Endocare, Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 21, 2007
ENDOCARE, INC.
(Exact name of registrant as specified in its charter)
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Delaware
(State or Other Jurisdiction of
Incorporation)
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001-15063
(Commission
File Number)
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33-0618093
(I.R.S. Employer
Identification Number) |
201 Technology Drive
Irvine, California 92618
(Address of Principal Executive Offices, including zip code)
(949) 450-5400
(Registrants telephone number, including area code)
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
TABLE OF CONTENTS
Item 1.02 Termination of a Material Definitive Agreement.
On February 22, 2007, the Board of Directors (the Board) of Endocare, Inc. (the Company)
terminated the Companys 2002 Supplemental Stock Plan (the 2002 Plan). As a result, no
additional stock options may be granted under the 2002 Plan. The termination of the 2002 Plan does
not impact the 140,000 stock options currently outstanding under the 2002 Plan. The only stock
options ever granted under the 2002 Plan were granted in 2002 on the date that the 2002 Plan was
adopted.
Item 5.02(e) Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Approval of Standard Form of RSU Agreement under 2004 Stock Incentive Plan
On February 21, 2007, the Boards Compensation Committee (the Compensation Committee) approved
the Companys standard form of restricted stock unit (RSU) agreement under the Companys 2004
Stock Incentive Plan. RSUs give the recipient the right to receive a certain number of shares of
the Companys common stock in the future when the RSUs vest. Vesting can be based on continued
employment and/or achievement of performance objectives. The standard form of RSU agreement
incorporates the default provisions under the 2004 Stock Incentive Plan, similar to the Companys
standard form of stock option agreement. These default provisions include double-trigger vesting
acceleration in the case of a change in control of the Company, such as a merger or acquisition.
Double-trigger vesting acceleration means that vesting acceleration is triggered only if the
employees employment terminates in certain circumstances in connection with or following a change
in control of the Company. Attached as Exhibit 10.1 is the standard form of RSU agreement approved
by the Compensation Committee.
RSU Grants to Executive Officers
On February 23, 2007, the Compensation Committee approved the following RSU grants to the Companys
executive officers under the Companys 2004 Stock Incentive Plan:
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Grant to Craig T. Davenport, the Companys Chairman, CEO and President. Consistent
with the proposed grant described in the Form 8-K filed by the Company on December 19,
2006, Mr. Davenport was granted an aggregate of 800,000 RSUs. 400,000 of these RSUs vest
equally over three years based on Mr. Davenports continued employment. Subject to the
single-trigger change in control provisions described below, the remaining 400,000 RSUs
vest only if the Company achieves specific profitability goals over the 2007-2009 period
(the Profitability Goals) and Mr. Davenport remains employed at the time such
achievement is determined by the Compensation Committee. The Profitability Goals are
measured using adjusted EBITDA, which consists of earnings before interest, taxes,
depreciation and amortization, excluding equity compensation expense. The form of RSU
agreement used for Mr. Davenports RSU grants is similar to the Companys standard form of
RSU agreement except that Mr. Davenports RSU agreements contain single-trigger vesting
acceleration. Single-trigger vesting acceleration means that vesting acceleration is
triggered automatically by the occurrence of a change in control of the Company, whether
or not Mr. Davenports employment continues following the change in control. The form of
RSU agreement used for Mr. Davenports grants is attached as Exhibit 10.2. |
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Grant to Michael R. Rodriguez, the Companys Senior Vice President, Finance and CFO.
Mr. Rodriguez was granted an aggregate of 150,000 RSUs, using the Companys standard form
of RSU agreement. Subject to the double-trigger change in control provisions contained
in the standard form of RSU agreement, these RSUs vest only if the Company achieves the
Profitability Goals and Mr. Rodriguez remains employed at the time such achievement is
determined by the Compensation Committee. |
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Grant to Clint B. Davis, the Companys Senior Vice President, Legal Affairs and General
Counsel. Mr. Davis was granted an aggregate of 120,000 RSUs, using the Companys standard
form of RSU agreement. Subject to the double-trigger change in control provisions contained
in the |
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standard form of RSU agreement, these RSUs vest only if the Company achieves the
Profitability Goals and Mr. Davis remains employed at the time such achievement is
determined by the Compensation Committee. |
Approval of 2007 MICP
On February 21, 2007, the Compensation Committee approved the Companys 2007 Management Incentive
Compensation Program (MICP), an annual incentive program under which the Companys executive
officers and other participants may earn cash and/or deferred stock units (DSUs) by achieving
specific annual performance objectives.
The incentive payable for 100% achievement under the 2007 MICP to the Companys executive officers
is the percentage of annual base salary that is specified in their respective employment
agreements, as follows: 85% for Mr. Davenport and 40% for each of Messrs. Rodriguez and Davis.
Additional overachievement amounts in excess of these percentages may be paid to reward exceptional
achievement under the 2007 MICP, subject to the overachievement cap described below.
The 2007 MICP is structured in a manner similar to the 2006 MICP, except that for 2007 all
participants have the same performance objectives. These performance objectives consist of one
corporate objective relating to revenues (weighted 50%) and one corporate objective relating to
profitability (weighted 50%). Profitability is measured using adjusted EBITDA, as defined above.
However, for purposes of the 2007 MICP certain other expenses are specifically excluded, as well
as any expenses that the Board designates in the future as expenses that should be excluded for
purposes of the 2007 MICP. Unlike the 2006 MICP, the 2007 MICP caps the amount that may be earned
through overachievement by establishing a maximum achievement percentage of 150% for each
performance objective.
The achievement percentages under the 2007 MICP will be determined in the first quarter of 2008.
Following that determination, the corresponding incentive payouts will be made in the form of cash
and/or the vesting of DSUs under the Employee DSU Program referred to below. A participant must
remain employed by the Company through the date of payout in order to receive any award under the
2007 MICP.
Additional terms applicable to the 2007 MICP are described in the summary attached as Exhibit 10.3.
Actions Under Employee DSU Program
On February 21, 2007, the Compensation Committee approved a premium percentage of 20% for 2007
under the Companys Employee Deferred Stock Unit Program (the Employee DSU Program), which is the
same premium percentage as was used for 2006. The Compensation Committee also established the
election deadline for 2007 as March 23, 2007 (30 days after February 21, 2007). For additional
information regarding the Employee DSU Program, see the Form 8-K filed by the Company on May 22,
2006.
Exercise of Discretion under 2006 MICP with Respect to Mr. Davis
On February 21, 2007, the Compensation Committee approved the achievement percentages and related
payouts to the Companys executive officers under the 2006 MICP. The Compensation Committee
exercised its discretion with respect to Mr. Davis achievement percentage and related payout by
excluding certain expenses relating to the Companys mediation with KPMG for purposes of
determining the extent to which Mr. Davis achieved his 2006 MICP objective relating to the
reduction of outside legal expenses. As a result of this exercise of discretion, Mr. Davis
aggregate achievement percentage under the 2006 MICP was 60.23%, resulting in the vesting of
23,376.63 of the DSUs granted to Mr. Davis in June 2006 under the Employee DSU Program. If the
Compensation Committee had not exercised its discretion, then Mr. Davis aggregate achievement
percentage under the 2006 MICP would have been 31.13%, resulting in the vesting of 12,082.26 DSUs.
There was no cash impact on the Company because Mr. Davis had elected in June 2006 to receive 100%
of his payout under the 2006 MICP in the form of DSUs, instead of cash.
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Increase in Mr. Rodriguezs Annual Base Salary
On February 21, 2007, the Compensation Committee approved an increase in Mr. Rodriguezs annual
base salary, from $216,140 to $223,763, retroactive to January 1, 2007.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
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10.1 |
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Standard Form of RSU Agreement under 2004 Stock Incentive Plan. |
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10.2 |
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Form of RSU Agreement used for Mr. Davenport under 2004 Stock Incentive Plan. |
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10.3 |
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Summary Description of 2007 MICP. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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ENDOCARE, INC.
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February 27, 2007 |
By: |
/s/ Michael R. Rodriguez
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Michael R. Rodriguez |
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Senior Vice President,
Finance and Chief Financial Officer |
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