SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ____ to ____
Commission file number 0-13634
MACROCHEM CORPORATION
(Exact name of registrant as
specified in its charter)
Delaware 04-2744744
-------- ----------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
110 Hartwell Avenue, Lexington, Massachusetts 02421-3134
--------------------------------------------------------
(Address of principal executive offices, Zip Code)
(781) 862-4003
--------------
(Registrant's telephone number, including area code)
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.
Yes X No
------ ------
As of June 30, 1999, there were 22,324,020 shares of Common Stock, $.01 par
value per share, of the Registrant outstanding.
<PAGE>
MACROCHEM CORPORATION
INDEX
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Page Number
-----------
PART I Financial Information
Item 1 Unaudited Financial Statements
Unaudited Balance Sheets
June 30, 1999 and December 31, 1998 3-4
Unaudited Statements of Operations
Three Months and Six Months Ended
June 30, 1999 and 1998 5
Unaudited Statements of Cash Flows
Six Months Ended June 30, 1999 and 1998 6
Notes to Unaudited Financial Statements 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-11
Item 3 Quantitative and Qualitative Disclosures About Market Risk 11
PART II Other Information
Item 4 Submission of Matters to a Vote of Security Holders 12
Item 6 Exhibits and Reports on Form 8-K 12-13
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
------------------------------
MACROCHEM CORPORATION
UNAUDITED BALANCE SHEETS
ASSETS
------
June 30, December 31,
1999 1998
---- ----
CURRENT ASSETS:
Cash and cash equivalents $17,428,998 $20,504,097
Accounts receivable 171,177 48,393
Prepaid expenses and other
current assets 182,261 204,181
Note receivable and related
accrued interest from affiliate 20,153 ---
---------- ----------
TOTAL CURRENT ASSETS 17,802,589 20,756,671
---------- ----------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation: 1999-$828,892; 1998-$731,080 431,494 397,483
---------- ----------
OTHER ASSETS:
Patents, net of accumulated amortization:
1999-$88,173; 1998-$79,600 402,207 351,110
Deposits 4,460 4,460
---------- ----------
TOTAL OTHER ASSETS 406,667 355,570
---------- ----------
TOTAL ASSETS $18,640,750 $21,509,724
========== ==========
(Continued)
<PAGE>
MACROCHEM CORPORATION
UNAUDITED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
June 30, December 31,
1999 1998
---- ----
CURRENT LIABILITIES:
Accounts payable $ 12,681 $ 116,246
Accrued clinical trial costs 180,158 498,716
Other accrued expenses 239,873 156,210
Deferred compensation and related
accrued interest 94,794 93,563
---------- ----------
TOTAL CURRENT LIABILITIES 527,506 864,735
---------- ----------
DEFERRED REVENUE 500,000 500,000
---------- ----------
TOTAL LIABILITIES 1,027,506 1,364,735
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock --- ---
Common stock, $.01 par value; authorized
60,000,000 shares; issued 22,453,564
shares, outstanding 22,324,020
shares at June 30, 1999 and issued
22,281,245 shares, outstanding
22,140,328 shares at December 31, 1998 224,536 222,812
Additional paid-in capital 48,874,462 47,295,449
Unearned compensation ( 400,262) ( 170,676)
Accumulated deficit (30,441,632) (26,508,119)
---------- ----------
Total 18,257,104 20,839,466
Less cost of treasury stock (129,544 shares
at June 30, 1999 and 140,917 shares
at December 31, 1998) ( 643,860) ( 694,477)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 17,613,244 20,144,989
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 18,640,750 $ 21,509,724
========== ==========
The accompanying notes are an integral part of these unaudited financial
statements.
(Concluded)
<PAGE>
<TABLE>
MACROCHEM CORPORATION
UNAUDITED STATEMENTS OF OPERATIONS
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
----------------------------- ------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Research contract $ 175,225 $ --- $ 233,971 $ ---
---------- ---------- ---------- ----------
TOTAL REVENUES $ 175,225 $ --- $ 233,971 $ ---
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Research and development 1,606,220 996,690 3,156,609 1,721,536
Marketing, general and administrative 635,565 471,496 1,413,159 954,240
Consulting fees with related parties 12,000 12,000 24,000 24,000
---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES 2,253,785 1,480,186 4,593,768 2,699,776
---------- ---------- ---------- ----------
LOSS FROM OPERATIONS ( 2,078,560) ( 1,480,186) ( 4,359,797) ( 2,699,776)
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest income 202,207 295,446 427,514 605,745
Interest expense ( 608) ( 1,066) ( 1,231) ( 3,031)
----------- ---------- ---------- ----------
TOTAL OTHER INCOME 201,599 294,380 426,283 602,714
---------- ---------- ---------- ----------
NET LOSS $( 1,876,961) $( 1,185,806) $( 3,933,514) $( 2,097,062)
========== ========== ==========
BASIC AND DILUTED
NET LOSS PER SHARE $( 0.08) $( 0.05) $( 0.18) $( 0.09)
========== ========== ========== ==========
SHARES USED TO COMPUTE
BASIC AND DILUTED NET
LOSS PER SHARE 22,199,795 22,244,358 22,266,363 22,247,522
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these unaudited financial
statements.
<PAGE>
<TABLE>
MACROCHEM CORPORATION
UNAUDITED STATEMENTS OF CASH FLOWS
<CAPTION>
For the six months ended June 30,
---------------------------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $( 3,933,514) $( 2,097,062)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation and amortization 106,385 86,971
Stock-based compensation 392,512 92,476
401(k) contribution in company common stock 38,169
Increase (decrease) in cash from:
Accounts receivable ( 122,784) ---
Prepaid expenses and other current asset 21,920 ( 40,498)
Note receivable and related accrued interest from affiliate ( 20,153)
Accounts payable and accrued expenses ( 338,460) 225,166
Deferred compensation and related accrued interes 1,231 2,129
---------- ----------
Total adjustments 78,820 366,244
Net cash used by operating activities ( 3,854,694) ( 1,730,818)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities --- (21,197,757)
Expenditures for property and equipment ( 131,823) ( 224,251)
Additions to patents ( 59,670) ( 43,373)
---------- ----------
Net cash used for investing
activities ( 191,493) (21,465,381)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease --- ( 8,925)
Proceeds from exercise of common stock options 136,875 169,432
Proceeds from exercise of common stock warrants 834,213 38,528
---------- ----------
Net cash provided from financing activities 971,088 199,035
Net decrease in cash and cash equivalents ( 3,075,099) (22,997,164)
Cash and cash equivalents, beginning of period 20,504,097 24,952,121
---------- ----------
Cash and cash equivalents, end of period $ 17,428,998 $ 1,954,957
========== ==========
</TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
During the six months ended June 30, 1999 and 1998, cash paid for interest
aggregated $0 and $902, respectively.
The Company did not pay any income taxes during those periods.
The accompanying notes are an integral part of these unaudited financial
statements.
<PAGE>
MACROCHEM CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) As permitted by the rules of the Securities and Exchange Commission (the
"Commission") applicable to quarterly reports on Form 10-Q, these notes are
condensed and do not contain all disclosures required by generally accepted
accounting principles. Reference should be made to the financial statements
and related notes included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998.
In the opinion of management of the Company, the accompanying unaudited
financial statements reflect all adjustments which were of a normal
recurring nature necessary for a fair presentation of the Company's
financial position as of June 30, 1999 and June 30, 1998, and results of
operations and cash flows for the three and six months ended June 30, 1999,
and 1998.
The results disclosed in the Unaudited Statements of Operations for the
three and six months ended June 30, 1999 are not necessarily indicative of
the results to be expected for the full year.
(2) Certain prior year amounts have been reclassified to conform to the current
presentation.
(3) The Company granted 243,750 common stock options under the 1994 Equity
Incentive Plan during the six months ended June 30, 1999. During this same
period, 35,000 options under the 1994 Equity Incentive Plan were exercised.
In addition, during this period, 44,000 options under the 1994 Equity
Incentive Plan were forfeited. All options were granted with an exercise
price at the fair market value of the underlying common stock determined on
the date of grant.
(4) Potential common shares are not included in the per share calculations for
diluted EPS, because the effect of their inclusion would be anti-dilutive.
Anti-dilutive potential shares not included in per share calculations for
the six months ended June 30, 1999 and 1998 were approximately 2,534,000
and 2,357,000, respectively. Anti-dilutive potential shares not included in
per share calculations for the three months ended June 30, 1999 and 1998
were approximately 2,510,000 and 2,656,000, respectively.
(5) Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income", which requires businesses to disclose comprehensive
income and its components in their general-purpose financial statements.
Comprehensive income (loss) is equal to net income (loss) for the three and
six months ended June 30, 1999 and 1998.
(6) In 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and hedging Activities." SFAS No.
133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. The provisions of SFAS No. 133 will
be effective for the Company beginning January 1, 2001. The Company has not
completed an evaluation of the effect of adopting SFAS No. 133 on the
Company's financial position and results of operations.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
MacroChem Corporation's primary business is the development of
pharmaceutical products for commercialization by applying SEPA(R) (Soft Enhancer
of Percutaneous Absorption), its patented topical drug delivery technology. SEPA
compounds, when properly combined with drugs, provide pharmaceutical
formulations (creams, gels, solutions, etc.) that enhance the transdermal
delivery of drugs into the skin or into the bloodstream. The Company currently
derives no significant revenue from product sales, royalties or license fees.
The Company plans to develop specific SEPA formulations for use with proprietary
and non-proprietary drugs manufactured by pharmaceutical companies, and to
commercialize these products through the formation of partnerships, strategic
alliances and license agreements with those companies. In order to attract
strategic partners, the Company is conducting clinical testing of certain
SEPA-enhanced drugs.
The Company's results of operations can vary significantly from year to
year and quarter to quarter, and depend, among other factors, on the signing of
new licenses and product development agreements, the timing of revenues
recognized pursuant to license agreements, the achievement of milestones by
licensees, the progress of clinical trials conducted by the licensees and the
Company and the degree of research, marketing and administrative effort. The
timing of the Company's revenues may not match the timing of the Company's
associated product development expenses. To date, research and development
expenses have generally exceeded revenue in any particular period and/or fiscal
year.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
During the three months ended June 30, 1999, the Company had $175,225 of
revenues as compared to no revenues during the same period in 1998. All of the
revenue for 1999 is represented by one research contract related to the
Company's proprietary SEPA technology.
Research and development expenses in the 1999 period increased
approximately $609,500 (61%) over the comparable 1998 period. Clinical trial
efforts and costs related to the Company's new product under development,
Benefen(TM), accounted for most of this increase over 1998.
Marketing, general and administrative expenses increased approximately
$164,000 (35%) over the comparable 1998 period. This increase is due primarily
to stock compensation and consulting fees associated with financial advisors,
and fees associated with legal counsel.
Total other income decreased approximately $92,800, resulting primarily
from decreased interest income earned on reduced cash and cash equivalents.
<PAGE>
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
During the six months ended June 30, 1999, the Company had $233,971 of
revenues as compared to no revenues during the same period in 1998. All of the
revenue for 1999 is represented by one research contract related to the
Company's proprietary SEPA technology.
Research and development expenses in the 1999 period increased
approximately $1,435,100 (83%) over the comparable 1998 period. Clinical trial
efforts and costs related to the Company's new product under development,
Benefen(TM), accounted for most of this increase over 1998.
Marketing, general and administrative expenses increased approximately
$458,900 (48%) over the comparable 1998 period. This increase is due primarily
to stock compensation and consulting fees associated with financial advisors,
and fees associated with legal counsel.
Total other income decreased approximately $176,400, resulting primarily
from decreased interest income earned on reduced cash and cash equivalents.
YEAR 2000 COMPLIANCE
Many existing computer programs use only two digits, rather than four, to
represent a year. The Year 2000 ("Y2K") problem arises because date-sensitive
software or hardware written or developed in this fashion may not be able to
distinguish between 1900 and 2000, and programs written in this manner that
perform arithmetic operations, comparisons or sorting of date fields may yield
incorrect results when processing a Y2K date. The Y2K problem could potentially
cause system failures or miscalculations that could disrupt operations.
The Company has appointed a Director of Year 2000 Compliance who, along
with an outside Y2K consultant, recently completed a review, which included
testing, of the Company's computer systems. This review of internal financial
and information technology systems was completed in the fourth quarter of 1998.
The Company has evaluated and prioritized the problems, which are not considered
significant. The Y2K consultant has certified that the Company's internal
computer systems are Year 2000 Compliant.
The Company intends to continuously identify and prioritize critical
vendors and suppliers and communicate with them about their plans and progress
in addressing their Y2K problems. The Company has implemented a policy to
exclude the use of any vendors which are not Y2K compliant.
Based on the efforts described above, the Company currently believes that
its systems are Y2K compliant. However, there can be no assurance that all Y2K
problems have been successfully identified, or that the necessary corrective
actions were taken. Failure to successfully identify and remediate such Y2K
problems in a timely manner could have a material adverse effect on the
Company's results of operations, financial position or cash flow.
The Company has created a formal contingency plan for mission critical Y2K
problems. Such plan includes having arrangements for alternate suppliers and
using manual intervention where necessary. If it becomes necessary for the
Company to take these corrective actions, it is uncertain whether this would
result in significant interruptions of business operations or would have a
material adverse effect on the Company's results of operations, financial
position or cash flow.
<PAGE>
As of June 30, 1999, the Company had not incurred significant costs related
to the Y2K problem, and does not expect to do so in the future. Overall, the
Company anticipates that incremental costs to the Company related to the Y2K
problem will not exceed $60,000, but there can be no assurance that such costs
will not be greater that anticipated.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the primary source of funding for the Company's operations
has been the private and public sale of its securities, and to a lesser extent,
the licensing of its proprietary technology, research contracts, and the limited
sales of products and test materials.
During the first six months of 1999, the Company received aggregate net
proceeds of $136,875 from the exercise of stock options and $834,213 from the
exercise of stock warrants, compared to approximately $169,432 and $38,528 for
the six months ended June 30, 1998. At June 30, 1999 working capital was
approximately $17.3 million, compared to $19.9 million at December 31, 1998. The
reduction in the Company's working capital was due primarily to the cash used by
operating activities. Until such time as the Company obtains agreements with
third-party licensees or partners to provide funding for the Company's
anticipated business activities or the Company is able to obtain funds through
the private or public sale of its securities, the Company's working capital will
be utilized primarily to fund its operating activities.
Pursuant to a plan approved by the Company's Board of Directors, the
Company is authorized to repurchase 1,000,000 shares of its common stock to be
held as treasury shares for future use. During the six months ended June 30,
1999, the Company did not repurchase any shares. At June 30, 1999, 129,544
repurchased shares remain available for future use and 845,150 shares remain
available for repurchase.
Capital expenditures and patent development costs for the six months ended
June 30, 1999 aggregated approximately $191,500. The Company expects capital
expenditures and patent development costs for the remainder of the year to be
consistent with expenditures made to date.
The Company's long term capital requirements will depend upon numerous
factors, including the progress of the Company's research and development
programs; the resources that the Company devotes to self-funded clinical testing
of SEPA enhanced compounds; proprietary manufacturing methods and advanced
technologies; the ability of the Company to enter into additional licensing
arrangements or other strategic alliances; the ability of the Company to
manufacture products under those arrangements; and the demand for its products
or the products of its licensees or strategic partners if and when approved for
sale by regulatory authorities. In any event, substantial additional funds will
be required before the Company is able to generate revenues sufficient to
support its operations. There is no assurance that the Company will be able to
obtain such additional funds on favorable terms, if at all. The Company's
inability to raise sufficient funds could require it to delay, scale back or
eliminate certain research and development programs.
<PAGE>
The Company believes that its existing cash and cash equivalents will be
sufficient to meet its operating expenses and capital expenditure requirements
for at least the next twelve months. The Company's cash requirements may vary
materially from those now planned because of changes in focus and direction of
the Company's research and development programs, competitive and technical
advances, patent developments or other developments. It is not believed that
inflation will have any significant effect on the results of the Company's
operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
CASH AND CASH EQUIVALENTS
As of June 30, 1999, the Company is exposed to market risks which relate
primarily to changes in U.S. interest rates. The Company's cash equivalents are
subject to interest rate risk and will decline in value if interest rates
increase. Due to the short duration of these financial instruments, three months
or less, changes to interest rates would not have a material effect upon the
Company's financial position. A hypothetical 10% change in interest rates would
result in an increase or decrease of approximately $20,000 and $43,000,
respectively, to reported interest income within the Company's statements of
operations for the three and six months ended June 30, 1999.
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS IN THIS REPORT AND IN
FORWARD-LOOKING STATEMENTS MADE FROM TIME TO TIME BY THE COMPANY ON THE BASIS OF
MANAGEMENT'S THEN-CURRENT EXPECTATIONS. FACTORS THAT MIGHT CAUSE SUCH A
DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO THE FOLLOWING: THE COMPANY'S HISTORY
OF OPERATING LOSSES AND NEED FOR CONTINUED WORKING CAPITAL; TECHNOLOGICAL
UNCERTAINTY RELATING TO TRANSDERMAL DRUG DELIVERY SYSTEMS AND THE EARLY STAGE OF
DEVELOPMENT OF THE COMPANY'S PROPOSED PRODUCTS; THE COMPANY'S NEED FOR
SIGNIFICANT ADDITIONAL PRODUCT DEVELOPMENT EFFORTS AND ADDITIONAL FINANCING;
UNCERTAINTIES RELATED TO CLINICAL TRIALS OF THE COMPANY'S PROPOSED PRODUCTS; THE
COMPANY'S DEPENDENCE ON THIRD PARTIES FOR COMMERCIALIZATION; NO ASSURANCE OF
LICENSE ARRANGEMENTS; THE LACK OF SUCCESS OF THE COMPANY'S PRIOR DEVELOPMENT
EFFORTS; UNCERTAINTIES RELATED TO GOVERNMENT REGULATION AND REGULATORY
APPROVALS; THE COMPANY'S DEPENDENCE ON THIRD PARTIES FOR THE FDA APPLICATION
PROCESS; THE COMPANY'S LACK OF EXPERIENCED MARKETING PERSONNEL AND DEPENDENCE ON
THIRD PARTIES FOR MARKETING AND DISTRIBUTION; THE COMPANY'S DEPENDENCE ON THIRD
PARTIES FOR MANUFACTURING; THE COMPANY'S RELIANCE ON KEY EMPLOYEES, THE LIMITED
PERSONNEL OF THE COMPANY AND ITS DEPENDENCE ON ACCESS TO SCIENTIFIC TALENT;
UNCERTAINTIES RELATING TO COMPETITION, PATENTS AND PROPRIETARY TECHNOLOGY;
UNCERTAINTIES RELATING TO RISKS OF PRODUCT LIABILITY CLAIMS, LACK OF PRODUCT
LIABILITY INSURANCE, AND EXPENSE AND DIFFICULTY OF OBTAINING ADEQUATE INSURANCE
COVERAGE; UNCERTAINTY OF PHARMACEUTICAL PRICING AND RELATED MATTERS; AND OTHER
FACTORS. ADDITIONAL INFORMATION ON THESE AND OTHER FACTORS WHICH COULD AFFECT
THE COMPANY'S ACTUAL RESULTS AND EXPERIENCE ARE INCLUDED IN THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 AND, IN PARTICULAR, THE
SECTION ENTITLED "RISK FACTORS".
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 24, 1999, the Company held its Annual Meeting of Stockholders to
vote on the following proposals:
1. To elect six members of the Board of Directors. Nominees for Director
were: a) Carlos M. Samour; b) Alvin J. Karloff; c) Willard M.
Bright; d) Peter G. Martin; e) Stephen J. Riggi; f) Michael A. Davis
("Proposal No. 1").
2. To ratify the appointment of Deloitte & Touche LLP, as independent
auditors for the Company for the fiscal year ending December 31, 1999.
Each of the proposals was adopted with a total vote as follows:
Shares
Shares Voting Against Shares Broker
Proposal Voting For or Authority Withheld Abstaining Non-Votes
- -------- ---------- --------------------- ---------- ---------
No. 1
Carlos M. Samour 19,648,987 694,516
Alvin J. Karloff 19,637,887 705,616
Willard M. Bright 19,648,646 694,857
Peter G. Martin 19,654,337 689,166
Stephen J. Riggi 19,653,531 689,972
Michael A. Davis 19,653,190 690,313
No. 2 20,141,473 141,138 53,892
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith:
10.14 Amended form of Employment Agreement between the Company and
Dr. Carlos M. Samour
10.15 Amended form of Employment Agreement between the Company and
Alvin J. Karloff.
10.16 Form of Employment Agreement between the Company and
Dr. Paul J. Schechter.
27. Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
MacroChem Corporation
(Registrant)
August 13, 1999 /s/ Alvin J. Karloff
--------------------------
Alvin J. Karloff
President & C.E.O.
/s/ William P. Johnson
--------------------------
William P. Johnson
Treasurer & Secretary
<PAGE>
AMENDMENT NO. 1, made June 24, 1999 ("Amendment"), to Employment Agreement
made October 14, 1992 (the "Agreement"), by and between MacroChem Corporation, a
Delaware corporation with offices at 110 Hartwell Avenue, Lexington,
Massachusetts 02421 ("MacroChem"), and Carlos M. Samour (the "Executive").
In consideration of the premises and the mutual covenants and agreements
herein contained, and in consideration of the Executive's continued employment
by MacroChem, the parties hereto agree as follows:
1. That the provisions of Paragraph 8(c) of the Agreement be and hereby are
deleted and that the following provisions be substituted in lieu thereof:
"c. Covenant Not to Compete. The Executive, in consideration of his
employment and all other matters contained in the preceding Paragraphs, and in
view of the Confidential Information that he may have access to as an employee
of MacroChem, and, provided that Executive shall receive the amounts set forth
in Paragraph 7 hereof in the event of his termination without cause, agrees that
during his employment, and for a period of two (2) years after the termination
of such employment, he shall not, directly or indirectly, individually or as an
owner, employee, partner, officer, director or stockholder, adviser, consultant
or in any capacity whatsoever of any person, partnership, corporation or other
entity however organized (i) compete with MacroChem in any of the businesses in
which MacroChem is then engaged, (ii) use in competition with MacroChem any of
the methods, information or products developed by MacroChem, or (iii) become
affiliated in any such capacity with any such person, partnership, corporation
or other entity which itself competes in the manner described in (i) above. If
any provision of this subparagraph 8(c) is invalid in whole or in part, it shall
be curtailed, whether as to time, area covered, or otherwise, as and to the
extent required for its validity under applicable law and, as so curtailed,
shall be enforceable."
2. That except as amended in Section 1 hereof, the Agreement shall continue
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective the day and year first above written.
CARLOS M. SAMOUR MACROCHEM CORPORATION
/s/ Carlos M. Samour By:/s/ Alvin J. Karloff
- -------------------- --------------------
Alvin J. Karloff
President
AMENDMENT NO. 1, made June 24, 1999 ("Amendment"), to Employment Agreement
made October 14, 1992 (the "Agreement"), by and between MacroChem Corporation, a
Delaware corporation with offices at 110 Hartwell Avenue, Lexington,
Massachusetts 02421 ("MacroChem"), and Carlos M. Samour (the "Executive").
In consideration of the premises and the mutual covenants and agreements
herein contained, and in consideration of the Executive's continued employment
by MacroChem, the parties hereto agree as follows:
1. That the provisions of Paragraph 8(c) of the Agreement be and hereby are
deleted and that the following provisions be substituted in lieu thereof:
"c. COVENANT NOT TO COMPETE. The Executive, in consideration
of his employment and all other matters contained in the preceding Paragraphs,
and in view of the Confidential Information that he may have access to as an
employee of MacroChem, and, provided that Executive shall receive the amounts
set forth in Paragraph 7 hereof in the event of his termination without cause,
agrees that during his employment, and for a period of two (2) years after the
termination of such employment, he shall not, directly or indirectly,
individually or as an owner, employee, partner, officer, director or
stockholder, adviser, consultant or in any capacity whatsoever of any person,
partnership, corporation or other entity however organized (i) compete with
MacroChem in any of the businesses in which MacroChem is then engaged, (ii) use
in competition with MacroChem any of the methods, information or products
developed by MacroChem, or (iii) become affiliated in any such capacity with any
such person, partnership, corporation or other entity which itself competes in
the manner described in (i) above. If any provision of this subparagraph 8(c) is
invalid in whole or in part, it shall be curtailed, whether as to time, area
covered, or otherwise, as and to the extent required for its validity under
applicable law and, as so curtailed, shall be enforceable."
2. That except as amended in Section 1 hereof, the Agreement shall continue
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective the day and year first above written.
ALVIN J. KARLOFF MACROCHEM CORPORATION
/s/ Alvin J. Karloff By:/s/ Carlos M. Samour
- -------------------- --------------------
Carlos M. Samour
Chairman
To: Paul J. Schechter, M.D., Ph.D.
263 Dedham St.
Dover, MA 02030 June 8, 1999
The undersigned, MacroChem Corporation, a Delaware corporation (the
"Company"), hereby agrees with you as follows:
1. POSITION AND RESPONSIBILITIES.
1.1 You shall serve as Vice President, Drug Development and Regulatory
Affairs of the Company, (or in such other executive capacity as shall be
designated by the Board of Directors and reasonably acceptable to you) and shall
perform the duties customarily associated with such capacity from time to time
and at such place or places as the Company shall designate are appropriate and
necessary in connection with such employment.
1.2 You will, to the best of your ability, devote your full time and
best efforts to the performance of your duties hereunder and the business and
affairs of the Company. You agree to perform such executive duties as may be
assigned to you by or on authority of the Company's Board of Directors from time
to time.
1.3 You will duly, punctually and faithfully perform and observe any
and all reasonable rules and regulations which the Company may now or shall
hereafter establish governing the conduct of its business.
2. TERM OF EMPLOYMENT.
2.1 Subject to the provisions hereof, specifically including,
without limitation, Section 2.2, the term of your employment shall be
indefinite.
2.2 The Company shall have the right to terminate your employment at
any time under this Agreement in any of the following ways:
(a) on thirty (30) days prior written notice to you upon your
disability (disability shall be defined as your inability to perform duties
under this Agreement for an aggregate of sixty (60) days, which need not be
consecutive, out of any one hundred twenty (120) day period due to mental or
physical disability or incapacity); you shall be provided benefits under the
Company's workers compensation and disability insurance policies, to the extent
and upon the terms and conditions of such plans that are in effect at the time;
(b) immediately without prior notice to you by the Company for "Cause",
as hereinafter defined, provided however, that prior to any such termination for
Cause, you have had a reasonable opportunity to be heard thereon;
-1-
<PAGE>
(c) immediately without prior notice to you in the event of the
bankruptcy or liquidation of the Company or the appointment of a receiver of the
assets of the Company instigated by a creditor of the Company that is not an
affiliate thereof.
(d) at any time without Cause, provided the Company shall be obligated
to pay to you after such termination an amount equal to six (6) months' Base
Salary, plus benefits provided by the Company to you at the time of such
termination for such period, less applicable taxes and other required
withholdings and any amounts you may owe to the Company. If the financial
condition of the Company so warrants, the Board of Directors of the Company may,
in its sole discretion, delay payment of such amounts due under this paragraph
2.2(d) until such time as the Board of Directors deems that such monies are
available.
2.3 You shall have the right to terminate your employment hereunder for
any reason, upon not less than four (4) weeks' prior written notice to the
Company.
2.4 "Cause" for the purpose of Section 2 of this Agreement shall
include: (i) the falseness or material inaccuracy of any of your warranties or
representations herein; (ii) your willful failure or refusal to comply with
explicit directives of the Board of Directors of the Company or to render the
services required herein; (iii) fraud or embezzlement involving assets of the
Company, its customers, suppliers or affiliates or other misappropriation of the
Company's assets or funds; (iv) your conviction for a criminal offense carrying
a potential sentence of more than twelve months in jail; (v) the willful breach
or habitual neglect of your obligations under this Agreement or your duties as
an employee of the Company; and (vi) use of non-prescription or illegal drugs
affecting your ability to perform the duties hereunder.
2.5 If your employment is terminated because of your death, all
obligations of the Company hereunder shall cease, except with respect to amounts
and obligations accrued to you, including accrued vacation pay, insurance,
vested stock options, and out-of-pocket expenses, through the last day of the
month during which your death has occurred.
3. COMPENSATION. You shall receive the compensation and benefits set forth
on Exhibit A hereto ("Compensation") for all services to be rendered by you
hereunder and for your transfer of property rights if any, pursuant to an
agreement relating to proprietary information and inventions of even date
herewith attached hereto as Exhibit B between you and the Company (the
"Confidential Information, Inventions and Noncompetition Agreement").
4. CONFIDENTIAL INFORMATION, INVENTIONS AND NONCOMPETITION. You agree to
execute, deliver and be bound by the provisions of the Confidential Information,
Inventions and Noncompetition Agreement attached hereto as Exhibit B.
5. REMEDIES. Your obligations under the Confidential Information,
Inventions and Noncompetition Agreement and the provisions of Sections 5 and 6
of this Agreement (as modified by Section 7, if applicable) shall survive the
expiration or termination of your employment with the Company in accordance with
the terms thereof. You acknowledge that a remedy at law for any breach or
threatened breach by you of the provisions of the Confidential Information,
-2-
<PAGE>
Inventions and Noncompetition Agreement would be inadequate and you therefore
agree that the Company shall be entitled to injunctive relief in case of any
such breach or threatened breach.
6. ASSIGNMENT. Subject to Section 2.2(c), this Agreement and the rights
and obligations of the parties hereto shall bind and inure to the benefit of any
successor or successors of the Company by reorganization, merger or
consolidation and any assignee of all or substantially all of its business and
properties, but, except as to any such successor or assignee of the Company,
neither this Agreement nor any rights or benefits hereunder may be assigned by
the Company or by you, except by operation of law or by a further written
agreement by the parties hereto.
7. INTERPRETATION. IT IS THE INTENT OF THE PARTIES THAT in case any one or
more of the provisions contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect the other provisions of this
Agreement, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. MOREOVER, IT IS THE
INTENT OF THE PARTIES THAT if any one or more of the provisions contained in
this Agreement is or becomes or is deemed invalid, illegal or unenforceable or
in case any provision shall for any reason be held to be excessively broad as to
duration, geographical scope, activity or subject, such provision shall be
construed by amending, limiting and/or reducing it to conform to applicable laws
so as to be valid and enforceable or, if it cannot be so amended without
materially altering the intention of the parties, it shall be stricken and the
remainder of this Agreement shall remain in full force and effect.
8. NOTICES. Any notice which the Company is required to or may desire to
give you shall be given by personal delivery or registered or certified mail,
return receipt requested, addressed to you at your address of record with the
Company, or at such other place as you may from time to time designate in
writing. Any notice which you are required or may desire to give to the Company
hereunder shall be given by personal delivery or by registered or certified
mail, return receipt requested, addressed to the Company at its principal
office, or at such other office as the Company may from time to time designate
in writing. The date of personal delivery or five (5) days after the date of
mailing any notice under this Section 8 shall be deemed to be the date of
delivery thereof.
9. WAIVERS. No waiver of any right under this Agreement shall be deemed
effective unless contained in a writing signed by the party charged with such
waiver, and no waiver of any right arising from any breach or failure to perform
shall be deemed to be a waiver of any future such right or of any other right
arising under this Agreement. If either party should waive any breach of any
provision of this Agreement, he or it shall not thereby be deemed to have waived
any preceding or succeeding breach of the same or any other provision of this
Agreement.
10. COUNSEL. You acknowledge that you have had the opportunity to read this
Agreement in its entirety and to obtain the advice of counsel regarding its
terms and conditions.
-3-
<PAGE>
11. COMPLETE AGREEMENT; AMENDMENTS. The foregoing, including Exhibits A
and B attached hereto, is the entire agreement of the parties with respect to
the subject matter hereof, superseding any previous oral or written
communications, representations, understandings, or agreements with the Company
or any officer or representative thereof. Any amendment to this Agreement or
waiver by the Company of any right hereunder shall be effective only if
evidenced by a written instrument executed by the parties hereto, upon
authorization of the Company's Board of Directors.
12. HEADINGS. The headings of the Sections contained in this Agreement are
inserted for convenience and reference only and in no way define, limit, extend
or describe the scope of this Agreement or the intent of any provisions hereof,
and shall not be deemed to constitute a part hereof or to affect the meaning of
this Agreement in any way.
13. COUNTERPARTS. This Agreement may be signed in two counterparts, each of
which shall be deemed an original and both of which shall together constitute
one agreement.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the Commonwealth of Massachusetts,
excluding its conflict of law principles.
If you are in agreement with the foregoing, please sign your name below and
also at the bottom of the Confidential Information, Inventions and
Noncompetition Agreement, whereupon both Agreements shall become binding in
accordance with their terms. Please then return this Agreement to the Company.
(You may retain for your records the accompanying counterpart of this Agreement
enclosed herewith).
Very truly yours,
MACROCHEM CORPORATION, a
Delaware corporation
By:/s/ Alvin J. Karloff
--------------------
Alvin J. Karloff
President & C.E.O.
Read, Accepted and Agreed:
/s/ Paul J. Schechter
- ---------------------
Paul J. Schechter, M.D., Ph.D.
-4-
<PAGE>
EXHIBIT A
COMPENSATION AND BENEFITS
OF PAUL SCHECHTER, M.D., Ph.D.
COMPENSATION. Your initial Base Salary, commencing on May 1, 1998, shall be
$175,000 per year, less applicable deductions, payable in accordance with the
Company's payroll policies. An increase in your Base Salary shall be reviewed
and adjusted from time to time by the Board of Directors of the Company.
VACATION. You shall be entitled to all state statutory holidays, and four (4)
weeks paid vacation for the first year of employment. Thereafter, any additional
vacation time, over and above the vacation time already referred to herein shall
be determined by the Board of Directors.
INSURANCE AND BENEFITS. You shall be eligible to receive medical, dental, life,
short and long term disability insurance, currently offered through the
Company's insurance carriers. The Company currently pays 70% of these premiums.
SICK DAYS AND EXCUSED ABSENCE DAYS. You shall be entitled to compensation for
sick days and excused absence days in accordance with Company policy.
STOCK OPTIONS. You have been granted incentive stock options to purchase shares
of the Common Stock of the Company, $.01 par value per share. Future stock
options may be granted by the Company based in part on your performance.
-A1-
<PAGE>
EXHIBIT B
CONFIDENTIAL INFORMATION, INVENTIONS AND NONCOMPETITION AGREEMENT
To: MacroChem Corporation Date: June 8, 1999
110 Hartwell Avenue
Lexington, Massachusetts 02421-3134
The undersigned, in consideration of and as a condition of my employment or
continued employment by you and/or by companies that you own, control, or are
affiliated with or their successors in business (collectively, the "Company"),
hereby agrees as follows:
1. CONFIDENTIALITY. I agree to keep confidential, except as the Company
may otherwise consent in writing, and except for the Company's benefit, not to
disclose or make any use of at any time either during or subsequent to my
employment, any Inventions (as hereinafter defined), trade secrets, confidential
information, knowledge, data or other information of the Company relating to
products, franchises, processes, know-how, techniques, methods, designs,
formulas, test data, customer lists, business plans, marketing plans and
strategies, pricing strategies, or other subject matter pertaining to any
business of the Company or any of its affiliates, which I may produce, obtain,
or otherwise acquire during the course of my employment, except as herein
provided. I further agree not to deliver, reproduce or in any way allow any such
trade secrets, confidential information, knowledge, data or other information,
or any documentation relating thereto, to be delivered to or used by any third
parties without specific direction or consent of the Chairman of the Board or
the Chief Executive Officer of the Company. The provisions of this Section 1
shall not apply to such knowledge, data or other information that is generally
known to the public.
2. CONFLICTING EMPLOYMENT; RETURN OF CONFIDENTIAL MATERIAL. I agree that
during my employment with the Company I will not engage in any other employment,
occupation, consulting or other activity relating to the business in which the
Company is now or may hereafter become engaged, or which would otherwise
conflict with my obligations to the Company. In the event my employment with the
Company terminates for any reason whatsoever, I agree to promptly surrender and
deliver to the Company all trade secrets, confidential information, processes
and records, including, but not limited to, designs, formulae, test data,
customer lists, business plans and strategies, Inventions or other written
memoranda, materials, equipment, drawings, documents and data that I may obtain
or produce during the course of my employment, and I will not take with me any
description containing or pertaining to any confidential information, knowledge
or data of the Company that I may produce or obtain during the course of my
employment.
-B1-
<PAGE>
3. ASSIGNMENT OF INVENTIONS.
3.1 I hereby acknowledge and agree that the Company is the owner of all
Inventions. In order to protect the Company's rights to such Inventions, by
executing this Agreement I hereby irrevocably assign to the Company all my
right, title and interest in and to all Inventions to the Company.
3.2 For purposes of this Agreement, "Inventions" shall mean all
discoveries, processes, designs, technologies, methods, techniques, devices, or
improvements in any of the foregoing or other ideas, whether or not patentable
or copyrightable and whether or not reduced to practice, made or conceived by me
(whether solely or jointly with others) during the period of my employment with
the Company that relate to the actual or demonstrably anticipated business,
work, or research and development of the Company, or result from or are
suggested by any task assigned to me or any work performed by me for or on
behalf of the Company.
3.3 Any discovery, process, design, method, technique, technology,
device, or improvement in any of the foregoing or other ideas, whether or not
patentable or copyrightable and whether or not reduced to practice, made or
conceived by me (whether solely or jointly with others) that I develop entirely
on my own time not using any of the Company's equipment, supplies, facilities,
or trade secret information ("Personal Invention") is excluded from this
Agreement provided such Personal Invention (a) does not relate to the actual or
demonstrably anticipated business, research and development of the Company, and
(b) does not result, directly or indirectly, from any work performed by me for
the Company.
4. DISCLOSURE OF INVENTIONS. I agree that in connection with any
Invention, I will promptly disclose such Invention to the Board of Directors of
the Company in order to permit the Company to enforce its property rights to
such Invention in accordance with this Agreement. My disclosure shall be
received in confidence by the Company. If the Company in good faith decides not
to use an Invention, it will advise me of same and the rights to such Invention
will revert to me within a reasonable period of time.
5. PATENTS AND COPYRIGHTS; EXECUTION OF DOCUMENTS.
5.1 Upon request, I agree to assist the Company or its nominee (at its
expense) during and at any time subsequent to my employment in every reasonable
way to obtain for its own benefit patents and copyrights for Inventions in any
and all countries. Such patents and copyrights shall be and remain the sole and
exclusive property of the Company or its nominee. I agree to perform such lawful
acts as the Company deems to be necessary to allow it to exercise all right,
title and interest in and to such patents and copyrights.
5.2 In connection with this Agreement, I agree to execute, acknowledge
and deliver to the Company or its nominee upon request and at its expense all
documents, including assignments of title, patent or copyright applications,
assignments of such applications, assignments of patents or copyrights upon
issuance, as the Company may determine necessary or desirable to protect the
Company's or its nominee's interest in Inventions, and/or to use in obtaining
patents or copyrights in any and all countries and to vest title thereto in the
Company or its nominee to any of the foregoing.
-B2-
<PAGE>
6. MAINTENANCE OF RECORDS. I agree to keep and maintain adequate and
current written records of all Inventions made by me (in the form of notes,
sketches, drawings, flowcharts, printouts, diskettes and other records as may be
specified by the Company), which records shall be available to and remain the
sole property of the Company at all times.
7. PRIOR INVENTIONS. It is understood that all Personal Inventions, if
any, whether patented or unpatented, which I made prior to my employment by the
Company, are excluded from this Agreement. To preclude any possible uncertainty,
I have set forth on Schedule A attached hereto a complete list of all of my
prior Personal Inventions, including numbers of all patents and patent
applications and a brief description of all unpatented Personal Inventions that
are not the property of a previous employer. I represent and covenant that the
list is complete and that, if no items are on the list, I have no such prior
Personal Inventions. I agree to notify the Company in writing before I make any
disclosure or perform any work on behalf of the Company that appears to threaten
or conflict with proprietary rights I claim in any Personal Invention. In the
event of my failure to give such notice, I agree that I will make no claim
against the Company with respect to any such Personal Invention.
8. OTHER OBLIGATIONS. I acknowledge that the Company from time to time may
have agreements with other persons, companies, entities, Governments or agencies
thereof, that impose obligations or restrictions on the Company regarding
Inventions made during the course of work thereunder or regarding the
confidential nature of such work. I agree to be bound by all such obligations
and restrictions and to take all actions necessary to discharge the Company's
obligations.
9. TRADE SECRETS OF OTHERS. I represent that my performance of all the
terms of this Agreement and as an employee of the Company does not and will not
breach any agreement to keep confidential proprietary information, knowledge, or
data acquired by me in confidence or in trust prior to my employment with the
Company, and I will not disclose to the Company, or induce the Company to use,
any confidential or proprietary information or material belonging to any
previous employer or others. I agree not to enter into any agreement either
written or oral in conflict herewith.
10. OTHER ACTIVITIES DURING EMPLOYMENT.
10.1 Except for any outside employments and directorships currently
held by me as listed on Schedule B hereto, and except with the prior written
consent of a majority of the Company's Board of Directors, which consent will
not be unreasonably withheld, I will not, during my employment by the Company,
undertake or engage in any other employment, occupation or business enterprise,
other than one in which I am an inactive investor, that would interfere with my
obligations to the Company.
-B3-
<PAGE>
10.2 I hereby agree, that except as disclosed on Schedule B hereto,
during my employment by the Company, I will not, directly or indirectly, engage
(a) individually, (b) as an officer, (c) as a director, (d) as an employee, (e)
as a consultant, (f) as an advisor, (g) as an agent (whether a salesperson or
otherwise), (h) as a broker, or (i) as a partner, coventurer, stockholder or
other proprietor owning directly or indirectly more than five percent (5%)
interest in any firm, corporation, partnership, trust, association, or other
organization which is engaged in the development and licensing of transdermal
delivery products or any other line of business in competition with, or engaged
in or under demonstrable development by the Company (such firm, corporation,
partnership, trust, association, or other organization being hereinafter
referred to as a "Prohibited Enterprise"), without the consent of the Company,
which consent will not be unreasonably withheld. Except as may be shown on
Schedule B hereto, I hereby represent that I am not engaged in any of the
foregoing capacities (a) through (i) in any Prohibited Enterprise.
11. POST-EMPLOYMENT ACTIVITIES.
11.1 For a period of two (2) years after the termination, for any
reason, of my employment with the Company, absent the Company's prior written
approval, I will not directly or indirectly engage in activities similar or
reasonably related to those in which I shall have engaged for the Company during
the two years immediately preceding termination, nor render services similar or
reasonably related to those which I shall have rendered during such time to, any
person or entity whether existing or hereafter established that directly
competes with (or proposes or plans to directly compete with) the Company, or in
other areas where the Company carries on a substantial amount of business
("Direct Competitor"). In addition, I shall not entice, induce or encourage any
of the Company's other employees to engage in any activity that, were it done by
me, would violate any provision of this Agreement.
11.2 No provision of this Agreement shall be construed to preclude me
from performing the same services that the Company retains me to perform for any
person or entity that is not a Direct Competitor of the Company upon the
termination of my employment (or any post-employment consultation) so long as I
do not thereby violate any term of this Agreement.
12. REMEDIES. My obligations under this Agreement shall survive the
termination of my employment with the Company. I acknowledge that a remedy at
law for any breach or threatened breach by me of the provisions of this
Agreement would be inadequate and I therefore agree that the Company shall be
entitled to injunctive relief in case of any such breach or threatened breach.
13. MODIFICATION. I agree that any subsequent change or changes in my
employment duties, salary or compensation or, if applicable, in any Employment
Agreement between the Company and me, shall not affect the validity or scope of
this Agreement.
14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon my heirs,
executors, administrators or other legal representatives and is for the benefit
of the Company, its successors and assigns.
-B4-
<PAGE>
15. INTERPRETATION. IT IS THE INTENT OF THE PARTIES THAT in case any one or
more of the provisions contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect the other provisions of this
Agreement, and this Agreement shall be construed as if such invalid, illegal, or
unenforceable provision had never been contained herein. MOREOVER, IT IS THE
INTENT OF THE PARTIES THAT if any provision of this Agreement is or becomes or
is deemed invalid, illegal or unenforceable or in case any one or more of the
provisions contained in this Agreement shall for any reason be held to be
excessively broad as to duration, geographical scope, activity or subject, such
provision shall be construed by amending, limiting and/or reducing it to conform
to applicable laws so as to be valid and enforceable or, if it cannot be so
amended without materially altering the intention of the parties, it shall be
stricken and the remainder of this Agreement shall remain in full force and
effect.
16. WAIVERS. No waiver of any right under this Agreement shall be deemed
effective unless contained in a writing signed by the party charged with such
waiver, and no waiver of any right arising from any breach or failure to perform
shall be deemed to be a waiver of any future such right or of any other right
arising under this Agreement. If either party should waive any breach of any
provision of this Agreement, he or it shall not thereby be deemed to have waived
any preceding or succeeding breach of the same or any other provision of this
Agreement.
17. COMPLETE AGREEMENT, AMENDMENTS. The foregoing including Schedules A
and B attached hereto is the entire agreement of the parties with respect to the
subject matter hereof, superseding any previous oral or written communications,
representations, understandings, or agreements with the Company or any officer
or representative thereof. Any amendment to this Agreement or waiver by the
Company of any right hereunder shall be effective only if evidenced by a written
instrument executed by the parties hereto, upon authorization of the Company's
Board of Directors.
18. HEADINGS. The headings of the Sections contained in this Agreement are
inserted for convenience and reference only and in no way define, limit, extend
or describe the scope of this Agreement, or the intent of any provision hereof,
and shall not be deemed to constitute a part hereof nor to affect the meaning of
this Agreement in any way.
19. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the Commonwealth of Massachusetts,
excluding its conflict of law principles.
20. NOTICES. All notices, requests, demands and communications which are or
may be required to be given hereunder shall be deemed effectively given if and
when sent by registered or certified mail, return receipt requested, postage
prepaid, to the following addresses:
If to the Company: Mr. Alvin J. Karloff, President
MacroChem Corporation
110 Hartwell Avenue
Lexington, MA 02421
-B5-
<PAGE>
If to Employee: Paul J. Schechter, M.D., Ph.D.
263 Dedham St.
Dover, MA 02030
21. CONFLICTS. In the event of any conflict between the provisions of this
agreement and the provisions of the Employment Agreement, the provisions of the
Employment Agreement will govern.
Very truly yours,
/s/ Paul J. Schechter
----------------------------------
Paul J. Schechter, M.D., Ph.D.
Vice President of Drug Development
& Regulatory Affairs
Agreed:
MacroChem Corporation
By:/s/ Alvin J. Karloff
-----------------------
Alvin J. Karloff
President & C.E.O.
-B6-
<PAGE>
SCHEDULE A
LIST OF PRIOR INVENTIONS
OF PAUL J. SCHECHTER, M.D., Ph.D.
TITLE DATE IDENTIFYING NUMBER
- ----- ---- ------------------
or BRIEF DESCRIPTION
--------------------
-B7-
<PAGE>
SCHEDULE B
OUTSIDE EMPLOYMENTS AND DIRECTORSHIPS
OF PAUL J. SCHECHTER, M.D., Ph.D.
Medical Advisory Board - Personal MD.com
-B8-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's balance sheet, statement of operations, statement of stockholders'
equity and statement of cash flows and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0000743884
<NAME> MacroChem Corporation
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-1-1999
<PERIOD-END> Jun-30-1999
<EXCHANGE-RATE> 1
<CASH> 17,428,998
<SECURITIES> 0
<RECEIVABLES> 171,177
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,802,589
<PP&E> 1,260,386
<DEPRECIATION> 828,892
<TOTAL-ASSETS> 18,640,750
<CURRENT-LIABILITIES> 527,506
<BONDS> 0
0
0
<COMMON> 224,536
<OTHER-SE> 17,388,708
<TOTAL-LIABILITY-AND-EQUITY> 18,640,750
<SALES> 233,971
<TOTAL-REVENUES> 233,971
<CGS> 0
<TOTAL-COSTS> 4,593,768
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,231
<INCOME-PRETAX> (3,933,514)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,933,514)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,933,514)
<EPS-BASIC> (0.18)
<EPS-DILUTED> (0.18)
</TABLE>
