<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): February 6, 1998
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North American Scientific, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-26670 51-0366422
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File number) Identification No.)
7435 Greenbush Avenue, North Hollywood, CA 91605
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 503-9201
---------------
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Former name or former address, if changed since last report
<PAGE>
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
On February 6, 1998, the Company entered into agreements with PracSys
Corp., a privately held Massachusetts corporation ("PracSys"), pursuant to
which (i) PracSys will manufacture and sell to the Company two particle
accelerators (the "Systems") to be used in the production of certain
isotopes, which will be utilized by the Company in connection with its new
brachytherapy product line, and (ii) PracSys will operate the Systems to
produce required isotopes for an initial 2-year period. The agreements call
for total payments to PracSys of approximately $2.7 million, which payments
are required to be made upon the achievement of certain milestones set forth
therein. Such payments are expected to be made from available cash. In
addition, PracSys will receive a service fee and also will be entitled to a
"royalty" on the Company's sales of products which incorporate isotopes
produced using the Systems.
The Company and PracSys have also entered into an Exclusivity and
Purchase Agreement pursuant to which the Company has been granted certain
exclusivity rights with regard to the PracSys technology. Pursuant to the
Exclusivity Agreement, PracSys also issued to the Company an aggregate of
140,150 shares of PracSys Common Stock, which is equal to approximately 5% of
PracSys total outstanding shares on a fully-diluted basis. In addition,
PracSys granted the Company a pre-emptive right in the event of certain
pre-initial public offering private financings and a three-year warrant to
purchase PracSys Common Stock equal to 5% of the number of shares of Common
Stock issued in an initial public offering.
Irwin J. Gruverman, a director and significant stockholder of both the
Company and PracSys was instrumental in introducing the parties but was not
involved in the negotiation or approval of the agreements. The agreements
were negotiated between the parties on an arms-length basis. Copies of the
Purchase Contract, Service Contract and Exclusivity Agreement are attached
hereto as Exhibits 10.1, 10.2 and 10.3, respectively.
<PAGE>
INDEX
Exhibit
Number Description of Document
- -------- -----------------------
10.1 Purchase Contract dated February 6, 1998, between North
American Scientific, Inc. and PracSys Corp.
10.2 Service Contract dated February 6, 1998, between North
American Scientific, Inc. and PracSys Corp.
10.3 Exclusivity and Purchase Contract dated as of December
31, 1997, as amended February 6, 1998, between North
American Scientific, Inc. and PracSys Corp.
<PAGE>
SIGNATURE
---------
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 thereunto duly authorized.
Dated: February 12, 1998 NORTH AMERICAN SCIENTIFIC, INC.
(Registrant)
By: /s/ L. Michael Cutrer
------------------------------------------
Name: L. Michael Cutrer
Title: President Chief Executive Officer
(Principal Executive, Financial and
Accounting Officer)
<PAGE>
PURCHASE CONTRACT
AGREEMENT made this 6th day of February 1998, by and between PracSys
Corp., a Massachusetts corporation having its principal place of business at
8E Industrial Way, Unit 10, Salem, New Hampshire 03079 ("PracSys"), and North
American Scientific, Inc. a California corporation having its principal
place of business at 7435 Greenbush Avenue, North Hollywood, California
91605 ("NASI").
RECITALS:
WHEREAS, NASI wishes to purchase certain equipment from PracSys as set
forth herein; and
WHEREAS, PracSys desires to sell such equipment to NASI; and
WHEREAS, PracSys and NASI desire to enter into a purchase contract with
respect to the foregoing.
NOW THEREFORE the parties agree as follows:
1. Sale by PracSys. PracSys shall perform preproduction engineering,
manufacture or have manufactured, deliver, install (unless installation
is excluded under the Special Conditions referred to below) and sell the
Equipment to NASI in accordance with the terms and conditions of the
Contract documents, and shall perform such other ancillary obligations
as are set forth therein.
2. Purchase by NASI. NASI shall purchase, receive and pay for the
Engineering and Equipment in accordance with the Contract Documents as
defined below, and shall perform such other ancillary obligations, as
are set forth therein.
3. Payment of Purchase Price. NASI shall pay the purchase price and such
other sums as may be stated in the Contract Documents, at the times
stated therein.
4. Special Manufacture. NASI recognizes that the Equipment will be
specially manufactured for NASI.
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
5. Contract Documents and Entire Agreement. The entire and exclusive
agreement of the parties with respect to the subject matter hereof is
set forth in the documents listed in APPENDIX 1 hereto (the "Contract
Documents"). The Contract Documents are listed in descending order of
precedence, in case of any conflict among them. The Contract Documents
supersede all prior or contemporaneous discussions, representations or
writings, none of which shall have any legal effect except insofar as
they are listed in or expressly incorporated by reference in one of the
Contract Documents. The Contract Documents may be amended or
supplemented only in writing signed by the party to be charged. By
causing this contract to be executed, PracSys and NASI each acknowledges
that it has reviewed and that it accepts all of the terms, conditions
and provisions of the Contract Documents.
IN WITNESS WHEREOF the parties have caused this Purchase Contract to be
executed as of the first date set forth above.
PracSys Corp. North American Scientific, Inc.
By: /s/ Wayne E. Webster By: /s/ L. Michael Cutrer
--------------------------------- ----------------------------------
Wayne E. Webster, President & CEO L. Michael Cutrer, President & CEO
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
APPENDIX 1
LIST OF
CONTRACT DOCUMENTS
<TABLE>
<CAPTION>
APPENDIX # OF PAGES DATE
-------- ---------- ----
<S> <C> <C> <C>
List of Contract 1 1 2/4/98
Documents
Special Conditions 2 8 2/4/98
General Conditions 3 9 2/4/98
</TABLE>
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
APPENDIX 2
SPECIAL CONDITIONS
1. BUYER. North American Scientific, Inc. ("NASI")
2. EQUIPMENT. The equipment being sold hereunder consists of: Two PracSys
IP-6, complete integrated isotope production systems (the "Equipment");
each system includes a NHVGx linear accelerator, *** target end station,
processing equipment, shielding and control system. System number one
serial number shall be SN1 ("System #1") and system number two serial
number shall be SN2 ("System #2").
3. SITE.
3.1 The site where the Equipment is intended to be installed is as
follows, unless notified otherwise by NASI:
The Equipment is to be installed by PracSys at a production center (the
"Production Center") in the PracSys facility at Salem, New Hampshire
(the "Site").
3.2 Special requirements for site preparation not contained in General
Conditions:
Performance of all special site preparation requirements at the Site is
the responsibility of PracSys.
4. INSTALLATION, DELIVERY AND ACCEPTANCE.
PracSys is to install the Equipment at the Site as part of the contract.
In the event NASI directs that the Equipment be installed at a location
other than the Site, PracSys shall have no responsibility for site
preparation, installation, set up, calibration, securing permits or
licenses, bonding for decommissioning or any and all other post
acceptance installation responsibilities notwithstanding any provision
of this Agreement to the contrary. The dates for installation and
acceptance are as follows:
INSTALLATION System #1 To occur within *** after receipt of order.
System #2 To occur within *** after receipt of order.
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
ACCEPTANCE Within 30 days following installation of
System #1 and System #2, respectively.
5. TRAINING. Operational training will be provided at the Production
Center by PracSys concurrently for its employees and NASI employees that
NASI elects to have participate. PracSys will provide complete training
on all aspects of the operation of the system and its daily maintenance.
This training is included in the Purchase Price. PracSys will provide
NASI with 30 days en notice of the date of scheduled training sessions
in which NASI may elect to participate. At any time PracSys is entitled
to the Revenue Participation pursuant to the Exclusivity and Purchase
Agreement dated as of December 31, 1997, as amended, by PracSys and NASI
(the "Exclusivity Agreement"), or in the event NASI shall exercise its
"March in Rights" pursuant to Section 8.6 of the Service Contract
between NASI and PracSys of even date herewith (the "Service Contract"),
PracSys shall provide additional training at NASI's request. NASI shall
reimburse PracSys for the reasonable expenses of any such additional
training.
6. DOCUMENTATION AND DATA. PracSys shall deliver to NASI and to the
Production Center complete written documentation sufficient for the
operation and daily standard maintenance for the equipment which will be
turned over to the production center manager or equivalent at the time
of acceptance of the equipment. The documentation will include the
as-built equipment specification ("Equipment Specification") which shall
specify maintenance and operating conditions referenced in the Warranty
provisions of the General Conditions.
7. PURCHASE PRICE.
7.1 The preproduction engineering required for the specialty equipment
(the "Engineering") is separately priced in the amount of $ *** (the
"Preproduction Engineering Price").
7.2 The total purchase price (the "Purchase Price") for two (2) IP-6
Systems installed is $ *** . Each System includes the following:
NHVG-TM- accelerator complete with operating system, shielding and stand
with a nominal *** rating.
*** target end station and processing equipment.
Facilities modification, utility hook-ups and installation at the Site.
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
8. PAYMENT TERMS.
8.1 The Preproduction Engineering Price is to be paid upon execution of
the Purchase Contract.
8.2 The Purchase Price for both Systems is to be paid as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
MILE-
STONE DESCRIPTION AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C>
1 Execution of Purchase Order $***
- --------------------------------------------------------------------------------
2 Receipt of Long Lead Accelerator Items for Systems #1 & #2 $***
- --------------------------------------------------------------------------------
3 Start of Accelerator Assembly Systems #1 & #2 $***
- --------------------------------------------------------------------------------
4 System #1 Proton Beam Demonstration between 0.5-1mA $***
- --------------------------------------------------------------------------------
5 System #2 Proton Beam Demonstration between 0.5-1mA $***
- --------------------------------------------------------------------------------
6 Acceptance of System #1 $***
- --------------------------------------------------------------------------------
7 Acceptance of System #2 $***
- --------------------------------------------------------------------------------
</TABLE>
In the event Milestone payments are delayed by NASI, PracSys shall have the
right to delay Equipment delivery and acceptance accordingly and submit a
change order for increases to the contract price.
PracSys hereby covenants and agrees that the Purchase Price payments made
to PracSys pursuant to this Agreement shall be applied solely for the
purpose of performance of this Agreement and that such payments shall not
be used by PracSys for any other business purpose without the prior written
consent of NASI. PracSys shall set aside a portion of the payments made to
PracSys pursuant to the Exclusivity Agreement and the Production
Engineering Price pursuant to this Agreement for payment to North Star
Research Corp. ("North Star") as necessary to satisfy the milestone and
other payment provisions of the North Star Contract (as defined in Section
9.3 below). PracSys shall make such payments to North Star promptly after
such payments become due pursuant to the North Star Contract, in order to
secure title to the North Star Accelerator (as defined in Section 9.3
below) as soon as reasonably practicable after the date hereof. In
addition, PracSys hereby covenants and agrees that no payments made to
PracSys pursuant to the Exclusivity Agreement or the Production Engineering
Price pursuant to this Agreement
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
shall be applied against amounts owed by PracSys to Wayne E. Webster and
Robert S. Miller, as reflected on the Long Term Obligations of the
Balance Sheet (as defined in Section 11 hereof), without the prior
written consent of NASI. These covenants terminate upon the acceptance
of System #2.
9. ACCEPTANCE.
9.1 At least 30 days prior to scheduled testing of Equipment for
acceptance, PracSys shall propose to NASI and PracSys and NASI shall act in
good faith to agree upon a detailed Equipment acceptance plan designed
to provide an acceptance testing procedure that will, upon successful
demonstration through the actual manufacture of product, assure that the
Equipment will consistently generate *** at a minimum rate of *** mCi per
hour per system. Acceptance shall occur upon evidence reasonably
satisfactory to NASI that the Equipment will consistently generate a
minimum rate of *** mCi per hour per system (the "Performance Criteria").
9.2 In the event acceptance of System #1 or System #2 is delayed more than
90 days beyond the respective scheduled acceptance date pursuant to Section
4 hereof, PracSys shall be responsible for contracting for delivery of the
Product from a third party or produce the Product with its or NASI's work
in process equipment (the "Alternate Supply"), sufficient to meet each
Monthly Production Estimate provided by NASI to PracSys pursuant to Section
2 of the Service Contract. In the event System #1 is accepted and System
#2 acceptance is delayed more than 90 days beyond its scheduled acceptance
date, PracSys would be required to provide the Alternate Supply only to the
extent the production of Product by System #1 is insufficient to meet the
Monthly Production Estimate. NASI will reimburse PracSys for the Product
at a per mCi price that would have resulted from the Service Contract based
on the volume delivered using the pricing factors set forth in Exhibit B of
the Service Contract. This shall be NASI's sole remedy for late acceptance
so long as PracSys provides the Product under these terms. Provided,
however, that (i) in the event PracSys shall be unable to provide such
Alternate Supply for any reason, including lack of financial resources and
(ii) NASI has perfected its process and facilities for the use of the
Product for the production of seeds for sale in commercial quantities to
the Market (the "Commercial Process"), then, after 10 days notice, NASI
may terminate this Agreement and transfer title to the work in progress to
PracSys and PracSys shall promptly refund contract payments made by NASI in
accordance with and to the extent set forth in the refund provisions of
Section 9.3 below.
9.3 Notwithstanding the mitigation of late acceptance of System #1 and
System #2 through PracSys providing for the Alternate Supply of the
Product, NASI may terminate
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
this Purchase Contract for default if System #1 or System #2 are not
accepted, which acceptance NASI will not unreasonably withhold, within
six (6) months after the start of the Alternate Supply, after thirty
(30) days written notice by NASI.
Upon such termination, PracSys shall refund all contract payments made by
NASI hereunder and pursuant to the Exclusivity Agreement. However, if
System #1 or System #2 is accepted and the other system has not been
accepted within six (6) months after the start of the respective Alternate
Supply and NASI elects to terminate after 30 days written notice, then,
upon such partial termination, PracSys shall refund 50% of each of
milestones 1, 2, and 3 and 100% of milestone 4 or 5 and 6 or 7 as
applicable to the extent the contract payments had been made by NASI. In
the event of such partial termination, PracSys has no obligation to refund
the Preproduction Engineering payment or the exclusivity payment made by
NASI pursuant to the Exclusivity Agreement.
Alternatively, NASI may elect not to terminate the Purchase Contract for
default pursuant to the provisions of either Section 9.2 or 9.3, above,
but, upon the above events of default and after 30 days notice, may remove
the work in progress, and take title to and remove any special tools, jigs,
molds, fixtures, equipment, technical data, books, records, computer
software and other records relating to the manufacture of the Equipment
(the "Work In Progress") for the purpose of completing the manufacture of
the Equipment(the "March In Termination"). PracSys shall cooperate in the
removal. If NASI shall be entitled to exercise its March in Termination
rights with respect to System #1, NASI shall also be entitled
simultaneously to exercise such March in Termination rights with respect to
System #2. In the event of March In Termination, NASI will complete the
manufacture at its own expense and PracSys will not be entitled to any
additional payments including any Revenue Participation payment pursuant to
the Exclusivity Agreement.
In the event of March In Termination, PracSys grants to NASI a non
exclusive, royalty-free, world wide license to manufacture, use and sell
without limitation the two Systems hereunder. PracSys represents and
covenants that it has and will continue to have the requisite power to
grant such sub-license.
As security for the performance of its obligations under this Agreement,
and for the refund when due of all payments now or hereafter made by NASI
pursuant to this Purchase Contract or the Exclusivity Agreement, PracSys
hereby grants to NASI a continuing first priority security interest in all
rights, title and interest of PracSys now existing or hereafter acquired
in, to and under each of the following: (i) the NHVGx PET accelerator (the
"North Star Accelerator") being produced for PracSys by North Star
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
Research Corp. ("North Star") pursuant to a contract between PracSys and
North Star executed by PracSys July 1, 1996, (the "North Star
Contract"), (ii) the North Star Contract, and (iii) all products and
proceeds of any of the foregoing, and PracSys hereby pledges,
hypothecates, assigns, sets over and delivers to NASI, and grants NASI a
first priority security interest in, the common stock of Florida PET
Center, Inc. (or such other entity to which title to the North Star
Accelerator is transferred by PracSys) held by PracSys or its
affiliates, whether through PET Scan Services, LLC, or otherwise (the
"Pledged Securities" and with (i), (ii) and (iii) above, the
"Collateral") including any dividends or distributions on the Pledged
Securities or any securities issued in addition to, or in exchange or
substitution therefor (which shall constitute part of the Pledged
Securities) and all voting and other rights pertaining to the Pledged
Securities (provided that, prior to a default, PracSys or its affiliate
shall have the right to exercise such voting or other like rights in a
manner which does not prejudice the rights of NASI hereunder).
All certificates and instruments representing or evidencing any Pledged
Securities shall be promptly delivered by PracSys to NASI and shall be
accompanied by stock powers or other instruments of transfer or assignment,
undated and duly executed in blank, all in form and substance satisfactory
to NASI. NASI shall have the right, at any time after default of refund of
payments by PracSys in its discretion and without notice to PracSys, and
without limitation to any other rights, to transfer to or to register in
the name of NASI or its nominee, any or all of the Pledged Securities. To
the extent PracSys now or hereafter owns or holds any right, title and
interest in any Pledged Securities through one or more persons or entities,
PracSys shall cause such persons or entities to pledge, collaterally assign
and deliver to NASI such Pledged Securities, by written instrument in form
and substance reasonably satisfactory to NASI.
PracSys acknowledges and agrees that NASI's payment pursuant to the
Exclusivity Agreement above is to be applied by it to purchase the
Collateral referenced in clause (i) above, and accordingly the parties
acknowledge and agree that the foregoing security interest in such
Collateral is a purchase money security interest.
Without the prior written consent of NASI, PracSys shall not sell, assign,
transfer, pledge, or otherwise encumber or dispose of any of the Collateral
or any right or interest therein. In addition, PracSys shall, at its own
expense, promptly execute, acknowledge and deliver all such instruments,
and take all such actions, as NASI from time to time may reasonably request
in order to preserve, protect, maintain and perfect NASI's security
interest in the Collateral and other rights of NASI intended to be created
by this Agreement. Furthermore, PracSys shall defend its title to the
Collateral and NASI's lien thereon against the claims of any other person
or entity so long as any of the obligations secured
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
hereby remain outstanding. NASI shall release the security interest
granted pursuant to (i) above upon evidence satisfactory to NASI that
Florida PET Center, Inc. shall have received financing in the amount of
at least $2,500,000. Subject to the terms hereof, NASI shall within 15
days after the acceptance of both Systems execute and deliver to PracSys
a written release of the security interests granted hereunder.
10. SERVICE CONTRACT. If NASI chooses to deliver, install and operate the
Equipment at any single site other than the production center located at
the PracSys, Salem, New Hampshire facility, NASI may at its option,
contract with PracSys to provide maintenance services for the Equipment at
the site for so long as PracSys shall be entitled to receive Revenue
Participation pursuant to the Exclusivity Agreement. NASI shall reimburse
PracSys for the reasonable expenses of such maintenance services.
11. REPRESENTATIONS AND WARRANTIES.
A. PracSys is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation; has all
requisite power to own, lease, license and operate its assets, properties
and business and to carry on its business, as now conducted and proposed to
be conducted; and is duly qualified or licensed to do business as a foreign
corporation and is in good standing in every jurisdiction in which the
nature of its business or the location of its properties requires such
qualification or licensing.
B. PracSys has taken all actions necessary to authorize it to enter into
and perform fully its obligations under this Agreement and to consummate
the transactions contemplated hereby. This Agreement is the legal, valid
and binding obligation of PracSys, enforceable in accordance with its
terms, subject, as to enforcement of remedies, to applicable bankruptcy,
insolvency, moratorium, reorganization and similar laws affecting
creditors' rights generally and to general equitable principles.
C. PracSys has full power and authority to execute and deliver this
Agreement and to perform its obligations under and to consummate the
transactions contemplated by this Agreement. The execution, delivery, and
performance by PracSys of this Agreement (i) have been duly authorized and
approved by all necessary corporate action on the part of PracSys, its
officers, directors and shareholders, or (ii) will not violate any
provision of law and will not conflict with, or result in a breach of, any
of the terms of, or constitute a default under, PracSys's Certificate of
Incorporation, Bylaws, or any contract or agreement, whether written or
oral, judgment, decree, order, or other restriction to which PracSys is a
party or by which it or any of its properties is bound.
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
D. PracSys has in all material respects complied with, and is now in all
material respects in compliance with, all laws and orders applicable to it.
Except to the extent, if any, disclosed in writing to NASI, PracSys holds
all business licenses, permits, franchises, orders and government approvals
material, excluding permits and licenses specific to the production of
radioactive materials and the operation of equipment used to produce
radioactive materials, to or necessary for the conduct of PracSys's
business as presently conducted or as proposed to be conducted, other than
those permits, if any, the absence of which would not have an adverse
effect on PracSys's business, operation or financial condition. Each
license and permit is in full force and effect; PracSys is not and has at
all times in the past been in all material respects in full compliance with
each thereof; and no proceeding is pending or, to the best of PracSys's
knowledge, threatened, to revoke, amend or limit any thereof. There are no
pending or, the best of PracSys's knowledge, threatened proceedings by or
before any governmental authority which involve new special assessments,
assessment districts, bonds, taxes, condemnation actions, laws or orders or
similar matters which, if instituted, could reasonably be expected to have
a material adverse effect upon the condition (financial or otherwise),
assets, liabilities, business or prospectus of PracSys.
E. All documents and other papers delivered or to be delivered, to NASI
by or on behalf of PracSys in connection with this Agreement and the
transactions contemplated herein are, and at the time of delivery will be,
true, correct and complete in all material respects. The information
furnished to NASI by or on behalf of PracSys in connection with this
Agreement and the transactions contemplated herein does not, and will not
contain any untrue statement of a material fact and does not, and will not,
omit to state any material fact necessary to make the statements made, in
context in which they are made, not false or misleading. There is no fact
known to PracSys which PracSys has not disclosed to NASI in writing which
could reasonably be expected to have a material adverse effect upon the
condition (financial or otherwise), assets, liabilities, business,
operations, properties or prospects of PracSys.
F. PracSys has delivered to NASI its unaudited balance sheet as of
December 31, 1997, (the "Balance Sheet"). which has been certified in
accordance with this paragraph by the chief financial officer of PracSys.
The Balance Sheet sets out and fairly describes in all material respects
the financial condition of PracSys as of the Balance Sheet date and is a
true and accurate description thereof. Since the date of the Balance
Sheet, there has been no material adverse change, individually or in the
aggregate, in the business, assets, condition, financial or otherwise or
net worth of PracSys. In addition, since the date of the Balance Sheet,
PracSys has not incurred any liabilities of any type which in the aggregate
exceed $50,000 whether absolute or contingent. PracSys, effective with the
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
execution of this agreement, will maintain a standard system of accounting
established and administered in accordance with generally accepted
accounting principles.
G. There are no actions, suits, or proceedings pending or, to the best of
the knowledge of PracSys, threatened against PracSys, at law or at equity
or before any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality.
PracSys has good and marketable title to, or a valid license interest in,
all intellectual property used in or material to PracSys's business, and no
person has asserted any right or interest adverse to PracSys in respect of
any of PracSys's intellectual property rights which would have a material
adverse effect on PracSys and its business, other than those rights, if
any, that have been disclosed to NASI by PracSys in writing. The conduct
of PracSys of its business does not, and as proposed to be conducted will
not, infringe upon or violate the intellectual property rights of any
other person or entity, and there has not been any claim to such effect.
The manufacture, use and sale of the Systems by PracSys or NASI pursuant to
this Agreement (including without limitation pursuant to the March In
Termination rights pursuant to section 9.3 hereof) and the Service
Contract, do not and will not conflict with any agreement to which PracSys
is a party, including, but not limited to, the License Agreement dated
December 6, 1995, by and between PracSys and North Star or the North Star
Contract.
I. Other than disclosed to NASI in writing, PracSys has not granted any
security interest to any third party, and nor has any security interest
been filed or asserted, with respect to any of PracSys's assets. Other
than disclosed to NASI in writing, PracSys is not currently in default of
any obligation for money borrowed or in default of any other agreement, and
PracSys knows of no threatened default with respect to any such agreement
and reasonably believes no basis exists upon which any such default could
be asserted.
12. NOTICES. The addresses for notices (see paragraph 17 of General
Conditions) are as follows:
PracSys: Wayne E. Webster, President & CEO
PracSys Corp.
8E Industrial Way
Unit 10
Salem, New Hampshire 03079
Telephone (603) 890-8555
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
Facsimile (603) 890-8558
NASI: L. Michael Cutrer, President & CEO
North American Scientific, Inc.
7435 Greenbush Avenue
North Hollywood, California 91605
Telephone (818) 503-9201
Facsimile (818) 503-0764
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
APPENDIX 3
GENERAL CONDITIONS
1. DELIVERY, RISK OF LOSS AND TITLE. If the Equipment is not being installed
by PracSys at the Site, then unless otherwise stated in the Special
Conditions, such Equipment is delivered f.o.b. point of shipment and NASI
shall be responsible for all expenses for preparing for shipment, packing
and moving the equipment from the location of Equipment acceptance to the
point of shipment. If Equipment is being installed by PracSys, then unless
otherwise stated in the Special Conditions, such Equipment is delivered at
site when it is accepted. Where the scheduled delivery of Equipment is
delayed by NASI, PracSys may deliver such Equipment by moving it to storage
for the account of and at the sole risk of NASI. When NASI is ready to
receive the Equipment, PracSys shall arrange at NASI's expense for removing
the equipment from storage and shipping it to NASI. Shipping dates are
based on prompt receipt of all necessary information from NASI. PracSys
reserves the right to make delivery in installments. Except as otherwise
provided in the Special Conditions, and except for the security interest
provided for in paragraph 3 below, risk of loss or damage shall pass to
NASI upon delivery. However, risk of loss shall remain with PracSys while
the Systems are installed at the PracSys Production Center. Subject to its
right to terminate this contract in the event of non-acceptance or
otherwise pursuant to this Agreement and to pass title back to PracSys,
NASI shall have title to the Work-in-Progress of each System from the date
of execution of this Contract.
During the manufacture of the Systems at the Production Center and upon
installation of the Systems, the Systems or the Work-in-Progress shall be
segregated from the rest of the facility by partitions or prominent floor
markings. A nameplate with model and serial numbers will be clearly
affixed to each system identifying NASI ownership.
NASI is responsible for removing the Equipment from the Site at the end of
the Term of the Service Contract or at an earlier termination date. NASI
shall reimburse PracSys for no more than the actual cost of posting
performance bonds, if any reasonably requested in the licensing and
permitting process to secure compliance with this removal obligation.
2. PAYMENT. NASI shall pay the Preproduction Engineering Price and the
Purchase Price as provided in the Special Conditions paragraph 8, Payment
Terms.
If shipment or delivery is delayed by NASI, payment shall become due on the
date PracSys is prepared to make delivery. Delays in delivery or
nonconformities in any
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installments shall not relieve NASI of its obligation to accept and pay
for remaining installments.
3. SECURITY INTEREST. As security for payment of all amounts due from time to
time under the Purchase Contract (the "Obligations"), NASI hereby grants to
PracSys a purchase money security interest in the Equipment and each
component thereof (the "Collateral"). NASI (a) represents and warrants
that its only offices and places of business are at the address shown in
the Contract Documents; and (b) agrees that (i) it will not transfer or
permit the transfer of the Collateral or any interest therein without the
prior written consent of PracSys, (ii) it will give PracSys prior written
notice of any change in corporate name or structure or in location of NASI
or the Collateral from the address referred to above, (iii) it will
promptly notify PracSys of any execution, levy, attachment, distraint or
seizure of or on the Collateral, (iv) it will execute and deliver to
PracSys financing statements in proper form for filing prior to shipment of
the Equipment or any component thereof, and (v) in the event of a failure
by NASI to pay the Obligations when due, or to comply with this paragraph
PracSys shall have all of the rights and may exercise all of the remedies
of a secured party, holder of a purchase money security interest, under the
laws of the Commonwealth of Massachusetts.
When requested by NASI, PracSys shall promptly cooperate in the filing by
NASI of a UCC financing statement for information purposes evidencing
NASI's title to each of the Systems and the Work-in-Progress.
4. TAXES. In addition to any price specified herein, NASI shall pay the gross
amount of any present or future sales, use, excise, value-added, or other
similar tax applicable to the price, sale or delivery of any equipment or
services furnished hereunder or to their use by PracSys or NASI, or NASI
shall furnish PracSys with evidence of exemption acceptable to the taxing
authorities. PracSys hereby represents and the parties hereby agree that
the sale shall take place in the State of New Hampshire.
5. CHANGES. NASI shall have the right to request in writing changes to the
configuration, design or delivery date of the Equipment, or additions to
or deletions from the general scope of supply hereunder. PracSys will
then prepare a change order reflecting all contract modifications
resulting from such request including but not limited to prices,
delivery schedules and warranties. PracSys shall have no obligation to
proceed with such request or change order until and unless the parties
have agreed in writing to the terms of such change order.
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6. EXCUSABLE DELAY. If delivery or installation of the Equipment is
prevented, restricted, interfered with or otherwise delayed by reason of
any cause beyond the reasonable control of PracSys or its subcontractors
or suppliers, including without limit: (i) fire, explosion, strike,
lockout by others, labor strike or similar dispute, casualty or
accident, lack of appropriate space on any available ship when the
Equipment is ready for shipment, epidemic, cyclone, drought, flood,
shortages of raw materials or power, or (ii) war, revolution, civil
commotion, acts of public enemies, blockade or embargo, or (iii) any law
or proclamation, regulation, ordinance, demand or requirement of any
applicable government or any subdivision thereof or representative of
any such government, then, and in that event, PracSys shall promptly
notify NASI of all resulting delays. Upon such notice, PracSys shall,
for the duration of its disability, be excused from the performance of
such of its obligations as are prevented, restricted, interfered with or
otherwise delayed by reason of any such cause and PracSys shall not be
deemed to be in default and not be subject to any liability or damage.
7. RIGHT TO INSPECT. NASI at its election and at its own expense may
inspect the manufacturing facility and components thereof at PracSys's
plant or plants during construction and factory tests, with reasonable
notice to PracSys, and at reasonable times.
8. ACCEPTANCE.
8.1 Representatives of NASI and PracSys shall sign each designated item
or test in the acceptance document as each is passed.
8.2 PracSys will supply all testing and calibration equipment for use
during these acceptance tests.
8.3 When all tests set forth in the relevant portion of the Contract
Documents for the Equipment (or a subsystem thereof subject to separate
testing and acceptance) are complete to the reasonable satisfaction of
NASI and have been signed by NASI'S representative, NASI will have
accepted the Equipment.
9. WARRANTY.
9.1 Except as set forth in paragraph 9.3 below and Paragraph 10 of
Appendix 2, PracSys warrants to NASI that the Equipment (i) shall, at
the date of completion of the acceptance tests for that equipment or
subsystem thereof (if there is a separate acceptance test for the
subsystem), comply with the requirements of the Performance Criteria and
(ii) shall, for a period of one year from the date of completion of the
acceptance tests be free from defect
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in material and workmanship when maintained and operated in accordance
with the Equipment Specifications, as the same may be changed from time
to time by mutual agreement.
9.2 Except as set forth in Paragraph 10 of Appendix 2, should the
Equipment or a separately accepted subsystem thereof covered by this
warranty fail to comply with the warranty during the aforesaid warranty
periods under normal and proper use and maintenance, PracSys shall, upon
receipt of prompt notice thereof, promptly correct such noncompliance at
its option by either repair or replacement. PracSys shall bear the cost
and risk of loss during transport for (i) any defective equipment or
parts thereof being returned to PracSys's factory or other site with
PracSys's prior consent and (ii) any repaired or replacement items being
returned to NASI. Replaced equipment or parts thereof shall become the
property of PracSys.
9.3 If the Equipment includes a computer system with standard data
processing systems and commercially available input and output devices,
all of which are subject to manufacturers' warranties, these
manufacturers' warranties shall be made available to NASI, and PracSys
shall not have any warranty obligations to NASI in respect of such
system beyond what is provided in these manufacturers' warranties.
PracSys shall notify NASI of the availability of manufacturers'
maintenance contracts that cover computer equipment after the expiration
of the manufacturers' warranties and NASI shall have the responsibility
for obtaining such maintenance contracts as it shall desire.
9.4 Any services provided hereunder and not covered by the Equipment
warranty, and any documentation or data to be delivered hereunder, are
warrantied for one year after performance or delivery to have been
performed or prepared in a workmanlike manner. If any such service,
documentation or data was not performed or prepared in the manner
warranted and such nonconformity appears during the one year period,
PracSys shall re-perform the services or revise the documentation or data
in a nonconforming manner.
9.5 Pracsys MAKES NO WARRANTIES OTHER THAN AS SET FORTH IN THIS
PARAGRAPH 9. ALL IMPLIED WARRANTIES ARE HEREBY DISCLAIMED, INCLUDING ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
CORRECTION OF NONCONFORMITIES OR DEFECTS AS PROVIDED ABOVE SHALL BE
NASI'S EXCLUSIVE REMEDY AND SHALL CONSTITUTE FULFILLMENT OF ALL
LIABILITIES OF PracSys OR ITS SUBCONTRACTORS OR AFFILIATES WHETHER IN
WARRANTY, CONTRACT, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE WITH
RESPECT TO THE QUALITY OF EQUIPMENT OR SERVICES FURNISHED HEREUNDER.
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10. Infringement.
10.1 PracSys shall defend, hold harmless and indemnify NASI from and
against any and all liability and expense by reason of any third party
claim, suit, action or proceeding for infringement of any third party
proprietary rights including, but not limited to, copyrights, trade
secrets rights, or patents arising in connection with the manufacture,
installation, sale or use of the Equipment including any and all
judgments or decrees which may be rendered against NASI and reasonable
attorney's fees and settlements made arising out of any such claim,
suit, action, or proceeding, provided, however, that:
10.1.1 PracSys shall not be responsible for any settlement of any
such claim, suit, action or proceeding made without its prior
written consent, which shall not unreasonably be withheld;
10.1.2 This indemnity shall not extend to any alleged infringement
based upon the combination of the Equipment or any portion thereof
with other items or things not furnished hereunder unless PracSys
(a) knew of NASI's specific intention to combine the Equipment or
any portion thereof with a specific item and (b) in connection
therewith PracSys may be held reasonably to have been aware that
such a combination would constitute an infringement and PracSys did
not so advise NASI; and
10.1.3 This indemnity shall not extend to any alleged infringement
based upon a modification to the Equipment by NASI unless PracSys
directs that the modification be made or unless Pracsys (a) knew of
NASI's specific intention to modify the Equipment or any portion
thereof and (b) in connection therewith PracSys may be held
reasonably to have been aware that such a modification would cause
an infringement and Pracsys did not so advise NASI.
10.2 PracSys shall defend at its own expense all suits, actions or
proceedings brought against NASI with respect to the matters listed in
paragraph 10.1 above. NASI shall have the right, at its option and at
its sole expense, to participate in the defense of any such claim, suit,
action or proceeding, without relieving PracSys of any obligation
hereunder. NASI shall promptly notify PracSys in writing after any such
claim is made or suit is brought and shall cooperate with PracSys in
writing after any such claim is made or suit is brought and shall
cooperate with PracSys, and PracSys agrees to reimburse NASI for its
reasonable out-of-pocket expenses incurred in connection with such
cooperation, provided PracSys has agreed to the nature of the
cooperation in advance.
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10.3 If, however, as a consequence of a final determination of any suit
for infringement or any court decision involving any injunction
resulting from or arising in connection with the manufacture, sale or
use of the Equipment or any part thereof furnished or employed by
PracSys hereunder, NASI is enjoined or limited in any material manner in
the use of said Equipment or material part thereof, PracSys shall, at
its option and at its own expense.
10.3.1 Procure for NASI the right to continue use of said Equipment
or part; or
10.3.2 So modify the Equipment or part as to render it
non-infringing without any significant effect on the use thereof; or
10.3.3 Replace the Equipment or part with a materially equivalent
non-infringing product.
10.4 In the event PracSys is unable, after diligent good faith efforts,
to provide any of the remedies provided for in clauses 10.3.1 through
10.3.3 hereof, PracSys may in fulfillment of its obligation under this
paragraph remove such Equipment or part and refund to NASI the purchase
price thereof.
10.5 THIS PARAGRAPH SETS FORTH THE SOLE OBLIGATIONS OF PracSys AND ITS
SUBCONTRACTORS AND AFFILIATES, AND THE EXCLUSIVE REMEDIES OF NASI, WITH
RESPECT TO INFRINGEMENT OF THIRD PARTY PROPRIETARY RIGHTS. IN NO EVENT
SHALL PracSys OR ITS SUBCONTRACTORS OR AFFILIATES BE LIABLE TO NASI FOR
LOSS OF USE, REVENUE, OR PROFIT OR ANY OTHER DIRECT, INDIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING FROM ANY SUCH INFRINGEMENT.
11. DISCLAIMER OF LIABILITY. IN NO EVENT SHALL PracSys OR ITS SUBCONTRACTORS
OR AFFILIATES BE LIABLE FOR SPECIAL, INDIRECT, CONSEQUENTIAL, OR
INCIDENTAL DAMAGES IN CONNECTION WITH THIS AGREEMENT OR THE EQUIPMENT,
SERVICES OR INFORMATION SUPPLIED HEREUNDER (INCLUDING LIABILITIES BASED
UPON CONTRACT, WARRANTY, NEGLIGENCE, TORT, STRICT LIABILITY OR
OTHERWISE) INCLUDING WITHOUT LIMITATION LIABILITY FOR LOSS OF USE,
REVENUE OR PROFIT, COST OF ALTERNATIVE SUPPLY AND OR FACILITIES,
DOWNTIME COSTS OR CLAIMS OF CUSTOMERS.
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12. INSURANCE. Immediately upon execution of this Agreement, except as
otherwise provided in this paragraph, PracSys, at its own expense, shall
obtain and maintain appropriate insurance as follows:
12.1 "All risk" property damage insurance covering the replacement cost
value of the Equipment while located on the premises of PracSys, or its
subcontractors prior to acceptance.
12.2 Comprehensive General Liability Insurance for property damage and
bodily injury liabilities with a combined single limit of not less than
$1,000,000.
12.3 A Workers' Compensation policy as required by the state or other
jurisdiction where the Equipment is to be installed, insuring employees
of PracSys, or its subcontractors, performing work for NASI at the Site.
12.4 "All risk" property damage insurance covering the period the
Equipment is in transit to and is being installed at the Site. The
PracSys insurance policies shall remain in force until acceptance, shall
be for 110% of the purchase price of the Equipment and shall be in the
joint names of NASI, PracSys and its subcontractors.
12.5 NASI shall be added as a named insured under said insurance as
respects their interests in the Equipment, including the "All risk" and
"Comprehensive General Liability Insurance" policies specified in
paragraphs 12.1 and 12.2 above. Each said insurance policy shall
specifically provide that it may not be canceled or materially altered
without thirty (30) days prior written notice to NASI.
12.6 PracSys shall furnish NASI with appropriate Certificates of
Insurance in forms acceptable to NASI within sixty (60) days of the date
hereof. PracSys shall make its policies available for inspection by
NASI. PracSys shall not reduce limits on any policy required by the
Contract Documents below those stated in the Certificates of Insurance
initially furnished to NASI so long as those insurance policies cover
activities under the Contract Documents.
12.7 The insurance described in paragraphs 12.2, 12.3 be required only
if PracSys is responsible for installation. The property insurance
described in paragraphs 12.1 and 12.4 above does not cover a computer
system if separately identified in the Special Conditions, or items
which are shipped direct from third party vendors.
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12.8 Neither PracSys nor its subcontractors or affiliates shall have
any liability for personal injuries or death or damage to property
occurring to NASI's personnel or property arising from the installation
or use of the Equipment, or components thereof, to be delivered
hereunder except to the extent that such injuries, death, or property
damage are caused by a defect in the design, manufacture or installation
of the Equipment or by the negligence of employees, agents consultants
and all other persons under the control of PracSys or its subcontractors.
13. SITE PREPARATION AND OTHER RESPONSIBILITIES OF PRACSYS.
13.1 PracSys shall have the sole responsibility for securing approvals
(a) for the design of the shielding required to maintain any radiation
leakage at safe levels and (b) for systems required to handle the
disposition of radioactive waste.
13.2 PracSys shall carry out and complete its work required for Site
preparation as defined in the Contract Documents. PracSys shall complete
such work prior to the scheduled arrival of the Equipment or any
component thereof.
13.3 PracSys shall be solely responsible for assuring that all
licenses, permits, approvals, consents and other authorization that may
be required by all Federal, state and local governmental authorities for
the installations and operation of the Equipment or any component at the
production site are obtained.
13.4 It is understood by the parties that PracSys can not and will not
require PracSys personnel to subject themselves to radiation exposure
beyond safe radiation dose limits and that if such a situation arises,
PracSys shall stop work until other personnel are available. Any delays
that result from radiation exposure shall be deemed to be excusable
delays.
14. PROPRIETY INFORMATION.
14.1 Information including data and documentation ("Information") in
whatever form disclosed by PracSys and identified as confidential or
proprietary or which by its nature would be regarded as confidential or
proprietary shall be and remain the property of PracSys. NASI shall have
a royalty-free license to use such Information in connection with the
use, operation and maintenance of the Equipment. NASI shall respect the
confidential and proprietary nature of such Information, shall not
disclose it to third parties or permit its dissemination to its own
employees other than those having a need to know, shall limit and
control the copying of such Information and shall keep all copies
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(which shall be numbered) in a secure place when not in use, shall
require its employees to respect the confidential and proprietary nature
of the Information, and shall treat such Information with a caution and
care not less than that with which it treats its own confidential or
proprietary information and will use similar means to protect it from
unauthorized disclosure.
14.2 Without limiting the foregoing, NASI shall not use such
Information for the purpose of designing or manufacturing any equipment
or parts unless the same is necessary to the operation of the Equipment
and PracSys has not been able to provide the needed equipment or parts.
14.3 No information, data or material shall be considered confidential
or proprietary if (i) it is in the public domain without fault of NASI
or its employees or is made publicly available by PracSys (ii) is
disclosed to NASI by another party under no obligation to maintain its
confidentiality, (iii) if it was already known to NASI, such prior
knowledge to be demonstrated only by written documents in existence
prior to the date of disclosure or (iv) if it corresponds in substance
to information which NASI independently develops.
14.4 Information including data and documentation ("Information") in
whatever form disclosed by NASI and identified as confidential or
proprietary or which by its nature would be regarded as confidential or
proprietary shall be and remain the property of NASI. PracSys shall have
a royalty-free license to use such Information in connection with the
use, operation and maintenance of the Equipment. PracSys shall respect
the confidential and proprietary nature of such Information, shall not
disclose it to third parties or permit its dissemination to its own
employees other than those having a need to know, shall limit and
control the copying of such Information and shall keep all copies (which
shall be numbered) in a secure place when not in use, shall require its
employees to respect the confidential and proprietary nature of the
Information, and shall treat such Information with a caution and care
not less than that with which it treats its own confidential or
proprietary information and will use similar means to protect it from
unauthorized disclosure.
14.5 Without limiting the foregoing, PracSys shall not use such
Information for the purpose of designing or manufacturing any equipment
or parts unless the same is necessary to the operation of the Equipment
and NASI has not been able to provide the needed equipment or parts.
14.6 No information, data or material shall be considered confidential
or proprietary if it is in the public domain without fault of PracSys Sys
or its employees or is made publicly
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available by NASI or is disclosed to PracSys by another party under no
obligation to maintain its confidentiality, or if it was already known
to PracSys, such prior knowledge to be demonstrated only by written
documents in existence prior to the date of disclosure.
15. WAIVER OF AUTOMATIC STAY. PracSys hereby waives any right to prevent
NASI from obtaining immediate relief from any automatic stay imposed
pursuant to Section 362 of the Bankruptcy Code, or otherwise, on or
against the exercise of the rights and remedies otherwise available to
NASI as provided herein, in the Contract Documents, or as otherwise
provided at law or in equity; (i) PracSys hereby consents to NASI's
relief from any aforementioned stay and to NASI's exercise of the rights
otherwise available to NASI herein or in the Contract Documents; and
(ii) PracSys shall not seek or apply for any expansion of the provisions
of Section 362 of the Bankruptcy Code or any injunction against NASI's
exercise of its rights herein or in the Contract Documents.
16. GOVERNING LAW. All questions relating to this Purchase Contract,
including the validity, interpretation and performance thereof, shall be
decided in accordance with the laws of the Commonwealth of
Massachusetts, United States of America.
17. NOTICES. Any notice under the Contract shall be in writing and shall be
given by personal delivery, first class air mail, air courier service,
telex, telefacsimilie or commercial cable and shall be addressed to the
addresses set forth in the Special Conditions.
18. SEVERABILITY. If any term or provision of the Contract is held to be
illegal or unenforceable, then the Contract, except for such part or
parts thereof, shall continue to be in full force and effect to the
extent possible without the illegal or unenforceable provision.
19. WAIVER. The failure by either party to enforce at any time or for any
period of time any of the provisions hereof shall not be a waiver of
such provisions nor of the right of such party thereafter to enforce
each and every such provision.
20. BENEFITS OF AGREEMENT. The Purchase Contract of which these conditions
form a part shall inure to the benefit of an be binding upon each of the
parties hereto and their respective successors and assigns, but neither
the rights nor the duties of either party hereunder may be assigned in
whole or part without the prior written consent of the other party.
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21. ARBITRATION.
21.1 If a dispute arises out of or related to this Agreement, or the
breach thereof, and if the dispute cannot be settled through
renogotiation, the parties agree first to try in good faith to settle the
dispute by mediation administered by the American Arbitration
Association under its Commercial Mediation Rules before resorting to
arbitration, litigation or some other dispute resolution procedure.
21.2 All disputes, controversies or differences which may arise between
the parties, out of or in relation to or in connection with this
Agreement, or for the breach thereof, shall be finally settled by
arbitration proceedings held in Boston, Massachusetts, and conducted in
accordance with the rules and procedures of the American Arbitration
Association. The award shall be final and binding on all parties hereto.
Judgment upon the award rendered may be entered in any court having
jurisdiction, or application may be made to such court for judicial
acceptance of the award or order of enforcement as the case may be.
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SERVICE CONTRACT
THIS AGREEMENT made this 6th day of February, 1998 by and between North
American Scientific, Inc., a California corporation with a principal place of
business at 7435 Greenbush Avenue, North Hollywood, California 91605
("NASI"), and PracSys Corp., a Massachusetts corporation with a principal
place of business at 8E Industrial Way, Unit 10, Salem, New Hampshire 03079
("PracSys").
WITNESSETH THAT:
WHEREAS, PracSys is the exclusive worldwide licensee of a patented ion
accelerator device, the Nested High Voltage Generator ("NHVG-TM-"); and
WHEREAS, NASI is purchasing from PracSys under a separate purchase
contract of the even date (the "Purchase Contract") two isotope production
systems (the "Systems") embodying the NHVG-TM-, to be used for the production
of *** processed targets (the "Product") to be used as a raw material for
production of seeds for use in brachytherapy (the "Market"); and
WHEREAS, PracSys will, pursuant to the Purchase Contract, manufacture and
install the Systems at its Salem, New Hampshire facility (the "Production
Center") ready for isotope production, unless NASI shall otherwise direct the
installation site, and
WHEREAS, NASI wishes to have its Systems operated by PracSys for the
production of the Product for shipment to NASI for processing into seeds for
sale to the Market (the "Market Sales"); and
WHEREAS, NASI and PracSys have entered into a separate Exclusivity and
Purchase Agreement dated December 31, 1997, as amended as of the date hereof
(the "Exclusivity Agreement") for production of the Product and other
isotopes; and
WHEREAS, the Exclusivity Agreement between NASI and PracSys provides that
the parties will reduce to writing the terms of a Service Contract.
NOW THEREFORE, in consideration of the premises and of mutual promises
and undertakings hereinafter set forth, as well as other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
the parties hereto, it is agreed as follows:
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1. Scope
Acting upon the Monthly Production Estimate (defined in Section 2
below), subject to the provisions of Section 8 below, PracSys shall operate
and maintain the Systems to produce *** processed targets which comply with
the specifications set forth in Exhibit A. The processed targets shall be
prepared for shipment in accordance with the provisions of Section 7 below.
2. Requirements
Following installation and acceptance of the first system to be
purchased by NASI pursuant to the Purchase Contract, NASI will provide
PracSys with a monthly estimate of Curies (Ci) EOB, (as defined in Exhibit
B), per week of Product to be produced (the "Monthly Production Estimate").
The Monthly Production Estimate shall be provided no less than two weeks in
advance of the first day of the upcoming Production Month. The Production
Month is defined as the period ending with the last Friday of a calendar
month, with the subsequent Production Month commencing the next day. PracSys
will fill all Monthly Production Estimate requirements and use its best
efforts to accommodate changes to the weekly production requirements that may
be requested by NASI during the Production Month, except when prevented from
doing so by strikes, fires, riots, accidents, war, unavailability of raw
materials and other conditions over which PracSys has no reasonable control.
3. Payments
Payments to be made hereunder are for services (the "Services")
performed by PracSys to produce the Product in the PracSys Production Center,
utilizing the NASI owned Systems, for shipment to NASI. It is the intention
of the parties that the actual costs incurred by PracSys in providing the
Services will be reimbursed by NASI. These costs will include direct costs,
allocated costs, indirect costs, facility costs, general and administrative
costs and other reasonably allocated costs of doing business, but shall not
include a profit factor. In no event shall such costs include or reflect
obligations owing by PracSys at or prior to the date of this Agreement.
Payments will be calculated and invoiced as follows:
3.1 A services pricing formula is established as set forth in Exhibit
B with cost categories segregated by fixed, semi-variable, and
variable costs (the "Reimbursement Formula"). PracSys hereby
represents that the Reimbursement Formula, Pricing Adjustment
Factors, and Example Calculation set forth in Exhibit B accurately
reflects PracSys' current estimate of the cost of the Services,
and thereby the effective cost per Millicurie ("mCi") for the
provision of Product, and is a reasonable estimation thereof.
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3.2 Upon receipt of the Monthly Production Estimate setting forth the
estimated weekly requirements for the Production Month, PracSys
will calculate, using the Reimbursement Formula, the payment due
for the Production Month requirements and invoice the calculated
amount (the "Monthly Billing"). Payment is due upon receipt of
the invoice, but no later than the first day of the Production
Month. The Monthly Billing is subject to reasonable retrospective
adjustment to reflect the actual cost for Services in accordance
with Section 4 below.
4. Retrospective Payment Adjustments
PracSys will calculate at the end of each period of three Production
Months (the "Quarterly Accounting") the actual costs for Services for the
preceding three Production Months (the "Adjustment Period") utilizing the
Reimbursement Formula in Exhibit B and compare these actual costs to the
Monthly Billings for the Adjustment Period.
4.1 The Quarterly Accounting will be based upon the actual production
of Product shipped to NASI during the Adjustment Period; and
4.2 The Quarterly Accounting will also reflect the actual costs
incurred during the Adjustment Period for the elements of costs
identified in the Reimbursement Formula (the "Pricing Adjustment
Factors").
4.3 The actual costs for the Adjustment Period will be compared to the
total Monthly Billings during the Adjustment Period.
4.3.1 If the actual costs exceed the Monthly Billings, PracSys
will invoice NASI for the difference showing the calculation
supporting the amount. The amount shall be payable by NASI to
PracSys within 15 days after receipt of the invoice unless NASI
requests clarification of the amount invoiced, in which case the
amount would be payable 15 days after NASI's receipt of such
clarification. If during such 15 day period NASI shall dispute
the calculation of such adjustment, the parties shall act in good
faith to resolve such dispute and, in the absence of agreement
between them, shall refer such dispute to an independent certified
public accountant selected mutually by NASI and PracSys. The
costs associated therewith shall be borne equally by the parties
hereto.
4.3.2 If the actual costs are less than the Monthly Billings,
PracSys will apply such difference as a credit against the next
Monthly Billing, identifying the credit and providing the
calculation substantiating the amount. If there is no applicable
next Monthly Billing, the credit will be reimbursed promptly to
NASI.
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
4.3.3 The Pricing Adjustment Factors values will be adjusted to
reflect the actual costs for the Quarterly Accounting. The list
of Pricing Adjustment Factors will be expanded or modified as
appropriate to reflect all elements of incurred costs. The
resulting modified Pricing Adjustment Factors will be used for
subsequent calculation of Monthly Billings. However, PracSys
hereby agrees that any pricing adjustment shall be subject to the
limitations set forth in Notes 1, 2, and 3 under Pricing
Adjustment Factors in Exhibit B.
5. Records, Cost Accounting, and Audit
PracSys will maintain separate cost accounting for the PracSys Services
provided at the Production Center and will record all direct labor and
material costs, as well as all indirect costs including indirect labor,
overhead, facility costs, and general and administrative costs that shall be
allocated on a consistent basis. The method of allocation will be shown on
such records and will be certified by the PracSys chief financial officer to
have been applied consistently. All direct costs are subject to audit by
NASI upon reasonable notice. All indirect costs and the method of allocation
may be audited by an independent certified public accountant selected
mutually by NASI and PracSys. The cost of such audit shall be borne equally
by the parties hereto.
6. Term
6.1 Unless sooner terminated as herein provided, this Agreement shall
be in force from the date hereof through the end of the second
Annual Period (the "Term"). The Annual Period is defined as a 12
month period beginning with the calendar date of the first day of
the calendar month following the calendar month in which the first
System at the Production Center is installed and ready for
production of the Product.
6.2 The Term shall be extended (the "Term Extension") by one year
annually subject to agreement of the parties to modification of
the Reimbursement Formula and other adjustment provisions for
prospective application. Any proposed adjustment shall be based
on actual costs incurred by PracSys during the current Annual
Period. The extension adjustments will be made at least 90 days
prior to the expiration of the Annual Period.
7. Shipping and Handling
Product shall be shipped FOB the Production Center in reusable certified
shipping containers provided by NASI. NASI will provide a quantity of
shipping containers to maintain a suitable inventory of containers for
shipments.
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
8. Termination
This Agreement shall be terminated prior to its expiration under the
following conditions:
8.1 NASI may, upon written notice six (6) months in advance of the
expiration of any Annual Period, commencing with the second Annual
Period, elect not to extend the Term of this Agreement. NASI
shall be responsible for the removal of the Systems from the
Production Center at its expense before or at the end of the Term.
8.2 Additionally, NASI may, upon six (6) months written notice, elect
to relocate or sell the Systems and terminate this Agreement. In
the event of such termination, NASI shall pay a decommissioning
charge to PracSys in the amounts and at the times specified in
Section 9 below.
8.3 NASI may, upon 90 days written notice but no later than 90 days
prior to the scheduled first acceptance date, direct that the
Systems be delivered to a site other than the Production Center.
8.4 PracSys may terminate this Agreement in the event of default by
NASI's material breach of any of the provisions of this Agreement
or the Exclusivity Agreement, upon written notice by PracSys of
such an event of default and if such default is not cured by NASI
within 60 days after such notice.
8.5 NASI may terminate this Agreement if PracSys is unable to secure
the necessary licenses and permits prerequisite to providing the
services herein. PracSys shall provide to NASI a monthly report
of the status of such licenses and permits commencing 60 days
after the date hereof.
8.6 In the event of default by PracSys's material breach of any of the
provisions of this Agreement (including the failure by PracSys to
meet any Monthly Production Estimate) or the Exclusivity
Agreement, upon written notice by NASI of such an event of default
and if such default is not cured by PracSys within 60 days after
such notice, NASI may terminate the Service Contract for default
and, at its discretion, may perform the services herein with its
own supervisory and operating personnel (the "March In Rights")
paying all direct costs and reimbursing PracSys for allocated
facility costs until such time as NASI removes the Systems from
the Production Center. PracSys shall have the right to purchase
Product from a third party in order to meet the requirements of
any Monthly Production Estimate (the "Alternate Supply"). In the
event PracSys shall provide an Alternate Supply, NASI shall
reimburse PracSys for the Product at a per mCi price that would
have resulted from
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
this Agreement based upon the volume of Product so purchased,
using the pricing factors set forth in Exhibit B hereof.
8.7 Should either party have reasonable grounds to believe the other
party is unable to pay its debts when due or is financially unable
to perform its obligations under this Agreement, or if either
party makes a general assignment for the benefit of creditors, or
institutes proceedings to be adjudicated a voluntary bankrupt, or
consents to the filing of a petition of bankruptcy against it, or
is adjudicated by a court of competent jurisdiction as bankrupt or
insolvent; or should either party seek reorganization under any
bankruptcy or similar act, or consent to the filing of a petition
seeking such petition; or should either party have a decree
entered against it by a court of competent jurisdiction appointing
a receiver, liquidator, trustee, or assignee in bankruptcy or in
insolvency or providing for the liquidator of such party's
property or business affairs; than the other party may, at its
option and without notice, terminate this Agreement effective
immediately.
9. Decommissioning Payment
9.1 In the event of termination pursuant to Section 8.2 above, NASI
shall pay to PracSys the following decommissioning payment:
9.1.1 An amount equal to the reasonable actual costs, including
but not limited to labor and materials for the removal of
the Systems, the preparation of the Systems for shipping
FOB the Production Center, and the restoration of the
facility to its configuration and condition prior to the
installation of the Systems. The removal costs will
include the cost of handling and disposal of any hazardous
materials. Payment will be made by NASI within 30 days
after receipt of invoice(s) submitted by PracSys that shall
be certified by the PracSys chief financial officer to be
true and actual costs.
9.1.2 NASI will pay to PracSys an amount equal to three (3)
months of service (the "Effective Period") under this
Agreement calculated in accordance with the Reimbursement
Formula for the fixed and semi-variable costs that would be
incurred without production of Product. The Effective
Period will commence with the last day of actual services
provided by PracSys which is the last day of the six month
notice period proscribed by Section 8.2 above. Payment is
due within 30 days after receipt of the invoice prepared by
PracSys which will show the calculation of the amount due.
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
10. Risk of Loss
Title and risk of loss of the Product pass to NASI FOB the Production
Center.
11. Right to Inspect
NASI at its election and at its own expense may inspect the production
of the Product at the Production Center, with no less than one business day's
notice to PracSys, during normal business hours. Such inspection shall not
unreasonably interfere with or unreasonably interrupt the service activities.
NASI representatives must conform to all facility safety instructions and
license and permit provisions.
12. Equipment Markings
During the manufacture of the Systems at the Production Center and upon
installation of the Systems, the Systems or the work-in-progress thereof
shall be segregated from the rest of the facility by partitions or prominent
floor markings. A name plate with model and serial numbers will be clearly
affixed to each System identifying NASI ownership.
13. General Terms and Conditions
General Terms and Conditions are set forth in Exhibit C.
14. Indemnification
PracSys shall indemnify, defend and hold NASI harmless from and against
any liability, damage, claims, cost or expense (including reasonable
attorney's fees) arising out of any claim of infringement by any third party
of any patents or any claimed violation of any other intellectual property
right of any third party arising out of the use of the Systems pursuant to
this Agreement. NASI shall indemnify, defend and hold PracSys harmless from
and against any liability, damage, claims, cost or expense (including
reasonable attorney's fees) arising out of any claim of infringement by any
third party of any patents or any claimed violation of any other intellectual
property right of any third party arising out of the sale by NASI of products
incorporating the Product to be supplied by PracSys to NASI pursuant to this
Agreement. Provided, however, that NASI shall have no such obligation to the
extent such claim of infringement is based upon the Product incorporated into
such NASI product.
15. Confidentiality
NASI and PracSys shall hold in strict confidence and shall not disclose
to others or use, either before or after the expiration of termination of
this Agreement, any technical, financial, or
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
business information, manufacturing technique, process, trade secret, or
other confidential information relating to each other's business. Upon
expiration or termination of this Agreement, NASI and PracSys shall return to
each other all documents containing any such information, shall delete and
purge from any of its electronic or mechanical storage systems all records
thereof, and shall certify to each other in writing that said steps have been
taken.
16. Arbitration
16.1 If a dispute arises out of or related to this Agreement, or
the breach thereof, and if the dispute cannot be settled
through negotiation, the parties agree first to try in good
faith to settle the dispute by mediation administered by
the American Arbitration Association under its Commercial
Mediation Rules before resorting to arbitration, litigation
or some other dispute resolution procedure.
16.2 All disputes, controversies or differences which may arise
between the parties, out of or in relation to or in
connection with this Agreement, or for the breach thereof,
shall be finally settled by arbitration proceedings held in
Boston, Massachusetts, and conducted in accordance with the
rules and procedures of the American Arbitration
Association. The award shall be final and binding on all
parties hereto. Judgment upon the award rendered may be
entered in any court having jurisdiction, or application
may be made to such court for judicial acceptance of the
award or order of enforcement as the case may be.
17. Construction
This Agreement shall be construed, and all rights, powers, and
liabilities of the parties hereunder shall be determined, in accordance with
the laws of The Commonwealth of Massachusetts. All amounts mentioned in this
Agreement are in the currency of the United States of America at exchange
rates in effect on the date when such payments shall become due and payable.
18. Waiver
No omission or delay of either party hereto in requiring due and
punctual fulfillment by the other party of the obligations of such other
party hereunder shall be deemed to constitute a waiver of its rights to
require such due and punctual fulfillment or of any of its remedies hereunder.
19. Notices
Any notice given by either party hereto to the other party shall be
deemed to have been sufficiently given if sent by the mailing thereof by
certified or registered mail, or by a recognized national overnight delivery
service, to the signatories herein to the address of such other party herein
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
set forth, unless and until another addressee and or address shall have been
designated in writing by such other party for the purpose.
20. Agency
It is understood and agreed that the parties hereto are independent
contractors and are engaged in the operation their own respective businesses
and neither NASI nor PracSys shall be considered the agent of the other party
hereto for any purposes whatsoever, and neither NASI nor PracSys has the
authority to enter into any contracts or assume any obligation for the other
party hereto, and nothing in this Agreement shall be construed to establish a
relationship of partners or joint ventures between the parties hereto.
21. Captions
The captions and section numbers appearing in this Agreement are
inserted only as a matter of convenience and in no way define, limit or
construe the scope and intent of such sections nor in any way affect this
Agreement.
22. Assignment
Neither NASI nor PracSys may assign or license any of its rights or
obligations under this Agreement without the prior written consent of the
other party.
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate, upon the date hereinabove set forth.
PracSys Corp. North American Scientific, Inc.
By: /s/ Wayne E. Webster By:/s/ L. Michael Cutrer
-------------------------- -----------------------------
Wayne E. Webster L. Michael Cutrer
President & CEO President & CEO
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
EXHIBIT A
PRODUCT SPECIFICATION
***
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
EXHIBIT B
REIMBURSEMENT FORMULA
***
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
EXHIBIT C
GENERAL TERMS AND CONDITIONS
1. PracSys ("Seller") warrants that at the time of shipment, the Products
produced by it pursuant to this Agreement are free from defects in
material and workmanship and conform to the specification set out in
Exhibit A. SELLER MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED, WITH
RESPECT TO THE PRODUCTS INCLUDING ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE. Notification of any breach of
warranty must be made within the half-life of the radioisotope contained
in the product, unless otherwise provided in writing by the Seller. No
claim shall be honored if NASI (the "Buyer") fails to notify the Seller
within the period specified. THE SOLE AND EXCLUSIVE REMEDY OF THE BUYER
FOR ANY LIABILITY OF SELLER OF ANY KIND INCLUDING LIABILITY BASED UPON
WARRANTY (EXPRESS OR IMPLIED WHETHER CONTAINED HEREIN OR ELSEWHERE),
STRICT LIABILITY, CONTRACT, OR OTHERWISE IS LIMITED TO THE REPLACEMENT
OF THE GOODS. SELLER SHALL NOT IN ANY CASE BE LIABLE FOR SPECIAL,
INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY KIND.
2. Seller shall not be responsible for any failure or delay in delivery of
services or goods because of any cause beyond Seller's reasonable
control. The Seller reserves the right to ship in one or more shipments.
3. The price of services and payment schedules are set forth in the
Agreement.
4. Any tax or governmental charge imposed upon the sale of services or
goods shall be paid by the Buyer, and the Buyer's failure to do so,
unless cured within 60 days after notice of such failure, shall be a
breach of this entire agreement. Prices on the specified services and
products are exclusive of all city, state and federal excise taxes,
including without limitation, taxes on manufacture, sales, receipts,
gross income, occupation, use and similar taxes.
5. No right to the use of any trade name or trademark of the Seller or
Buyer passes to the other party under this Agreement and the Buyer and
Seller agrees to refrain from using, either directly or indirectly, any
of the other parties trade names or trademarks unless specifically
authorized to do so in writing. Except as otherwise specifically agreed
in writing, all drawings, and specification produced by Seller and Buyer
pursuant to this Agreement, and all patent, copyright and other
intellectual property rights with respect to the goods sold hereunder,
shall be the sole and exclusive property of the originator and holder of
such rights.
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
6. No modification of this Agreement shall be binding unless in writing and
signed by Buyer and Seller.
7. Waiver by Seller or Buyer of a breach by the other party of any
provision of this Agreement shall not be deemed a waiver of future
compliance therewith, and such provision, as well as all other
provisions hereunder, shall remain in full force and effect.
8. If any provision of this Agreement is or becomes, at any time and under
any law, rule or regulation, unenforceable or invalid, no other
provision of this Agreement shall be affected thereby, and the remaining
provisions of this Agreement shall continue with the same effect as if
such unenforceable or invalid provisions shall not have been inserted in
this Agreement.
9. Each party agrees to pay for all costs and expenses including attorney's
fees, incurred in the enforcement of this Agreement and the collection
of any amounts due the other party hereunder.
10. Each party hereby represents that such party is solvent and has the
financial resources sufficient to perform its obligations under this
Agreement, and that on each delivery this representation shall be deemed
renewed unless notice to the contrary is given in writing by such party
to the other party at or before delivery of the goods.
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
10.3
EXCLUSIVITY AND PURCHASE AGREEMENT
EXCLUSIVITY AGREEMENT, dated as of December 31, 1997 by and between PracSys
Corp., a Massachusetts corporation (the "Company") and North American
Scientific, Inc. a Delaware California corporation, ("NASI").
WHEREAS, NASI wishes to purchase from the Company two of its proprietary
integrated NHVG-TM- isotope production systems (the "Systems") at a fixed price
(the "Fixed Price") for installation and operation by the Company in its
production center, and
WHEREAS, NASI wishes to obtain from the Company certain market exclusivity
in the use of the Systems within the Market (as described hereinafter), and
WHEREAS, NASI wishes to obtain from the Company an option to acquire the
exclusive rights to acquire the Company's proprietary NHVG-TM- isotope
production systems for use in other markets (the "Option"), and
WHEREAS, NASI wishes to have an equity interest in the Company, and
WHEREAS, the Company is willing, in return for certain consideration and
under certain terms and conditions, to provide to NASI the Service Contract (as
described in Section 3. below), the Fixed Price purchase of Systems, the Market
exclusivity, the Option for additional exclusive rights, and an equity interest
in the Company.
NOW THEREFORE, the parties agree as follows:
1. During the Term of this Agreement (as defined in Section 9. below), the
Company (i) will produce the Product (as described in Section 4. below),
exclusively for NASI pursuant to the Service Contract, (ii) will not knowingly
sell the System to third parties' for the purpose of the third parties'
production of the Product, and as expanded to include other isotopes pursuant to
Section 6. below, and (iii) will use its best efforts to limit the purchase and
adaptation of the Company's proprietary technology by third parties for the
production of the Product, and as expanded to include other isotopes pursuant to
Section 6. below.
2. In consideration for the exclusivity, NASI will pay to the Company
$ *** (the "Exclusivity Consideration") by wire transfer to the Company's
account upon the Closing (as described in Section 8. below).
3. At the Closing, NASI and the Company shall enter into a renewable
Service Contract for a two (2) year term commencing with the installation of
System #1 ready for the production of the Product, generally in accordance
with the Company's proposal to NASI dated December 12, 1997, which is hereby
incorporated by reference, made a part hereof and is attached hereto as
Exhibit A. The Service Contract will provide for monthly reimbursement, in
advance, based on volume estimates from NASI in advance, subject to quarterly
adjustment retrospectively to reflect volume of Product
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
<PAGE>
delivered to NASI and pricing adjustment factors to be defined in the Service
Contract. The Service Contract will be a rolling two year agreement extended
by one year annually subject to negotiation, based on actual cost, as defined
in the Service Contract, incurred by the Company in producing the Product, 90
days prior to the expiration of the annual period. The Company shall
negotiate the annual extension in good faith and shall have a right of
termination only in the event of default by NASI of the provisions of the
Service Contract or this Agreement after a 60 day cure period. NASI may,
upon written notice six (6) months in advance of the expiration of any annual
period, elect not to extend the term of the Service Contract. Additionally,
as provided in the Service Contract, NASI may upon six (6) months notice
elect to relocate or sell the Systems and terminate the Service Contract. In
event of System relocation or sale, the equipment, facility and organization
decommissioning charge set forth in the Service Contract would be paid to the
Company.
4. At the Closing, (also the "Order Date") NASI agrees to place with the
Company a purchase order in form and substance to be agreed upon by both
parties, providing for the purchase by NASI of two Systems each consisting of
a Nested High Voltage Generator (NHVG-TM-) linear accelerator, target end
station, and processing equipment for the production of *** processed targets
(the "Product"), with such Systems to be delivered to and installed in the
Production Center (the "Purchase Order").
a. The Purchase Order will be issued with a *** lead time to delivery
from the Order Date for System #1 and a *** lead time to delivery from the
Order Date for System #2.
b. The Fixed Price Systems purchase price, which includes installation
at the Production Center, is $ *** and includes the following:
- NHVG-TM- accelerator complete with operating system, shielding and stand.
- *** target end station, shielding and processing equipment.
- Facilities modification, utility hook-ups and installation.
c. Payments will be made to the Company according to the following
schedule:
- -------------------------------------------------------------------------------
MILE-
STONES DESCRIPTION AMOUNT
- -------------------------------------------------------------------------------
1 Execution of Purchase Order $ ***
- -------------------------------------------------------------------------------
2 Receipt of Long Lead Items for System #1 & #2 $ ***
- -------------------------------------------------------------------------------
3 Start of Accelerator Assembly System #1 & #2 $ ***
- -------------------------------------------------------------------------------
4 System #1 Proton Beam Demonstration $ ***
- -------------------------------------------------------------------------------
5 System #2 Proton Beam Demonstration $ ***
- -------------------------------------------------------------------------------
6 Acceptance of System #1 $ ***
- -------------------------------------------------------------------------------
7 Acceptance of System #2 $ ***
- -------------------------------------------------------------------------------
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
2
<PAGE>
d. The Purchase Order will also include a provision whereby the Company,
at the request of NASI, will use its best efforts to sell the System(s) as a
non-commissioned agent of NASI.
5. Commencing with the delivery of Product to NASI, and thereafter
during the Term of the Agreement as it may be extended, NASI shall pay to the
Company, quarterly in arrears, an amount ("Revenue Participation") equal to a
percentage of its gross revenues ("Market Revenue") for Market sales of
brachytherapy seeds that incorporate Product in accordance with the following
sliding scale. Such Market Revenues shall be defined as collected sales
revenues at the end user price.
QUARTERLY NASI MARKET REVENUES REVENUE PARTICIPATION %
- ------------------------------ -----------------------
first $1 million .................................... *** % then
-----
for sales from $1 million to 3 million .............. *** % then
-----
for sales from $3 million to $6 million ............. *** % then
-----
for all sales over $6 million ....................... *** %
-----
For example, the Revenue Participation for quarterly seed sales of $4
million would be $***:
-----
for first $1 million ................................ $ ***
----
for the sales between $1 million to $3 million ...... $ ***
----
for sales between $3 million to $4 million .......... $ ***
----
The quarterly Revenue Participation for $4 million in seed sales would
be $ ***.
----
6. The Company at the Closing grants to NASI a first Option to acquire
during the Term of this Agreement, the exclusive or, at NASI's option,
non-exclusive rights to acquire proprietary equipment or services for the
production of other isotopes (excluding positron emitting isotopes used in
Positron Emission Tomography) and for other markets at a mutually acceptable
price and terms to be negotiated in good faith. Also, during the Term of
this Agreement, NASI is granted 30 calendar days to match any third party
offers received by the Company for the equipment or services referred to in
the preceding sentence. If NASI chooses not to make a matching offer, the
Company may proceed to sell rights, equipment, and or services to the third
party on the terms set forth in such offer. Such rights do not include the
use of NASI owned equipment or other rights previously granted to NASI for
such third party agreements.
7. Upon the Closing, the Company will issue to NASI a certificate for
140,150 shares of its common stock representing a 5% fully diluted interest
in the Company's currently issued and outstanding common stock and assuming
conversions of the currently issued and outstanding preferred stock (the
"Securities"). THE SECURITIES REPRESENTED BY SUCH CERTIFICATE WILL NOT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND, ACCORDINGLY, MAY NOT BE
OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT (i) UPON EFFECTIVE
REGISTRATION OF THE SECURITIES REPRESENTED BY SUCH CERTIFICATE UNDER THE
SECURITIES ACT OF 1933, OR (ii) UPON ACCEPTANCE BY THE COMPANY OF AN OPINION
OF COUNSEL IN SUCH FORM
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
3
<PAGE>
AND BY SUCH COUNSEL, OR OTHER DOCUMENTATION, AS IS SATISFACTORY TO COUNSEL
FOR THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. By accepting the
Securities, NASI agrees, in the event of a public offering of the Company's
common stock, not to sell any of its Securities (in any manner, including
pursuant to Rule 144 under the Act and however acquired) for a period
established by the Underwriter (the "Lockup Period") that is equally applied
to the Company's officers, private investors, directors and shareholders
including those that own five (5%) or more of the outstanding shares of the
Company.
8. NASI and the Company shall use reasonable efforts to negotiate and
prepare the Purchase Order and the Service Contract on or before January 15,
1998. NASI will proceed with its due diligence during that period. NASI's
obligation shall be subject to its reasonable satisfaction with the results
of its due diligence, agreement upon the Purchase Order and Service Contract,
and approval thereof of its Board of Directors. A closing is scheduled on or
before January 15, 1998 (the "Closing"). At the Closing, (i) the Exclusivity
Consideration (see Section 2. above) shall be wire transferred to the
Company, (ii) the Company will issue the Securities (see Section 7. above),
(iii) the parties shall execute the Purchase Order (see Section 4. above) and
the Milestone 1 payment shall be wire transferred to the Company (see Section
4. c. above), and (iv) the parties shall execute the Service Contract (see
Section 3. above).
9. This Agreement shall be in effect for a period ending with the later
of (i) the expiration of the term, as extended, of the Service Contract or
(ii) the cessation of use of the Systems by NASI, its affiliates or
successors to produce the Product (the "Term").
10. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. This Agreement
may not be amended, except by a written instrument duly executed by the
parities hereto, and it sets forth the entire agreement and understanding
between the parties as to the subject matter hereof.
11. This Agreement shall be governed by and construed under
Massachusetts law not giving effect to its internal conflicts of laws
provisions and the parties hereby agree to submit themselves to the
jurisdiction of the courts thereof.
12. Neither the Company nor NASI shall make any public disclosure
whether in a news release, securities offering documents or otherwise with
respect to this Agreement, or the subject matter thereof, without the prior
written consent of the other party, except where public disclosure may be
required by law (in which event the disclosing party shall give the other
party prior written notification of such disclosure along with the legal
basis therefor).
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
4
<PAGE>
IN WITNESS WHEREOF the parties have caused this Agreement to be
executed as of the date set forth above.
PracSys Corp. North American Scientific, Inc.
By: /S/ WAYNE E. WEBSTER By: /S/ L. MICHAEL CUTRER
----------------------------- ------------------------------
Wayne E. Webster Michael Cutrer
President & CEO President & CEO
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
5
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EXCLUSIVITY AND PURCHASE AGREEMENT
AMENDMENT NO. 1
AMENDMENT NO. 1, dated as of February 6, 1998 by and between PracSys
Corp., a Massachusetts corporation (the "Company") and North American
Scientific, Inc. a Delaware corporation, ("NASI").
WHEREAS, NASI and the Company entered into the Exclusivity and Purchase
Agreement (the "Agreement") dated as of December 31, 1997; and
WHEREAS, the Agreement provides that the Agreement may not be amended,
except by a written instrument duly executed by the parties, and
WHEREAS, NASI and the Company wish to amend the Agreement.
NOW THEREFORE, in consideration of the premises and of mutual promises
and undertakings hereinafter set forth, as well as other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
the parties hereto, it is agreed that the Agreement is amended as follows:
Section 2 of the Agreement is amended to read in its entirety as follows:
"2. IN CONSIDERATION FOR THE EXCLUSIVITY, NASI WILL PAY TO THE
COMPANY $ *** BY WIRE TRANSFER TO THE COMPANY'S ACCOUNT UPON THE
CLOSING (AS DESCRIBED IN SECTION 8 BELOW) AND WILL, SUBJECT TO THE
PROVISIONS OF THIS AGREEMENT, ENTER INTO THE SERVICE CONTRACT AND
PURCHASE ORDER, AS DEFINED HEREIN (COLLECTIVELY, THE "EXCLUSIVITY
CONSIDERATION")."
Section 7 of the Agreement is revised to include the following
provisions after the existing paragraph:
"THE COMPANY SHALL PRIOR TO THE ISSUANCE BY THE COMPANY OF ANY OF
ITS EQUITY SECURITIES, OFFER NASI BY WRITTEN NOTICE THE RIGHT, FOR A
PERIOD OF THIRTY (30) DAYS, TO PURCHASE UP TO THE NUMBER OF SHARES OF
SUCH SECURITIES THAT WOULD PRESERVE THE NASI PERCENT OWNERSHIP IN THE
EQUITY OF THE COMPANY, FOR CASH AT AN AMOUNT EQUAL TO THE PRICE OR
OTHER CONSIDERATION FOR WHICH SUCH SECURITIES ARE TO BE ISSUED;
PROVIDED,
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
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HOWEVER, THAT THESE FIRST REFUSAL RIGHTS OF NASI SHALL NOT APPLY TO
SECURITIES ISSUED (A) UPON THE CONVERSION OF ANY OF THE PREFERRED STOCK
OF THE COMPANY, (B) AS A STOCK DIVIDEND OR UPON ANY SUBDIVISION OF
SHARES OF COMMON STOCK, PROVIDED THAT THE SECURITIES ISSUED PURSUANT TO
SUCH STOCK DIVIDEND OR SUBDIVISION ARE LIMITED TO ADDITIONAL SHARES OF
COMMON STOCK, (C) PURSUANT TO SUBSCRIPTIONS, WARRANTS, OPTIONS, OR
CONVERTIBLE SECURITIES, (D) SOLELY IN CONSIDERATION FOR THE ACQUISITION
(WHETHER BY MERGER OR OTHERWISE) BY THE COMPANY OR ANY OF ITS
SUBSIDIARIES OF ALL OR SUBSTANTIALLY ALL OF THE STOCK OR ASSETS OF ANY
OTHER ENTITY, (E) PURSUANT TO THE EXERCISE OF OPTIONS TO PURCHASE COMMON
STOCK GRANTED TO DIRECTORS, OFFICERS, EMPLOYEES OR CONSULTANTS OF THE
COMPANY, (F) PURSUANT TO A PUBLIC OFFERING (G) TO EQUIPMENT LEASING
COMPANIES IN CONNECTION WITH ANY LEASING ARRANGEMENTS TO WHICH THE
COMPANY IS A PARTY AND WHICH HAVE BEEN APPROVED BY THE COMPANY'S BOARD
OF DIRECTORS, AND (H) UPON THE EXERCISE OF ANY RIGHT WHICH WAS NOT
ITSELF IN VIOLATION OF THE TERMS OF THIS FIRST RIGHT OF REFUSAL. THE
COMPANY'S WRITTEN NOTICE TO NASI SHALL DESCRIBE THE SECURITIES PROPOSED
TO BE ISSUED BY THE COMPANY AND SPECIFY THE NUMBER, PRICE AND PAYMENT
TERMS. NASI MAY ACCEPT THE COMPANY'S OFFER AS TO THE FULL NUMBER OF
SECURITIES OFFERED TO IT OR ANY LESSER NUMBER, BY WRITTEN NOTICE THEREOF
GIVEN BY IT TO THE COMPANY PRIOR TO THE EXPIRATION OF THE AFORESAID
THIRTY (30) DAY PERIOD, IN WHICH EVENT THE COMPANY SHALL PROMPTLY SELL
AND NASI SHALL BUY, UPON THE TERMS SPECIFIED, THE NUMBER OF SECURITIES
AGREED TO BE PURCHASED BY NASI. THE COMPANY SHALL BE FREE AFTER THE
DATE OF ITS NOTICE TO NASI, TO OFFER AND SELL TO ANY THIRD PARTY OR
PARTIES THE NUMBER OF SUCH SECURITIES NOT AGREED BY NASI TO BE PURCHASED
BY THEM AND THE NUMBER OF SUCH SECURITIES NOT OFFERED TO NASI, AT A
PRICE AND ON PAYMENT TERMS NO LESS FAVORABLE TO THE COMPANY THAN THOSE
SPECIFIED IN SUCH NOTICE OF OFFER TO NASI. HOWEVER, IF SUCH THIRD PARTY
SALE OR SALES ARE NOT CONSUMMATED AT A PRICE AND ON PAYMENT TERMS NO
LESS FAVORABLE TO THE COMPANY THAN THOSE SPECIFIED IN SUCH NOTICE OF
OFFER TO NASI, THE COMPANY SHALL NOT SELL SUCH SECURITIES WITHOUT AGAIN
COMPLYING WITH THIS FIRST REFUSAL RIGHT PROVISION. THE RIGHT OF FIRST
REFUSAL PROVIDED IN THIS PARAGRAPH SHALL EXPIRE ON THE EARLIER OF (I)
DECEMBER 31, 2000 OR (II) THE EFFECTIVE DATE OF THE INITIAL PUBLIC
OFFERING OF THE COMPANY'S COMMON STOCK) PROVIDING NO LESS THAN
$3,000,000 GROSS PROCEEDS TO THE COMPANY ("IPO").
NASI IS GRANTED A COMMON STOCK WARRANT (THE "NASI WARRANT") TO
PURCHASE A NUMBER OF COMMON STOCK THAT WILL BE EQUAL TO 5% OF THE
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
2
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NUMBER OF IPO COMMON STOCK OFFERED TO THE PUBLIC IN AN IPO AT A PER
SHARE PURCHASE PRICE EQUAL TO 80% OF THE IPO PER SHARE PRICE TO THE
PUBLIC. THE WARRANT MUST BE EXERCISED IN WHOLE OR IN PART WITHIN 60
DAYS AFTER THE IPO OFFERING DATE. THE WARRANT EXPIRES ON THE EARLIER
OF THREE (3) YEARS OR 61 DAYS AFTER THE IPO OFFERING DATE. THE
CALCULATION OF THE NUMBER OF SHARES PURCHASABLE BY NASI IS BASED ON
THE NUMBER OF COMMON STOCK INITIALLY OFFERED TO THE PUBLIC AND NOT ANY
UNDERWRITER OVER-ALLOTMENT SHARES SHOULD THEY BE ISSUED. THE NASI
WARRANT DOES NOT INCLUDE THE RIGHT TO PURCHASE COMMON STOCK WARRANTS
SHOULD THEY BE SOLD TO THE PUBLIC AS PART OF AN IPO.
ANY SECURITIES, INCLUDING THE NASI WARRANT, ISSUED PURSUANT TO THIS
SECTION 7 SHALL BE SUBJECT TO THE PROVISIONS OF THE FIRST PARAGRAPH
HEREOF."
Section 8 of the Agreement is amended to restate the last sentence
thereof to read in its entirety as follows:
"AT THE CLOSING, (i) THE EXCLUSIVITY CONSIDERATION (SEE SECTION 2.
ABOVE) SHALL BE WIRE TRANSFERRED TO THE COMPANY, (ii) THE COMPANY WILL
ISSUE THE SECURITIES (SEE SECTION 7. ABOVE), (iii) THE PARTIES SHALL
EXECUTE THE PURCHASE ORDER (SEE SECTION 4. ABOVE), AND THE
PREPRODUCTION ENGINEERING PRICE OF $ *** AND THE MILESTONE 1 PAYMENT
(SEE SECTION 4. c. ABOVE) SHALL BE WIRE TRANSFERRED TO THE COMPANY,
AND (iv) THE PARTIES SHALL EXECUTE THE SERVICE CONTRACT (SEE SECTION
3. ABOVE)."
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
3
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IN WITNESS WHEREOF the parties have caused this Agreement to be executed
as of the date set forth above.
PracSys Corp. North American Scientific, Inc.
By:/s/ Wayne E. Webster By:/s/ L. Michael Cutrer
--------------------------- -----------------------------
Wayne E. Webster L. Michael Cutrer
President & CEO President & CEO
*** REDACTED PORTION. CONFIDENTIAL TREATMENT REQUESTED. THE REDACTED MATERIAL
HAS BEEN SEPARATELY FILED WITH THE COMMISSION.
4
