pre14a
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant ¨
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to Rule 14a-11(c) or Rule 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):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Aggregate number of securities to which transaction applies: |
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Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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Proposed maximum aggregate value of transaction:
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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.
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Amount previously paid: |
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Form, Schedule or Registration Statement No.: |
ENDOCARE, INC.
201 Technology Drive
Irvine, California 92618
August 2, 2005
Dear Stockholder of Endocare, Inc.:
You are cordially invited to attend the Special Meeting of
Stockholders of Endocare, Inc. to be held on August 30,
2005 at 8:00 a.m. Pacific time at our executive offices
located at 201 Technology Drive, Irvine, California 92618.
We have provided details of the business to be conducted at the
Special Meeting in the attached Notice of Special Meeting of
Stockholders and Proxy Statement.
In order for us to have an efficient meeting, please sign, date
and return the enclosed proxy promptly in the accompanying reply
envelope. If you decide to attend the Special Meeting and wish
to change your proxy vote, you may do so automatically by voting
in person at the Special Meeting.
We look forward to seeing you at the Special Meeting.
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Sincerely, |
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Craig T. Davenport |
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Chairman and Chief Executive Officer |
Irvine, California
YOUR VOTE IS IMPORTANT
In order to assure your representation at the meeting, you
are requested to complete, sign and date the enclosed proxy as
promptly as possible and return it in the enclosed envelope. You
do not need to add postage if mailed in the United States.
Voting instructions are included with your proxy card.
TABLE OF CONTENTS
ENDOCARE, INC.
201 Technology Drive
Irvine, California 92618
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held August 30, 2005
Dear Stockholder of Endocare, Inc.:
NOTICE IS HEREBY GIVEN that the Special Meeting of Stockholders
of Endocare, Inc., a Delaware corporation, will be held at
8:00 a.m. Pacific time at our executive offices located at
201 Technology Drive, Irvine, California 92618, for the
following purposes:
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1. To approve an amendment to our Restated Certificate of
Incorporation to effect a reverse stock split of our common
stock, at an exchange ratio ranging from one-to-two to
one-to-five; and |
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2. To transact any other business as may properly come
before the Special Meeting or any postponements or adjournments
thereof. |
The foregoing items of business are more fully described in the
Proxy Statement accompanying this Notice. Only stockholders of
record at the close of business on July 29, 2005 will be
entitled to vote at the Special Meeting. Our stock transfer
books will remain open between the record date and the date of
the Special Meeting. A list of stockholders entitled to vote at
the Special Meeting will be available for inspection at our
executive offices.
All stockholders are cordially invited to attend the Special
Meeting in person. Whether or not you plan to attend the
Special Meeting in person, please sign, date and return the
enclosed proxy card in the reply envelope provided. Voting
instructions are included with your proxy card. Should you
receive more than one proxy because your shares are registered
in different names and addresses, each proxy should be signed,
dated and returned to assure that all your shares will be voted.
You may revoke your proxy at any time prior to the Special
Meeting. If you attend the Special Meeting and vote by ballot,
your proxy will be revoked automatically and only your vote at
the Special Meeting will be counted. The prompt return of your
proxy will assist us in preparing for the Special Meeting.
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By Order of the Board of Directors |
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Michael R. Rodriguez
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Senior Vice President, Finance, |
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Chief Financial Officer and Secretary |
Irvine, California
August 2, 2005
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF
SHARES YOU OWN. PLEASE READ THE ATTACHED PROXY STATEMENT
CAREFULLY, COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AS
PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE.
ENDOCARE, INC.
201 Technology Drive
Irvine, California 92618
PROXY STATEMENT
FOR THE SPECIAL MEETING OF STOCKHOLDERS
To Be Held On August 30, 2005
GENERAL
The enclosed proxy is solicited on behalf of the Board of
Directors of Endocare, Inc., a Delaware corporation, for use at
the Special Meeting of Stockholders to be held on
August 30, 2005 (the Special Meeting). The
Special Meeting will be held at 8:00 a.m. Pacific time at
our executive offices located at 201 Technology Drive, Irvine,
California 92618. This Proxy Statement and accompanying proxy
were first mailed to stockholders on or about August 2,
2005, to all stockholders entitled to vote at the Special
Meeting.
Voting
The specific proposals to be considered and acted upon at the
Special Meeting are summarized in the accompanying Notice of
Special Meeting of Stockholders and are described in more detail
in this Proxy Statement. Each stockholder is entitled to one
vote for each share of our common stock held by such stockholder
on July 29, 2005, the record date for determining which
stockholders are entitled to vote at the Special Meeting. On
June 30, 2005, there were 30,059,977 issued and outstanding
shares of common stock. Our Amended and Restated Bylaws (the
Bylaws) provide that a majority of the shares
entitled to vote, represented in person or by proxy, will
constitute a quorum for transaction of business at the Special
Meeting.
All votes will be tabulated by the inspector of elections
appointed for the Special Meeting, who will separately tabulate
affirmative and negative votes, abstentions and broker
non-votes. Abstentions and broker non-votes will be counted for
purposes of determining whether a quorum is present at the
Special Meeting. A broker non-vote occurs when a
nominee holding shares for a beneficial holder does not have
discretionary voting power and does not receive voting
instructions from the beneficial owner. All matters to be acted
upon by the stockholders at the Special Meeting will require the
approval of the holders of a majority of the outstanding shares
of our common stock present in person or represented by proxy
and entitled to vote at the Special Meeting. With respect to
such matters, abstentions will have the effect of negative
votes, and broker non-votes will not be counted for purposes of
determining whether any of those proposals have been approved.
Proxies
Our Board of Directors has selected Craig T. Davenport and
William J. Nydam, and each of them, to serve as Proxyholders for
the Special Meeting. If a stockholder properly signs and returns
the enclosed form of proxy, the Proxyholders will vote the
shares represented by such proxy at the Special Meeting in
accordance with the instructions the stockholder writes on the
Proxy. If the Proxy does not specify how the shares are to be
voted, the Proxy will be voted FOR the approval of
Proposal 1 described in the accompanying Notice of Special
Meeting of Stockholders and this Proxy Statement. In addition,
the shares represented by the Proxy will be voted in accordance
with the discretion of the Proxyholders on all other matters
that properly come before the Special Meeting.
You may revoke or change your Proxy at any time before the
Special Meeting by mailing our Secretary at our executive
offices located at 201 Technology Drive, Irvine, California
92618, a notice of revocation or another signed Proxy with a
later date. You may also revoke your proxy by attending the
Special Meeting and voting in person.
We do not know of other matters to be presented for
consideration at the Special Meeting. However, if any other
matters properly come before the Special Meeting, it is the
intention of the persons named in the enclosed form of Proxy to
vote the shares they represent as the Board of Directors may
recommend. Discretionary authority with respect to such other
matters is granted by the execution of the enclosed Proxy.
Solicitation
We will bear the entire cost of soliciting proxies, including
the preparation, assembly, printing and mailing of this Proxy
Statement, the Proxy and any additional solicitation material
furnished to stockholders. Copies of solicitation material will
be furnished to brokerage firms, banks, nominees, custodians and
fiduciaries holding shares in their names that are beneficially
owned by others so that they may forward this solicitation
material to such beneficial owners. In addition, we may
reimburse such persons for their costs of forwarding the
solicitation materials to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by
solicitation by telephone or other means by our directors,
officers, employees or agents. No additional compensation will
be paid to our directors, officers or employees for any such
services.
PROPOSALS TO BE CONSIDERED AT THE SPECIAL MEETING
PROPOSAL NO. 1
AMENDMENT OF ENDOCARES RESTATED CERTIFICATE OF
INCORPORATION
TO EFFECT A REVERSE STOCK SPLIT
General
Our Board of Directors has unanimously approved a proposal to
amend our Restated Certificate of Incorporation to effect a
reverse stock split of all outstanding shares of our common
stock at an exchange ratio ranging from one-to-two to
one-to-five. The board has recommended that this proposal be
presented to our stockholders for approval. You are now being
asked to vote upon an amendment to our Restated Certificate of
Incorporation to effect this reverse stock split whereby a
number of outstanding shares of our common stock between and
including two and five, such number consisting only of whole
shares, will be combined into one share of our common stock.
Pending stockholder approval, the board will have the sole
discretion pursuant to Section 242(c) of the Delaware
General Corporation Law to elect, as it determines to be in the
best interests of Endocare and its stockholders, whether or not
to effect a reverse stock split, and if so, the number of shares
of our common stock between and including two and five that will
be combined into one share of our common stock, at any time
before the first anniversary of the Special Meeting. The board
believes that stockholder approval of an amendment granting the
board this discretion, rather than approval of a specified
exchange ratio, provides the board with maximum flexibility to
react to then-current market conditions and, therefore, is in
the best interests of Endocare and its stockholders.
The text of the form of the proposed amendment to our Restated
Certificate of Incorporation is attached to this proxy statement
as Appendix A. By approving this amendment,
stockholders will approve an amendment to our Restated
Certificate of Incorporation pursuant to which any whole number
of outstanding shares between and including two and five would
be combined into one share of our common stock and authorize the
board to file such amendment as determined by the board in the
manner described herein. The board may also elect not to effect
any reverse split.
If approved by the stockholders, and following such approval,
the board determines that effecting a reverse stock split is in
the best interests of Endocare and its stockholders, the reverse
stock split will
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become effective upon filing such amendment with the Secretary
of State of the State of Delaware. The amendment filed thereby
will contain the number of shares selected by the board within
the limits set forth in this proposal to be combined into one
share of our common stock.
If the board elects to effect a reverse stock split following
stockholder approval, the number of issued and outstanding
shares of common stock would be reduced in accordance with an
exchange ratio determined by the board within the limits set
forth in this proposal. Except for adjustments that may result
from the treatment of fractional shares as described below, each
stockholder will hold the same percentage of our outstanding
common stock immediately following the reverse stock split as
such stockholder held immediately prior to the reverse stock
split. Currently, Endocare is authorized to issue up to a total
of 51,000,000 shares of capital stock, consisting of
1,000,000 shares of preferred stock and
50,000,000 shares of common stock. The amendment would not
change the number of total authorized shares of our capital
stock. Thus, immediately following the reverse stock split, the
total number of authorized shares of capital stock would remain
at 51,000,000, consisting of 1,000,000 shares of preferred
stock and 50,000,000 shares of common stock. The par value
of our common stock and preferred stock would remain unchanged
at $0.001 per share as well. Currently, the board does not
have any plans to issue additional authorized but unissued
shares of our common stock following the reverse stock split.
Reasons for the Reverse Stock Split
The board believes that a reverse stock split may be desirable
for a number of reasons. First, the board believes that a
reverse stock split may better qualify us to list our stock on a
national exchange or market. Second, the board believes that a
reverse stock split could improve the marketability and
liquidity of our common stock. Third, the board believes that a
reverse stock split is desirable in order to increase our common
stock price in the near term while we continue to progress
towards achieving our business objectives.
Our common stock is currently quoted on the pink
sheets maintained by the National Quotation Bureau, Inc.
The board believes that it is in the best interests of Endocare
and its stockholders to list our common stock on a national
exchange or market. Alternative markets like the Over the
Counter Bulletin Board or the pink sheets are
generally considered to be less efficient and not as widely
followed as other exchanges or markets like those operated by
the Nasdaq Stock Market, Inc. (Nasdaq) or the
American Stock Exchange.
In order for us to list our common stock on a market operated by
Nasdaq or the American Stock Exchange, we must satisfy certain
listing standards, some of which standards require a minimum bid
price. For example, certain listing standards of the Nasdaq
SmallCap Market would require that our common stock have a
minimum bid price of at least $4.00 per share and certain
listing standards of the Nasdaq National Market would require
that our common stock have a minimum bid price of at least
$5.00 per share. In addition, certain of the listing
standards of the American Stock Exchange would require that our
common stock have a minimum bid price of at least $3.00 per
share. As of June 30, 2005, the closing price for our
common stock as reported on the pink sheets was
$4.00 per share. Of course, we cannot predict whether this
share price will be maintained or increased in the future.
The board expects that a reverse stock split of our common stock
will increase the market price of our common stock so that we
would be better able to satisfy the minimum bid price listing
standards of a national market or exchange like Nasdaq or the
American Stock Exchange. However, the effect of a reverse split
upon the market price of our common stock cannot be predicted
with any certainty, and the history of similar reverse stock
splits for companies in like circumstances is varied. It is
possible that the per share price of our common stock after the
reverse split will not rise in proportion to the reduction in
the number of shares of our common stock outstanding resulting
from the reverse stock split, and there can be no assurance that
the market price per post-reverse split share will either exceed
or remain in excess of the minimum bid price for a sustained
period of time. The market price of our common stock may be
based also on other factors that may be unrelated to the number
of shares outstanding, including our future performance.
Notwithstanding the foregoing, the board believes that the
proposed reverse stock
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split, when implemented within the proposed exchange ratio
range, is likely to result in the market price of our common
stock rising to the level necessary to satisfy the minimum bid
price requirement.
In many instances historically the markets have reacted
negatively to the effectuation of a reverse stock split. We
cannot assure you that our stock will not be negatively affected
if our board decides to proceed with a reverse stock split.
However, we believe that our circumstances and rationale for the
reverse stock split differentiate us from many other companies
that have effectuated reverse stock splits. Among other things,
we would be effectuating a reverse stock split to qualify our
common stock for listing, whereas many other companies have
effectuated reverse stock splits to avoid delisting in the face
of dire financial or operational circumstances.
The board also believes that the increased market price of our
common stock expected as a result of implementing a reverse
stock split will improve the marketability and liquidity of our
common stock and will encourage interest and trading in our
common stock. Because of the trading volatility often associated
with low-priced stocks, many brokerage houses and institutional
investors have internal policies and practices that either
prohibit them from investing in low-priced stocks or tend to
discourage individual brokers from recommending low-priced
stocks to their customers. Some of those policies and practices
may function to make the processing of trades in low-priced
stocks economically unattractive to brokers. Additionally,
because brokers commissions on low-priced stocks generally
represent a higher percentage of the stock price than
commissions on higher-priced stocks, the current average price
per share of our common stock can result in individual
stockholders paying transaction costs representing a higher
percentage of their total share value than would be the case if
the share price were substantially higher. It should be noted
that the liquidity of our common stock may be adversely affected
by the proposed reverse stock split given the reduced number of
shares that would be outstanding after the reverse stock split.
The board is hopeful, however, that the anticipated higher
market price will reduce, to some extent, the negative effects
on the liquidity and marketability of the common stock inherent
in some of the policies and practices of institutional investors
and brokerage houses described above.
The board is hopeful that the price of our common stock will
increase as a result of improvements in our business. The board
believes that the market price of our common stock will increase
to the extent we are able to achieve commercial success over
time. Nevertheless, the board believes that a reverse stock
split is desirable because of the anticipated higher market
price of our common stock resulting from such action.
Board Discretion to Implement the Reverse Stock Split
If the reverse stock split is approved by our stockholders, it
will be effected, if at all, only upon a determination by the
board that a reverse stock split (with an exchange ratio
determined by the board as described above) is in the best
interests of Endocare and its stockholders. The determination by
the board as to whether the reverse split will be effected, if
at all, will be based upon certain factors, including meeting
the listing requirements for a national market or exchange like
Nasdaq or the American Stock Exchange, existing and expected
marketability and liquidity of our common stock, prevailing
market conditions and the likely effect on the market price of
our common stock. If the board determines to effect the reverse
stock split, the board will consider certain factors in
selecting the specific exchange ratio, including the overall
market conditions at the time and the recent trading history of
our common stock.
Notwithstanding approval of the reverse stock split by the
stockholders, the board may, in its sole discretion, abandon the
proposed amendment and determine prior to the effectiveness of
any filing with the Secretary of State of the State of Delaware
not to effect the reverse stock split prior to the one-year
anniversary of the Special Meeting, as permitted under
Section 242(c) of the Delaware General Corporation Law. If
the board fails to implement any of the reverse stock splits
prior to the one-year anniversary of the Special Meeting,
stockholder approval again would be required prior to
implementing any reverse stock split.
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Effects of the Reverse Stock Split
After the effective date of the proposed reverse stock split,
each stockholder will own a reduced number of shares of our
common stock. However, the proposed reverse stock split will
affect all of our stockholders uniformly and will not affect any
stockholders percentage ownership interest in us, except
to the extent that the reverse stock split results in any of our
stockholders owning a fractional share as described below.
Proportionate voting rights and other rights and preferences of
the holders of our common stock will not be affected by the
proposed reverse stock split (other than as a result of the
payment of cash in lieu of fractional shares). For example, a
holder of 2% of the voting power of the outstanding shares of
common stock immediately prior to the reverse stock split would
continue to hold 2% of the voting power of the outstanding
shares of common stock immediately after the reverse stock
split. The number of stockholders of record will not be affected
by the proposed reverse stock split (except to the extent that
any stockholder holds only a fractional share interest and
receives cash for such interest after the proposed reverse stock
split).
Although the proposed reverse stock split will not affect the
rights of stockholders or any stockholders proportionate
equity interest in Endocare, subject to the treatment of
fractional shares, the number of authorized shares of common
stock and preferred stock will not be reduced. This will
increase significantly the ability of the board to issue
authorized and unissued shares without further stockholder
action. The issuance in the future of such additional authorized
shares may have the effect of diluting the earnings per share
and book value per share, as well as the stock ownership and
voting rights, of the currently outstanding shares of common
stock. The effective increase in the number of authorized but
unissued shares of common stock may be construed as having an
anti-takeover effect by permitting the issuance of shares to
purchasers who might oppose a hostile takeover bid or oppose any
efforts to amend or repeal certain provisions of our certificate
of incorporation or bylaws.
The proposed reverse stock split will reduce the number of
shares of common stock available for issuance upon exercise of
our outstanding stock options in proportion to the exchange
ratio of the reverse stock split and will effect a proportionate
increase in the exercise price of such outstanding stock
options. In connection with the proposed reverse stock split,
the number of shares of common stock issuable upon exercise or
conversion of outstanding stock options will be rounded to the
nearest whole share and no cash payment will be made in respect
of such rounding. The proposed reverse stock split would have a
similar effect upon our outstanding warrants and stock purchase
rights under our stockholder rights plan.
If the proposed reverse stock split is implemented, it will
increase the number of stockholders of Endocare who own
odd lots of less than 100 shares of our common
stock and decrease the number of stockholders who own
whole lots of 100 shares or more of our common
stock. Brokerage commissions and other costs of transactions in
odd lots are generally higher than the costs of transactions of
whole lots or a greater number of shares. In addition, certain
listing standards of exchanges or markets like those operated by
Nasdaq or the American Stock Exchange may require that we have a
certain minimum number of holders of whole lots.
Our common stock is currently registered under
Section 12(g) of the Securities Exchange Act of 1934, as
amended, and we are subject to the periodic reporting and other
requirements of the Exchange Act. The proposed reverse stock
split will not affect the registration of the common stock under
the Exchange Act. If the proposed reverse stock split is
implemented (and depending on whether we choose thereafter to
list our common stock on another market or exchange), our common
stock will continue to be reported on the pink
sheets under the symbol ENDO.PK.
The proposed reverse stock split will not affect the par value
of our common stock. As a result, on the effective date of the
reverse stock split, the stated capital on our balance sheet
attributable to the common stock will be reduced in proportion
to the exchange ratio selected by the board in the manner
described above, and the additional paid-in capital account
shall be credited with the amount by which the stated capital is
reduced. The per share net income or loss and net book value of
our common stock will be increased because there will be fewer
shares of our common stock outstanding.
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Effective Date
The proposed reverse stock split would become effective as of
5:00 p.m., Eastern time on the date of filing of a
Certificate of Amendment to our Restated Certificate of
Incorporation with the office of the Secretary of State of the
State of Delaware. Except as explained below with respect to
fractional shares, on the effective date, shares of common stock
issued and outstanding immediately prior thereto will be
combined and converted, automatically and without any action on
the part of the stockholders, into new shares of common stock in
accordance with the reverse stock split ratio determined by the
board within the limits set forth in this proposal.
Payment for Fractional Shares
No fractional shares of common stock will be issued as a result
of the proposed reverse stock split. Instead, stockholders who
otherwise would be entitled to receive fractional shares, upon
surrender to the exchange agent of such certificates
representing such fractional shares, will be entitled to receive
cash in an amount equal to the product obtained by multiplying
(i) the fair market value of our common stock as determined
by our board of directors on the effective date by (ii) the
number of shares of our common stock held by such stockholder
that would otherwise have been exchanged for such fractional
share interest.
Exchange of Stock Certificates
As soon as practicable after the effective date, stockholders
will be notified that the reverse split has been effected. Our
transfer agent will act as exchange agent for purposes of
implementing the exchange of stock certificates. We refer to
such person as the exchange agent. Holders of
pre-reverse split shares will be asked to surrender to the
exchange agent certificates representing pre-reverse split
shares in exchange for certificates representing post-reverse
split shares in accordance with the procedures to be set forth
in a letter of transmittal to be sent by us. No new certificates
will be issued to a stockholder until such stockholder has
surrendered such stockholders outstanding certificate(s)
together with the properly completed and executed letter of
transmittal to the exchange agent. Stockholders should not
destroy any stock certificate and should not submit any
certificates until requested to do so.
Accounting Consequences
The par value per share of our common stock would remain
unchanged at $0.001 per share after the reverse stock
split. As a result, on the effective date of the reverse split,
the stated capital on our balance sheet attributable to the
common stock will be reduced proportionally, based on the
exchange ratio of the reverse stock split, from its present
amount, and the additional paid-in capital account shall be
credited with the amount by which the stated capital is reduced.
The per share common stock net income or loss and net book value
will be increased because there will be fewer shares of our
common stock outstanding. We do not anticipate that any other
accounting consequences would arise as a result of the reverse
stock split.
No Appraisal Rights
Under the Delaware General Corporation Law, our stockholders are
not entitled to appraisal rights with respect to our proposed
amendment to our charter to effect the reverse stock split, and
we will not independently provide our stockholders with any such
rights.
Material Federal U.S. Income Tax Consequences of the
Reverse Stock Split
The following is a summary of certain U.S. federal income tax
considerations of the proposed reverse stock split. It addresses
only U.S. Stockholders (as defined herein) who hold the
pre-reverse split shares and post-reverse split shares as
capital assets. This summary is based upon the Internal Revenue
Code of 1986, as amended (the Code), Treasury
Regulations, judicial authorities, published positions of the
Internal Revenue Service (the IRS) and other
applicable authorities, all as in effect on the date hereof
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and all of which are subject to change or differing
interpretations (possibly with retroactive effect). It does not
address tax considerations under state, local, foreign and other
laws.
As used herein, the term U.S. Stockholder means
(i) an individual who is a citizen or resident of the
United States, (ii) a corporation or other entity treated
as a corporation created or organized in or under (or treated
for U.S. federal income tax purposes as created or organized in
or under) the laws of the United States or any state thereof or
the District of Columbia, (iii) an estate subject to U.S.
federal income taxation without regard to the source of its
income, and (iv) a trust if (a) a U.S. court is able
to exercise primary supervision over the trusts
administration and one or more U.S. fiduciaries have the
authority to control all of the trusts substantial
decisions, or (b) the trust has in effect a valid election to be
treated as a United States person within the meaning of the U.S.
Treasury Regulations. The discussion does not address the U.S.
federal income tax considerations that affect the treatment of
an entity that is a partnership for U.S. federal income tax
purposes and that holds the pre-reverse split shares and
post-reverse split shares, or the partners of such partnership.
Such partnerships and their partners should consult their own
tax advisors. The discussion does not purport to be complete and
does not address stockholders subject to special rules, such as
stockholders that are not U.S. Stockholders, or that are
financial institutions, tax-exempt organizations, insurance
companies, dealers in securities, mutual funds, stockholders who
hold the pre-reverse split shares as part of a straddle, hedge
or conversion transaction or other risk reduction strategy,
stockholders who hold the pre-reverse split shares as qualified
small business stock within the meaning of Section 1202 of
the Code, stockholders who are subject to the alternative
minimum tax provisions of the Code and stockholders who acquired
their pre-reverse split shares pursuant to the exercise of
employee stock options or otherwise as compensation.
Furthermore, we have not obtained a ruling from the IRS or an
opinion of legal or tax counsel with respect to the consequences
of the reverse stock split. ACCORDINGLY, ALL STOCKHOLDERS SHOULD
CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE REVERSE
STOCK SPLIT.
The reverse stock split is intended to constitute a
reorganization within the meaning of Section 368 of the
Code. Assuming the reverse split qualifies as a reorganization,
a U.S. Stockholder generally will not recognize gain or loss on
the reverse stock split, except (as discussed below) to the
extent of cash, if any, received in lieu of a fractional share
interest in the post-reverse split shares. The aggregate tax
basis of the post-reverse split shares received will be equal to
the aggregate tax basis of the pre-reverse split shares
exchanged therefor (excluding any portion of the holders
basis allocated to fractional shares), and the holding period of
the post-reverse split shares received will include the holding
period of the pre-reverse split shares exchanged.
A holder of the pre-reverse split shares who receives cash in
lieu of a fractional share interest in the post-reverse split
shares will generally recognize gain or loss equal to the
difference between the portion of the tax basis of the
pre-reverse split shares allocated to the fractional share
interest and the cash received. Such gain or loss will be a
capital gain or loss and will be short term if the pre-reverse
split shares were held for one year or less and long term if
held more than one year. It is assumed for this purpose that
cash will be paid in lieu of fractional shares only as a
mechanical rounding off of fractions resulting from the exchange
rather than separately bargained-for consideration. It is also
assumed that the reverse split is not being undertaken to
increase any stockholders proportionate ownership of the
Company.
No gain or loss will be recognized by us as a result of the
reverse stock split.
Required Vote
The affirmative vote of the holders of a majority of the
outstanding shares of our common stock present in person or
represented by proxy at the Special Meeting is required to
approve the amendment to our Restated Certificate of
Incorporation. Abstentions will have the same effect as negative
votes on this proposal, while broker non-votes will have no
effect.
7
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE AMENDMENT TO OUR RESTATED CERTIFICATE OF INCORPORATION TO
EFFECT A
REVERSE STOCK SPLIT OF OUR COMMON STOCK.
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to us with
respect to the beneficial ownership of our common stock as of
June 30, 2005, unless otherwise noted, by:
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each stockholder known to us to own beneficially more than 5% of
our common stock; |
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each of our directors, nominees and executive officers; |
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each of our Named Executive Officers listed in the Summary
2004 Compensation Table included in the proxy statement
for our 2005 annual meeting; and |
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all of our current directors and executive officers as a group. |
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. None of the directors,
nominees, executive officers or named executed officers listed
below owns any shares of common stock of record but not
beneficially. Except as otherwise noted below, the address of
each person or entity listed on the table is 201 Technology
Drive, Irvine, California 92618.
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Amount and Nature | |
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of Beneficial | |
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Percentage | |
Name and Address |
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Ownership(1) | |
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of Total | |
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DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
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John R. Daniels, M.D.(2)
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194,115 |
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* |
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Craig T. Davenport(3)
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526,037 |
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* |
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David L. Goldsmith(4)
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3,000 |
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* |
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Eric S. Kentor(5)
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* |
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Terrence A. Noonan(6)
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10,000 |
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* |
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Michael J. Strauss, M.D.(7)
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70,000 |
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* |
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Thomas R. Testman(8)
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25,000 |
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* |
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William J. Nydam(9)
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733,940 |
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* |
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Michael R. Rodriguez(10)
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68,750 |
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* |
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All current directors and executive officers as a group
(9 persons)(11)
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1,630,842 |
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5.2 |
% |
NAMED EXECUTIVE OFFICERS WHO NO LONGER ARE EXECUTIVE
OFFICERS
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Katherine Greenberg(12)
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32,148 |
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* |
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Amount and Nature | |
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of Beneficial | |
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Percentage | |
Name and Address |
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Ownership(1) | |
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of Total | |
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5% STOCKHOLDERS
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State of Wisconsin Investment Board(13)
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3,075,500 |
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10.2 |
% |
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P.O. Box 7842 |
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Madison, WI 53707 |
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Entities and individuals affiliated with WS Capital, L.L.C and
WSV Management, L.L.C.(14)
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2,168,280 |
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7.2 |
% |
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300 Crescent Court, Suite 1111 |
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Dallas, TX 75201 |
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Entities and individuals affiliated with SC Fundamental LLC (15)
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1,800,000 |
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6.0 |
% |
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747 Third Avenue, 27th Floor |
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New York, NY 10017 |
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* |
Represents beneficial ownership of less than 1% of the
outstanding shares of our common stock. |
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(1) |
Beneficial ownership is determined in accordance with the rules
of the Securities and Exchange 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 exercisable within 60 days of
June 30, 2005, 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 June 30, 2005, there were
30,059,977 shares of our common stock outstanding. |
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(2) |
Includes (i) 108,303 outstanding shares and
(ii) 75,812 shares underlying currently exercisable
warrants held by Dr. Daniels and his wife AnnaMarie
Daniels, as trustees of the Daniels Family Trust UTA 1993.
Also includes 10,000 shares subject to options that are
exercisable within 60 days after June 30, 2005.
Dr. Daniels received an option to
purchase 20,000 shares of common stock granted on
January 10, 2005, of which no shares are exercisable within
60 days after June 30, 2005. |
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(3) |
Includes 412,500 shares subject to options that are
exercisable within 60 days after June 30, 2005 and
warrants to purchase 46,750 shares of common stock,
all of which are currently exercisable. |
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(4) |
Consists of 1,500 shares held by David L. Goldsmith, as
trustee of the Leah Goldsmith Trust dated January 24, 1998,
750 shares held by David L. Goldsmith, as trustee of the
Aaron Goldsmith Trust, dated January 24, 1998, and
750 shares held by Aaron Goldsmith,
Mr. Goldsmiths son. Mr. Goldsmith received an option
to purchase 30,000 shares of common stock granted on
June 23, 2005, of which no shares are exercisable within 60
days after June 30, 2005. |
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(5) |
Mr. Kentor has served as a director since February 2005.
Mr. Kentor received an option to
purchase 30,000 shares of common stock granted on
February 23, 2005, of which no shares are exercisable
within 60 days after June 30, 2005. |
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(6) |
Represents 10,000 shares subject to options that are
exercisable within 60 days after June 30, 2005.
Mr. Noonan received an option to
purchase 20,000 shares of common stock granted on
January 10, 2005, of which no shares are exercisable within
60 days after June 30, 2005. |
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(7) |
Represents 55,000 shares subject to options that are
exercisable within 60 days after June 30, 2005.
Dr. Strauss received an option to
purchase 20,000 shares of common stock granted on
January 10, 2005, of which no shares are exercisable within
60 days after June 30, 2005. |
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(8) |
Represents 25,000 shares subject to options that are
exercisable within 60 days after June 30, 2005.
Mr. Testman received an option to
purchase 20,000 shares of common stock granted on
January 10, 2005, of which no shares are exercisable within
60 days after June 30, 2005. |
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(9) |
Includes 427,083 shares subject to options that are
exercisable within 60 days after June 30, 2005 and
warrants to purchase 126,352 shares of common stock,
all of which are currently exercisable. |
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(10) |
Represents 68,750 shares subject to options that are exercisable
within 60 days after June 30, 2005. |
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(11) |
Includes 1,008,333 shares subject to options that are
exercisable within 60 days after June 30, 2005 and
warrants to purchase 248,914 shares of common stock,
all of which are currently exercisable. |
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Beneficial ownership of our common stock by Ms. Greenberg
is not included in this calculation as she is no longer an
executive officer. |
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(12) |
Represents 32,148 shares subject to options that are
exercisable within 60 days after June 30, 2005. |
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(13) |
Pursuant to a Schedule 13G/ A filed on February 8,
2005 with the SEC, the State of Wisconsin Investment Board
reported sole voting and dispositive power over
3,075,500 shares. |
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(14) |
Pursuant to a joint Schedule 13G filed on March 10,
2005 with the SEC: (i) WS Capital, L.L.C. reported that it
had sole voting and dispositive power over
1,720,909 shares; (ii) W.S. Capital Management, L.P.
reported that it had shared voting and dispositive power over
1,720,909 shares; (iii) Walker Smith Capital, L.P.
reported that it had sole voting and dispositive power over
132,428 shares; (iv) Walker Smith Capital (Q.P.), L.P.
reported that it had sole voting and dispositive power over
625,821 shares; (v) Walker Smith International Fund,
Ltd. reported that it had sole voting and dispositive power over
962,660 shares; (vi) WSV Management, L.L.C. reported
that it had sole voting and dispositive power over
447,371 shares; (vii) WS Ventures Management, L.P.
reported that it had sole voting and dispositive power over
447,371 shares; (viii) WS Opportunity Fund (Q.P.),
L.P. reported that it had sole voting and dispositive power over
137,090 shares; (ix) WS Opportunity
Fund International, Ltd. reported that it had sole voting
and dispositive power over 182,840 shares; (x) Reid S.
Walker reported that he had sole voting and dispositive power
over 2,168,280 shares; (xi) G. Stacy Smith reported
that he had sole voting and dispositive power over
2,168,280 shares; and (xii) Patrick P. Walker reported
that he had sole voting and dispositive power over
447,371 shares. In addition to the shares noted in the
table above, the joint Schedule 13G filed on March 10,
2005 also indicates that (i) BC Advisors, LLC had sole
voting and dispositive power over 908,107 shares;
(ii) SRB Management, L.P. had sole voting and dispositive
power over 908,107 shares; (iii) SRB Greenway Capital,
L.P. had sole voting and dispositive power over
102,986 shares; (iv) SRB Greenway Capital (Q.P.), L.P.
had sole voting and dispositive power over 736,238 shares;
(v) SRB Greenway Offshore Operating Fund, L.P. had sole
voting and dispositive power over 68,883 shares; and
(vi) Steven R. Becker had sole voting and dispositive power
over 908,107 shares. Pursuant to a letter agreement, Steven
R. Becker may collaborate with Reid S. Walker, G. Stacy Smith
and Patrick P. Walker on investment strategies from time to time. |
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Pursuant to a joint Schedule 13G/ A filed on April 22,
2005 with the SEC: (i) SC Fundamental Value Fund, L.P.
reported that it had sole voting and dispositive power over
879,750 shares; (ii) SC Fundamental LLC reported that it
had shared voting and dispositive power over 879,750 shares;
(iii) SC Fundamental Value BVI, Ltd. reported that it had
sole voting and dispositive power over 845,250 shares;
(iv) SC-BVI Partners reported that it had shared voting and
dispositive power over 845,250 shares; (v) PMC-BVI, Inc.
reported that it had shared voting and dispositive power over
845,250 shares; (vi) SC Fundamental BVI, Inc. reported that
it had shared voting and dispositive power over 845,250 shares;
(vii) Peter M. Collery reported that he had shared voting
and dispositive power over 1,800,000 shares; (viii) Neil H.
Koffler reported that he had shared voting and dispositive power
over 1,725,000 shares; (ix) John T. Bird reported that he
had shared voting and dispositive power over 1,725,000 shares;
and (x) SC Fundamental LLC Employee Savings and Profit
Sharing Plan reported that it had shared voting and dispositive
power over 75,000 shares. |
10
STOCKHOLDER PROPOSALS FOR THE 2006 ANNUAL MEETING
Stockholder proposals that are intended to be presented at our
2006 Annual Meeting must be received no later than
February 3, 2006, in order that they may be included in the
proxy statement and form of proxy relating to that meeting, and
must meet all the other requirements as specified in the Bylaws.
In addition, the proxy solicited by the Board of Directors for
the 2006 Annual Meeting will confer discretionary authority to
vote on any stockholder proposal presented at that meeting,
unless we receive notice of such proposal not later than
April 19, 2006.
OTHER MATTERS
We know of no other matters that will be presented for
consideration at the Special Meeting. If any other matters
properly come before the Special Meeting, it is the intention of
the Proxyholders to vote the shares of common stock represented
by Proxies as our Board of Directors may recommend. By the
execution of the enclosed Proxy, you grant discretionary
authority to the Proxyholders with respect to such other matters.
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By Order of the Board of Directors |
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Michael R. Rodriguez |
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Senior Vice President, Finance, |
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Chief Financial Officer and Secretary |
Irvine, California
August 2, 2005
11
APPENDIX A
CERTIFICATE OF AMENDMENT
OF RESTATED CERTIFICATE OF INCORPORATION
OF ENDOCARE, INC.
The undersigned, Michael R. Rodriguez, hereby certifies that:
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1. He is the Senior Vice President, Finance, Chief
Financial Officer and Secretary of Endocare, Inc., a
Delaware corporation (the Corporation), the original
Certificate of Incorporation of which was filed with the
Secretary of State of the State of Delaware on May 10,
1994. The Corporation filed a Restated Certificate of
Incorporation on December 6, 1995, a Certificate of
Designation on September 1, 1999 and a Certificate of
Amendment of Restated Certificate of Incorporation on
September 25, 2000. |
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2. The first paragraph of Article IV of the
Corporations Restated Certificate of Incorporation is
hereby amended and restated to read in its entirety as follows: |
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The total number of shares of stock which the Corporation
shall have the authority to issue is 51,000,000 shares,
consisting of 50,000,000 shares of Common Stock having a
par value of $0.001 per share (Common Stock)
and 1,000,000 shares of Preferred Stock having a par value
of $0.001 per share (Preferred Stock).
Effective as of 5:00 p.m., Eastern time, on the date that
this Certificate of Amendment is filed with the Secretary of
State of the State of Delaware, each outstanding [*] shares
of Common Stock shall be combined and converted into one share
of Common Stock, par value $0.001 per share. No fractional
shares shall be issued and, in lieu thereof, any holder of less
than one share of Common Stock shall be entitled to receive cash
for such holders fractional share based upon the fair
market value of the Common Stock as of the date that this
Certificate of Amendment is filed with the Secretary of State of
the State of Delaware, as such fair market value is determined
by the Corporations Board of Directors. Whether or not the
reverse stock split provided above would result in fractional
shares for a holder of record shall be determined on the basis
of the total number of shares of Common Stock held by such
holder of record at the time that the reverse stock split
occurs. |
The second paragraph of Article IV of the
Corporations Restated Certificate of Incorporation is not
amended by this Certificate of Amendment.
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3. This Certificate of Amendment has been duly adopted by
the Board of Directors and stockholders of the Corporation in
accordance with Sections 242 and 228 of the General
Corporation Law of the State of Delaware. |
IN WITNESS WHEREOF, the undersigned have executed this
Certificate of Amendment of Restated Certificate of
Incorporation on this day
of ,
2005.
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Michael R. Rodriguez |
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Senior Vice President, Finance, Chief Financial |
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Officer and Secretary |
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By approving this amendment, stockholders will approve the
combination of any whole number of shares of Common Stock
between and including two and five into one share of Common
Stock, i.e., each of the following combination ratios:
one for two, one for three, one for four and one for five. The
Certificate of Amendment filed with the Secretary of State of
the State of Delaware will include the specific number
determined by the Board of Directors to be in the best interests
of the Corporation and its stockholders. |
A-1
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PROXY
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ENDOCARE, INC.
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PROXY |
FOR THE SPECIAL MEETING OF STOCKHOLDERS, AUGUST 30, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Craig T. Davenport and William J. Nydam, and each of them, the
Proxy of the undersigned, with full power of substitution, to vote all shares of stock which the
undersigned is entitled to vote, either on his or her own behalf or on the behalf of any entity or
entities, at the Special Meeting of Stockholders of Endocare, Inc., a Delaware corporation (the
Company), to be held on August 30, 2005, or at any postponements or adjournments thereof, as
specified below, with the same force and effect as the undersigned might or could do if personally
present thereat. The undersigned revokes all previous Proxies and acknowledges receipt of the
Notice of the Special Meeting of Stockholders to be held on August 30, 2005 and the Proxy
Statement.
THIS PROXY CONFERS ON EACH PROXYHOLDER DISCRETIONARY AUTHORITY TO VOTE ON ANY MATTER AS TO WHICH A
CHOICE IS NOT SPECIFIED BY THE UNDERSIGNED. IF NO SPECIFICATION IS MADE, THIS PROXY, WHEN PROPERLY
EXECUTED, WILL BE VOTED IN FAVOR OF PROPOSAL 1, AS MORE SPECIFICALLY DESCRIBED IN THE PROXY
STATEMENT, AND WILL BE VOTED BY THE PROXYHOLDER AT HIS OR HER DISCRETION AS TO ANY OTHER MATTERS
PROPERLY TRANSACTED AT THE SPECIAL MEETING OR ANY POSTPONEMENTS OR ADJOURNMENTS THEREOF.
(Continued and to be signed on the Reverse Side)
PLEASE DETACH PROXY CARD HERE AND RETURN IT IN THE ENVELOPE PROVIDED
The Board of Directors recommends a vote FOR Proposal 1. This Proxy, when properly executed, will
be voted as specified below.
1. |
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To approve an amendment to our Restated Certificate of Incorporation to effect a reverse
stock split of our common stock, at an exchange ratio ranging from one-to-two to one-to-five. |
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¨ FOR
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¨ AGAINST
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¨ ABSTAIN
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2. |
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In accordance with the discretion of the Proxyholders, to act upon all matters incident to
the conduct of the Special Meeting and upon other matters as may properly come before the
Special Meeting. |
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Dated:
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, 2005
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Signature |
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Signature |
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Title(s) |
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Note: Please sign your name exactly as it appears hereon. If signing as attorney,
executor, administrator, trustee or guardian, please give full title as such, and, if
signing for a corporation, give your title. When shares are in the names of more than one
person, each should sign. |