FORM 8-K
SECURITIES and EXCHANGE COMMISSION
Washington D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or l5 (d) of
The Securities Exchange Act of 1934
MEDISCIENCE TECHNOLOGY CORPORATION
(exact name of registrant as specified in charter)
New Jersey 0-7405 22-1937826
(state of Incorporation) (commission file No.) (IRS Employer Identification No.)
1235 Folksone Way, Cherry Hill, New Jersey 08034
(address of principle executive offices)
Registrant's telephone number, including area code (856) 428 7952
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(former address, if changed since last report)
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Other Materially Important Events
On November 17, 1999, Registrant, Mediscience Technology Corp, entered into
an employment contract with Frank S. Castellana MD engaging him as president and
Chief Executive Officer subject to a financial condition precedent Effective
February 1, 2000.
Upon satisfaction of it's condition precedent agreement and with the
successful achievement of certain performance milestones over a three year
period Framk S. Castellana MD could initially acquire various options and
warrants representing seven percent of the registrant's outstanding common as of
November 17, 1999
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
This Agreement dated November 17, 1999 (this "Agreement") by and between
Mediscience Technology Corp., a New Jersey corporation ("MDSC"), 1235 Folksone
Way, Cherry Hill, New Jersey 08034, and Frank S. Castellana ("Employee"), who
resides at 227 Stuart Road East, Princeton, New Jersey 08540
W I T N E S S E T H:
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For and in consideration of the covenants and undertakings set forth below,
the parties hereto hereby agree as follows:
1. MDSC agrees to employ Employee, and Employee accepts such employment, as
President and Chief Executive Officer of MDSC on the terms and conditions and
during the Term hereinafter set forth.
2. The initial term of Employee's employment hereunder shall commence on
February 1, 2000, or such other date as shall be mutually acceptable to Employee
and the Board of Directors (the "Board") of MDSC (the "Commencement Date") and
shall end on the third anniversary of the Commencement Date, said initial term
to be automatically extended by additional one-year renewal terms unless either
MDSC or Employee shall notify the other in writing, at least 120 days prior to
the end of the then current term, of intent to terminate this Agreement as of
the end of the then current term. In addition, this Agreement is terminable
prior to the expiration of its term as above provided in this Section 2, as
follows: (i) by MDSC for Cause (as such term is hereafter defined in Section 13
below), and (ii) upon the death or "permanent and total disability" (as such
term is defined in section 22(e)(3) of the Code) of Employee. The term of this
Agreement is herein referred to as the "Term")
3. As President and Chief Executive Officer of MDSC, Employee shall,
subject to the control of the Board, have general charge of the business and
affairs of MDSC and shall have the direction of all other officers, agents and
employees of MDSC (except the Chairman of the Board and Treasurer, who shall
report directly to the Board). Employee may assign such duties to the other
officers of MDSC as he deems appropriate. As President and Chief Executive
Officer, Employee shall, when present, preside at all meetings of the
shareholders of MDSC and shall also preside at all meetings of the Board at
which the Chairman of the Board is not present. Employee shall be ex officio a
member of all committees of the Board.
4. Employee has prepared a comprehensive business plan for the transition
of MDSC from a development stage to a profitable commercial company (the
"Business Plan"). The Business Plan has been approved by the Board and by
Sarnoff Corporation. Employee shall use his best efforts to cause MDSC to meet
the goals and objectives of the Business Plan including, without limitation,
promptly obtaining offers of equity investment in the Company on terms
acceptable to the Board staged to meet the Business Plan requirements. Nothing
herein shall require Employee to take any action which would require him to
become registered as a broker, dealer, agent or finder under any applicable
federal or state law.
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5. In consideration of Employee's services pursuant to this Agreement,
during the Term MDSC shall pay Employee an annual base salary of $100,000,
payable monthly in arrears. Annual base salary shall be subject to annual review
based on the on- going financial capability of MDSC and MDSC's ability to timely
satisfy the five critical milestones (each, a "Critical Milestone") described on
page 54 of the Business Plan (i.e. the completion on budget of (i) preclinical
toxicity studies within 9 months of the initial funding contemplated by the
Business Plan (the "Initial Funding Date"), (ii) device development and
preclinical validation within 15 months of the Initial Funding Date, (iii) phase
I clinical trials within 24 months of the Initial Funding Date, (iv) phase 111
clinical trials and PMA submission to the FDA within 34-1/2 months of the
Initial Funding Date and (v) PMA approval within 36 months of the Initial
Funding Date). In addition, MDSC shall pay Employee a cash bonus of $50,000 per
year for the timely achievement on the Critical Milestones and may also, in the
discretion of the Board, pay Employee an additional bonus (either in cash or
MDSC common stock at the election of the Board) upon MDSC's timely satisfaction
on budget of each Critical Milestone so satisfied. In the event that the Term
shall be ended by the death or the permanent and total disability of Employee,
base salary and bonuses shall continue to be paid during the one-year period
following the end of the Term.
6. Employee acknowledges that MDSC does not now have any group life,
disability or medical insurance, or cash bonus, deferred compensation, pension,
retirement or other employee benefit plan of any kind or any liability insurance
or director and officer insurance. Employee agrees that MDSC shall not be
required to institute any of such plans or insurance until and unless its
financial resources permit and then only to the extent contemplated by the
Business Plan. Once instituted in accordance with the Business Plan, Employee
shall be entitled to participate in all such plans and to be covered by all such
insurance. Employee shall not be entitled to reimbursement for the cost of any
insurance Employee obtains or maintains or for the cost or loss of opportunity
to contribute to any pension or retirement plan, but shall be entitled to a car
allowance and other fringe benefits up to a maximum of $25,000 per year during
the Term (in addition to all fringe benefits required by law to be provided to
Employee). During the Term, Employee shall be entitled to: (i) vacation time
each year in accordance with MDSC's standard employee policy in respect thereof
from time to time in effect in addition to the holidays normally observed by
MDSC; and (ii) prompt reimbursement for reasonable out-of-pocket business
expenses incurred by Employee and budgeted in the Business Plan in accordance
with MDSC's standard employee reimbursement policy from time to time in effect.
In addition, MDSC shall reimburse Employee for all reasonable expenses incurred
by him prior to the Commencement Date in connection with preparing the Business
Plan and conducting due diligence, which as of the date of this Agreement
aggregate $700.
7. To the maximum extent permitted by applicable law, MDSC shall indemnify
Employee, and hold Employee harmless from and against, any loss, damage or claim
to which Employee may become subject as the result of his acts or omissions as
the President and Chief Executive Officer of MDSC, and shall provide at its own
expense legal counsel to defend Employee in connection therewith. Such counsel
shall be MDSC's counsel unless MDSC's counsel shall have a conflict of interest,
in which case Employee may select counsel of his choice and MDSC shall promptly
reimburse Employee for the reasonable fees and expenses of such counsel.
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8. During the Term, Employee shall devote his full time and energies to the
business of MDSC. Notwithstanding the foregoing and provided that such
activities do not materially impair the performance by Employee of his duties
under this Agreement as President and Chief Executive Officer of MDSC, Employee
shall not be prohibited from: (i) engaging in charitable and civic activities,
(ii) discharging those obligations which Employee is subject to on the date of
this Agreement as summarized on Annex I hereto; (iii) continuing to participate
in those businesses listed on Annex 2 hereto; and (iv) retaining for his
personal benefit all fees, honoraria and profits from the activities permitted
by clauses (i), (ii) and (iii) of this sentence.
9. The Board has adopted an incentive stock option plan (the " 1999 Plan")
complying with section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and will recommend the 1999 Plan to MDSC's shareholders for their
approval at the next annual meeting of shareholders of MDSC which will take
place within 12 months after the date of the Board's adoption of the 1999 Plan.
The 1999 Plan permits holders of options granted thereunder to pay the exercise
price due upon their exercise of such options either with cash or shares of MDSC
Common Stock valued at the fair market value of such shares at the time of such
exercise. The 1999 Plan will provide for the maximum periods permitted by the
Code during which the Option can be exercised following the death, permanent and
total disability or termination of employment.
10. On the date of this Agreement, MDSC will grant to Employee an incentive
stock option pursuant to the 1999 Plan (the "Option") to purchase up to 914,373
shares of MDSC Common Stock at an option price of $.32 per share, subject to
adjustment in the event of stock splits, reverse stock splits and other similar
events and also in the event of the issuance of any shares of MDSC common stock
in lieu of salary, consulting fees or services rendered, upon the exercise of
any options (other than the Option) or warrants (other than the Warrant referred
to in Section 11 below) or in the first round of equity financing contemplated
by the Business Plan. Approval of this Employment Agreement by the Board shall
also constitute the Board's approval of equally broad anti-dilution protection
for the present equity positions (i.e. Common Stock, options, warrants,
convertible promissory notes) of MDSC's two founders, Dr. Robert Alfano and
Peter Katevatis. The Option will be exercisable: (a) to the extent of 304,791
shares from and after the later of: (i) the first anniversary of the date of
this Agreement or (ii) the date on which MDSC shall have received at least
$3.343 million in equity investments based upon the Business Plan; (b) to the
extent of an additional 304,791 shares from and after the later of: (i) the
second anniveraries of the date of this Agreement or (ii) the date on which
MDSC shall have received at least $6.315 million in equity investments based
upon the Business Plan; and (c) to the extent of an additional 304,791 shares
from and after the later of: (i) the third anniversaries of the date of this
Agreement or (ii) the date on which MDSC shall have received at least $9.052
million in equity investments based upon the Business Plan. Notwithstanding the
foregoing provisions of this Section 10, the Option will be fully exercisable in
the event of a "change in control" resulting from the sale, transfer or
disposition of all or substantially all of the assets of MDSC, a merger
involving MDSC in which a majority of the Board of Directors of the surviving
entity is not composed of members of the Board of MDSC as of the day preceding
the effective date of the merger, or the leveraged buyout of MDSC (a "Chan~e in
Control"). The Option will expire on the tenth anniversary of the date of this
Agreement.
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11. On the date of this Agreement, MDSC shall sell and Employee shall
purchase for $ 100 a warrant to purchase up to 1,978,746 shares of MDSC Common
Stock (the "Warrant") at an exercise price of $.05 per share for the first
150,000 shares exercised and at an exercise price of $.50 per share for the
remaining 1,828,746 shares subject to the Warrant, subject to adjustment in the
event of stock splits, reverse stock splits and other similar events and also in
the event of the issuance of any shares of MDSC common stock in lieu of salary,
consulting fees or services rendered upon the exercise of any options (other
than the Option) or warrants (other than the Warrant) or in the first round of
equity financing contemplated by the Business Plan. The Warrant will be
exercisable: (a) to the extent of 150,000 shares from and after the Commencement
Date; (b) to the extent of 609,582 shares from and after the later of: (i) the
first anniversary of the date of this Agreement and (ii) the date on which MDSC
shall have received at least $3.343 million in equity investments based upon the
Business Plan, (c) to the extent of an additional 609,582 shares from and after
the later of: (i) the second anniversaries of the date of this Agreement or (ii)
the date on which MDSC shall have received at least $6.315 million in equity
investments based upon the Business Plan; and (d) to the extent of an additional
609,582 shares from and after the later of: (i) the third anniversaries of the
date of this Agreement or (ii) the date on which MDSC shall have received at
least $9.052 million in equity investments based upon the Business Plan.
Notwithstanding the foregoing provisions of this Section 11, the Warrant will be
fully exercisable in the event of a Chamge in Control. MDSC shall credit
Employee with $25,000 of exercise price in lieu of a signing bonus. The Warrant
will expire on the tenth anniversary of the date of this Agreement.
12. The Warrant and the Option will bear a legend to the effect that the
Warrant or Option, as the case may be, and the shares of Common Stock of MDSC to
be issued upon exercise thereof (respectively, the "Ol~tion Shares" and the
"Warrant Shares") have not been registered under the Securities Act of 1933 (the
"Act") or the Blue Sky laws of any jurisdiction (the "Blue Sky Laws"), that the
Warrant and the Option have been, and if issued the Warrant Shares and the
Option Shares will be, acquired by Employee for investment, and that neither the
Warrant nor the Option nor the Warrant Shares nor the Option Shares may be sold,
transferred, pledged or hypothecated in the absence of an effective registration
statement for the Warrant and/or the Warrant Shares or the Option and/or the
Option Shares, as the case may be, under the Act and the Blue Sky Laws or an
opinion of counsel to MDSC that registration is not required under the Act or
the Blue Sky Laws. MDSC shall use its best efforts to include in any
registration statement filed under the Act during the Term the same proportion
of the total number Warrant Shares and Option Shares then owned by Employee as
Peter Katevatis shall have included in such registration statement.
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13. In the event that Employee voluntarily terminates his employment or
Employee's employment is terminated by MDSC for Cause, Employee shall be
entitled to receive compensation and benefits earned by him and/or accruing to
him prior to the date of such termination, prorated up to and including such
date. In the event that Employee's employment is terminated by MDSC without
Cause or in connection with a Change in Control, Employee shall be entitled to
receive compensation and benefits earned by him and/or accruing to him prior to
the date of such termination, prorated up to and including the first anniversary
of such date or, if longer, until the scheduled expiration date of the Term. For
purposes of this Agreement, "Cause" means any of the following: (i) any act or
acts of Employee constituting a felony (or its equivalent) under the laws of the
United States, any state thereof or any foreign jurisdiction; or (ii) any
material breach by Employee of this Agreement or the policies of MDSC or any of
its subsidiaries or the willful and persistent (after written notice to
Employee) failure or refusal of Employee to perform his duties of employment or
comply with any lawful directives of the Board; or (iii) a course of conduct by
Employee amounting to gross neglect, willful misconduct or dishonesty; or (iv)
any misappropriation of material property (whether real, personal, tangible or
intangible) of MDSC by Employee; or (v) any misappropriation of a corporate or
business opportunity of MDSC or any of its subsidiaries by Employee. Anything to
the contrary herein notwithstanding, "Cause" shall not include Employee's
failure or inability to meet or cause MDSC to meet any particular performance
goals or targets or MDSC's dissatisfaction with Employee's achievements or the
financial perfomance of MDSC.
14. During Employee's employment by MDSC and during any time thereafter
while Employee remains a member of the Board or a consultant to MDSC, he will
develop and be exposed to confidential information and trade secrets of MDSC as
well as similar information which MDSC has received from others (e.g. Sarnoff
Corporation and CUNY) and considers to be confidential. Employee understands
that the maintenance of the proprietary character of such information is vital
to MDSC. Accordingly, at any time during Employee's employment and at all times
thereafter, he will not disclose to others any such confidential information or
trade secrets. The provisions of this Section 14 shall not apply after the
proprietary information has been: (i) voluntarily disclosed to the public by
MDSC; or (ii) independently developed and disclosed by others; or (iii)
otherwise enters the public domain through lawful means.
15. For an 18-month period following the termination of his employment
under the terms of Section 2 above, Employee shall not for his account or in any
other capacity (including as an officer, member, employee, consultant, partner,
representative, sole proprietor or advisor of another) participate in any entity
(or affiliate or connect with, or render service to, or furnish assistance or
advice to, any person, corporation, firm or other organization), which, in
competition with MDSC, (a) renders medical services or engages in research,
development, marketing and/or manufacture of medical devices or equipment or (b)
utilizes optical spectroscopy methods and instrumentation to: (i) differentiate
dysplastic or malignant from nonmalignant tissue and cellular smears; (ii)
determine the efficacy of vitamins and/or and other chemicals in reversing
pre-cancerous conditions; (iii) differentiate between sterile and non-sterile
environments; (iv) differentiate between residue and non-residue enviroments;
(v) create images in turbid media using time and space gated technology for
optical mammography and tomography; or (vi) determine healing from sores, wounds
and burns. Without limiting MDSC's other remedies, in the event of Employee's
actual or threatened breach of this Section 15, MDSC shall be entitled to
injunctive relief to enforce it.
<PAGE>
16. This Agreement shall inure to and be binding on the successors and
assigns of MDSC. This Agreement contemplates personal services and shall not be
assignable by Employee.
17. This Agreement supersedes in its entirety all other agreements and
understandings, both written and oral, regarding Employee's employment with
MDSC.
18. Unless otherwise hereinafter designated by either party, any notices or
written communications under this Agreement shall be faxed and confirmed by
certified mail to the respective addresses of the parties set forth above.
19. This Agreement, the Option and the Warrant contain the entire
understanding and agreement between the parties with respect to the subject
matter hereof and thereof. The invalidity of any provision of this Agreement
shall not impair the validity of any other provision. In the event that any
provision herein which specifies a time period is or is held to be invalid or
unenforceable, such time period shall be deemed to be the maximum enforceable
time period consistent with applicable law. Any representations, promises or
conditions in connection therewith not incorporated herein, in the Option or in
the Warrant shall not be binding upon either party. No modification, waiver or
agreement of termination of this Agreement shall be binding upon either party
unless made in writing and signed for or on behalf of such party.
20. This Agreement shall be construed in accordance with the laws of the
State of New Jersey and MDSC and Employee hereby agree to submit any and all
disputes to binding arbitration in New Jersey with the American Arbitration
Association..
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IN WITNESS WHEREOF, the parties have executed this Agreement on and as of
the date first above written.
MEDISCIENCE TECHNOLOGY CORP.
By: /s/ Peter Katevatis
-------------------------------
Peter Katevatis
Chairman of the Board and Chief
Executive Officer
/s/ Frank S. Castellana
-------------------------------
Frank S. Castellana
<PAGE>
Annex A to
Employment Agreement
Dated November 17, 1999
The only continuing obligation of Employee which predates the Agreement is the
consulting obligation to Behrman Capital. Employee's consulting obligation under
this arrangement does not and will not be in areas that compete with those in
which MDSC now or in the future engages.
<PAGE>
Annex B to
Employment Agreement
Dated November 17, 1999
The only businesses in which Employee participates which will require Employee's
continuing participation are Roesch Scientific Corporation and C&K Associates.
Such businesses do not and will not engage in activities which compete with
those in which MDSC now or in the future engages.
<PAGE>
SIGNATURES
Pursuant of the requirements of the Securities Exchange Act of 1934, In
Registrant has duly caused this report to be signed on its behalf by the
undesigned hereunto duly authorized
Mediscience Technology Corporation
MEDISCIENCE TECHNOLOGY CORP.
/s/ Peter Katevatis
-----------------------------------
Peter Katevatis, Esq., Chairman
Dated November l8, 1999
