Exhibit 10.61
EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT dated as of January 5, 2006 (as the same may be
amended, restated, supplemented or otherwise modified from time to time
hereafter, this “Agreement”), is entered into by and between Columbia
Laboratories, Inc., a Delaware corporation having its corporate offices at 354
Eisenhower Parkway, Livingston, New Jersey 07039 (the “Company”), and Michael
McGrane (“Executive”).

WITNESSETH:

WHEREAS, Executive was elected Senior Vice President, General Counsel, and
Secretary of the Company on January 5, 2006; and
 
WHEREAS, the Company wishes to continue the employment of Executive on the terms
and conditions set forth in this Agreement; and

WHEREAS, the Company and Executive desire to enter into this Agreement so the
rights, duties, benefits, and obligations of each regarding Executive’s
employment for and by the Company will be fully set forth under the terms and
conditions stated within this Agreement;

NOW THEREFORE, in consideration of the mutual promises and undertakings
hereunder, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:

1.  Term. The term of this Agreement shall commence on the date first written
above and continue through March 31, 2008, unless this Agreement is earlier
terminated in accordance with Section 6 or 8 hereof. The term shall be
automatically extended without further action of either party for additional
one-year periods, unless written notice of either party’s intention not to
extend has been given to the other party hereto at least sixty (60) days prior
to the expiration of the then effective term.

2.  Title; Duties.

(a) Executive shall be the Senior Vice President, General Counsel, and Secretary
of the Company. Executive will perform duties customarily associated with such
position, including, but not limited to, duties relating to the management of
the legal affairs of the Company and its affiliates, and such other duties
commensurate with the job description as may be assigned to him from time to
time by the President of the Company (the “Company President”) or his designee.
Executive shall be employed at the Company’s offices located in Livingston, New
Jersey. Executive will report to the Company President.

(b) Executive agrees to devote his entire business time and attention to the
performance of his duties under this Agreement. He shall perform his duties to
the best of his ability and shall use his best efforts to further the interests
of the Company. Executive shall perform his duties and will be required to
travel as reasonably necessary to perform the services required of him under
this Agreement. Executive represents and warrants to the Company that he is able
to enter into this Agreement and that his ability to enter into this Agreement
and to fully perform his duties hereunder are not limited to or restricted by
any agreements or understandings between Executive and any other person. For the
purposes of this Agreement, the term “person” means any natural person,
corporation, partnership, limited liability partnership, limited liability
company, or any other entity of any nature.

 

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(c) Executive will observe the reasonable rules, regulations, policies and/or
procedures which the Company may now or hereafter establish governing the
conduct of its business, except to the extent that any such rules, regulations,
policies and/or procedures may be inconsistent with the terms of this Agreement,
in which case the terms of this Agreement shall control.

3.  Employment Contract. The Company and Executive acknowledge that the terms of
his employment are set forth in this Agreement. If Executive’s employment
terminates for any reason, Executive shall not be entitled to any payments,
benefits, damages, award or compensation other than as provided in this
Agreement, or as may otherwise be available in accordance with the Company’s
established written plans and written policies at the time of termination.

4.  Compensation.

(a) Subject to tax withholdings and deductions to cover Executive contributions
to, and payments under, applicable Executive benefit and welfare plans and
programs, the Company will pay Executive an annual base compensation of $279,500
per year to be paid in accordance with the Company’s normal payroll practices
during the term of this Agreement (“Base Salary”). The Company’s Board of
Directors (the “Board”) or Compensation Committee of the Board (or any committee
of the Board that shall replace such committee) shall review annually
Executive’s compensation for increases during the term of this Agreement in
conjunction with the Company’s regular review of the salaries of other executive
level employees and in consultation with the Company President. At such time,
the Company will consider (without any obligation to implement) upward
adjustments to Executive’s compensation under this Agreement in a manner
consistent with the Company’s practices in effect from time to time.

(b) In addition to Base Salary, Executive also will be eligible to receive an
annual performance bonus as the Board or Compensation Committee of the Board (or
any committee of the Board that shall replace such committee) shall, in its sole
discretion, deem appropriate based upon the parameters and criteria contained in
the Company’s bonus plan and in consultation with the Company President. He
shall be eligible for a Target Annual Bonus of 40% of his Base Salary as then in
effect. This bonus, if any, shall be paid to the Executive within seventy-five
(75) days of the end of each calendar year.

(d) Executive also shall be eligible in the sole discretion of the Board or the
Compensation Committee of the Board (or any committee of the Board that shall
replace such committee) to participate in the Company’s stock option plan as is
from time to time in effect, subject to the terms and conditions of such plan.
The Executive shall receive a grant of 30,000 restricted shares of the Company’s
stock which shares are to vest on the first business day of the calendar month
following the Company’s announcement of the results of the Phase III
multi-center, randomized, double-blind, placebo-controlled, clinical trial
designed to assess the efficacy, safety and tolerability of Prochieve® 8%
(progesterone gel) in preventing preterm delivery in pregnant women who are at
increased risk for preterm birth. Stock options granted to Executive prior to
the date hereof shall not be affected by this Agreement in any manner.

 
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5.  Benefits.

(a)  Executive and Executive’s eligible dependents shall be eligible for all
employee benefit programs (including any pension, 401K, group life insurance,
group medical and dental, vision, and short-term and long-term disability
policies, plans, and programs) generally available to other executive level
employees of the Company during the term of this Agreement, in accordance with
the terms of those benefit plans.

(b) Executive shall be entitled to accrue paid time off (“PTO”) during the term
of this Agreement in accordance with the Company’s standard policy and in an
amount commensurate with other executive level employees of the Company.

(c) In accordance with the policies of the Company in effect from time to time,
Executive will be entitled to reimburse-ment for approved ordinary and necessary
business expenses incurred by him during the term of this Agreement commensurate
with other executive level employees of the Company.
 
6.  Termination.

(a) Death. Executive’s employment shall terminate immediately upon his death.

(b) Disability. Executive’s employment shall terminate upon Executive having a
“Disability.” For purposes of this Agreement, “Disability” means a determination
by Company in accordance with applicable law that, as a result of a physical or
mental illness, Executive is unable to perform the essential functions of his
job with or without reasonable accommodation for a period of six (6) months.

(c) Termination by Company for Cause. Upon delivery of written notice of
termination for “Cause” from Company to Executive, Executive’s employment shall
terminate. Termination for “Cause” shall mean termination based on (i)
Executive’s failure or refusal to perform, in any material respect, his duties
faithfully and diligently in accordance with this Agreement; (ii) gross
negligence, recklessness or malfeasance in the performance of Executive’s
duties; (iii) Executive committing any criminal act; (iv) Executive committing
any act of fraud or other material misconduct resulting or intending to result
directly or indirectly in gain or personal enrichment at the expense of Company;
(v) Executive willfully engaging in any conduct relating to the business of
Company that could reasonably be expected to have a materially detrimental
effect on the business or financial condition of the Company; (vi) misconduct
which materially discredits or damages Company, or violates Company’s policies
or procedures, after Company has notified Executive of the actions Company deems
to constitute non-compliance; (vii) Executive materially breaches his
obligations under Sections 9 and 10 below, relating to confidential information,
non-solicitation and non-competition.

 
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Termination for Cause pursuant to subsections (i), (ii), (iv), or (v) of this
Paragraph (c) of Section 6 shall not take effect unless and until the Company
complies with the provisions of this paragraph. Executive shall be given written
notice by the Company of its intention to terminate him for Cause, stating in
detail the particular act(s) or failure(s) to act that constitute the grounds on
which the proposed termination for Cause is based. That written notice shall be
given to Executive within ninety (90) days of the Company’s learning of such
act(s) or failure(s) to act. Executive shall then have thirty (30) days after
receipt of such written notice to cure such conduct, to the extent such cure is
possible. If Executive fails to cure such conduct on or before the end of the
thirty (30) day period, Executive shall be terminated for Cause. If Executive’s
conduct is not curable, no notice need be given by the Company before
terminating Executive for Cause.

(d) Resignation for Good Reason. Executive may terminate his employment with
“Good Reason” (as defined below) upon no fewer than thirty (30) days prior
written notice to the Company specifying the reason(s) for the termination. Upon
receipt of Executive’s notice of intent to terminate his employment for Good
Reason, Company shall have a right to cure the alleged breach or other conduct
alleged by Executive to constitute Good Reason within the thirty (30) day
period. For purposes of this Agreement, “Good Reason” means (i) Company
materially breaches this Agreement; (ii) Company assigns duties to Executive
which are materially inconsistent with his duties as set forth in Section 2 or
which materially impair his ability to perform the services contemplated
hereunder; or (iii) Company has, without Executive’s consent, relocated
Executive’s office more than 100 miles from its location at the commencement of
this Agreement or (iv) Company substantially reduces the Executive’s job title,
responsibilities, or level of authority from that customary for the Senior Vice
President, General Counsel, and Secretary of a specialty pharmaceutical company.

(e) Resignation Without Good Reason. Executive may terminate his employment
without Good Reason upon no fewer than thirty (30) days prior written notice to
the Company. Without Good Reason as used in this Agreement refers to any reason
not included as a Good Reason in section 6(d).

(f) Termination by Company Without Cause. Executive’s employment shall terminate
thirty (30) days after written notice delivered to Executive of Company’s
termination of Executive’s employment for reason other than Death, Disability or
Cause.

7.  Compensation Upon Termination

(a) If Executive’s employment is terminated by Company for Cause, by Death or
Disability, or if Executive resigns Without Good Reason, Executive shall be
entitled to receive:

(i) the Base Salary through the date of termination;

(ii) reimbursement for any previously unreimbursed business expenses properly
incurred and documented by Executive in accordance with Company policy prior to
the date of Executive’s termination; and

 
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(iii) such Employee Benefits, if any, as to which Executive may be entitled
under the employee benefit plans of the Company.

(b) If Executive’s Employment is terminated by Company without Cause or by
Executive with Good Reason, Executive shall be entitled to:

(i) the Base Salary through the date of termination;

(ii) reimbursement for any previously unreimbursed business expenses properly
incurred and documented by Executive in accordance with Company policy prior to
the date of Executive’s termination;

(iii)  receive a lump sum payment equal to (1) one times Executive’s Annual Base
Salary at the rate immediately in effect before Executive’s Termination Date;
and (2) the greater of (A) the cash bonus paid to Executive in the preceding
year pursuant to the Company’s bonus plan or (B) the Executive’s target bonus in
effect at the time of the termination.

(iv) for a period of twelve (12) months following his Termination Date, continue
to receive the medical and dental coverage in effect on his Termination Date (or
generally comparable coverage) for himself and, where applicable, his spouse and
dependents, as the same may be changed from time to time for employees
generally, as if Executive had continued in employment during such period; or,
as an alternative, the Company may elect to pay Executive cash in lieu of such
coverage in an amount equal to Executive’s after-tax cost of continuing such
coverage, where such coverage may not be continued (or where such continuation
would adversely affect the tax status of the plan pursuant to which the coverage
is provided). The COBRA health care continuation coverage period under Section
4980B of the Code, shall run concurrently with the foregoing twelve (12) month
benefit period.

(c) If Executive’s Employment is terminated as a result of Company providing
written notice to Executive pursuant to Section 1 of this Agreement of Company’s
intention not to extend the term of the Agreement, Executive shall be entitled
to:

(i) the Base Salary through the end of the term;

(ii)  reimbursement for any previously unreimbursed business expenses properly
incurred and documented by Executive in accordance with Company policy prior to
the end of the term;

(iii)  receive a lump sum payment equal to (1) one times Executive’s Annual Base
Salary at the rate immediately in effect before the end of the term.

 
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8.  Change in Control.

(a) In the event of “Change in Control” of Company, as defined in the Executive
Change in Control Severance Agreement dated as of April 8, 2004 (the “Change in
Control Agreement”) between the Company and Executive attached hereto as Exhibit
A and incorporated by reference as if fully set forth herein, Executive shall be
entitled to the benefits, if any, available to him pursuant to the Change in
Control Agreement. 

9.  Restrictive Covenants.

(a) During Executive’s employment and for a period of one (1) year following the
termination of Executive’s employment for any reason, Executive will not compete
directly with the Company anywhere in the world by rendering services or
providing assistance for himself or on behalf of any other person or entity, in
any line of business in which the Company is engaged or has made preparations to
engage, as of the termination date of Executive’s employment with the Company.
The term “compete” as used herein means that Executive engages in research,
development, design, consulting, manufacturing, marketing, promotion or sales
with respect to the Company’s business for a third party or for its or his own
interest.

(b) Executive agrees that during the period stated in subsection (a) above, he
will not (i) directly solicit or encourage in any manner the resignation of any
employee of the Company or any of its subsidiaries; or (ii) directly or
indirectly solicit or divert customers, vendors, or business of the Company or
any of its subsidiaries (provided that Executive may deal with any such
customers or vendors in any manner which does not violate the provisions of
subsection (a) above); or (iii) attempt to influence, directly or indirectly,
any person or entity to cease, reduce, alter, or rearrange any business
relationship with the Company or any of its subsidiaries.

(c) Executive acknowledges and agrees that he considers the restrictions set
forth in this Section 9 to be reasonable both individually and in the aggregate
and that the duration, geographic scope, extent and application of these
restrictions are no greater than is necessary for the protection of the
Company’s legitimate interests. It is the desire and intent of Executive and the
Company that the provisions of this Section 9 shall be enforced to the fullest
extent possible under the laws and public policies of the State of New Jersey.
The Company and Executive further agree that if any particular provision or
portion of this Section 9 shall be adjudicated to be invalid or unenforceable,
such adjudication shall apply only with respect to the operation of such
provision in the particular jurisdiction in which such adjudication is made. The
Company and Executive further agree that in the event that any restriction
herein shall be found to be void or unenforceable but would be valid or
enforceable if some part or parts thereof were deleted or the period or area of
application reduced, such restriction shall apply with modification as may be
necessary to make it valid and Executive and the Company empower a court of
competent jurisdiction to modify, reduce or otherwise reform such provision(s)
in such fashion as to carry out the parties’ intent to grant the Company the
maximum allowable protection consistent with the applicable law and facts and
the express exceptions contained herein.

 
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(d) Without limiting the foregoing, Executive will not be deemed to be in
competition with the Company by reason of his employment by an enterprise
(“Subsequent Employer”) whose businesses include both (i) activities that
involve the Company Technology (“Covered Business”); and (ii) activities that do
not involve the Company Technology (“Excluded Business”) upon satisfaction of
the following conditions: (A) Executive delivers to the Subsequent Employer a
copy of this Agreement or an extract thereof setting forth fully and completely
the restrictions set forth in this Section 9; (B) the Subsequent Employer
executes and delivers to the Company a written agreement in which, as a
condition to Executive’s employment, the Subsequent Employer (1) acknowledges
receipt of such restriction, (2) agrees to employ Executive only in the Excluded
Business, (3) agrees to cause the executive in charge of the Covered Business to
acknowledge such restrictions in writing and agree that Executive will not be
permitted to participate in the Covered Business, (4) agrees to establish
reasonable internal policies and procedures to prevent violation of such
restrictions or disclosure by Executive to personnel engaged in the Covered
Business, and (5) agrees that the Company shall be entitled to enforce such
agreement directly against the Subsequent employer; and (C) Executive and the
Subsequent Employer perform their obligations pursuant to this Agreement and
such agreement.

10.  Confidentiality. The Employee Proprietary Information and Inventions
Agreement dated March 14, 2003, between the Company and Executive is attached
hereto as Exhibit B and incorporated by reference as if fully set forth herein.

11.  Cooperation: Executive agrees to cooperate on a reasonable basis in the
truthful and honest prosecution and/or defense of any claim in which the
Company, its affiliates, and/or its subsidiaries may have an interest (subject
to reasonable limitations concerning time and place), which may include without
limitation making himself available on a mutually agreed, reasonable basis to
participate in any proceeding involving the Company, its affiliates, and/or its
subsidiaries, allowing himself to be interviewed by representatives of the
Company, its affiliates, and/or its subsidiaries without asserting or claiming
any privilege against the Company, its affiliates, and/or its subsidiaries,
appearing for depositions and testimony without requiring a subpoena and without
asserting or claiming any privilege against the Company, its affiliates, and/or
its subsidiaries, and producing and/or providing any documents or names of other
persons with relevant information without asserting or claiming any privilege
against the Company, its affiliates, and/or its subsidiaries; provided that, if
such services are required after the end of any period during which he is
eligible for severance benefits, if any, the Company, its affiliates, and/or its
subsidiaries shall provide Executive with reasonable compensation for the time
actually expended in such endeavors and shall pay his reasonable expenses
incurred at the prior and specific request of the Company, its affiliates,
and/or its subsidiaries.

12.  Remedies. Executive acknowledges and agrees that the Company’s remedy at
law for a breach or threatened breach of the provisions of this Agreement would
be inadequate and, in recognition of this fact, in the event of a breach or
threatened breach by Executive of any provision of this Agreement, it is agreed
that, in addition to any available remedy at law, the Company shall be entitled
to, without posting any bond, specific performance, temporary restraining order,
temporary or permanent injunction, or any other equitable relief or remedy which
may then be available; provided, however, nothing herein shall be deemed to
relieve the Company of its burden to prove grounds warranting such relief nor
preclude Executive from contesting such grounds or facts in support thereof.
Nothing herein contained shall be construed as prohibiting the Company from
pursuing any other remedies available to it for such breach or threatened breach
hereof.

 
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13.  Applicable Laws and Consent to Jurisdiction. The validity, construction,
interpretation, and enforceability of this Agreement shall be determined and
governed by the laws of the State of New Jersey without giving effect to the
principles of conflicts of law. For the purpose of litigating any dispute that
arises under this Agreement, the parties hereby consent to exclusive
jurisdiction of, and agree that such litigation shall be conducted in, any state
or federal court located in the State of New Jersey.

14.  Severability. The provisions of this Agreement are severable and if any one
or more provisions are determined to be illegal or otherwise unenforceable, in
whole or in part, the remaining provisions shall nevertheless be binding and
enforceable. The Parties agree that the covenants set forth herein are
reasonable. Without limiting the foregoing, it is the intent of the parties that
the covenants set forth herein be enforced to the maximum degree permitted by
applicable law. As such, the parties ask that if any court of competent
jurisdiction were to consider any provision of this Agreement to be overly broad
based on the circumstances at the time enforcement is requested, that such court
“blue pencil” the provision and enforce the provision to the full extent that
such court deems it to be reasonable in scope.  

15.  Indemnification. The Indemnification Agreement dated April 8, 2004, between
the Company and Executive is attached hereto as Exhibit C and incorporated by
reference as if fully set forth herein.

16.  Miscellaneous; Waiver. Executive further agrees that this Agreement,
together with the Exhibits incorporated by reference as if fully set forth
herein, sets forth the entire employment agreement between the Company and
Executive, supersedes any and all prior agree-ments between the Company and
Executive, and shall not be amended or added to except in writing signed by the
Company and Executive. Executive understands that he may not assign his duties
and obligations under this Agreement to any other party and that the Company
may, at any time and without further action by or the consent of Executive,
assign this Agreement to any of its affiliated companies.

17.  Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original and all of which taken together shall
constitute one and the same agreement.

18.  Successors and Assigns. This Agreement shall be binding on the successors
and heirs of Executive and shall inure to the benefit of the successors and
assigns of the Company.

19.  Notices. Any notice required or permitted hereunder shall be in writing and
shall be sufficiently given if personally delivered or if sent by registered or
certified mail, postage prepaid, with return receipt requested, addressed: (a)
in the case of the Company, to Columbia Laboratories, Inc., 354 Eisenhower
Parkway, Livingston, New Jersey 07039, attn.: General Counsel, and (b) in the
case of Executive, to Executive's last known address as reflected in the
Company's records, or to such other address as Executive shall designate by
written notice to the Company. Any notice given hereunder shall be deemed given
at the time of receipt thereof by the person to whom such notice is given.

 
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the dates set
forth below.
 

EXECUTIVE     COLUMBIA LABORATORIES, INC.                  /s/ Michael McGrane  
  /s/ Stephen G. Kasnet

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Michael McGrane    

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 Stephen G. Kasnet, Chairman Date: March 30, 2006      Date: March 30, 2006 

 
 
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