr. Chinn a warrant to purchase 25,000 shares of common stock
of Endocare at $4.375 per share. This warrant expired February 14,
2002. In addition, in 2000, Endocare issued to Dr. Chinn a warrant to
purchase 20,000 shares of common stock of Endocare at $9.00 per share,
which warrant terminates upon termination on the License Agreement.
Although Dr. Chinn has not received any current information on the
financial results of Endocare and on royalties owed to him for his
license under the License Agreement, Dr. Chinn believes that Endocare
is past due on payments owed to Dr. Chinn under the License Agreement.
Dr. Chinn believes that his participation in the events surrounding
this proxy statement and the preparation or filing of this proxy
statement do not abrogate his confidentiality obligations under this
License Agreement.
C. OTHER INFORMATION. Douglas Chinn, M.D.'s father, James
Chinn, M.D., as trustee of the James Chinn Trust Dated September 6,
1984, is currently in discussions with Endocare over claims by Endocare
that the James Chinn Trust Dated September 6, 1984 owes Endocare
certain amounts as payment for cryosurgical equipment. Although Douglas
Chinn, M.D. is a potential future beneficiary of the James Chinn Trust
Dated September 6, 1984, Douglas Chinn, M.D. has no involvement in
these discussions between James Chinn, M.D. and Endocare. Douglas
Chinn, M.D. believes that the actions represented by this proxy
statement are wholly separate and apart from discussions between James
Chinn, M.D. and Endocare.
7. None of the CRE Nominees or any member of their immediate families has
been indebted to the Company or any of its subsidiaries at any time since the
beginning of the Company's last fiscal year. Except Dr. Chinn's Consulting
Agreement discussed in Section 6(A) above, no CRE Nominee has received any
compensation from the Company.
8. Except as set forth below, no family relationships exist among the CRE
Nominees or between any Company director or executive officer and any of the CRE
Nominees.
A. Joseph D'Angelo, one of our participants, is the father of
the Secretary and Managing Director of Solana Capital Partners, Inc.
B. John Queen, one of our Nominees, is the father of
Christopher Queen, an employee of Solana Capital Partners, Inc.
9. The following is a summary of all transactions in Company common stock
by our participants over the last two years.
A. DR. CHINN. Transactions during the last two years in the
Company's common stock by Douglas Chinn, M.D.:
Date Of Transaction Nature Of Transaction Number Of Shares(1)
------------------- --------------------- ----------------
10/23/01 Sell 8,455
10/24/01 Buy(2) 10,000
10/24/01 Sell 10,000
10/24/01 Sell 500
2/21/02 Buy 5,000
10/22/02 Buy 14,583
(1) Does not include 3,020 shares of Endocare common stock owned beneficially by
Dr. Chinn's spouse and children, of which Dr. Chinn disclaims beneficial
ownership.
(2) Acquired on margin.
21
B. SOLANA CAPITAL PARTNERS, INC. Transactions during the last
two years in the Company's common stock by Solana Capital Partners,
Inc.
Date Of Transaction Nature Of Transaction Number Of Shares(1)
------------------- --------------------- ----------------
4/14/03 Buy 1,000
(1) Does not include 17,000 shares of Endocare common stock owned by a
stockholder and officer of Solana Capital Partners, Inc., of which Solana
Capital Partners, Inc. disclaims beneficial ownership.
C. ELLER. Transactions during the last two years in the
Company's common stock by David Eller.
Date Of Transaction Nature Of Transaction Number Of Shares(1)
------------------- --------------------- ----------------
4/16/03 Buy 1,000
WE STRONGLY RECOMMEND THAT YOU VOTE
"FOR" THE ELECTION OF OUR NOMINEES
22
OTHER MATTERS TO BE CONSIDERED
AT THE 2003 ANNUAL MEETING OR SPECIAL MEETING OF STOCKHOLDERS
Except as set forth above, we are not aware of any proposals to be
brought before the 2003 Annual Meeting or Special Meeting of Stockholders.
However, we intend to bring before the 2003 Annual Meeting or Special Meeting of
Stockholders such business as may be appropriate, including without limitation
nominating additional persons for directorships, or making other proposals as
may be appropriate to address any action of Endocare's Board not publicly
disclosed prior to the date of this proxy statement. Should other proposals be
brought before the 2003 Annual Meeting or Special Meeting of Stockholders, the
persons named as proxies in the enclosed GOLD proxy card will vote on such
matters in their discretion.
VOTING PROCEDURES
In order to ensure that your views on the proposals are heard by
Endocare and your vote represented at the 2003 Annual Meeting or Special Meeting
of Stockholders, we urge you to sign and date the enclosed GOLD proxy card and
return it to MacKenzie Partners, in the enclosed postage paid envelope TODAY.
Execution of the GOLD proxy card will not affect your right to attend the 2003
Annual Meeting or Special Meeting of Stockholders and to vote in person.
You are eligible to execute a GOLD proxy card only if you owned the
Common Stock on the Record Date. Endocare's Board has set ___________ as the
Record Date for determining those Stockholders who will be entitled to notice of
and to vote at the 2003 Annual Meeting or Special Meeting of Stockholders. You
will retain the right to execute a proxy card in connection with this proxy
solicitation even if you sell your shares after the Record Date. Accordingly, it
is important that you vote the shares held by you on the Record Date, or grant a
proxy to vote such shares on the GOLD proxy card, even if you sell such shares
after the Record Date.
As of the close of business on the Record Date, we believe that there
were 24,279,229 shares of common stock of Endocare issued and outstanding and
entitled to vote, according to Endocare's most recent Quarterly Report on Form
10-Q filed on July 24, 2002. Stockholders will have one vote for each share of
common stock they own with respect to all matters to be considered at the 2003
Annual Meeting or Special Meeting of Stockholders.
In order for your views on the above-described proposals to be
represented at the 2003 Annual Meeting or Special Meeting of Stockholders,
please sign and date the enclosed GOLD proxy card and return it to MacKenzie
Partners in the enclosed prepaid envelope TODAY. Execution of the GOLD proxy
card will not affect your right to attend the 2003 Annual Meeting or Special
Meeting of Stockholders and to vote in person. Any proxy may be revoked at any
time prior to the 2003 Annual Meeting or Special Meeting of Stockholders by
delivering a written notice of revocation or a later dated proxy for the 2003
Annual Meeting or Special Meeting of Stockholders to MacKenzie Partners, or by
voting in person at the 2003 Annual Meeting or Special Meeting of Stockholders.
Only your latest dated proxy will count.
Unless otherwise indicated, the GOLD proxy card authorizes the persons
named in the proxy to vote, and such persons will vote, properly executed and
duly returned proxies FOR the CRE Nominees.
VOTE REQUIRED
Based on currently available public information of Endocare, a quorum
will exist at the 2003 Annual Meeting or Special Meeting of Stockholders if
holders of not less than a majority of the shares of Endocare common stock
outstanding and entitled to vote at the 2003 Annual Meeting or Special Meeting
of Stockholders are present in person or by proxy. Endocare's Amended and
Restated By-laws require that in order to be elected, nominees for director must
receive the affirmative vote of a plurality of those shares voted.
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WE STRONGLY RECOMMEND THAT YOU VOTE
"FOR" THE ELECTION OF OUR NOMINEES
METHOD OF COUNTING VOTES
The holders of not less than a majority of the number of shares of
Endocare common stock outstanding and entitled to vote at the 2003 Annual
Meeting or Special Meeting of Stockholders must be represented in person or by
proxy in order to constitute a quorum for the transaction of business.
Abstentions and broker non-votes will be included for purposes of determining
whether a quorum exists. Broker non-votes occur when brokers do not receive
voting instructions from their customers on non-routine matters and consequently
have no discretion to vote on those matters. If your Endocare shares are held in
the name of a brokerage firm, bank nominee or other institution, you should
contact the person responsible for your account and give instructions for a
proxy card to be issued so that your shares will be represented at the 2003
Annual Meeting or Special Meeting of Stockholders.
After a quorum is determined to exist at the 2003 Annual Meeting or
Special Meeting of Stockholders, abstentions and broker non-votes will have no
effect on the outcome of the election of directors.
ADDITIONAL INFORMATION
The principal executive offices of Endocare, Inc. are located at 201
Technology Drive, Irvine, California 92618. Except as otherwise noted herein,
the information concerning Endocare has been taken from or is based upon
documents and records on file with the SEC and other publicly available
information. Although we do not have any knowledge that would indicate that any
statement contained herein based upon such documents and records is untrue, we
do not take any responsibility for the accuracy or completeness of the
information contained in such documents and records, or for any failure by
Endocare to disclose events that may affect the significance or accuracy of such
information.
The principal executive offices of CRE are at 990 Highland Drive, Suite
314, Solana Beach, California 92075.
PROXY SOLICITATION; EXPENSES
Executed proxies may be solicited in person, by mail, advertisement,
telephone, telecopier, telegraph or similar means. Solicitation may be made by
our Nominees or our agents and affiliates, none of whom will receive additional
compensation for such solicitation. Proxies will be solicited from individuals,
brokers, banks, bank nominees and other institutional holders. We have requested
or will request banks, brokerage houses and other custodians, nominees and
fiduciaries to forward all solicitation materials to the beneficial owners of
the shares they hold of record. We will reimburse these record holders for their
reasonable out-of-pocket expenses.
In addition, CRE has retained MacKenzie Partners to solicit proxies on
our behalf in connection with the 2003 Annual Meeting or Special Meeting of
Stockholders. MacKenzie Partners will employ approximately 10 people in its
efforts. We have agreed to reimburse MacKenzie Partners for its reasonable
expenses and to pay to MacKenzie Partners a fee up to $100,000.
The entire expense of our proxy solicitation is being borne by Solana
Capital Partners, Inc. In the event that our Nominees are elected to the
Endocare Board, we will seek reimbursement of such expenses from Endocare and
will not submit such reimbursement to a vote of Stockholders. In addition to the
engagement of MacKenzie Partners described above, costs related to the
solicitation of proxies include expenditures for printing, postage, legal and
related expenses and are expected to be approximately $300,000. Total payment of
costs to date in furtherance of our proxy solicitation is approximately $65,000.
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT OF ENDOCARE
The following table presents, except as otherwise described herein, as
of March 31, 2002, based solely on information contained in Endocare's 2002
proxy statement, the Common Stock beneficially owned by (i) each current
director; (ii) each Named Officer (as defined therein) of the Company; and (iii)
all current executive
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officers, directors and nominees for director of the Company as a group. Unless
otherwise indicated, each of the named Stockholders possesses sole voting and
investment power with respect to the shares beneficially owned. Shares covered
by stock options are included in the footnotes below.
Beneficial ownership is determined in accordance with the rules of the
SEC and generally includes voting or investment power relating to securities.
Shares of common stock subject to options or convertible securities currently
exercisable or exercisable within 60 days are deemed to be outstanding for
computing the percentage of the person holding such securities and the
percentage ownership of any group of which the holder is a member, but are not
deemed outstanding for computing the percentage of any other person. Except as
indicated by footnote, and subject to the community property laws where
applicable, the persons or entities named in the table have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them. Except as otherwise noted below, the address of each
person or entity listed on the table is 201 Technology Drive, Irvine, California
92618.
AMOUNT AND
NATURE OF
BENEFICIAL PERCENTAGE
NAME AND ADDRESS OWNERSHIP(1) OF TOTAL
---------------- ------------ --------
DIRECTORS AND EXECUTIVE OFFICERS
Paul W. Mikus(2) 737,083 3.1%
John V. Cracchiolo(3) 51,000 *
Jay J. Eum(4) 160,626 *
Kevin Quilty(5) 62,500 *
Holly H. Williams(6) 22,083 *
Vincent C. Cutarelli(7) 190,729 *
William R. Hughes(8) 257,812 1.1%
Peter F. Bernardoni(9) 627,457 2.7%
Robert F. Byrnes(10) 291,613 1.2%
Benjamin Gerson, M.D.(11) 35,000 *
Michael J. Strauss, M.D.(12) 55,000 *
All directors and Named Executive Officers
as a group (11 persons) 2,490,903 10.5%
-----------------
* Represents beneficial ownership of less than 1% of the outstanding shares of
the Company's common stock.
(1) Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to
securities. Shares of common stock relating to options or convertible
securities currently exercisable, or exercisable within 60 days of March 31,
2002, 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. As of March 31, 2002, there were 23,607,134
shares of common stock of the Company outstanding.
(2) Includes 526,083 shares subject to options which became exercisable within
60 days after March 31, 2002.
(3) Represents 51,000 shares subject to options which became exercisable within
60 days after March 31, 2002.
(4) Represents 160,626 shares subject to options which became exercisable within
60 days after March 31, 2002.
(5) Represents 62,500 shares subject to options which became exercisable within
60 days after March 31, 2002.
(6) Represents 22,083 shares subject to options which became exercisable within
60 days after March 31, 2002.
(7) Mr. Cutarelli resigned from his position as the Company's Senior Vice
President of Regulatory Affairs and Quality Assurance, effective on August
16, 2001.
(8) Includes 31,812 shares subject to options which became exercisable within 60
days after March 31, 2002. Mr. Hughes
25
resigned from his position as the Company's Chief Financial Officer,
effective on June 25, 2001.
(9) Includes 592,457 shares held by Technology Funding Partners III, L.P.,
Technology Funding Venture Partners IV, an Aggressive Growth Fund, L.P. and
Technology Funding Venture Partners V, a Aggressive Growth Fund, L.P.
(collectively, the "Funds") and 25,000 shares subject to options that are
exercisable within 60 days after March 31, 2002. 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 shared investment power with respect to all shares owned by the Funds,
and therefore may be deemed to be beneficial owner of such shares.
(10) Includes 5,000 shares subject to options which became exercisable within 60
days after March 31, 2002.
(11) Includes 25,000 shares subject to options which became exercisable within
60 days after March 31, 2002.
(12) Includes 40,000 shares subject to options which became exercisable within
60 days after March 31, 2002.
PRINCIPAL STOCKHOLDERS OF ENDOCARE
The following table presents, except as otherwise described herein, as
of March 31, 2002, and based on information contained in Endocare's 2002 proxy
statement, the only Stockholders known by CRE to beneficially own more than 5%
of the outstanding Common Stock:
AMOUNT AND NATURE OF PERCENTAGE
NAME AND ADDRESS BENEFICIAL OWNERSHIP(1) OF TOTAL
5% STOCKHOLDERS
Kern Capital Management, LLC(13) 1,314,000 5.4
114 West 47th Street
New York, NY 10036
Entities affiliated with SAFECO Corporation(14) 2,196,645 9.0
4333 Brooklyn Ave, NE
Seattle, WA 98185
Entities affiliated with FFC Partners(15) 1,443,533 6.1
10 Glenville Street
Grenwich, CT 06831
State of Wisconsin Investment Board (16) 2,625,000 10.81
P. O. Box 7842
Madison, WI 53707
(13) Pursuant to a Schedule 13G filed on February 14, 2003 with the SEC, Kern
Capital Management, LLC reported sole voting power and sole dispositive
power over 1,314,000 shares and disclaimed any beneficial ownership over
the securities of the Company held by Robert E. Kern and David G. Kern, the
principal and controlling members of Kern Capital Management, LLC.
(14) Pursuant to a joint Schedule 13G filed on February 13, 2003 with the SEC,
as of January 11, 2002: (i) SAFECO Common Stock Trust reported that it had
shares voting and dispositive power over 1,279,825 shares; (ii) SAFECO
Asset Management Company reported that it had shares voting and dispositive
power over 1,924,545 shares and disclaimed any beneficial ownership over
1,913,645 of the shares reported on the joint Schedule 13G which were
beneficially owned by registered reporting companies for which SAFECO Asset
Management Company serves as an advisor; and (iii) SAFECO Corporation
reported shared voting and
26
dispositive power over 2,196,645 shares and disclaimed 1,722,640 shares.
(15) Pursuant to a Schedule 13G filed on April 1, 2002 with the SEC: (i) FFC
Partners I, L.P. reported sole voting power over 1,386,186 shares and sole
dispositive power over 1,331,204 shares (FFC Partners I, L.P. has no
dispositive power over 54,982 shares held in escrow); (ii) FFC Executive
Partners I, L.P. reported sole voting power over 57,347 shares and sole
dispositive power over 55,072 shares (FFC Executive Partners I, L.P. has no
dispositive power over 2,275 shares held in escrow); and (iii) Ferrer
Freeman & Company, LLC reported that it is a general partner of FFC
Partners I, L.P. and may be deemed to be the beneficial owner of the
indicated shares.
(16) Pursuant to a Schedule 13G filed on February 12, 2003 with the SEC, State
of Wisconsin Investment Board reported sole voting power and dispositive
power of 2,625,000 shares.
STOCKHOLDERS' PROPOSALS IN ENDOCARE PROXY STATEMENT
According to Endocare's 2002 proxy statement, if a Stockholder desires
to present a proposal at the 2003 Annual Meeting or Special Meeting of
Stockholders, the proposal must have been received by the Company in writing no
later than January 6, 2003 in order for such proposal to be eligible for
inclusion in the Company's proxy statement and form of proxy for such meeting.
Proposals should be addressed to the Corporate Secretary, Endocare,
Inc., 201 Technology Drive, Irvine, California 92618.
WE URGE YOU TO SIGN, DATE AND RETURN THE GOLD PROXY CARD IN FAVOR OF THE
ELECTION OF OUR NOMINEES DESCRIBED IN THIS PROXY STATEMENT.
Dated: May _____, 2003
Sincerely,
/s/ Douglas O. Chinn, M.D.
Committee to Revitalize Endocare
Douglas O. Chinn, M.D.
27
PROXY CARD
ENDOCARE, INC.
PROXY SOLICITED ON BEHALF OF COMMITTEE TO REVITALIZE ENDOCARE AND THE
OTHER PARTICIPANTS IDENTIFIED IN THE PROXY STATEMENT FURNISHED HEREWITH ("CRE")
FOR THE 2003 ANNUAL MEETING OR SPECIAL MEETING OF STOCKHOLDERS, ___________ ___,
2003 AT ________A.M.
The undersigned Stockholder of Endocare, Inc. ("Endocare") hereby
appoints Douglas O. Chinn, M.D. and David Eller and each of them, as attorneys
and proxies, each with power of substitution and revocation, to represent the
undersigned at the Annual Meeting or Special Meeting of Stockholders of
Endocare, Inc. to be held at ______________ on June ____, 2003 at ____ A.M,
local time, and at any adjournment or postponement thereof, with authority to
vote all shares held or owned by the undersigned in accordance with the
directions indicated herein.
Receipt of the Proxy Statement furnished herewith is hereby
acknowledged.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED STOCKHOLDER. ON MATTERS FOR WHICH YOU DO NOT
SPECIFY A CHOICE, YOUR SHARES WILL BE VOTED IN ACCORDANCE WITH
THE RECOMMENDATION OF CRE. YOU MAY APPROVE OR VOTE
SEPARATELY ON ANY OR ALL OF THE PROPOSALS.
(continued and to be signed on the reverse side)
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CRE RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED BELOW.
ELECTION OF DIRECTORS
FOR all nominees listed on the right WITHHOLD AUTHORITY to vote for all NOMINEES:
(except as marked to the contrary). nominees listed to the right. William A. Barry
Douglas O. Chinn, M.D.
( ) ( ) David Eller
Robert P. Fry, M.D., J.D.
Kurt Landgraf
John R. Queen
(Instructions: To withhold
authority to vote for any
individual nominee, write that
nominee's name in the space
provided below.)
--------------------------
CRE MAKES NO RECOMMENDATION ON THE FOLLOWING MATTER TO BE VOTED ON AT THE 2003
ANNUAL MEETING OR SPECIAL MEETING OF STOCKHOLDERS
FOR AGAINST ABSTAIN
--- ------- -------
( ) ( ) ( )
CRE RECOMMENDS A VOTE "FOR" GRANTING THE PROXIES DISCRETION TO
VOTE ON OTHER BUSINESS.
FOR AGAINST ABSTAIN
--- ------- -------
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER ( ) ( ) ( )
BUSINESS AS MAY PROPERLY BE PRESENTED BEFORE THE 2003 ANNUAL MEETING OR
SPECIAL MEETING OF STOCKHOLDERS OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
* * * *
Dated:
---------------------------------------
Signature:
---------------------------------------
Signature if held jointly:
---------------------------------------
Title:
---------------------------------------
INSTRUCTIONS. Please sign exactly as name appears hereon. When shares
are held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
The signer hereby revokes all proxies heretofore given by the signer to vote at
the 2003 Annual Meeting or Special Meeting of Stockholders of Endocare, Inc. and
any adjournment or postponement thereof.
29