Document:

exv10w47

 

THIS SECURITY HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY PORTION HEREOF OR INTEREST HEREIN MAY BE
SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE AND THE CORPORATION SHALL HAVE RECEIVED, AT THE EXPENSE OF THE HOLDER HEREOF, EVIDENCE OF
SUCH EXEMPTION REASONABLY SATISFACTORY TO THE CORPORATION (WHICH MAY INCLUDE, AMONG OTHER THINGS,
AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION).

WARRANT TO PURCHASE SHARES OF COMMON STOCK OF

SAVE THE WORLD AIR, INC.

			
	Los Angeles, California
	 	___________, 2007

     This is to Certify that, for value received,
_______________(the “Holder”), is entitled
to purchase, subject to the provisions of this Warrant, from Save the World Air, Inc., a Nevada
corporation (the “Company”), at any time on or after date hereof, and not later than 5:00 p.m.
California local time, three years after ___________, 2007,
 ___________ shares of the Common
Stock, US$.001 par value, of the Company (the “Common Stock”) at a purchase price per share equal
to US$1.00, subject to adjustment as to the number of shares and purchase price as hereinafter set
forth. The shares of the Company’s Common Stock issuable upon the exercise of this Warrant are
called herein the “Warrant Stock.” The price per share of the Warrant Stock as adjusted from time
to time as hereinafter set forth is sometimes referred to as the “Exercise Price.” The Holder
hereof may exercise this Warrant as to all or any portion of the shares of the Warrant Stock which
such Holder shall have the right to acquire hereunder. This Warrant is the Warrant referred to in
that certain Subscription Agreement of even date herewith (the “Subscription Agreement”) between
the Company and the Holder.

     (a) Exercise of Warrant. This Warrant may be exercised by presentation and surrender hereof to
the Company with the Exercise Notice attached hereto as Annex A. The Warrant shall be deemed to
have been exercised when (i) the Company has received this Warrant, together with a completed
Exercise Notice, and (ii) the Company has received payment in the amount of the applicable Exercise
Price, notwithstanding that certificates representing such shares of Common Stock shall not then be
actually delivered to the Holder. If the stock transfer books of the Company shall be closed on the
date of receipt of this Warrant, the Exercise Notice and the Exercise Price as aforesaid, the
Holder shall be deemed to be the holder of such shares of Common Stock on the next succeeding day
on which the stock transfer books of the Company shall be opened. If

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this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant
for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase
the balance of the shares purchasable hereunder. In the event this Warrant shall not be exercised
on or before three (3) years after the date of issue, this Warrant shall become void and all rights
hereunder shall cease.

          (1) Method of Payment. Holder may pay the applicable Exercise Price by cash, check or cash
equivalent.

          (2) Expenses of Issuance. The Company shall issue the shares of Common Stock upon exercise of
this Warrant without charge to Holder for any issuance tax or other cost incurred by the Company in
connection with such exercise and the related issuance of the shares of Common Stock. Each of the
shares of Common Stock shall, upon payment of the Exercise Price therefor, be fully paid and
nonassessable and free from all liens and charges with respect to the issuance thereof.

          (3) Withholding Taxes. Holder shall satisfy any federal, state, local or foreign withholding
tax obligations arising from the exercise of the Warrant or the subsequent disposition of the
Shares.

     (b) Reservation of Shares. The Company agrees that at all times there shall be authorized and
reserved for issuance upon exercise of this Warrant such number of shares of its Common Stock as
shall be required for issuance or delivery upon exercise of this Warrant.

     (c) Fractional Shares. This Warrant shall be exercisable in such manner as not to require the
issuance of fractional shares or scrip representing fractional shares. If, as a result of
adjustment in the Exercise Price or the number of shares of Common Stock to be received upon
exercise of this Warrant fractional shares would be issuable, no such fractional shares shall be
issued. In lieu thereof the Company shall pay the Holder an amount in cash equal to such fraction
multiplied by the current market value of one share of Common Stock. The current value shall be an
amount, not less than twice book value, determined in such reasonable manner as may be prescribed
by the Board of Directors of the Company, such determination to be final and binding on the Holder.

     (d) Exchange or Assignment of Warrant. Holder may not, directly or indirectly, voluntarily or
involuntarily, sell, assign, transfer, pledge, hypothecate, encumber or otherwise dispose of,
voluntarily or involuntarily, directly or indirectly (each, a “Transfer”) this Warrant, except that
Holder may transfer the Warrant to Holder’s spouse and direct descendants of Holder, and the heirs,
executors, administrators, testamentary trustees, legatees or beneficiaries of Holder’s estate upon
death (each, a “Permitted Transferee”); provided, however, that (x) any such Permitted Transferee
shall have agreed in writing to be bound by the terms of this Agreement with respect to the Shares
and (y) any transfer to a Permitted Transferee shall not be in violation of applicable federal or
state securities laws.

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     (e) Rights of the Holder; Limitation on Liability. The Holder shall not, prior to exercise of
this Warrant, by virtue hereof, be entitled to any rights of a shareholder in the
Company, either at law or equity, and the rights of the Holder are limited to those expressed in
the Warrant. No provision hereof, in absence of an affirmative action by the Holder to purchase the
Warrant Stock, and no enumeration herein of rights or privileges by the Holder, shall give rise to
any liability of the Holder for the Exercise Price of the Warrant Stock.

     (f) Adjustment of Exercise Rights. The Exercise Price or the number of shares of Common Stock
to be received upon the exercise of this Warrant, or both shall be subject to adjustment from time
to time as follows:

          (l) Dividends. In case any additional shares of Common Stock or any obligation or stock
convertible into or exchangeable for shares of Common Stock (such convertible or exchangeable
obligations or stock being hereinafter called “Convertible Securities”) shall be issued as a
dividend on any class of stock of the Company, such shares or Convertible Securities, the Exercise
Price then in effect shall be increased proportionately and the number of shares of Warrant Stock
then exercisable hereunder shall be decreased proportionately. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment in the Exercise Price in
the case of the issuance at any time or from time to time of any shares of Common Stock pursuant to
any exercise of this Warrant.

          (2) Effect of “Split-ups” and “Split-down” and Certain Dividends. In case at any time or from
time to time the Company shall subdivide as a whole, by reclassification, by the issuance of a
stock dividend on the Common Stock payable in Common Stock, or otherwise, the number of shares of
Common Stock then outstanding into a greater number of shares of Common Stock, with or without par
value, the Exercise Price then in effect shall be reduced proportionately, and the number of shares
of Warrant Stock then exercisable hereunder shall be increased proportionately. In case at any time
or from time to time the Company shall consolidate as a whole, by reclassification or otherwise,
the number of shares of Common Stock then outstanding into a lesser number of shares of Common
Stock, with or without par value, the Exercise Price then in effect shall be increased
proportionately and the number of shares of Warrant Stock then exercisable hereunder shall be
decreased proportionately.

          (3) Statement of Adjusted Exercise Price. Whenever the Exercise Price is adjusted pursuant to
any of the foregoing provisions of this Section (f), the Company shall forthwith prepare a written
statement signed by the President or the Treasurer of the Company, setting forth the adjusted
Exercise Price and any adjustment in the number of shares purchasable hereunder, determined as
provided in this Section (f), and in reasonable detail the facts requiring such adjustment. Such
statement shall be filed among the permanent records of the Company, shall be furnished to the
Holder of each Warrant upon request, and shall be open to inspection by the Holders of the Warrants
during normal business hours.

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          (4) Effect of Merger or Consolidation. In case the Company shall enter into any consolidation
with or merger into any other corporation wherein the Company is not the surviving corporation, or
sell or convey its property as an entirety or substantially as an entirety and in connection with such consolidation, merger, sale or
conveyance shares of stock or other securities shall be issuable or deliverable in exchange for the
Common Stock of the Company, the Holder of any Warrant shall thereafter be entitled to purchase
pursuant to such Warrant (in lieu of the number of shares of Common Stock which such Holder would
have been entitled to purchase immediately prior to such consolidation, merger, sale or conveyance)
the shares of stock or other securities to which such number of shares of Common Stock would have
been entitled at the time of such consolidation, merger sale or conveyance, at an aggregate
Exercise Price equal to that which would have been payable if such number of shares of Common Stock
had been purchased immediately prior thereto. In case of any such consolidation, merger, sale or
conveyance, appropriate provision (as determined by resolution of the Board of Directors of the
Company with the approval of the Holder) shall be made with respect to the rights and interests
thereafter of the Holders of Warrants, to the end that all the provisions of the Warrants
(including adjustment provisions) shall thereafter be applicable, as nearly as reasonably
practicable, in relation to such stock or other securities.

          (5) Reorganization and Reclassification. In case of any capital reorganization or any
reclassification of the capital stock of the Company (except as provided in Subsection (2) of this
Section (f)); the Holder of any Warrant shall thereafter be entitled to purchase pursuant to such
Warrant (in lieu of the number of shares of Common Stock which such Holder would have been entitled
to purchase immediately prior to such reorganization or reclassification) the shares of stock of
any class or classes or other securities or property to which the holder of such number of shares
of Common Stock would have been entitled at the time of such reorganization or reclassification, at
an aggregate Exercise Price equal to that which would have been payable if such number of shares of
Common Stock had been purchased immediately prior to such reorganization or reclassification,
appropriate provision (as determined by resolution of the Board of Directors of the Company with
the approval of the Holder) shall be made with respect to the rights and interest thereafter of the
Warrants (including adjustment provisions) shall thereafter be applicable, as nearly as reasonably
practicable, in relation to such stock or other securities or property.

          (6) Distributions. In case the Company shall make any distribution of its assets to holders of
its Common Stock as a liquidation or partial liquidation dividend or by way of return of capital,
or other than as a dividend payable out of earnings or any surplus legally available for dividends
under the laws of the State of California, then the Holder of this Warrant who thereafter exercises
the same as herein provided after the date of record for the determination of those holders of
Common Stock entitled to such distribution of assets, shall be entitled to receive for the purchase
price of the shares of Common Stock stated in this Warrant, in addition to the Shares of Common
Stock, the amount of such assets (or at the option of the Company, a sum equal to the value thereof
at the time of such distribution to holders of Common Stock, as such
value

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is determined by the Board of Directors of the Company in good faith), which would have been payable to such Holder had
he been the holder of record of such shares of Common Stock on the record date for the
determination of those entitled to such distribution.

          (7) Dissolution or Liquidation. In case the Company shall liquidate or wind up its affairs,
the Holder of this Warrant shall be entitled, upon the exercise thereof, to receive, in lieu of the
shares of Common Stock of the Company which it would have been entitled to receive, the same kind
and amount of assets as would have been issued, distributed or paid to it upon any such
dissolution, liquidation or winding up with respect to such shares of Common Stock of the Company,
had it been the holder of record of such shares of Common Stock on the record date for the
determination of those entitled to receive any such liquidating distribution; provided, however,
that all rights under this Warrant shall terminate on a date fixed by the Company, such date to be
not earlier than the date of commencement of proceedings for dissolution, liquidation or winding up
and not later than 30 days after such commencement date, unless the Holder shall have, prior to
such termination date, exercised this Warrant. Notice of such termination of rights under this
Warrant shall be given to the last registered Holder hereof, as the same shall appear on the books
of the Company, by mail at least 30 days prior to such termination date. In the event of such
notice the Holder may exercise this Warrant prior to the fifth anniversary hereof.

     (g) Limitations on Transfer of Warrant Stock. The Warrant Stock issuable pursuant hereto has
not been registered under the Act. Accordingly, by acceptance hereof the Holder agrees that:

          (l) It will acquire the Warrant Stock issuable pursuant hereto to be held as an investment and
that it will not attempt to sell, distribute or dispose of the same except pursuant to this
agreement and:

(a) pursuant to a registration statement filed and rendered effective under the
Act; or

(b) pursuant to a specific exemption from registration under the Act.

          (2) There shall appear on the certificate or certificates evidencing any Warrant Stock issued
pursuant hereto a legend as follows:

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THIS SECURITY HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY PORTION HEREOF OR INTEREST HEREIN MAY BE SOLD,
ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAW, OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE AND THE CORPORATION SHALL HAVE RECEIVED, AT THE EXPENSE OF THE HOLDER HEREOF, EVIDENCE OF
SUCH EXEMPTION REASONABLY SATISFACTORY TO THE CORPORATION (WHICH MAY INCLUDE, AMONG OTHER THINGS,
AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION).

     (h) Company shall cover all shares which may be issued to the Holder under the terms of this
Warrant in the registration statement to be filed by the Company.

     (i) Notices. All notices, payments, requests and demands and other communications required or
permitted under this Warrant shall be deemed to have been duly given, delivered and made if in
writing and if served either by personal delivery to the party for whom it is intended or by being
deposited, postage prepaid, certified or registered mail return receipt requested to the address
shown below or such other address as may be designated in writing hereafter by such party:

If
to the Company:

Save The World Air, Inc.
Bruce H.
McKinnon, CEO
 5125 Lankershim Boulevard

North Hollywood, California 91601

With
a copy to:

Lance Jon Kimmel, Esq.
SEC
Law Firm

11693 San Vicente Boulevard, Suite 357
Los
Angeles, California 90049

If
to the Holder:

____________________

____________________

____________________

____________________

     (i) Governing Law. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of New York.

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     (j) Controversy. In the event of any controversy, claim or dispute between the parties hereto,
arising out of or relating to this Warrant, the prevailing party shall be entitled to recover from
the non-prevailing party reasonable expenses, attorneys’ fees, and costs.

     (k) Further Assurances. The parties agree to execute, acknowledge and deliver any and all such
other documents and to take any and all such of the action as may, in the reasonable opinion of
either of the parties hereto be necessary or convenient to efficiently carry out any or all of the
purposes of this Warrant.

     (l) Severability. Each and all provisions of this Warrant deemed to be prohibited by law or
otherwise held invalid shall be ineffective only to the extent of such prohibition or invalidity
and shall not invalidate or otherwise render ineffective any or all of the remaining provisions of
this Warrant.

     (m) Parties in Interest. Assignment. The Company may assign any and all of its rights under
this Agreement to its successors, and this Agreement shall inure to the benefit of, and be binding
on, the successors of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon the Holder and his heirs,
executors, administrators, successors and assigns.

     (n) Entire Agreement. This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supercedes in its entirety all prior undertakings and
agreements of the Company and the Holder with respect to the subject matter hereof, and may not be
modified adversely to the Holder interest except by means of a writing signed by the Company and
the Holder.

     IN WITNESS WHEREOF, the Company has caused this instrument to be signed as of the
___, 2007.

SAVE THE WORLD AIR, INC.

	 	 	 	 	 
	 	 	 
	By:  	SPECIMEN
 	 	 
	 	 	 	 
	Its: 	 	 	 
	 

7exv10w1

 

Exhibit 10.1

COMMON STOCK SUBSCRIPTION AGREEMENT

     THIS COMMON STOCK SUBSCRIPTION AGREEMENT (this “Agreement”) is made effective on the
last date of signature indicated on the signature page below (the “Effective Date”), by and
between Endocare, Inc., a Delaware corporation (“Endocare”), and Frazier Healthcare V,
L.P., a Delaware limited partnership (the “Purchaser”).

WHEREAS, the Purchaser wishes to purchase the Shares (as defined below); and

     WHEREAS, Endocare is willing to sell the Shares to the Purchaser in exchange for the Purchase
Price (as defined below);

     NOW, THEREFORE, in consideration of the foregoing and of the mutual promises contained herein,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto (each, a
“Party” and both together, the “Parties”), hereby agree as follows:

     1. Purchase and Sale of Stock.

          (a) The Purchaser hereby agrees to purchase from Endocare on the Closing Date (as defined
below) 3,255,814 shares of Endocare’s Common Stock (the “Shares”) at a purchase price per
share of $2.15, for an aggregate purchase price of $7.0 million (the “Purchase Price”).

          (b) Endocare hereby agrees to issue the Shares to the Purchaser on the Closing Date in
exchange for the Purchase Price.

     2. The Closing.

          (a) The closing of the purchase and sale of the Shares shall occur on the first business day
following the Effective Date (such date, the “Closing Date”).

          (b) On the Closing Date, the Purchaser shall (i) pay the Purchase Price to Endocare via wire
transfer, in accordance with wire transfer instructions provided by Endocare to the Purchaser, and
(ii) deliver to Endocare the Registration Rights Agreement in the form of Exhibit A hereto and
dated as of the Closing Date (the “Registration Rights Agreement”), duly executed by the
Purchaser.

          (c) On the Closing Date, Endocare shall (i) provide to Endocare’s transfer agent, U.S. Stock
Transfer Corporation (together with any successor thereto, the “Transfer Agent”),
irrevocable instructions to issue and deliver via overnight courier to the Purchaser a certificate
representing the Purchaser’s ownership of the Shares, free and clear of any legends except those
set forth in Section 4(e) hereof, (ii) deliver to the Purchaser an opinion of in-house counsel to
Endocare in the form of Exhibit B hereto and dated as of the Closing Date, duly executed by such
counsel, and (iii) deliver to the Purchaser the Registration Rights Agreement, duly executed by
Endocare.

 

 

          (d) Endocare shall pay any and all transfer, stamp or similar taxes that may be payable with
respect to the issuance and delivery of the Shares to the Purchaser.

     3. Representations and Warranties of Endocare. Endocare hereby represents and
warrants to the Purchaser as of the Effective Date and as of the Closing Date as follows:

          (a) Organization; Qualification. Endocare and each of the subsidiaries of Endocare
set forth in Endocare’s most current SEC Filings (as defined below) (the “Subsidiaries”) is
a corporation duly organized and validly existing in good standing under the laws of its respective
jurisdiction of incorporation and has the requisite corporate power and authority to own its
respective properties and to carry on its respective business as now being conducted.

          (b) Authorization; Enforcement. Endocare has the requisite corporate power and
authority to (i) enter into and perform its obligations under this Agreement, the Registration
Rights Agreement and all other documents and certificates entered into or delivered by Endocare in
connection herewith and therewith (collectively, the “Transaction Documents”) and (ii)
issue the Shares in accordance with the terms of this Agreement. The execution and delivery by
Endocare of the Transaction Documents and the consummation by Endocare of the transactions
contemplated thereby have been duly authorized by Endocare’s board of directors and no further
consent or authorization is required of Endocare, its board or directors or its shareholders in
connection therewith. This Agreement has been, and each of the other Transaction Documents upon
the Closing Date will be, duly executed and delivered by Endocare. This Agreement constitutes, and
each of the other Transaction Documents upon the Closing Date will constitute, a valid and binding
obligation of Endocare enforceable against Endocare in accordance with its respective terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors’ rights generally and subject to
equitable principles of general application.

          (c) No Conflicts. The execution, delivery and performance of the Transaction
Documents by Endocare and the consummation of the transactions contemplated thereby will not (i)
result in a violation of the certificate of incorporation or by-laws or any other governing
document of Endocare or any of the Subsidiaries (each, a “Governing Document”), (ii)
conflict with, or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give any party any right of termination, amendment, acceleration
or cancellation of, any agreement of any type to which Endocare or any of the Subsidiaries is a
party or by which any of their respective assets are bound (each, a “Contract”), or (iii)
result in any violation of any law, order, rule or regulation (including without limitation all
applicable Securities Laws (as defined below) and the rules and regulations of the OTC Bulletin
Board) applicable to Endocare, any of the Subsidiaries, any of their respective assets or the
Shares (collectively, “Laws”). Except in each case which would not have or reasonably be
expected to result in, individually or in the aggregate, a Material Adverse Effect, neither
Endocare nor any of the Subsidiaries is in violation of (i) any term of any Governing Document,
(ii) any term of any Contract, or (iii) any Laws.

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          For purposes of this Agreement, the term “Material Adverse Effect” means a material
adverse effect on the business, assets, liabilities, earnings, condition (financial or otherwise),
properties or results of operations of Endocare or any of the Subsidiaries.

          (d) Consents; Approvals. Endocare is not required to obtain any consent,
authorization or approval of, or make any filing or registration with, any court or governmental or
regulatory or administrative authority, including pursuant to all applicable Securities Laws (as
defined below) or the rules and regulations of the OTC Bulletin Board, in order for Endocare to
execute, deliver and perform any of its obligations under the Transaction Documents or in order to
consummate any of the transactions contemplated thereby, except those consents, authorizations,
approvals, filings and registrations contemplated by Section 6(d) hereof and the Registration
Rights Agreement, which shall be obtained or made as contemplated thereby.

          (e) Capitalization; Issuance of Shares. The authorized capital stock of Endocare
consists of (i) 50,000,000 shares of Common Stock, 31,529,125 shares of which are issued and
outstanding (excluding the Shares), 7,846,191 shares of which are reserved for issuance under
existing stock option plans and other equity compensation arrangements of Endocare and none of
which are held as treasury shares, (ii) 1,000,000 shares of Preferred Stock, none of which are
issued and outstanding. All of such outstanding shares have been, or upon issuance will be,
validly issued and are fully paid and nonassessable. The Shares have been duly authorized and,
upon issuance, will be validly issued, fully paid and non-assessable and free from all liens, taxes
and charges with respect to the issuance thereof and shall not be subject to any preemptive or
similar shareholders’ rights. The holders of the Shares shall be entitled to all of the rights
accorded to a holder of Common Stock by virtue of holding Common Stock.

          (f) Public Filings. Since January 1, 2006, Endocare has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with the Securities and
Exchange Commission (the “SEC”) pursuant to the requirements of the Securities Act of 1933,
as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and the rules and regulations promulgated under each and under any other
of the federal and state securities laws (collectively, the “Securities Laws”) (all of the
foregoing filings, all of the exhibits and financial statements thereto and all of the documents
incorporated by reference therein, the “SEC Filings”). As of their respective dates: (i)
the SEC Filings complied in all material respects with all applicable Securities Laws, and (ii)
none of the SEC Filings (except to the extent they have been properly amended or supplemented)
contained any untrue statement of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading. As of their respective dates, the financial
statements of Endocare included in the SEC Filings complied in all material respects with all
applicable accounting requirements and the published rules and regulations of the SEC with respect
thereto. Such financial statements have been prepared in accordance with generally accepted
accounting principles, consistently applied, during the periods involved (except as may otherwise
be indicated in the notes thereto), and fairly present in

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all material respects the financial position of Endocare as of the date thereof. Since
January 1, 2006, except for (i) the SEC investigation and related July 2006 consent judgment
described in the SEC Filings, and (ii) routine notices and correspondence relating to the SEC’s
review of registration statements and periodic reports filed by Endocare, Endocare has not received
any notices or correspondence from the SEC or the OTC Bulletin Board and neither has commenced any
enforcement proceedings against or affecting Endocare.

          (g) Intellectual Property. Endocare owns or has a valid license to use (x) the
patents and patent applications listed on Schedule 3(g) hereto (collectively, the
“Patents”) and (y) all other intellectual property necessary for the conduct of its
business and the respective business of each of the Subsidiaries (collectively with the Patents,
the “Intellectual Property”). Endocare has all right, title and interest in the
Intellectual Property, except to the extent set forth on Schedule 3(g). All employees and all
Designated Independent Contractors of Endocare and the Subsidiaries are under a binding obligation
to assign any patent and other intellectual property rights to Endocare or the applicable
Subsidiary. For purposes of this Agreement, the term “Designated Independent Contractors” means
individuals who both (i) serve as independent contractors of Endocare or any of the Subsidiaries
and (ii) are involved in Endocare’s research and development activities or otherwise work primarily
with Endocare’s Intellectual Property. Since January 1, 2006, neither Endocare nor any of the
Subsidiaries has received any assertion of infringement, threat of litigation, invitation to
license or other notification of rights regarding third party intellectual property rights or been
involved in any discussion, dispute, conflict or proceeding with any third party with respect to
any such assertion, threat, invitation or notification. To Endocare’s actual knowledge, neither
Endocare nor any of the Subsidiaries is infringing, or has ever infringed, any third party
intellectual property rights, except in each case which would not have or reasonably be expected to
result in, individually or in the aggregate, a Material Adverse Effect. To Endocare’s actual
knowledge, Endocare has no reason to believe that any of its or any of the Subsidiaries’ rights
with respect to the Intellectual Property are invalid or unenforceable. Except for routine review
of pending patent applications by the U.S. Patent and Trademark Office and foreign equivalents,
there are no current governmental proceedings regarding Endocare’s or any of the Subsidiaries’
rights with respect to the Intellectual Property.

          (h) Litigation. Except as disclosed in the SEC Filings, there is no action, suit,
proceeding or investigation pending or, to the knowledge of Endocare, threatened against or
affecting Endocare or any of the Subsidiaries or any of their respective assets before any court,
governmental or regulatory or administrative authority which (i) challenges or affects the validity
or enforceability of the Transaction Documents, the transactions contemplated thereby or the
Shares, or (ii) which, individually or in the aggregate, would have or would reasonably be expected
to result in a Material Adverse Effect.

          (i) Investment Company. Neither Endocare nor any of the Subsidiaries is subject to
the Investment Company Act of 1940, as amended.

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          (j) Integration. No circumstance exists which, to Endocare’s knowledge, requires the
offering of the Shares by Endocare to the Purchaser to be integrated with prior, contemporaneous or
ongoing offerings of Endocare for purposes of the Securities Act or the rules and regulations of
the OTC Bulletin Board.

          (k) Private Placement. Assuming the accuracy of the representations made by the
Purchaser in Section 4, no registration under the Securities Act is required for the offer and sale
of the Shares by Endocare to the Purchaser as contemplated by this Agreement.

          (l) Certain Fees. There are no brokerage or finder’s fees or commissions payable by
Endocare to any broker, financial advisor, consultant, finder, placement agent, investment banker
or otherwise with respect to the transactions contemplated by the Transaction Documents. The
Purchaser shall have no obligation with respect to any such fees or any claims made by or on behalf
of any such persons that any such fees are due.

          (m) Application of Anti-takeover Protections. Endocare and its board of directors has
taken all necessary action, if any, in order to render inapplicable any control share acquisition,
business combination, poison pill, shareholder rights agreements or other similar anti-takeover
provision under Endocare’s certificate of incorporation or by-laws or the laws of the State of
Delaware that is or could become applicable to the Purchaser’s purchase or ownership of the Shares
or the Purchaser’s exercise of its rights or fulfillment of its obligations under the Transaction
Documents.

          (n) Disclosure. Endocare confirms that neither it nor any of its advisors or
representatives nor any person acting on their respective behalf has provided the Purchaser with
any material non-public information. Endocare acknowledges that the Purchaser will rely on the
representations and warranties of Endocare in this Section 3(n) in effecting transactions in the
Shares.

          (o) No Other Representations. Endocare acknowledges that the Purchaser makes no other
representations or warranties with respect to the transactions contemplated by the Transaction
Documents except for those specifically set forth in Section 4 and that the Purchaser has not made
any promises to or agreements with Endocare not specifically provided in the Transaction Documents.

     4. Representations of the Purchaser. The Purchaser hereby represents and warrants to
Endocare as follows:

          (a) The Purchaser is a “qualified institutional buyer” within the meaning of Rule 144A under
the Securities Act and an “accredited investor” within the meaning of Rule 501 of Regulation D
under the Securities Act.

          (b) The Purchaser understands that the Shares are “restricted securities” under the federal
securities laws inasmuch as the Shares are being acquired from the Company in a transaction not
involving a public offering and that under the Securities Act and the

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applicable regulations thereunder the Shares may be resold without registration under the
Securities Act only in certain limited circumstances. In this connection the Purchaser represents
that it is familiar with Rule 144 under the Securities Act and understands the resale limitations
imposed thereby and by the Securities Act and the Securities Exchange Act of 1934, as amended (the
“Securities Exchange Act”), including, without limitation, Section 16 of the Securities
Exchange Act if applicable to the Purchaser. The Purchaser acknowledges and agrees that Endocare
has no obligation to register the Shares for resale except as set forth in the Registration Rights
Agreement.

          (c) The Purchaser is acquiring the Shares for investment for the Purchaser’s own account, not
as a nominee or agent, and not with a view to the resale or distribution of any part thereof in
violation of applicable Securities Laws.

          (d) The Purchaser is a sophisticated investor and acknowledges that it can bear the economic
risk of its investment in the Shares, and has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of its investment in the
Shares. The Purchaser has been given the opportunity to ask Endocare all questions relevant to its
investment in the Shares and any such questions have been answered to the Purchaser’s satisfaction.

          (e) The Purchaser understands that any certificates representing the Shares shall bear the
following legend, in addition to any legend required by state “Blue Sky” laws:

THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH
SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF
1933, AS AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE
144(K), OR (III) SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933 AND WITHOUT QUALIFICATION UNDER
APPLICABLE STATE SECURITIES LAWS.

          (f) The Purchaser acknowledges that Endocare makes no other representations or warranties with
respect to the transactions contemplated by the Transaction Documents except for those specifically
set forth in Section 3 and that Endocare has not made any promises to or agreements with the
Purchaser not specifically provided in the Transaction Documents.

     5. Lock Up. The Purchaser hereby covenants and agrees that the Purchaser shall not
engage, directly or indirectly, in any Prohibited Transaction (as defined below) (i) with respect
to 2,441,861 of the Shares, for a period of 12 months after the Closing Date, and (ii) with respect
to 813,953 of the Shares, for a period of 18 months after the Closing Date; provided that the
foregoing covenant shall cease to apply and shall no longer be effective upon the happening of any
of the following events after the Closing Date: (a)

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the occurrence or public announcement by Endocare of a Change in Control, (b) Endocare
entering into, or publicly announcing its intention to enter into, any transaction or series of
transactions with any party or parties other than the Purchaser whereby Endocare agrees to sell or
transfer any capital stock of Endocare, any security directly or indirectly convertible or
exchangeable for any such capital stock or any option or right to acquire any of the foregoing,
which in the aggregate after the date hereof constitutes or allows the holder(s) thereof to acquire
20% or more of the outstanding capital stock of Endocare as of the Effective Date; or (c) Endocare
entering into, or publicly announcing its intention to enter into, any transaction or series of
transactions with any party or parties other than the Purchaser whereby Endocare agrees to sell or
transfer any capital stock of Endocare, or any security directly or indirectly convertible or
exchangeable for any such capital stock or any option or right to acquire any of the foregoing,
which in the aggregate constitutes or allows the holder(s) thereof to acquire more than 5% of the
outstanding capital stock of Endocare as of the Effective Date and in connection with which any
person(s) or entit(ies) acquiring or holding such securities are not subject to a lock-up on terms
at least as restrictive upon such holders as those set forth in this Section 5 at all times while
this Section 5 is applicable to the Purchaser; provided, however, that subsections (b) and (c)
shall not apply to any stockholder-approved equity compensation plans or arrangements (or to
Endocare’s existing deferred stock unit programs) the purpose of which is to compensate Endocare’s
employees or non-employee directors and not in any material respect to raise capital; and provided,
further, that subsections (b) and (c) shall not apply to the agreements entered into by Endocare
prior to the Effective Date with Fusion Capital Fund II, LLC (“Fusion Capital”) unless and until
Endocare actually sells after the Effective Date an amount of shares of capital stock that equals
or exceeds, in the case of subsection (b), the 20% threshold described therein and, in the case of
subsection (c), the 5% threshold described therein; and provided further that in the case of
subsection (c), to the extent the securities are held by Strategic Investors (and only with respect
to the securities held by them), the aggregate threshold (rather than 5%) will be that percentage
equal to 10 minus the percentage of outstanding stock of Endocare otherwise encompassed by
subsection (c) and issued or issuable to any person, entity or division of an entity that is not a
Strategic Investor. For purposes of this Agreement, the term “Prohibited Transaction”
includes any of the following transactions and any agreement or other arrangement with respect to
any such transactions: (a) any sale; (b) any transfer or other disposition of any interest; (c) any
grant of any option; (d) any transfer of the economic risk of ownership; (e) any transfer of voting
or dispositive power; (f) any pledge; (g) any short sale, whether or not against the box; (h) any
establishment of any “put equivalent position” (as defined in Rule 16a-1(h) under the Securities
Exchange Act); (i) any grant of any other right with respect to any of the Shares or with respect
to any security that includes, relates to or derives any significant part of its value from any of
the Shares; and/or (j) any hedging transaction, except, in each case, to (x) any affiliate of the
Purchaser (including its partners or members) or (y) any third party in a private sale, provided
that in each case of clause (x) and (y) such person agrees to be bound by the provisions of this
Section 5. For purposes of this Agreement, the term “Change in Control” means the
occurrence of any of the following in one or a series of related transactions: (i) an acquisition
after the date hereof by any person or “group” (as described in Rule 13d-5(b)(1) under the Exchange
Act) of 40% or

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more of the voting rights or equity interests in Endocare; (ii) a replacement of more than
one-half of the members of Endocare’s board of directors that is not approved by those individuals
who are members of the board of directors on the Effective Date (or other directors previously
approved by such individuals); (iii) a merger or consolidation of Endocare or a sale of
substantially all or more than one-half of the assets of Endocare in one or a series of related
transactions; (iv) a recapitalization, reorganization or other transaction involving Endocare or
any of the Subsidiaries that constitutes or results in a transfer of a majority of the voting
rights or equity interests in Endocare; (v) consummation of a “Rule 13e-3 transaction” as defined
in Rule 13e-3 under the Exchange Act (other than routine and de minimus repurchases of securities
from terminated employees or non-employee directors by Endocare under equity compensation plans or
arrangements), (vi) a publicly announced tender offer for any class of Endocare’s outstanding
securities (other than an issuer tender offer not for cash and not to effectuate a going private
transaction) or (vii) the execution by Endocare or its controlling stockholders of an agreement
providing for or intended to result in any of the foregoing events. For purposes of this
Agreement, the term “Strategic Investor” means an entity or division of an entity
principally engaged in the business of developing, selling or marketing medical devices or
providing related services (including their affiliated strategic investment entities).

     6. Other Agreements of the Parties.

          (a) Endocare covenants to use its commercially reasonable efforts to maintain the listing of
the Common Stock on the OTC Bulletin Board or a national securities exchange for so long as the
Purchaser owns any of the Shares. Endocare will use commercially reasonable efforts to continue
the listing and trading of its Common Stock on the OTC Bulletin Board or a national securities
exchange and will use commercially reasonable efforts to comply in all respects with the applicable
reporting, filing and other obligations under the bylaws or rules and regulations of the OTC
Bulletin Board or such national securities exchange, as applicable.

          (b) As long as the Purchaser owns any of the Shares, Endocare covenants to use commercially
reasonable efforts to timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by Endocare pursuant to the Securities
Laws. Upon the request of the Purchaser, Endocare shall deliver to the Purchaser a written
certification of a duly authorized officer as to whether it has complied with the preceding
sentence. As long as the Purchaser owns any of the Shares, if Endocare is not required to file
reports pursuant to the Securities Laws, it will prepare and furnish to the Purchaser and make
publicly available in accordance with Rule 144(c) such information as is required for the Purchaser
to sell the Shares under Rule 144, as promulgated under the Securities Act (“Rule 144”).
Endocare further covenants that it will use commercially reasonable efforts to take such further
action as the Purchaser may reasonably request, all to the extent required from time to time to
enable the Purchaser to sell Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.

-8-

 

          (c) Endocare shall not, and shall use commercially reasonable efforts to cause each of its
Subsidiaries and each of their respective officers, directors, employees, agents, advisors and
representatives not to, provide the Purchaser with any material nonpublic information regarding
Endocare or any of its Subsidiaries without the express prior written consent of the Purchaser.

          (d) Promptly following the Closing Date, Endocare shall (i) issue a press release mutually
agreed upon by Endocare and the Purchaser disclosing the transactions contemplated by the
Transaction Documents (the “Press Release”), and (ii) file a Form 8-K with the SEC (the
“8-K Filing”) reasonably acceptable to the Purchaser describing the material terms of the
transactions contemplated by the Transaction Documents and attaching the relevant Transaction
Documents as exhibits. Except for the Press Release and the 8-K Filing, Endocare shall not
publicly disclose the name of the Purchaser, or include the name of the Purchaser in any filing
with the SEC or the OTC Bulletin Board or any other regulatory authority, without the prior written
consent of the Purchaser, except as required by Law, in which case Endocare shall promptly provide
the Purchaser with copies of such disclosure. Except for the Press Release and the 8-K Filing,
Endocare shall not issue any press release or any other public statement with respect to the
transactions contemplated by the Transaction Documents, except as required by Law, in which case
Endocare shall provide the Purchaser with prior notice of such disclosure.

          (e) Certificates evidencing the Shares shall not be required to contain any legend (including
the legend set forth in Section 4(e)): (i) following a sale of the Shares pursuant to an effective
registration statement, (ii) following a sale of the Shares pursuant to Rule 144 (assuming the
transferor is not an affiliate of Endocare), (iii) while the Shares are eligible for sale under
Rule 144(k), (iv) if such legend is not required under applicable requirements of the Securities
Act, or (v) while a registration statement covering the resale of the Shares is effective under the
Securities Act. Following such time as any legends (including those set forth in Section
4(e)) are no longer required to be placed on certificates representing Shares, Endocare will, no
later than three business days following the delivery by the Purchaser to the Transfer Agent of a
certificate representing Shares containing such legends, deliver or cause to be delivered to the
Purchaser a certificate representing such Shares that is free from all legends. Endocare may not
make any notation on its records or give instructions to the Transfer Agent that enlarge the
restrictions on transfer set forth in Section 4.

     7. Miscellaneous. The representations, warranties, agreements and covenants
contained in this Agreement and the other Transaction Documents shall survive the Closing Date and
the delivery of the Shares. The Agreement constitutes the entire agreement between the Parties and
no Party shall be liable or bound to the other Party in any manner by any representations,
warranties or covenants except as expressly set forth in this Agreement. Any term of this
Agreement may be amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively), only by an
express written consent signed by duly authorized signatories of both of the Parties. This
Agreement shall be governed by and construed under the laws of the State of New York without regard
to any conflict of

-9-

 

laws principles that would require the application of the laws of any other jurisdiction.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.

[SIGNATURE PAGE FOLLOWS]

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     IN WITNESS WHEREOF, the Parties hereby execute and deliver this Common Stock Subscription
Agreement.

	 	 	 	 	 
	 	ENDOCARE, INC.

 	 
	 	By:  	/s/ Craig T. Davenport
 	 
	 	 	Craig T. Davenport 	 
	 	 	CEO, President & Chairman 

Date of Signature: May 24, 2007	 
	 

	 	 	 	 	 
	 	FRAZIER HEALTHCARE V, L.P.
By: FHM V, LP, its general partner

By: FHM V, LLC, its general partner

 	 
	 	By:  	/s/ Thomas S. Hodge
 	 
	 	 	Thomas S. Hodge 	 
	 	 	Chief Operating Officer 

Date of Signature: May 24, 2007	 
	 

-11-

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