Executive Separation Benefits Plan

EXECUTIVE SEPARATION BENEFITS PLAN


TABLE OF CONTENTS
Page


Section 1 General Information............................................... 1


Section 2 Definitions....................................................... 1


Section 3 Benefits under the Plan........................................... 5


Section 4 Plan Amendment and Termination.................................... 9


Section 5 Plan Administration............................................... 9


Section 6 Miscellaneous Matters............................................. 11


Section 7 Claims Procedure.................................................. 12


Section 8 ERISA Rights...................................................... 14


Summary Plan Description Information........................................ 17


Appendix A to the Endocare, Inc. Executive Separation Benefits Plan......... 18


Appendix B to the Endocare, Inc. Executive Separation Benefits Plan......... 19


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SECTION 1


GENERAL INFORMATION


1.1. ADOPTION AND PURPOSE OF PLAN. The Employer hereby adopts this Executive Separation Benefits Plan to provide certain Separation Benefits to Eligible Employees in accordance with the terms and conditions of the Plan.


1.2. STATUS OF PLAN. The Plan is intended to comply with all applicable state and federal laws regarding severance pay plans, specifically Title I of ERISA. The Plan is intended to be a "welfare benefit plan," as defined in ERISA Section 3(1) and Department of Labor Regulation Section 2510.3-1.


1.3. SUMMARY PLAN DESCRIPTION. The Plan Administrator is hereby authorized to use this document embodying the Plan and all supplementary materials, as from time to time amended, to satisfy all of the Plan's "summary plan description" requirements pursuant to ERISA.


1.4. EFFECTIVE DATE. The Plan is effective as of July 17, 2002.


1.5. PLAN YEAR. For recordkeeping and reporting purposes, the Plan Year shall be the 12-month period ending each December 31. Notwithstanding the foregoing, the initial Plan Year shall begin on July 17, 2002 and end on December 31, 2002.


SECTION 2
DEFINITIONS


2.1. "Base Pay" means an Eligible Employee's highest annual base salary rate paid during the twenty-four months (or total period of employment, if less) immediately preceding termination of the employee's employment due to a Covered Termination plus the maximum amount of any bonus payable to the Eligible Employee in such period under a written bonus plan of the Company. The term Base Pay shall exclude all other types of compensation or remuneration to an Eligible Employee, and shall exclude without limitation, overtime pay and shift differentials, contributions (other than employee salary-reduction contributions) to any retirement or other employee benefit plans, commissions, profit sharing payments, incentive payments of any kind, special payments of any kind (including without limitation business expense reimbursements, tuition reimbursements and flexible spending account reimbursements) and contingent compensation of any kind.


2.2. "Board" means the Employer's Board of Directors.


2.3. "Cause" means an Eligible Employee's (a) willful and continuing failure to substantially perform duties assigned in good faith from time to time by the Employer (provided that such failure is not solely the result of (i) a disability entitling the Eligible Employee to benefits under the Employer's long-term disability plan or Medicare, (ii) a leave of absence either granted in writing by the Employer or guaranteed by applicable law or (iii) some other reason agreed to in advance by either the Employer's Chairman or a majority of its Board); or (b) willful conduct which is demonstrably and materially injurious to the Employer; or


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(c) conviction of a felony or a misdemeanor involving the theft, misappropriation or embezzlement of property of the Employer.


No termination of an Eligible Employee's employment shall be for Cause unless: (a) notice of such Cause is provided to the employee by or on behalf of the Board; and (b) no valid prior or simultaneous notice of Good Reason has been given by the employee; and (c) the employee is afforded an opportunity to be heard before the Board and represented by counsel; and (d) a majority of the Board then determines that Cause exists for the employee's termination; and (e) only if and to the extent a cure-period is permitted under any separate written agreement between the Employer and the employee and cure is feasible, the employee has failed to timely cure such asserted Cause. The required hearing need not be held before the Eligible Employee's termination occurs, but it must be held within 30 days after the required notice of asserted Cause is given to the Eligible Employee, unless the employee agrees to a postponement.


For purposes of this Subsection, the term Board shall include the board of directors (or body with a similar function) of the Employer's successor following a Change in Control.


2.4. A "Change In Control" of the Employer will occur upon:


(a) The acquisition by any individual, entity or group (within the
meaning of Sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934 (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50
percent or more of either (i) the then outstanding shares of the
Employer's common stock (the "Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Employer entitled
to vote generally in the election of the directors (the "Outstanding
Employer Voting Securities"); provided, however, that the following
acquisitions shall not constitute a Change in Control: (A) any acquisition
directly from the Employer (including an equity financing); (B) any
acquisition by the Employer or by any corporation controlled by the
Employer; (C) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Employer or any corporation
controlled by the Employer; or (D) any acquisition by any corporation or
business entity pursuant to a consolidation or merger, if, following such
consolidation or merger, the conditions described in clauses (i) and (ii)
of paragraph (c) of this definition are satisfied; or


(b) At any time, individuals who, as of the Effective Date,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the Effective Date whose
election, or nomination for election by the Employer's stockholders, was
approved by a vote or resolution of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as
a result of either an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board.


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(c) Adoption by the Board of a resolution approving an agreement of
consolidation of the Employer with or merger or similar transaction of the
Employer into another corporation or business entity in each case, unless,
following such consolidation or merger, (i) more than 50 percent of the
combined voting power of the then outstanding voting securities of such
corporation or business entity entitled to vote generally in the election
of directors (or other persons having the general power to direct the
affairs of such entity) is then beneficially owned, directly or
indirectly, by the beneficial owners, respectively, of the Common Stock
and Outstanding Employer Voting Securities immediately prior to such
consolidation or merger in substantially the same proportions as their
ownership, immediately prior to such consolidation or merger, of the
Common Stock and/or Outstanding Employer Voting Securities, as the case
may be and (ii) at least a majority of the members of the board of
directors (or other group of persons having the general power to direct
the affairs of the corporation or other business entity) resulting from
such consolidation or merger were members of the Incumbent Board at the
time of the execution of the initial agreement providing for such
consolidation or merger; provided that any right which shall vest by
reason of the action of the Board pursuant to this paragraph (c) shall be
divested, with respect to any such right not already exercised, upon (A)
the rejection of such agreement of consolidation or merger by the
stockholders of the Employer or (B) its abandonment by either party
thereto in accordance with its terms.


(d) Adoption by the requisite majority of the whole Board, or by the
holders of such majority of stock of the Employer as is required by law or
by the Certificate of Incorporation or By-Laws of the Employer as then in
effect, of a resolution or consent authorizing (i) the liquidation or
dissolution of the Employer or (ii) the sale or other disposition of all
or substantially all of the assets of the Employer, other than to a
corporation or other business entity with respect to which, following such
sale or other disposition, (A) more than 50 percent of the combined voting
power of the then outstanding voting securities of such corporation or
other business entity entitled to vote generally in the election of
directors (or other persons having the general power to direct the affairs
of such entity) is then beneficially owned, directly or indirectly, by the
beneficial owners, respectively, of the Common Stock and Outstanding
Employer Voting Securities immediately prior to such sale or other
disposition in substantially the same proportions as their ownership,
immediately prior to such sale or other disposition, of the Common Stock
and/or Outstanding Employer Voting Securities, as the case may be, and (B)
at least a majority of the members of the board of directors (or other
group of persons having the general power to direct the affairs of such
corporation or other entity) were members of the Incumbent Board at the
time of the execution of the initial agreement or action of the Board
providing for such sale or other disposition of assets of the Employer;
provided that any right which shall vest by reason of the action of the
Board or the stockholders pursuant to this paragraph (d) shall be
divested, with respect to any such right not already exercised, upon the
abandonment by the Employer of such dissolution, or such sale or other
disposition of assets, as the case may be.


(e) Any other event which constitutes a change of control as defined
in Employer's 1995 Stock Plan.


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A Change in Control shall not occur upon the mere reincorporation of the Employer in another state or setting up a new holding company.


2.5 "Committee" means the committee appointed by the Board to administer the Plan.


2.6 "Covered Termination" means the termination of an Eligible Employee's employment either (i) by the Eligible Employee for Good Reason after a Change in Control, (ii) by the Eligible Employee for any reason or no reason during the 30-day period immediately following the six month anniversary of the closing of a transaction resulting in a Change in Control or (iii) voluntarily by the Employer (or its successor following a Change in Control) after a Change in Control for a reason other than Cause, death or disability. However, in no event shall transferring employment from a parent to a subsidiary corporation (or vice versa) constitute a Covered Termination.


The term Covered Termination shall not include the transfer of the Eligible Employee's employment to the Employer's successor following a Change in Control, provided that such transfer does not constitute or result in the employee having Good Reason to resign.


2.7 "Effective Date" means the date set forth in Subsection 1.4 above.


2.8 "Eligible Employee" means an individual who either is designated on Appendix A to this Plan, as amended by the Committee from time to time, as of the date of a Covered Termination.


2.9 "Eligibility Conditions" means the conditions on eligibility for Separation Pay set forth in Subsection 3.2 below.


2.10 "Employer" means Endocare, Inc., a corporation organized under the laws of Delaware, and its subsidiaries. To the extent required to carry out the intent of this Plan, the term Employer shall also refer to the Employer's successor following a Change in Control.


2.11 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended.


2.12 "Good Reason" means an Eligible Employee's resignation from his or her employment due to: (a) a substantial reduction imposed by the Employer in the responsibilities of the employee's position with the Employer; or (b) a reduction in the employee's Base Pay unless such reduction affects all similarly situated individuals; or (c) the elimination or impairment of the employee's eligibility for compensation or benefits programs generally available to other Eligible Employees unless such elimination or impairment affects all similarly situated individuals; or (d) a requirement imposed by the Employer that the employee relocate to a new post at least 50 miles from his or her then-existing post; or (e) the employee has not been offered continued employment with the Employer or its successor following a Change in Control on substantially the same terms and conditions of employment as were in effect for the employee immediately prior to the Change in Control.


No resignation by an Eligible Employee shall be for Good Reason unless: (a) notice of such Good Reason is provided to the Board by or on behalf of the Eligible Employee and (b) the


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Employer fails to cure such asserted Good Reason within 30 days after receipt of such notice; provided that the Employer shall have the sole discretion to determine whether or not (i) to attempt or complete such a cure or (ii) to dispute in good faith or accept the existence of such Good Reason.


For purposes of this Subsection, the term Board shall include the Board of Directors (or body with a similar function) of the Employer's successor following a Change in Control.


2.13 "Participant" means an Eligible Employee who is entitled to receive Separation Benefits under the terms and conditions of the Plan.


2.14 "Plan" means the Employer's Executive Separation Benefits Plan as set forth in this document and in any and all amendments and supplements to this document.


2.15 "Plan Administrator" means the person responsible for satisfying the reporting and disclosure obligations of ERISA, which shall be the Employer.


2.16 "Plan Year" means the relevant period set forth in Subsection 1.5 above.


2.17 "Separation Benefits" means Separation Pay and the other benefits provided pursuant to Section 3.1.


2.18 "Separation Benefits Period" means, for any Participant, the period equal to the number of months of Base Pay to be received by the Participant as Separation Pay. However, a Participant's Separation Benefits Period shall end earlier upon the Participant's failure to continue satisfying all Eligibility Conditions.


2.19 "Separation Pay" means the continuation of a Participant's Base Pay during the Separation Benefits Period in accordance with the terms and conditions of the Plan.


SECTION 3
BENEFITS UNDER THE PLAN


3.1 TYPES OF BENEFITS. An Eligible Employee whose employment with the Employer (or its successor following a Change in Control) is terminated solely due to a Covered Termination and with respect to whom all applicable Eligibility Conditions set forth in Subsection 3.2 below are met shall be entitled u ...