SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K/A
AMENDMENT
NO. 1
x
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the fiscal year ended October 31, 2008
OR
¨
TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE
REQUIRED]
For
the transition period from _______ to _____
Commission
File Number 0-26670
NORTH
AMERICAN SCIENTIFIC, INC.
(Exact
name of Registrant as specified in its charter)
Delaware
(State
or other jurisdiction of
incorporation
or organization)
|
51-0366422
(I.R.S.
Employer
Identification
No.)
|
20200
Sunburst Street, Chatsworth, CA 91311
(Address
of principal executive offices)
(818) 734-8600
(Registrant's
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
Title of Each Class
|
|
Name of Each Exchange on Which
Registered
|
Common
Stock, par value $0.01 per share
|
|
The
NASDAQ Stock Market LLC
|
Securities
registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act.
o
Yes
x
No
Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or Section
15(d) of the Act.
o
Yes
x
No
Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
x
Yes
o
No
Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this
Form10-K.
o
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer or a smaller reporting company. See the definition of “accelerated
filer”, “large accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Securities Exchange Act of 1934. Large
Accelerated Filer
o
Accelerated
Filer
o
Non-Accelerated
Filer
o
Smaller
Reporting Company
x
Indicate by check mark whether
registrant is a shell company (as defined in Rule 12b-2 of the Act.
o
Yes
x
No
The aggregate market value of voting
stock held by non-affiliates of the Registrant was approximately $6,981,000
(based upon the price at which the common stock was last sold, as of April 30,
2008, the last business day of the Registrant’s most recently completed second
fiscal quarter).
As of February 19, 2009, approximately
18,520,000
shares of
the Registrant's Common Stock, $0.01 par value per share, were
outstanding.
NORTH
AMERICAN SCIENTIFIC, INC.
Table
of Contents
Form 10-K/A
|
|
Page
|
PART
III
|
|
Item
10.
|
Directors,
Executive Officers and Corporate Governance
|
3
|
Item
11.
|
Executive
Compensation
|
7
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
12
|
Item
13.
|
Certain
Relationships and Related Transactions and Director
Independence
|
15
|
Item
14.
|
Principal
Accounting Fees and Services
|
16
|
PART
IV
|
|
Item
15.
|
Exhibits,
Financial Statement Schedules
|
17
|
|
Signatures
|
18
|
Explanatory
Note:
North
American Scientific, Inc. (the “Company”) is filing this Amendment No. 1 to its
Annual Report on Form 10-K for the fiscal year ended October 31, 2008, as
originally filed with the Securities and Exchange Commission on January 29, 2009
(the “Original Form 10-K”), to add information required in Part III of the
Company’s Annual Report on the Original Form 10-K. There are no changes to the
Company’s financial statements as originally filed. There are also no
changes to the disclosures in the Original Form 10-K, except that this Amendment
No. 1 amends and restates, in their entirety, Items 10 through 14 of Part III of
the Original Form 10-K. This Amendment No. 1 continues to speak as of
the date of the Original Form 10-K, and the Company has not updated the
disclosure contained herein to reflect any events that occurred at a later
date. Because this Form 10-K/A includes no financial statements, we
are not including certifications pursuant to Rule 13a-14(b) under the
Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
PART III
Item
10.
|
DIRECTORS
EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
|
Name
|
|
Position
|
|
Age
|
Directors:
|
|
|
|
|
Dr.
Gary N. Wilner
|
|
Chairman
of the Board of Directors
|
|
68
|
John
B. Rush
|
|
President,
Chief Executive Officer and Director
|
|
50
|
Dr.
Wilfred E. Jaeger
|
|
Director
|
|
52
|
John
M. Sabin
|
|
Director
|
|
54
|
Richard
A. Sandberg
|
|
Director
|
|
65
|
Robert
V. Toni
|
|
Director
|
|
67
|
Roderick
A. Young
|
|
Director
|
|
65
|
Non-Director
Officers:
|
|
|
|
|
Brett
L. Scott
|
|
Senior
Vice-President & Chief Financial Officer
|
|
58
|
The terms
of all directors will expire at the next annual meeting of the stockholders, or
when their successors are elected and qualified. Directors are elected each
year, and all directors serve one-year terms. Officers serve at the pleasure of
the Board of Directors. On June 6, 2006, we entered into a Securities
Purchase Agreement with Three Arch Partners whereby we provided the right to
Three Arch Partners to designate two nominees who are reasonably acceptable to
us to serve on the Board of Directors. If at any time, Three Arch
Partners owns less than 3,500,000 shares (including shares of common stock
issuable upon exercise of warrants, and as adjusted for stock splits, stock
dividends and recapitalization), but more than 2,000,000 shares, Three Arch
Partners would then have the right to designate one nominee who is reasonably
acceptable to us to serve on the Board of Directors. In that case, one of the
designees must resign from the Board effective immediately. Our
obligations pursuant to the Securities Purchase Agreement terminate if at any
time Three Arch Partners owns less than 2,000,000 shares. If Three
Arch Partners owns less than 2,000,000 shares at any time, any director
previously nominated by Three Arch Partners is obligated to resign from the
Board immediately. On June 13, 2006, the Board elected the two
designees of Three Arch Partners, Dr. Jaeger and Mr. Young, both of whom
continue to serve on the Board.
On
December 12, 2007, we entered into a Securities Purchase Agreement with Three
Arch Partners whereby we agreed to decrease the number of members of the Board
of Directors from nine (9) members to seven (7) members and that the Board of
Directors shall include at least one (1) representative from Three Arch Partners
(the “Three Arch Partners Board Member”) and two (2) new independent members
(the “New Independent Board Members”) with relevant industry
experience. The Three Arch Partners Board Member shall be reimbursed
for all out-of-pocket expenses related to attending meetings of the Board of
Directors. In addition if our Board members receive any additional
fees or compensation, Three Arch Partners shall be entitled to equivalent
payment. We further covenant and agree to use commercially reasonable
efforts to place the Three Arch Partners Board Member on the slate of directors
presented to our stockholders at each annual meeting at which directors are
elected and to place the New Independent Board Members on the slate of directors
presented to our stockholders at the next annual meeting at which directors are
elected, in all cases subject to compliance with relevant Nasdaq rules and
regulations and subject to the approval of such nominees by the Nominating and
Corporate Governance Committee of the Board of Directors. If the Nominating and
Corporate Governance Committee of the Board of Directors does not approve any
proposed Three Arch Partners Board Member, Three Arch Partners shall be entitled
to propose another candidate who shall be reasonably acceptable to us. Our
obligations under the Securities Purchase Agreement with respect to the Three
Arch Partners Board Member shall terminate in their entirety if at any time
Three Arch Partners beneficially owns less than 5,000,000 shares of common stock
(including shares of common stock issuable upon exercise of warrants, and as
appropriately adjusted for stock splits, stock dividends and recapitalizations),
in such case, the Three Arch Partners Board Member shall resign from the Board
effective immediately.
There are
no other arrangements or understandings between us and any other person pursuant
to which such person was or is to be selected as a director, executive officer
or nominee. We have, however, entered into employment agreements with three of
our executive officers, which are described on page 14 below under the heading
“Potential Payments Upon Termination or Change-in-Control.”
Dr. Gary N. Wilner
has served
on our Board of Directors since December 2002 and Chairman of the Board of
Directors since March 2006. He retired from the practice of medicine in January
2005, having been an academic and consultative cardiologist for the past 30
years. Dr. Wilner serves as a Trustee and Chairman of the Board of Trustees of
the Oakmark Family of Funds. He has had prior service as a Director of the
American Heart Association and the Albert Einstein Peace Prize
Foundation.
John B. Rush
has served as our
President and Chief Executive Officer since April 2007, and became a Director in
June 2007. Previously, Mr. Rush served since 2002 as President and Chief
Executive Officer of Sanarus Medical, a leading developer of minimally invasive
medical devices for diagnosing and treating breast disease. Prior to joining
Sanarus, Mr. Rush was President and Chief Executive Officer of Micro
Therapeutics, Inc. (now owned by ev3, Inc.), a publicly traded medical device
company focused on the treatment of cerebral and peripheral vascular disorders
worldwide.
Dr. Wilfred E. Jaeger
has
served on our Board of Directors since June 2006. Dr. Jaeger is the
cofounder of
Three
Arch Partners. Previously, he was a general partner at Schroder Ventures. Dr.
Jaeger began his medical career in private practice. He was subsequently
recruited by Chec Medical, a venture capital backed ambulatory care startup in
Seattle. He subsequently attended business school and began working in venture
capital in 1989. He has since been an active early stage investor in
numerous successful biotechnology, healthcare service, and medical device
companies. Dr. Jaeger serves on the boards of many private healthcare companies,
and he currently serves as a director of Threshold Pharmaceuticals,
Inc.
John M. Sabin
has served on
our Board of Directors since August 2005. He has served as Chief
Financial Officer and General Counsel of Phoenix Health Systems, a private
health care IT consulting and outsourcing firm, since October 2004. From
January 2000 to October 2004, he served as Chief Financial Officer, General
Counsel and Secretary of NovaScreen Biosciences Corporation, a developer of
biotechnology-based tools to accelerate drug discovery and development.
Previously, he served as Executive Vice President and Chief Financial Officer of
Hudson Hotels Corporation, a limited service hotel development and management
company, and as an executive at Vistana, Inc., Choice Hotels International,
Inc., Manor Care Inc. and Marriott International, Inc. Mr. Sabin has
served as a Trustee of Hersha Hospitality Trust, a publicly traded
hospitality real estate investment trust since 2003, and as a Trustee of Prime
Group Realty Trust, a real estate investment trust since
2005.
Richard A. Sandberg
has served
on our Board of Directors since August 2005. He has served as the
Chief Financial Officer of Oxford Immunotec, Ltd, a T-cell diagnostics company
developing tests for tuberculosis and other infectious diseases, since
2007. From 2002 to 2007, he served as Chief Financial Officer of MZT
Holdings, Inc. (formerly Matritech, Inc.), a publicly traded developer and
manufacturer of cancer diagnostic test products, and has also been on that
company’s board of directors since 1999 (excluding the period from June to
September 2002). Mr. Sandberg has also served as Manager and Chief
Financial Officer of Battery Asset Management, LLC, a firm specializing in
foreign exchange transactions. From 1997 to 2001, Mr. Sandberg served as
Chairman of the Board of Lifecodes Corporation, a manufacturer of DNA test kits
and a provider of DNA testing services and from May 1997 to September 1998, as
its Chief Financial Officer. From 1983 to 1997, Mr. Sandberg held
financial and operating positions at Dianon Systems, Inc., an anatomic
pathology testing and genetic and clinical chemistry testing company he founded
in 1983, including Chief Executive Officer and Chief Financial Officer.
Since 2003, Mr. Sandberg has been a director of Ethan Allen Interiors, Inc., a
publicly traded home furnishings company.
Robert V. Toni
has served on
our Board of Directors since April 2008. Mr. Toni retired in
October 2002 from Closure Medical Corporation, where he held the position
of President and Chief Executive Officer and served on the Executive Committee
for eight years. Previous to Closure Medical, Mr. Toni was General Manager
of Iolab Corporation for five years and held a number of senior positions with
Coopervision Cilco for 7 years with his last position being President.
Mr. Toni’s earlier career was primarily in financial management for several
large companies, including AMF and General Motors where he held the positions of
Controller and Accounting Manager, respectively. Mr. Toni is a director of
Conceptus, Inc.
Roderick A. Young
has served
on our Board of Directors since June 2006. Mr. Young has been a
Venture Partner of Three Arch Partners since May 2006. From February 2003 to
July 2005, Mr. Young was President and CEO of Vivant Medical, Inc., a
venture-backed medical device company that was acquired by Tyco International,
Ltd. Prior to his tenure at Vivant, Mr. Young was President and CEO of
Targesome, Inc., a biotechnology company, from October 1998 to October 2002.
Prior to Targesome, Mr. Young also served as Chairman and CEO of General
Surgical Innovations, President & CEO of Focus Surgery, President of Toshiba
America MRI and President and COO of Diasonics.
Brett L. Scott
has served as
our Senior Vice President and Chief Financial Officer since August
2008. Mr. Scott is a certified public accountant and has previously
served as Chief Financial Officer at Alsius Corporation, a publicly traded
medical device company focused on temperature control of patients in the
critical care arena, from January 2006 to August 2008. Mr. Scott has also held
the position of Chief Financial Officer with the following companies: Irvine
Biomedical, a medical device company which was acquired by St. Jude
Medical; Pain Concepts, a medical device company who’s flagship product was
acquired by Stryker Medical; Cardiac Science, a publicly traded medical device
company who merged with Quinton Cardiology Systems; and finally, Neuro
Navigational Corporation, a publicly traded medical device company which was
sold to Ballard Medical.
Troy A. Barring
served as our
Senior Vice-President and Chief Operating Officer from September 2007 until his
resignation in October 2008. Previously, Mr. Barring served since 2001 in a
number of positions with Biosense Webster, a Division of Johnson and Johnson,
including Vice President, World Wide Services, Vice President of Operations, and
Senior Vice President of Research and Development and Operations. Mr. Barring
has over 13 years of management experience in the medical device sector, with a
background in manufacturing, operations, and research and development at such
companies as Scimed Life Systems, a Division of Boston Scientific, and Sorin
Biomedical.
L. Michael Cutrer
served as
our Executive Vice President and Chief Technology Officer from April 2007 until
his resignation in May 2008. Previously, Mr. Cutrer served as our
President and Chief Executive Officer from 1990 to April
2007. Previously, Mr. Cutrer was a Manager of Isotope Products
Laboratory, Inc., a radioisotope manufacturing company, where he was
responsible for industrial product manufacturing, research and
development.
James W. Klingler
served as
our Senior Vice President and Chief Financial Officer from July 2004 until his
resignation in March 2008. Previously, he was Vice President-Finance and Chief
Financial Officer of Troy Group, Inc., a provider of secure check printing
products and wireless connectivity solutions, from January 2002 to July
2004. From February 2001 to November 2001, he served as Senior Vice
President, Business Operations and Chief Financial Officer of
Trinagy, Inc., a software company that was merged into Hewlett-Packard
Company. In prior positions, Mr. Klingler was Vice President, Finance and
Administration of Triconex Corporation, a supplier of products, systems and
services for safety, critical control and turbomachinery applications and a
subsidiary of Invensys plc, from February 1999 to February 2001, and
Vice President and Chief Financial Officer of Wilshire Technologies Inc., a
company that manufactures polyurethane products, from October 1994 to
February 1999.
Section 16(a) Beneficial
Ownership Reporting Compliance
Section 16(a) of
the Securities Exchange Act of 1934 (the “Act”) requires our officers, directors
and persons who own more than 10% of any class of our securities registered
under Section 12(g) of the Act to file reports of ownership and
changes in ownership with the SEC. Officers, directors and greater than 10%
stockholders are required by SEC regulation to furnish us with copies of all
Section 16(a) forms they file.
Based
solely on a review of copies of such reports furnished to us during the fiscal
year ended October 31, 2008, we believe that all persons subject to the
reporting requirements pursuant to Section 16(a) complied with all
applicable reporting requirements, except for the following: Mr. Rush, our Chief
Executive Officer, filed a Form 4 on February 18, 2009 with respect to an open
market purchase of 1,000 shares of our common stock on July 24,
2008.
Board
of Directors Meetings and Committees
Our Board
of Directors held 8 meetings during the fiscal year ended October 31, 2008,
and acted by unanimous written consent on 3 occasions. All of the directors who
were on the Board during fiscal year 2008 attended at least 92% of the total
number of meetings of the Board of Directors and committees on which they
served. The Board of Directors has three standing committees: the
Audit Committee, the Compensation Committee, and the Nominating and Corporate
Governance Committee.
Audit Committee.
During the
fiscal year ended October 31, 2008, the members of the Audit Committee were Mr.
John Sabin (Chairman), Mr. Richard Sandberg, and Mr. Robert V. Toni, each of
whom is “independent” as defined under current Rule 4200(a)(15) of the
Nasdaq listing standards and Securities and Exchange Commission regulations.
During the fiscal year ended October 31, 2008, the Audit Committee met on
10 occasions.
Audit Committee Financial
Experts.
The
Board of Directors has determined that John M. Sabin and Richard A. Sandberg
each qualify as an “audit committee financial expert” and “independent” as
defined under the applicable Securities and Exchange Commission
rules.
Compensation Committee.
From November 1, 2007 to
April 29, 2008, the Compensation Committee consisted of Mr. Richard Sandberg
(Chairman), Mr. John M. Sabin, Dr. Gary N. Wilner and Ms. Nancy
Wysenski. From April 29, 2008 through October 31, 2008, the
Compensation Committee consisted of Mr. Richard Sandberg (Chairman), Dr. Gary N.
Wilner and Mr. Roderick A. Young. Mr. Sandberg and Dr. Wilner are
non-employee Directors who meet the Nasdaq listing standards for “independence.”
The Compensation Committee oversees the Company’s executive compensation
programs and policies and is responsible for determining grants of options to
purchase common stock. During the fiscal year ended October 31, 2008, the
Compensation Committee met on 5 occasions.
Nominating and Corporate Governance
Committee.
The Nominating and Corporate Governance Committee is
responsible for recommending candidates for election to the Board of Directors
and reviewing matters of corporate governance. The Nominating and Corporate
Governance Committee will consider director nominees recommended by stockholders
if properly submitted. This Committee currently consists of Mr. Robert V. Toni
(Chairman), Mr. John Sabin and Dr. Gary N. Wilner, each of whom is “independent”
under current Nasdaq listing standards. During the fiscal year ended October 31,
2008, the Nominating and Corporate Governance Committee met on 4
occasions.
We have a
written Code of Ethics that applies to all employees, including our Chief
Executive Officer, Chief Financial Officer, and Corporate
Controller. The full text of our Code of Ethics is published on our
website at www.nasmedical.com under the “Investor Center-Corporate Governance”
caption. We will disclose any future amendments to, or waivers from,
certain provisions of the Code of Ethics applicable to our Chief Executive
Officer, Chief Financial Officer and Corporate Controller on our website within
four business days following the date of such amendment or waiver.
Item
11.
|
EXECUTIVE
COMPENSATION
|
Summary
Compensation Table
The
following table summarizes aggregate amounts of compensation paid or accrued by
us for the fiscal year ended October 31, 2008 for services rendered by our chief
executive officer, our other most highly compensated executive officer as of the
end of the last fiscal year whose total compensation exceeded $100,000 and two
of our former executive officers for whom disclosure would have been provided
but for the fact that such persons were not serving as executive officers at the
end of the last completed fiscal year. We refer to these individuals in
this report as the named executive officers.
Name and Principal Position
|
|
Year
|
|
Salary ($)
|
|
|
Option
Awards ($)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
All Other
Compensation
($)
(1)
|
|
|
Total ($)
|
|
John
B. Rush
|
|
2008
|
|
|
310,708
|
|
|
|
529,147
|
|
|
|
50,366
|
|
|
|
7,712
|
|
|
|
897,933
|
|
President
and Chief
|
|
2007
|
|
|
175,000
|
|
|
|
1,167,120
|
|
|
|
72,904
|
|
|
|
—
|
|
|
|
1,415,024
|
|
Executive
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brett
L. Scott
|
|
2008
|
|
|
37,946
|
(2)
|
|
|
80,917
|
|
|
|
4,362
|
|
|
|
1,799
|
|
|
|
124,994
|
|
Senior
Vice President and
|
|
2007
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Chief
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Troy
A. Barring
(4)
|
|
2008
|
|
|
279,059
|
|
|
|
438,498
|
|
|
|
—
|
|
|
|
11,094
|
|
|
|
728,650
|
|
Vice
President and Chief
|
|
2007
|
|
|
32,692
|
|
|
|
262,422
|
|
|
|
12,002
|
|
|
|
—
|
|
|
|
307,117
|
|
Operating
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
L.
Michael Cutrer
(5)
|
|
2008
|
|
|
176,781
|
|
|
|
57,122
|
|
|
|
—
|
|
|
|
122,548
|
|
|
|
356,451
|
|
Executive
Vice President
|
|
2007
|
|
|
310,340
|
|
|
|
—
|
|
|
|
15,400
|
|
|
|
7,212
|
|
|
|
332,952
|
|
and
Chief Technology
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
All
Other Compensation consists of the Company’s contribution to such Named
Executive Officer’s 401(k) plan, Company paid life insurance
premiums, relocation payments, and severance
payments.
|
(2)
|
Mr. Scott
commenced employment with the Company on August 11, 2008 at an annual
salary of $220,000.
|
(3)
|
Represents
the pro-rated portion of Mr. Scott’s bonus for the 2008 fiscal year
.
|
(4)
|
Mr.
Barring terminated his employment with the Company effective October 24,
2008.
|
(5)
|
Mr.
Cutrer terminated his employment with the Company effective May 30,
2008.
|
Outstanding
Equity Awards Value at Fiscal Year-End
The
following table includes certain information with respect to the value of all
unexercised options previously awarded to the named executive officers at the
fiscal year ended October 31, 2008. The number of options held at October 31,
2008 includes options granted under the 2006 Stock Plan and stand-alone grants
outside of our 2006 Stock Plan.
|
|
Option Awards
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
|
|
Option
|
|
|
|
Options
|
|
|
Options
|
|
|
Option
|
|
Expiration
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
(1
)
|
|
|
Exercise Price ($)
|
|
Date
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
B. Rush
|
|
|
135,000
|
|
|
|
224,999
|
|
|
|
2.05
|
|
4/23/2017
|
|
|
|
|
—
|
|
|
|
566,094
|
|
|
|
1.40
|
|
1/15/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Troy
A. Barring
|
|
|
—
|
|
|
|
26,972
|
|
|
|
2.05
|
|
1/24/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brett
L. Scott
|
|
|
—
|
|
|
|
203,359
|
|
|
|
0.69
|
|
8/11/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
L.
Michael Cutrer
|
|
|
—
|
|
|
|
9,795
|
|
|
|
30.63
|
|
2/25/2014
|
|
|
|
|
—
|
|
|
|
4,204
|
|
|
|
30.63
|
|
9/28/2011
|
|
|
|
|
—
|
|
|
|
11,000
|
|
|
|
31.25
|
|
3/11/2012
|
|
|
|
|
—
|
|
|
|
19,200
|
|
|
|
39.69
|
|
3/11/2012
|
|
|
|
|
—
|
|
|
|
15,000
|
|
|
|
83.76
|
|
5/26/2010
|
|
|
|
|
—
|
|
|
|
1,651
|
|
|
|
2.05
|
|
3/16/2013
|
|
|
|
|
—
|
|
|
|
3,999
|
|
|
|
2.05
|
|
10/31/2013
|
|
|
|
|
—
|
|
|
|
799
|
|
|
|
2.05
|
|
3/2/2011
|
|
|
|
|
—
|
|
|
|
1,560
|
|
|
|
2.05
|
|
9/20/2012
|
|
|
|
|
—
|
|
|
|
1,151
|
|
|
|
2.05
|
|
2/25/2014
|
|
|
|
|
—
|
|
|
|
440
|
|
|
|
2.05
|
|
9/28/2011
|
|
|
|
|
—
|
|
|
|
479
|
|
|
|
2.05
|
|
3/11/2012
|
|
|
(1)
|
Except
where otherwise noted, all options expire ten years from the date of grant
and option shares vest at the rate of 25% on the first
anniversary of the option grant and annually thereafter, such that options
are fully vested upon the fourth anniversary of the option grant date. In
addition, the vesting of options may accelerate upon a change in control
of the Company.
|
Directors
who also serve as our employees or as employees of our subsidiaries receive no
separate compensation for serving as Directors or as members of any committees
of the Board of Directors. Each non-employee Director receives a quarterly
payment of $5,000, and receives $1,250 per Board or committee meeting if he
attends in person or $500 per meeting if he participates by telephone. Directors
may be reimbursed for certain expenses incurred in connection with attending
Board or committee meetings. In addition, the Chairman of the Board of Directors
receives compensation of $40,000 per year, paid in $3,333 monthly installments
(in lieu of the $5,000 quarterly payment); the Chairman of the Audit Committee
receives $5,000 per year; the Chairman of the Compensation Committee receives
$2,500 per year; and the Chairman of the Nominating and Corporate Governance
Committee receives $2,500 per year.
In
addition, each individual who is first elected or appointed as a non-employee
director shall receive the same cash compensation as described above and
thereafter, and shall automatically be granted, on the date of such initial
election or appointment, a non-statutory stock option to purchase 30,000 shares
of common stock. On the date of each annual stockholders meeting each individual
who is re-elected to serve as a non-employee director is automatically granted a
non-statutory stock option to purchase 10,000 shares of common stock. In
addition to the non-statutory stock option to purchase 30,000 shares of common
stock granted to each non-employee director upon such individual’s initial
election or appointment, a non-employee director first elected to serve as the
Chairman of the Board shall automatically be granted a non-statutory stock
option to purchase 15,000 shares of common stock as an initial grant on the date
of such individual’s initial appointment as Chairman of the Board. Further, on
the date of each annual stockholders meeting, if the Chairman of the Board
continues to serve as the Chairman, as well as the non-statutory stock option to
purchase 10,000 shares of common stock granted to each non-employee director
upon such individual’s re-election, such individual shall automatically be
granted an additional non-statutory stock option to purchase 10,000 shares of
common stock. All options granted to non-employee directors (including the
Chairman) upon initial election or appointment shall vest over time with 1/12
vesting per quarter. All options granted to non-employee directors (including
the Chairman) annually, shall vest in equal amounts on a quarterly basis over
three years. All options granted to non-employee directors shall have a term of
seven years. The annual grant of non-statutory stock options is only given to
those non-employee directors who have served at least six months. In the event
that a non-employee director’s service as a director terminates other than as a
result of the non-employee director’s voluntary resignation or involuntary
removal for cause, all unvested options granted to such non-employee director as
compensation for service as a director will vest in full immediately. In such
case, all vested options will remain exercisable until the earlier of (i) a
change of control of the Company, or (ii) the expiration of the seven year term
of the option.
During
the fiscal year ended October 31, 2008, Dr. Jaeger and Messrs. Sabin,
Sandberg, Young and Toni each received an annual grant of seven-year
non-statutory stock options to purchase 10,000 shares of common stock, at a
price of $1.65 per share, which become fully vested on April 29, 2009. Mr. Toni
also received a grant of seven-year non-statutory stock options to purchase
30,000 shares of common stock, at a price of $1.65 per share as a first-elected
non-employee director. During the fiscal year ended October 31, 2008, Dr.
Wilner received a grant of seven-year non-statutory stock options to purchase
20,000 shares of common stock, at a price of $1.65 per share, which become fully
vested on April 29, 2009.
The
following table and footnotes provide information regarding the compensation
paid to the non-employee members of the Board of Directors during the fiscal
year ended October 31, 2008.
Name
|
|
Fees
Earned
or
Paid
in
Cash
($)
|
|
|
Option
Awards
($)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
Gary N. Wilner
|
|
$
|
58,000
|
|
|
$
|
62,959
|
|
|
$
|
120,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
Wilfred E. Jaeger
|
|
$
|
26,250
|
|
|
$
|
38,801
|
|
|
$
|
65,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
M. Sabin
|
|
$
|
45,000
|
|
|
$
|
38,801
|
|
|
$
|
83,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
A. Sandberg
|
|
$
|
44,000
|
|
|
$
|
38,801
|
|
|
$
|
82,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roderick
A. Young
|
|
$
|
28,250
|
|
|
$
|
38,801
|
|
|
$
|
67,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
V. Toni
|
|
$
|
19,250
|
|
|
$
|
38,060
|
|
|
$
|
57,310
|
|
Potential
Payments Upon Termination or Change-in-Control
John
B. Rush
On March
22, 2007, we entered into an employment agreement with John B. Rush in
connection with his employment as our President and Chief Executive Officer. Mr.
Rush’s base salary is $350,000. Mr. Rush is also eligible to receive an annual
bonus, if any, based upon performance goals approved by the Board or the
Compensation Committee of the Board, in consultation with Mr. Rush, in an
amount, not to exceed 60% of his base salary, to be determined by the
Compensation Committee.
On April
23, 2007, we granted stock options to Mr. Rush with respect to 1,800,000 shares
of our common stock. The stock options have an exercise price of $1.16, which
was equal to the fair market value per share of our common stock on the grant
date. In addition, in the event that within 24 months of April 23, 2007, we
issue additional shares of stock in connection with raising capital in a private
placement transaction, we are required to grant options to Mr. Rush to acquire
an additional number of shares of common stock equal to 3% of the number of
shares issued in connection with such transaction.
All of
the options have a term of ten years and vest monthly over a four-year period.
The options remain exercisable until the earlier of the expiration of the term
of the option or (i) three months following Mr. Rush’s date of termination in
the case of termination for reasons other than cause, death or disability (as
such terms are defined in the employment agreement) or (ii) 12 months following
Mr. Rush’s date of termination in the case of termination on account of death or
disability. In the event that Mr. Rush is terminated for cause, all outstanding
options, whether vested or not, will immediately lapse.
In the
event (a) Mr. Rush’s employment is terminated by us at any time after April 23,
2007 for any reason other than Mr. Rush’s death, disability or cause or (b) Mr.
Rush resigns for a “good reason” (as defined in the employment agreement), Mr.
Rush will receive his base salary in effect on the date of termination for a
period ending 12 months following the date of termination paid in accordance
with our standard payroll practices for salaried employees. If this
event had occurred at the end of our fiscal year, Mr. Rush would have received
$350,000 in salary payments over the following 12 months.
In the
event of a “Control Termination” (as defined in the employment agreement), Mr.
Rush will be entitled to receive his base salary in effect on the date of
termination paid in accordance with our standard payroll practices for salaried
employees and group health benefits for a period ending 12 months following the
date of termination and, in addition, Mr. Rush shall, as of the date of the
Control Termination, become fully vested in any unvested options previously
granted to him. If this event had occurred at the end of our fiscal year, Mr.
Rush would have received $350,000 in salary payments and approximately $15,185
in group health benefits over the following 12 months. At the end of
our fiscal year, the exercise price per share of Mr. Rush’s stock options
exceeded the closing market price per share of our common stock. As a result, no
value is recognized for the acceleration of his unvested stock
options.
The
employment agreement also provides that we will make a tax gross-up payment to
Mr. Rush in the event that payments to Mr. Rush on account of a change in
control constitute an excess parachute payment subject to an excise tax under
Section 4999 of the Code. Similarly, we will make a tax gross-up payment to Mr.
Rush for any excise tax in the event that amounts or benefits payable to Mr.
Rush are determined to be subject to the excise tax on nonqualified deferred
compensation under Section 409A of the Code.
In the
event that any amount payable upon Mr. Rush’s termination would be determined to
be “non-qualified deferred compensation” subject to Section 409A of the Code, we
may delay payment for six months, in order to comply with Section 409A of the
Code.
On
December 31, 2008, we entered into an amendment to the employment agreement with
Mr. Rush for the sole purpose of bringing the agreement into compliance with the
applicable provisions of Section 409A of the Internal Revenue Code of 1986, as
amended, and the Treasury Regulations issued thereunder. The amendment, among
other things, clarifies that any severance payments which are treated as
nonqualified deferred compensation must be made upon a “separation of service”
with the Company and that, subject to certain exceptions, such payments may be
delayed for a period of six months if Mr. Rush is deemed to be a “specified
employee” at the time of his or her termination of employment, and provides that
certain payments to Mr. Rush, including expense reimbursements, will be made
only at times permissible without triggering tax penalties under Section
409A.
Brett
L. Scott
In July
2008, we executed an offer letter with Brett L. Scott in connection with his
employment as our Senior Vice President of Finance and Chief Financial Officer,
effective as of August 11, 2008. Pursuant to the offer letter, Mr. Scott’s
compensation initially consists of an annual salary of $220,000 and an annual
bonus of up to 30% of his base salary subject to approval by our Board of
Directors of the senior management bonus program payouts. In addition, Mr. Scott
was granted stock options to purchase 203,359 shares of our common stock at an
exercise price of $0.69 per share. These options vest 25% upon the first
anniversary of the grant date and monthly thereafter for the following
thirty-six months. The letter further provides that if Mr. Scott’s employment
with us is terminated at any time without cause, which includes a material
breach of the letter or any policy of the Company, he will be entitled to
receive a lump sum severance payment equal to six months of his base
salary.
On
December 31, 2008, we entered into an amendment to the offer letter with Mr.
Scott for the sole purpose of bringing the offer letter into compliance with the
applicable provisions of Section 409A of the Internal Revenue Code of 1986, as
amended, and the Treasury Regulations issued thereunder. The amendment, among
other things, clarifies that any severance payments which are treated as
nonqualified deferred compensation must be made upon a “separation of service”
with the Company and that, subject to certain exceptions, such payments may be
delayed for a period of six months if Mr. Scott is deemed to be a “specified
employee” at the time of his or her termination of employment, and provides that
certain payments to Mr. Scott, including expense reimbursements, will be made
only at times permissible without triggering tax penalties under Section
409A.
Item
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
Except as
otherwise indicated below, the following table sets forth information known to
us with respect to the beneficial ownership of our common stock as of February
19, 2009 by (i) all those known by us to own more than 5% of our
outstanding common stock; (ii) each of our directors; (iii) each of
our named executive officers; and (iv) all directors and executive officers
as a group:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
B. Rush
|
|
|
350,403
|
(3)
|
|
|
1.9
|
%
|
L.
Michael Cutrer
|
|
|
347,861
|
(4)
|
|
|
1.9
|
%
|
Troy
A. Barring
|
|
|
—
|
(5)
|
|
|
*
|
|
Brett
L. Scott
|
|
|
—
|
(6)
|
|
|
*
|
|
Wilfred
E. Jaeger
|
|
|
10,288,209
|
(7)
|
|
|
52.3
|
%
|
John
M. Sabin
|
|
|
10,400
|
(8)
|
|
|
*
|
|
Richard
A. Sandberg
|
|
|
12,198
|
(9)
|
|
|
*
|
|
Gary
N. Wilner
|
|
|
15,200
|
(10)
|
|
|
*
|
|
Robert
A. Toni
|
|
|
7,500
|
(11)
|
|
|
*
|
|
Roderick
A. Young
|
|
|
10,000
|
(12)
|
|
|
*
|
|
All
directors and executive officers as a group (8 persons)
|
|
|
10,693,910
|
(13)
|
|
|
53.3
|
%
|
Three
Arch Partners
|
|
|
10,278,209
|
(14)
|
|
|
52.3
|
%
|
SF
Capital Partners Ltd
|
|
|
2,390,228
|
(15)
|
|
|
12.7
|
%
|
CHL
Medical Partners
|
|
|
2,560,975
|
(16)
|
|
|
13.7
|
%
|
(1)
|
Unless
otherwise indicated, the business address of each stockholder is c/o North
American Scientific, Inc., 20200 Sunburst Street, Chatsworth, California
91311.
|
(2)
|
This
table is based upon information supplied by officers, directors, and
principal stockholders of the Company and by Schedules 13D and 13G filed
with the SEC. Except where indicated by footnote, and subject to community
property laws where applicable, the persons named in this table have sole
voting and investment power with respect to all of their shares of common
stock. Except with respect to 5% security holders, applicable percentages
are based on 18,520,472 shares of common stock outstanding on February 19,
2009, adjusted as required. The information known to the Company with
respect to each of the following’s beneficial ownership of common stock is
as of February 19, 2009: John B. Rush, Wilfred E. Jaeger, John M. Sabin,
Richard A. Sandberg, Gary N. Wilner, Robert A. Toni, Roderick A. Young,
Troy A. Barring and Brett L. Scott.
|
(3)
|
Includes
349,403 shares subject to outstanding options that are exercisable within
60 days of February 19, 2009.
|
(4)
|
Includes
69,278 shares subject to outstanding options that are exercisable within
60 days of February 19, 2009. Also includes 10,717 shares owned by a trust
over which the reporting person has shared voting and dispositive power
with his spouse. Also includes 502 shares held in a trust for the
reporting person’s sons. Mr. Cutrer’s employment terminated on May 31,
2008.
|
(5)
|
Mr.
Barring’s employment terminated on October 24,
2008.
|
(6)
|
Mr.
Scott’s employment commenced on August 11,
2008.
|
(7)
|
Includes
9,154,413 shares and warrants to purchase 1,123,796 shares that are
exercisable within 60 days of February 19, 2009 held of record by Three
Arch Partners IV, L.P., Three Arch Associates IV, L.P., Three Arch
Capital, L.P. and TAC Associates, L.P. and 10,000 shares subject to
outstanding options that are exercisable within 60 days of February 19,
2009 held by Dr. Jaeger. Dr. Jaeger, who serves as a member of the Board,
is a managing member of Three Arch Management IV, L.L.C., or TAM IV, which
is the general partner for Three Arch Partners IV, L.P. and Three Arch
Associates IV, L.P. Dr. Jaeger is also a managing member of TAC
Management, L.L.C., or TAC MGT, which is the general partner for Three
Arch Capital, L.P. and TAC Associates, L.P. TAM IV and TAC MGMT may be
deemed to have sole power to vote these shares, Mark A. Wan, a managing
member of TAM IV and TAC MGMT, may be deemed to have sole power to vote
these shares, Dr. Jaeger, a managing member of TAM IV and TAC MGMT, may be
deemed to have sole power to vote these shares, and Barclay Nicholson, a
managing member of TAM IV and TAC MGMT, may be deemed to have sole power
to vote these shares. Dr. Jaeger disclaims beneficial ownership of shares
held by Three Arch Partners IV, L.P., Three Arch Associates IV, L.P.,
Three Arch Capital, L.P. and TAC Associates, L.P., except to the extent of
his pecuniary interest therein.
|
(8)
|
Includes
10,000 shares subject to outstanding options that are exercisable within
60 days of February 19, 2009.
|
(9)
|
Includes
10,000 shares subject to outstanding options that are exercisable within
60 days of February 19, 2009.
|
(10)
|
Includes
15,000 shares subject to outstanding options that are exercisable within
60 days of February 19, 2009.
|
(11)
|
Consists
of shares subject to outstanding options that are exercisable within 60
days of February 19, 2009.
|
(12)
|
Consists
of shares subject to outstanding options that are exercisable within 60
days of February 19, 2009.
|
(13)
|
Includes
411,903 shares subject to outstanding options and warrants to purchase
1,123,796 shares of our common stock, all of which are exercisable within
60 days of February 19, 2009.
|
|
Based
on information set forth in a Schedule 13G filed with the SEC on February
10, 2009. Includes 9,154,413 shares and warrants to purchase 1,123,796
shares that are exercisable within 60 days of February 19, 2009 held of
record by Three Arch Partners IV, L.P., Three Arch Associates IV, L.P.,
Three Arch Capital, L.P. and TAC Associates, L.P. Dr. Jaeger, who serves
as a member of the Board, is a managing member of Three Arch Management
IV, L.L.C., or TAM IV, which is the general partner for Three Arch
Partners IV, L.P. and Three Arch Associates IV, L.P. Dr. Jaeger is also a
managing member of TAC Management, L.L.C., or TAC MGT, which is the
general partner for Three Arch Capital, L.P. and TAC Associates, L.P. TAM
IV and TAC MGMT may be deemed to have sole power to vote these shares,
Mark A. Wan, a managing member of TAM IV and TAC MGMT, may be deemed to
have sole power to vote these shares, Dr. Jaeger, a managing member of TAM
IV and TAC MGMT, may be deemed to have sole power to vote these shares,
and Barclay Nicholson, a managing member of TAM IV and TAC MGMT, may be
deemed to have sole power to vote these shares. Dr. Jaeger disclaims
beneficial ownership of shares held by Three Arch Partners IV, L.P., Three
Arch Associates IV, L.P., Three Arch Capital, L.P. and TAC Associates,
L.P., except to the extent of his pecuniary interest therein. The
principal address for Three Arch Partners is 3200 Alpine Road, Portola
Valley, California 94028.
|
(15)
|
Based
on information set forth in a Schedule 13G/A filed with the SEC on
February 14, 2008. Includes 2,032,520 shares and warrants to purchase
357,708 shares that are exercisable within 60 days of February 19, 2009
held of record by SF Capital Ltd. As of December 31, 2008, Michael A. Roth
and Brian J. Stark have shared voting and investment power of 538,901
shares. The 538,901 shares are held directly by SF Capital Partners Ltd.
or SF Capital. In addition, SF Capital Ltd. purchased 2,032,520 shares and
received warrants to purchase 357,708 shares in the Private Placement in
January 2008. Messrs Roth and Stark are the managing members of Stark
Offshore Management LLC, or Stark Offshore, which acts as investment
manager and has sole power to direct the management of SF Capital. Through
Stark Offshore, Messrs. Roth and Stark possess voting and investment power
over all of the shares. Messrs. Roth and Stark disclaim beneficial
ownership of the shares. The principal address for SF Capital is 3600
South Lake Drive, St. Francis, Wisconsin
53235.
|
(16)
|
Based
on information set forth in a Schedule 13G filed with the SEC on January
28, 2008. Includes 2,439,024 shares and warrants to purchase 121,951
shares that are exercisable within 60 days of February 19, 2009 Represents
shares held by CHL Medical Partners III, L.P. and CHL Medical Partners III
Side Fund, L.P. The principal address of CHL Medical Partners is 1055
Washington Boulevard, Stamford, Connecticut
06901.
|
Change
in Control
On
December 12, 2007, we entered into a Securities Purchase Agreement (the
“Securities Purchase Agreement”) with Three Arch Partners IV, L.P. and
affiliated funds (“Three Arch Partners”), SF Capital Partners Ltd. (“SF
Capital”) and CHL Medical Partners III, L.P. and an affiliated fund (“CHL,” and
together with Three Arch Partners and SF Capital, the “Investors”) providing for
the private placement (the “Private Placement”) of 12,601,628 shares of common
stock (the “Shares”), and warrants to purchase 630,081 shares of common stock
(the “Warrants”) for a total purchase price of $15.5 million. Pursuant to the
Securities Purchase Agreement, Three Arch Partners agreed to purchase 8,130,084
Shares and 406504 Warrants, SF Capital agreed to purchase 2,032,520 Shares and
101,626 Warrants, and CHL agreed to purchase 2,439,024 Shares and 121,951
Warrants.
On
January 18, 2008, we completed the Private Placement. At the time of the closing
of the Private Placement, Three Arch Partners owned 9,154,412 shares of the
common stock, or approximately 49.5% of the outstanding common stock at the
time, and the Investors owned in the aggregate 14,164,857 shares of the common
stock, or approximately 76.6% of the outstanding common stock at the time. Thus,
Three Arch Partners may be deemed to beneficially own a total of 9,871,704
shares of the common stock, or 51.4%, as of January 18, 2008, including shares
issuable upon exercise of warrants held by Three Arch Partners, and the
Investors may be deemed to beneficially own a total of 15,138,231 shares of the
common stock, or 79.7%, as of January 18, 2008, including shares issuable upon
exercise of warrants held by the Investors. The foregoing does not take into
account the exercise or conversion of our other outstanding convertible or
exercisable securities, which would have the effect of reducing the percentage
beneficial ownership of Three Arch Partners and the Investors. Because of this
high percentage of beneficial ownership, Three Arch Partners and the Investors
may be able to control matters requiring the vote of stockholders, including the
election of a portion of the Board of Directors and certain other significant
corporate actions.
The
consideration paid for the Shares and Warrants in the Private Placement,
pursuant to the Securities Purchase Agreement, was $15.5 million, in the
aggregate, with $10 million being paid by Three Arch Partners. To our knowledge,
each of the Investors paid for the Shares and Warrants from its own funds,
without the use of any bank loan proceeds.
Pursuant
to the Securities Purchase Agreement, we agreed to decrease the number of
members of our Board of Directors from nine members to seven members. Three Arch
Partners was granted the right to nominate one member of the Board of Directors,
so long as Three Arch Partners continues to beneficially own in excess of
1,000,000 shares of the common stock (including shares of common stock issuable
upon exercise of the Warrants, and as appropriately adjusted for stock splits,
stock dividends and recapitalizations). Two of the current members of the Board
of Directors, Dr. Jaeger and Mr. Young, are affiliated with Three Arch Partners.
Also, pursuant to the Securities Purchase Agreement, we agreed to add two new
independent members with relevant industry experience to the Board of
Directors.
The
following table sets forth information about the Company’s equity compensation
plans as of October 31, 2008:
Plan category
|
|
(a)
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
|
|
|
(b)
Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights
|
|
|
(c)
Number of Securities
Remaining Available
For Future Issuance Under
Equity Compensation Plans
(excluding securities reflected
in column (a))
|
|
Equity
compensation plans approved
by
stockholders(1)
|
|
|
2,455,911
|
|
|
$
|
3.12
|
|
|
|
2,678,398
|
(2)
|
Equity
compensation plans not approved by stockholders
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
|
2,455,911
|
|
|
$
|
3.12
|
|
|
|
2,678,398
|
|
(1)
|
Consists
of the 1996 Stock Option Plan, as amended (the “1996 Plan”), the 2008
Non-Employee Directors’ Equity Compensation Plan (the “Directors Plan”),
the 2006 Stock Plan (“2006 Plan”), the 2000 Employee Stock Purchase Plan
(the “ESPP”), and a stand-alone grant outside of our 2006 Stock
Plan.
|
(2)
|
Includes
shares available for issuance under the ESPP. As of October 31, 2008
an aggregate of 21,257 shares of common stock were available for issuance
under the ESPP.
|
Item
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
Transactions
with Related Persons
On
February 17, 2006, we entered an exclusive license agreement with IdeaMatrix,
Inc. (a company wholly owned by our former Vice President of New Product
Development (Brachytherapy), Richard Terwilliger), for certain brachytherapy
technology pertaining to needles and strands, used in the brachytherapy
manufacturing process. This technology is critical to our SurTRAK line of
products, sold in connection with our brachytherapy seeds. Under this exclusive
license agreement, we paid $125,000 upon execution of the license agreement on
February 17, 2006, and we are required to pay $125,000 per year over five years.
There is no annual renewal fee or royalty arising out of this license. The term
of this license expires upon the last expiring patent included in the license.
As part of this license agreement, we have agreed to indemnify Mr. Terwilliger
and IdeaMatrix, Inc. for claims arising from the licensed property, including
the claim raised in the Worldwide Medical Technology lawsuit against Mr.
Terwilliger and IdeaMatrix, Inc.
On
October 30, 2007, we entered into a Loan Agreement (the “Friede Loan Agreement”)
with Mr. John Friede (the “Lender”), a stockholder and former director of the
Company. Subject to the terms of the Friede Loan Agreement, the Lender agreed to
loan us $500,000 in two installments of $250,000 each. The loan was unsecured
and subordinated to the loan agreements with Silicon Valley Bank and Agility
Capital. In connection with the Friede Loan Agreement, we agreed to issue to the
Lender a warrant to purchase that number of shares of our common stock as shall
be equal to $200,000 divided by the Exercise Price, which is the per share
closing price of our common stock on the trading day before the issuance of the
warrant. On November 1, 2007, we executed the promissory note underlying the
loan and we received the first $250,000 installment. We and the Lender amended
the Friede Loan Agreement on November 20, 2007, prior to funding of the second
$250,000 installment, to extend the maturity date of the Friede Loan Agreement
from November 20, 2007 to December 20, 2007, and to reduce the borrowing
capacity to $250,000 from $500,000. The loan and accrued interest were paid in
full on December 20, 2007.
On
December 7, 2007, we entered into a Loan Agreement (the “Three Arch Loan
Agreement”) with Three Arch Capital, L.P., TAC Associates, L.P., Three Arch
Partners IV, L.P. and Three Arch Associates IV, L.P. (the “Lenders”). The
Lenders are, collectively, our largest stockholder, and Dr. Wilfred Jaeger and
Roderick Young, two of our directors, are affiliates of the Lenders. The
transaction contemplated by the Three Arch Loan Agreement was approved by a
committee of our Board of Directors consisting only of disinterested directors.
Under the Three Arch Loan Agreement, the Lenders loaned us $1.0 million and we
issued notes to the Lenders (the “Notes”). The Notes bear interest at an annual
rate equal to the prime rate plus six percent (6%) and are subordinated to our
indebtedness to SVB and Agility Capital LLC. The Notes are due and payable on
December 20, 2007, provided that if prior to December 20, 2007, SVB shall have
extended the maturity date under its Loan and Security Agreement with us (the
“SVB Loan Agreement”) until after December 20, 2007, then the Notes shall be due
and payable on the earliest of (i) February 4, 2008, (ii) the close of our
pending private investment public equity financing transaction (See Securities
Purchase Agreement below), or (iii) the maturity date under the SVB Loan
Agreement. In connection with the Loan Agreement, we have agreed to pay an
aggregate of $20,000 as a loan fee to the Lenders and have granted the Lenders
warrants to purchase, in the aggregate, 205,128 shares of our common stock at a
purchase price of $1.95 per share. The loan and accrued interest were paid in
full on January 24, 2008.
On
December 12, 2007, we entered into a Securities Purchase Agreement with the
Investors providing for the sale of 12,601,628 shares of our common stock and
warrants to purchase 630,081 shares of common stock for a total purchase price
of $15.5 million. As described above, Three Arch Partners is our largest
stockholder. SF Capital also is one of our significant stockholders. This
transaction was approved by a committee of our Board of Directors consisting
only of disinterested directors.
Director
Independence
Our
securities are listed on The Nasdaq Capital Market and are governed by its
listing standards. Our Board of Directors has determined that the
following four directors satisfy the current “independent director” standards
established by Nasdaq Marketplace Rules: Mr. Sabin, Mr. Sandberg, Mr. Toni and
Dr. Wilner.
The Board
of Directors has established three standing committees: the Audit Committee, the
Compensation Committee, and the Nominating and Corporate Governance
Committee. Each member of the Audit Committee and Nominating and
Corporate Governance Committee, respectively, meets the independence standards
set forth in Nasdaq Marketplace Rule 4200(a)(15). On the Compensation
Committee, Mr. Young does not meet the independence standards set forth in
Nasdaq Marketplace Rule 4200(a)(15).
Item
14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
Principal
Accountant Audit Fees and Services Fees
The
following table describes fees for professional audit services rendered by
SingerLewak LLP, our independent registered public accounting firm, for the
audit of our annual financial statements for the fiscal years ended
October 31, 2008 and 2007, respectively, and fees billed for other services
rendered by SingerLewak LLP, PricewaterhouseCoopers LLP and Georges & Moore
Accountancy Corporation during those periods.
Type of Fee
|
|
2008
|
|
|
2007
|
|
Audit
Fees
|
|
$
|
217,000
|
|
|
$
|
268,000
|
|
Audit
Related Fees
|
|
$
|
23,000
|
|
|
$
|
56,000
|
|
Tax
Fees
|
|
$
|
157,000
|
|
|
$
|
119,000
|
|
All
Other Fees
|
|
$
|
—
|
|
|
$
|
—
|
|
Total
|
|
$
|
397,000
|
|
|
$
|
443,000
|
|
Audit Fees.
Includes fees for
professional services rendered by SingerLewak LLP for the audit of our annual
financial statements in our Form 10-K and reviews of quarterly interim financial
statements included in our Form 10-Q. This category also includes fees for
services that generally only the independent registered public accounting firm
reasonably can provide to a company, such as procedures related to consents and
assistance with and review of documents filed with the SEC.
Audit-Related Fees.
Includes
fees for professional services rendered by SingerLewak LLP associated with
assurance and related services traditionally performed by the independent
registered public accounting firm and that are reasonably related to the
performance of the audit or review of our financial statements This category
includes fees related to assistance in financial due diligence related to
issuance of debt and common stock, accounting consultations
and consultations concerning financial accounting and reporting
standards.
Tax Fees
. Includes the fees
for professional services rendered by PricewaterhouseCoopers, LLP in 2007 and
2008, and Georges & Moore Accountancy Corporation in 2008 for tax
compliance, tax advice and tax planning.
Audit
Committee Pre-Approval Policies and Procedures
The Audit
Committee on an annual basis reviews audit and non-audit services performed by
the independent registered public accounting firm. All audit and non-audit
services are pre-approved by the Audit Committee, which considers, among other
things, the possible effect of the performance of such services on the auditors’
independence. The Audit Committee has considered the role of SingerLewak LLP in
providing services to us for the fiscal year ended October 31, 2008 and has
concluded that such services are compatible with their independence as our
auditors. The Audit Committee has established its pre-approval policies and
procedures, pursuant to which the Audit Committee approved all of the foregoing
audit and other services provided by SingerLewak LLP in fiscal years 2008 and
2007, respectively.
PART
IV
Item
15.
|
EXHIBITS,
FINANCIAL STATEMENT SCHEDULES
|
(b)
Exhibits
Exhibit
No.
|
|
Description
|
31.1*
|
|
Certification
of Chief Executive Officer Pursuant to Rule 13a-14(a)/15(d) of the
Securities Exchange Act of 1934.
|
31.2*
|
|
Certification
of Chief Financial Officer Pursuant to Rule 13a-14(a)/15(d) of the
Securities Exchange Act of 1934.
|
* Filed
herewith
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) 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.
|
NORTH
AMERICAN SCIENTIFIC, INC.
|
|
|
|
|
|
/s/JOHN
B. RUSH
|
February
27, 2009
|
By:
|
John
B. Rush
President
and Chief Executive
Officer
|
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