CONFIDENTIAL SETTLEMENT COMMUNICATION PURSUANT TO MEDIATION
ENDOCARE, INC. V. KPMG LLP
MEMORANDUM OF UNDERSTANDING
     This Memorandum of Understanding (“MOU”) contains the principal terms of
the settlement (the “Settlement”) agreed to between Plaintiff and
Cross-Defendant Endocare, Inc. (“Endocare”) and Defendant and Cross-Complainant
KPMG LLP (“KPMG”) in Endocare, Inc. v. KPMG LLP, Orange County Superior Court
Case Number 06 CC11414 (the “Action”). This MOU is intended to form the basis
for drafting a Settlement Agreement that shall embody the terms set forth herein
as well as such other terms as are agreed upon by the parties to this MOU.

  1.   Settlement Amount: KPMG shall pay $950,000 to Endocare to resolve all
claims asserted against KPMG as well as all claims that Endocare could have
asserted against KPMG in the Action (the “Settlement Amount”) within thirty
(30) days of execution of this MOU.     2.   Return of Fees: KPMG shall return
to Endocare fees in the amount of $150,000 within thirty (30) days of execution
of this MOU.     3.   Restrictions on Use of Settlement Proceeds: No portion of
the Settlement Amount paid by KPMG shall be used to pay, advance, or reimburse
any fees or costs incurred or to be incurred by Paul Mikus or John Cracchiolo in
any criminal or SEC enforcement action.     4.   Dismissals:

  a.   Within ten (10) days of execution of this MOU, Endocare will file with
the Orange County Superior Court a Dismissal with prejudice of the claims
against KPMG in the Action.     b.   Within ten (10) days of execution of the
this MOU, KPMG will file with the Orange County Superior Court a Dismissal with
prejudice of the claims against Endocare, Paul Mikus, and John Cracchiolo in the
Action.

  5.   Releases:

  a.   Endocare, on behalf of itself and all of its officers and directors,
releases all claims it asserted and which could have been asserted in the Action
against KPMG and/or any of its current or former officers, directors, agents,
partners, principals and employees.     b.   Endocare shall use its best efforts
in good faith to obtain signed releases of KPMG by both Paul Mikus and John
Cracchiolo, which releases shall release all claims which Messrs. Mikus and
Cracchiolo could have asserted in the Action or otherwise against KPMG and/or
any of its current or former officers, directors, agents, partners, principals
and employees.     c.   KPMG, on behalf of itself and all of its officers and
directors, releases all claims it asserted and which could have been asserted in
the Action

 

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CONFIDENTIAL SETTLEMENT COMMUNICATION PURSUANT TO MEDIATION

      against Endocare and/or any of its current or former employees, officers,
directors, shareholders, and agents, including but not limited to Paul Mikus and
John Cracchiolo.     d.   The releases in the Settlement Agreement will be in a
form reasonably acceptable to both Endocare and KPMG, and shall include waivers
of Cal. Civil Code § 1542.

  6.   No Admission of Liability:

  a.   KPMG does not admit or concede that any of the claims released by
Endocare have merit and the Settlement, and the provisions contained in this
MOU, shall not be deemed or offered or received in evidence as a presumption, a
concession, or an admission of any fault, liability or wrongdoing, and, except
as required to enforce the Settlement, they shall not be offered or received in
evidence or otherwise used by any person in these or any other actions or
proceedings, whether civil, criminal, or administrative.     b.   Endocare does
not admit or concede that any of the claims released by KPMG have merit and the
Settlement, and the provisions contained in this MOU, shall not be deemed or
offered or received in evidence as a presumption, a concession, or an admission
of any fault, liability or wrongdoing, and, except as required to enforce the
Settlement, they shall not be offered or received in evidence or otherwise used
by any person in these or any other actions or proceedings, whether civil,
criminal, or administrative.

  7.   Cooperation in Drafting Settlement Agreement: The terms of the Settlement
are final and conclusive. The parties agree that they will cooperate to
expeditiously prepare and execute a definitive Settlement Agreement. In the
event of disputes regarding the drafting of a Settlement Agreement (and related
documents), the parties agree to submit such disputes to Hon. Robert Altman for
prompt binding arbitration. The parties acknowledge that Judge Altman has
received confidential information from them (and various other parties) to date,
and make this designation notwithstanding that fact. Notwithstanding the
foregoing, the terms of this MOU will be binding on the parties until and unless
it is superseded by a subsequent written agreement. This MOU may be enforced
under the provisions of Code of Civil Procedure Section 664.6 and is not a mere
agreement to agree.     8.   Confidentiality: Endocare and KPMG agree to
maintain absolute confidentiality regarding this MOU and the Settlement
Agreement and not to divulge the events that led up to this MOU, the terms of
this MOU or the Settlement Agreement or the fact of Settlement to any person
except for Endocare’s and KPMG’s attorneys, tax advisors, or as otherwise
required by law, without the prior consent of the other party. The parties agree
that disclosure of this Settlement in any proceeding and/or by any current or
former officer, employee, or agent of Endocare or

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CONFIDENTIAL SETTLEMENT COMMUNICATION PURSUANT TO MEDIATION

      KPMG while testifying would be contrary to the parties’ agreement to
maintain confidentiality and inconsistent with Cal. Evid. Code §§ 1115 et seq.
and 1154.     9.   Costs and Fees: Each party shall bear its own fees and costs.
    10.   Authority: Each signatory to this MOU certifies that he or she is
authorized to execute this MOU and to legally bind the party he or she
represents, and that such party shall be fully bound by the terms hereof upon
such signature without further act, approval, or authorization of such party.

                  Dated:   9-11-2007       ENDOCARE, INC.
 
               
 
               
 
          By:   /s/ Clint Davis
 
               
 
              Clint Davis
 
               
 
          Its   SVP, Legal Affairs & General Counsel
 
               
 
                Dated:   9-11-2007       KPMG LLP
 
               
 
               
 
          By:   /s/ Joseph Warganz
 
               
 
              Joseph Warganz
 
               
 
          Its   Assistant General Counsel
 
               
 
                APPROVED AS TO FORM:        
 
                Dated:   9-11-07       CALDWELL LESLIE & PROCTOR, PC
 
               
 
                            /s/ Christopher G. Caldwell                        
  CHRISTOPHER G. CALDWELL
            Attorneys for Plaintiff and Cross-Defendant Endocare
 
                Dated:   9/11/07       SIDLEY AUSTIN LLP
 
               
 
                            /s/ Michael C. Kelley                          
MICHAEL C. KELLEY
            Attorneys for Defendant and Cross-Complainant KPMG LLP

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