According to the Company’s Form 10-K for the fiscal year ended December 31, 2004, on November 8, 2004, the Company executed a settlement agreement with the lead plaintiffs and their counsel. Under the agreement, in exchange for a release of all claims, the Company and certain individuals will pay a total of $8.95 million in cash. The Company directors and officers’ liability insurance carriers agreed to fund the total amount of $8.95 million, subject to reservations of rights by the carriers. On February 7, 2005, the Court issued a final order approving the agreement and dismissing the class-action lawsuit.

As summarized by the same SEC filing, in November 2002, the Company was named as a defendant, together with certain former officers, one of whom is also a former board member, in a class-action lawsuit filed in the United States District Court for the Central District of California. On February 2, 2003, the court issued an order consolidating this action with various other similar complaints and ordering plaintiffs to file a consolidated complaint, which was filed on October 31, 2003. The consolidated complaint asserted two claims for relief, alleging that the defendants violated sections of the Securities Exchange Act of 1934 by purportedly issuing false and misleading statements regarding our revenues and expenses in press releases and SEC filings. Plaintiffs sought class certification and unspecified damages from the Company, as well as forfeiture and reimbursement of bonus compensation received by two of the individual defendants. On April 26, 2004, the court issued an order denying the Company’s motion to dismiss the consolidated complaint.

The original complaint charges Endocare and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Endocare develops, manufactures, and markets cryosurgical and stent technological devices for the treatment of prostate cancer and benign prostate hyperplasia. Endocare is also developing cryosurgical technologies for treating tumors in organs such as the kidney, breast and liver. The complaint alleges that during the Class Period, defendants caused Endocare's shares to trade at artificially inflated levels
through the issuance of false and misleading financial statements. As a result of this inflation, Endocare was able to complete a public offering of 4 million shares, raising proceeds of $68 million on Nov. 16, 2001. On Oct. 30, 2002, the Company issued a press release entitled, "Endocare Will Delay Release of Third Quarter Results Until Completion of Its Review Process." On this news the stock dropped below $3 per share.