Exhibit 10.18

 

 

October 7, 2004

 

 

Anne-Marie Corner

586 West Mermaid Lane

Philadelphia, PA 19118

 

 

Dear Anne-Marie:

 

 

By means of this letter agreement (the “Agreement”), we are pleased to confirm
the terms of your employment, effective as of the Effective Date (as defined
below) and subject to the other terms and conditions herein, with Cellegy
Pharmaceuticals, Inc. (“Cellegy” or the “Company”).

 

1.                                       Effective Date.

 

This Agreement is entered into in connection with that certain Agreement and
Plan of Share Exchange dated as of October 7, 2004 by and between Biosyn, Inc.
(“Biosyn”) and Cellegy (the “Exchange Agreement”).  The terms of this Agreement
shall become effective (the “Effective Date”) only upon the completion of the
“Closing” and the “Effective Time,” as those terms are defined in the Exchange
Agreement.  If the Closing of the transactions contemplated by the Exchange
Agreement does not occur, then this Agreement shall have no force or effect and
shall terminate in its entirety.

 

2.                                       Impact on Previous Agreements.

 

Upon and after the Effective Date and the payment to you at the Closing of the
amounts specified pursuant to the Exchange Agreement, this Agreement shall
replace and supersede all prior employment agreements or employment
arrangements, whether written or oral, between you and Biosyn, including, but
not limited to, that certain agreement of employment between Biosyn and you
dated June 4, 1999 (as the same may be amended, the “Prior Employment
Agreement”), that certain Agreement to Defer Salary between Biosyn and you dated
as of March 26, 2003, as amended, that certain Amended Agreement for Deferral of
Compensation between you and Biosyn dated as of February 17, 2004 and that
certain Change of Control Agreement between Biosyn and you dated as of
February 18, 2004 (collectively, the “Prior Employment Arrangements”), and upon
the Effective Date, all Prior Employment Arrangements shall be terminated in
their entirety and shall be of no further force or effect.  Notwithstanding the
foregoing, Subsection 7(d) of the Prior Employment Agreement that relates to the
assignment by you to Biosyn of inventions or other intellectual property rights,
shall survive and remain effective.

 

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3.                                       Duties.

 

You will serve as Senior Vice President, Women’s Preventive Health and as an
Officer of Cellegy Pharmaceuticals, Inc. Your responsibilities will include
those described in Exhibit A hereto, subject to the overall directives of the
Chief Executive Officer and the Board of Directors of Cellegy.  You will
initially report to the Chief Executive Officer.  You agree to devote your full
time, effort and attention to the affairs of Cellegy and shall not, during the
term of this Agreement, actively engage in any other business activity, whether
or not for profit.  The foregoing shall not be construed as preventing you from
(a) making investments in other businesses or enterprises, (b) participating in
the activities of professional trade organizations related to the business of
the Company, as approved by your manager, (c) engaging in civic, charitable or
fraternal activities, in each of the above cases whose businesses are not
competitive with the Company provided that your ownership does not exceed 1% of
each such business or enterprise and (d) serving on the boards of directors of
not more than one other entity (and up to one additional nonprofit organization)
that is reasonably satisfactory to the Company and whose business is not
competitive with the Company.  The principal location of your employment will be
at the Company’s principal executive office located in Huntingdon Valley,
Pennsylvania, although you understand and agree that you may be required to
travel from time to time for business reasons.

 

4.                                       Annual Salary.

 

Subject to the immediately following sentence, during your first year of
employment, Cellegy agrees to pay you a monthly salary at an annual rate of
$250,000 per annum (the “Base Salary”), payable in conformity with Cellegy’s
normal payroll periods and subject to all applicable withholdings and
deductions.  Your salary shall be reviewed by Cellegy’s Board of Directors or
Compensation Committee on an annual basis and may be increased in the discretion
of the Board or such Committee.  Your first salary review will occur in
approximately December 2005 with respect to your Base Salary for the 2006 year.

 

5.                                       Bonus.

 

Promptly after the Effective Date you will be paid a cash bonus of $25,000 in
recognition of your performance during the course of 2004.  Effective January 1,
2005, you will be eligible to participate in Cellegy’s bonus programs in a
manner and percentage similar to similarly situated Cellegy employees, with
Company and individual performance targets for the relevant calendar year to be
established by Cellegy’s Board of Directors or the Compensation Committee
thereof (and amounts, if any, paid after completion of the year to which such
performance targets relate).  As part of this program, you will be eligible to
receive an annual cash bonus up to a target amount of 25% of Base Salary based
on Company and individual performance.

 

6.                                       Equity Incentive Programs.

 

You shall be eligible to participate in future equity incentive programs
established by the Company to provide restricted stock, stock options and other
equity-based incentives to officers and key employees of the Company.

 

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7.                                       Business Expenses.

 

You shall be entitled to reimbursement of travel and entertainment expenses
incurred in connection with your services hereunder consistent with the policies
of Cellegy, upon receipt of reasonable supporting documentation.

 

8.                                       Benefits; Vacation/PTO.

 

You shall be entitled to participate in Cellegy’s benefit plans to the same
extent as other similarly situated Cellegy employees, including plans that
provide vacation, medical and dental insurance benefits described in Cellegy’s
employee handbook, which previously was provided to you.  In general, you will
be entitled to the number vacation/paid-time-off (“PTO”) days that are specified
in Cellegy’s standard vacation policies for similarly situated employees. 
Notwithstanding the foregoing, you will be entitled to carry over to Cellegy the
same number of accrued but unused PTO days that you had with Biosyn immediately
before the Effective Date, and unused PTO days will carry-over at year-end into
the succeeding year.  However, no additional PTO days shall accrue after the
Effective Date until such time as you have used a number of your then accrued
PTO days such that the number of your then accrued PTO days is less than the
maximum number of PTO days that you would be entitled to under Cellegy’s
standard policy regarding PTO days, and at that time, the number of PTO days
that you shall be entitled to will be governed by Cellegy’s standard PTO
policies.  To the maximum extent permitted under Cellegy’s plans, you will be
given credit for the time during which you were employed by Biosyn.  You will
also receive such other benefits as are generally made available from time to
time to other similarly situated employees of Cellegy.  By signing this
Agreement, you agree and acknowledge that in consideration of Cellegy’s
assumption of your PTO days accrued while you were employed with Biosyn, neither
Cellegy nor Biosyn will have any financial obligation to you with respect to
such PTO days in connection with any termination of your employment with Biosyn
that may be deemed to occur with respect to the transactions contemplated by the
Exchange Agreement and your employment by Cellegy (including without limitation
any obligation to make any cash payment to you with respect to such accrued
unused PTO days).

 

9.                                       401(k) Savings Plan.

 

You will be eligible to participate in Cellegy’s 401(k) plan on the same terms
and conditions as other Cellegy employees.

 

10.                                 Termination.

 

(a)                                  Termination of Employment.  Notwithstanding
anything contained in this Agreement, this Agreement and your employment
hereunder may be terminated at any time (a) voluntarily by you upon prior
written notice to Cellegy and (b) by Cellegy immediately upon notice to you. 
Cellegy may terminate your employment:

 

(i)                                     for Cause;

 

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(ii)                                  by reason of your death;

 

(iii)                               by reason of your disability, where such
disability has continued for a period of ninety (90) days, whether or not
consecutive, in any 365 day period (“disability” shall mean your inability to
perform the services contemplated by this Agreement for such period, as
determined by a physician reasonably satisfactory to both you and Cellegy;
provided, that if you and Cellegy do not agree on a physician, you and Cellegy
shall each select one, and these two together will select a third physician,
whose determination as to disability shall be binding on all parties); and

 

(iv)                              without Cause, for any reason or no reason
(with employment terminations by reason of death or disability, or your
termination of your employment by reason of your non-renewal of the term of this
Agreement, not constituting terminations without Cause).

 

(b)                                 Cause.  For the purposes of this Agreement,
“Cause” shall be deemed to exist for:

 

(i)                                     your willful and deliberate failure or a
refusal (not resulting from your incapacity due to physical or mental illness)
to comply in any material respect with the legal or ethical policies, standards
or regulations of the Company (including without limitation the Company’s
insider trading policy), or willful and deliberate failure to follow the lawful
written directions of the Chief Executive Officer or the Board of Directors,
provided that written notice in reasonable detail as to the alleged failure or
refusal has been given to you by the Chief Executive Officer or his authorized
designate and, if the failure is capable of cure, you have had a reasonable
opportunity to cure such failure;

 

(ii)                                  your misconduct which is materially
detrimental to the Company, or willful and deliberate failure or a refusal (not
resulting from your incapacity due to physical or mental illness) in any
material respect faithfully or diligently, to perform your legal and ethical
duties, determined by the Company in accordance with any written agreement
between you and the Company or the customary duties of your employment; provided
that written notice, in reasonable detail as to the alleged failure or refusal,
has been given to you by the Chief Executive Officer or his authorized designate
and, if the failure is capable of cure, you have had a reasonable opportunity to
cure such failure;

 

(iii)                               your deliberate concealment from the Board
of any action by you in violation of any legal or ethical policy, standard or
regulation set by the Company;

 

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(iv)                              any unethical or fraudulent conduct that is
demonstrably injurious and materially discredits the Company or is materially
detrimental to the reputation, character or standing of the Company;

 

(v)                                 dishonest conduct or a deliberate attempt by
you to do injury to the Company;

 

(vi)                              your material breach of any written employment
agreement or invention assignment and confidentiality agreement between you and
the Company; or

 

(vii)                           commission of an unlawful or criminal act
(serious in nature) which the Board of Directors or the Chief Executive Officer
reasonably concludes would reflect adversely on the Company, or your conviction
of a felony or other crime involving embezzlement or fraud involving the money
or property of the Company.

 

11.                                 Effect of Termination.

 

(a)                                  General.  Upon termination of your
employment, you (or your heirs in the event of your death) will be paid (i) the
Base Salary (as defined above) through the date of termination, (ii) any portion
of your bonus then earned but not yet paid, and (iii) all other benefits payable
in accordance with the applicable plans and programs of Cellegy, and all rights
and benefits hereunder shall cease except as expressly provided herein.

 

(b)                                 Termination.  In the event that Cellegy
terminates your employment in a termination without Cause or notifies you of
Cellegy’s determination not to renew this Agreement upon the expiration of any
term or in the event that you terminate your employment for Good Reason (as
defined below), then:

 

(i)                                     you will be entitled to receive your
Base Salary for a period of twelve (12) months, one-half of which shall be paid
in a lump sum payment as of the date of termination and the other half of which
shall be paid in six equal monthly installments on the first day of each of the
six calendar months immediately following the date of termination.

 

(ii)                                  any stock options granted by Cellegy to
you after the Effective Time (the “Post-Acquisition Options”) will become vested
and exercisable on a pro rata basis through the date of termination (with
vesting for the year in which termination occurred to be on a monthly basis for
the portion of the year in which the termination occurred) and you shall have 90
days in which to exercise the options; provided, however, that if your
employment is terminated in a Termination upon Change of Control as defined in
Cellegy’s Retention and Severance Plan for Executives (the “Retention Plan”),
then all Post-Acquisition Options will become fully vested and exercisable as
provided in the Retention Plan.

 

(iii)                               if you elect coverage under COBRA, you will
receive, by means of payment by Cellegy on behalf of yourself, your spouse and
your dependents of the applicable premiums, continued provision of the Company’s
health-related and other standard employee

 

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insurance coverages as are in effect immediately prior to such employment
termination for a period of twelve (12) months following such termination (with
you remaining responsible for such deductibles or percentage of payments under
such insurance as you were responsible for contributing immediately before the
employment termination).  You will be responsible for all taxes relating to any
payments made pursuant to this Section 10, and the amounts of any such payments
will be reduced by any amounts required to be withheld or deducted by the
Company from the payments.  The date of the “qualifying event” for you and your
spouse and dependents shall be the date of your employment termination. 
Notwithstanding the preceding provisions, in the event you become covered as a
primary insured (that is, not as a beneficiary under a spouse’s or partner’s
plan) under another employer’s group health plan that is comparable or superior
to Cellegy’s health plan during the period provided for herein, you shall
promptly shall inform the Company and the Company shall cease provision of
continued group health insurance for you and any family.

 

For purposes of this paragraph, “Good Reason” shall mean: assignment to you of a
title position, responsibilities or duties that are materially less than the
title position, responsibilities and duties that you occupied immediately after
the Effective Time (except that following a Change of Control (as defined in the
Company’s Retention and Severance Plan), a reduction in title position,
responsibilities or duties solely by virtue of the Company being acquired and
made part of a larger entity or operated as a subsidiary shall not constitute
Good Reason); (ii) a material breach by the Company of any of the terms of this
Agreement; or (iii) a material reduction in your compensation or benefits (other
than reductions in benefits under employee benefit plans applicable to officers
or employees of the Company generally); provided, in each of the foregoing
cases, that you have provided written notice to the Company that an event
constituting Good Reason has occurred and the Company has a reasonable
opportunity, not to exceed thirty (30) days, to cure such event.

 

12.                                 Indemnification

 

Cellegy shall indemnify and defend you and hold you harmless to the fullest
extent permitted by Cellegy’s bylaws and applicable law in connection with any
claim, action, suit, investigation or proceeding arising out of or relating to
performance by you of services for, or action by you as an officer or employee
of (i) Biosyn prior to the Effective Date or (ii) Cellegy, or any parent,
subsidiary or affiliate of Cellegy after the Effective Date.  Expenses incurred
by you in defending a claim, action, suit or investigation or criminal
proceedings shall be paid for by Cellegy in advance of the final disposition
thereof in accordance with Cellegy’s bylaws and upon the receipt by Cellegy of
your undertaking to repay said amount if it shall ultimately be determined that
you are not entitled to be indemnified hereunder.  You acknowledge receipt of a
copy of such bylaws.  Notwithstanding the foregoing, Cellegy shall not be
required:

 

(a)                                  (Unlawful Indemnification) to indemnify you
with respect to any acts or omissions or transactions from which a court having
jurisdiction in the matter shall determine that you may not be relieved of
liability under any applicable state or federal law.  In this respect, you
acknowledge having been advised that the Securities and Exchange Commission
takes the position that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and

 

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that claims for indemnification should be submitted to appropriate courts for
adjudication;

 

(b)                                 (Claims Initiated by you) to indemnify or to
advance expenses to you with respect to proceedings or claims initiated or
brought voluntarily by you and not by way of defense, except as may expressly be
required under applicable law, but such indemnification or advancement of
expenses may be provided by the Company in specific cases if the Board of
Directors has approved the initiation or bringing of such suit; or

 

(c)                                  (No Duplication of Payments) to indemnify
you for expenses or liabilities of any type whatsoever (including, without
limitation, judgments, fines, ERISA, excise taxes or penalties, and amounts paid
in settlement) to the extent that you have otherwise actually received payment
(under any insurance policy, provision of the Company’s certificate of
incorporation, bylaws or otherwise) of the amounts otherwise payable hereunder.

 

13.                                 Acknowledgement of No Claims; Release of
Claims.

 

 You acknowledge and agree that, except as may be expressly disclosed in the
Biosyn Disclosure Schedule relating to the Exchange Agreement and provided that
at the Closing of the transactions contemplated by the Exchange Agreement you
receive all salary, bonus and benefits payments that are provided for in the
Exchange Agreement, as of the date of this Agreement, all accrued salary, bonus
pay, cash profit-sharing, termination benefits or other compensation to which
you are entitled by virtue of your employment with Biosyn has been satisfied or
will be satisfied by Biosyn on or before the Effective Date (other than accrued
salary or reimbursements for expenses incurred in the ordinary course of
business for pay periods before the Effective Date, all of which will be
satisfied by Biosyn before the Effective Date).  You acknowledge and agree that
as of the date of this Agreement and as of the Effective Date, you do not have
and will not have any claims arising from any omissions, acts or facts that have
occurred up until and including the date of this Agreement and the Effective
Date against Biosyn, the Company or any of their officers, shareholders,
employees, directors, or agents, including without limitation any claims  under
any employment laws, including, but not limited to, claims of unlawful
discharge, breach of contract, breach of the covenant of good faith and fair
dealing, fraud, violation of public policy, defamation, emotional distress,
claims for additional compensation or benefits arising out of you employment
with Biosyn or your separation of employment from Biosyn in connection with the
transactions contemplated by the Exchange Agreement, claims under Title VII of
the 1964 Civil Rights Act, as amended, and any other laws and/or regulations
relating to employment or employment discrimination.  Your right to receive the
severance and other benefits described in this Agreement (other than benefits
required by law to be paid to you upon employment termination) is conditioned
upon your execution and delivery to Cellegy of a release of claims agreement
upon employment termination in the form attached as Exhibit B hereto or, if
payment of severance and benefits as contemplated by this Agreement are as
provided in the Retention Plan, then on the form of release provided in the
Retention Plan

 

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14.                                 Term.

 

The term of this Agreement shall be for a period of two (2) years beginning on
the Effective Date, unless terminated earlier as provided in Section 9 hereof,
and shall renew automatically for successive one (1) year terms unless either
you or Cellegy notifies the other in writing of your or its determination not to
renew this Agreement at least sixty (60) days prior to the termination of the
immediately preceding term.

 

15.                                 Secrecy and Non-Competition.

 

(a)                                  Non-Competing Employment.  You acknowledge
that the agreements and covenants contained in this Section are essential to
protect the value of the Company’s business and assets (including resulting from
the acquisition of the business of Biosyn) and, by your current employment with
the Company, you have obtained and will obtain such knowledge, contacts,
know-how, training and experience and there is a substantial probability that
such knowledge, know-how, contacts, training and experience could be used to the
substantial advantage of a competitor of the Company and to the Company’s
substantial detriment.  Therefore, you agree that for the period commencing on
the Effective Date and ending on the first anniversary of the termination of
employment hereunder (such period is hereinafter referred to as the “Restricted
Period”) with respect to any geographical area in which the Company is engaged
in business or actively contemplating engaging in business in the immediate
future during your term of employment with the Company, you shall not
participate or engage, directly or indirectly, for your benefit or on behalf of
or in conjunction with any person, partnership, corporation or other entity,
whether as an employee, consultant, advisor, agent, officer, director,
shareholder, partner, joint venturer, investor or otherwise, in the research,
development or commercialization of any technologies, intellectual property,
potential products or products relating to (i) anti-microbial spermicides or
intravaginal gels used for contraception or the prevention or reduction in
transmission of infectious or sexually transmitted diseases, or (ii) any other
business of the Company that you become substantially engaged in during the
period of time that you are an employee of, or consultant to, the Company after
the Effective Time (collectively, the “Restricted Field”), which technologies or
products are competitive with any technology, intellectual property, potential
products, or products or application thereof in the Restricted Field designed,
contemplated to be implemented in the immediate future, under research or
development, marketed, announced, leased or sold by the Company or any of its
subsidiaries (which term for purposes of this Section includes the Company
and/or Biosyn either before or after the Effective Date) during your term of
employment with the Company or any of its subsidiaries or at the time of the
termination of your employment; provided, however, that you may own any
securities of any company which is engaged in such business and is publicly
owned and traded but in an amount not to exceed at any one time one percent of
any class of stock or securities of such company.

 

(b)                                 Nondisclosure of Confidential Information.
 Except in connection with your employment hereunder, you shall not disclose to
any person or entity or use, either during the term of your employment with the
Company or any of its subsidiaries or at any time thereafter, any information
not in the public domain, is generally known in the industry or has been
independently developed and disclosed by others, in any form, acquired by you
while employed by the Company (or any subsidiary) or any predecessor to the
Company’s business or, if acquired following the term of your employment with
the Company, such information which, to

 

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your knowledge, has been acquired, directly or indirectly, from any person or
entity owing a duty of confidentiality to the Company or any of its subsidiaries
or affiliates, relating to the Company, its subsidiaries or affiliates,
including but not limited to information regarding customers, vendors,
suppliers, trade secrets, training programs, manuals or materials, technical
information, contracts, systems, or other data (including the revenues, costs or
profits associated with any of the Company’s products or services), business
plans, code books, invoices and other financial statements, computer programs,
software systems, databases, discs and printouts, plans (business, technical or
otherwise), customer and industry lists, correspondence, internal reports,
personnel files, sales and advertising material, telephone numbers, names,
addresses or any other compilation of information, written or unwritten, which
is or was used in the business of the Company or any subsidiaries or affiliates
thereof.  You agree and acknowledge that all of such information, in any form,
and copies and extracts thereof, are and shall remain the sole and exclusive
property of the Company, and upon termination of your employment with the
Company, you shall return to the Company the originals and all copies of any
such information (whether in hard copy, electronic form or otherwise) provided
to or acquired by you in connection with the performance of your duties for the
Company or any subsidiary, and shall return to the Company all files,
correspondence and/or other communications received, maintained and/or
originated by you during the course of your employment.

 

(c)                                  No Interference.  During the Restricted
Period, you shall not, whether for your own account or for the account of any
other individual, partnership, firm, corporation or other business organization
(other than the Company), directly or indirectly solicit, endeavor to entice
away from the Company or its subsidiaries, or otherwise directly interfere with
the relationship of the Company or its subsidiaries with any person who is
employed by or otherwise engaged to perform services for the Company or its
subsidiaries (including, but not limited to, any independent sales
representatives or organizations) or who is, or was within the then most recent
twelve-month period, a customer or client of the Company or other entity having
a business relationship with the Company, its predecessors or any of its
subsidiaries.  The placement of any general classified or “help wanted”
advertisement and/or general solicitations to the public at large shall not
constitute a violation of this Section unless your name is contained in such
advertisements or solicitations.

 

(d)                                 Inventions, etc.  By signing this Agreement
you hereby sell, transfer and assign to the Company or to any person or entity
designated by the Company your entire right, title and interest in and to all
inventions, ideas, disclosures and improvements, whether patented or unpatented,
and copyrightable material, made or conceived by you, solely or jointly, during
your employment by the Company (or any subsidiary) which relate to methods,
apparatus, designs, products, processes or devices, sold, leased, used or under
consideration or development by the Company (or any subsidiary), or which
otherwise relate to or pertain to the business, functions or operations of the
Company (or any subsidiary) or which were made or conceived during business
hours or using the facilities or other resources of the Company (or any
subsidiary).  You shall communicate promptly and disclose to the Company, in
such form as the Company requests, all information, details and data pertaining
to the aforementioned inventions, ideas, disclosures and improvements; and you
shall execute and deliver to the Company such formal transfers and assignments
and such other papers and documents as may be necessary or required to permit
the Company or any person or entity designated by the Company to file and
prosecute the patent

 

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applications and, as to copyrightable material, to obtain copyright thereof. 
Any invention relating to the business of the Company (or any subsidiary) and
disclosed by you within one year following the termination of your employment
with the Company shall be deemed to fall within the provisions of this
Section unless proved to have been first conceived and made following such
termination.  No later than the Effective Date, you agree to execute Cellegy’s
standard form of proprietary information and invention assignment agreement.

 

(e)                                  Injunctive Relief.  Without intending to
limit the remedies available to the Company, you acknowledge that a breach of
any of the covenants contained in Section hereof may result in material
irreparable injury to the Company or its subsidiaries or affiliates for which
there is no adequate remedy at law, that it may not be possible to measure
damages for such injuries precisely and that, in the event of such a breach or
threat thereof, the Company shall be entitled to obtain a temporary restraining
order and/or a preliminary or permanent injunction, without the necessity of
proving irreparable harm or injury as a result of such breach or threatened
breach of this Section, restraining you from engaging in activities prohibited
by this Section hereof or such other relief as may be required specifically to
enforce any of the covenants in Section.

 

16.                                 Arbitration.

 

In order to obtain the many benefits of arbitration over court proceedings,
including speed of resolution, lower costs and fees and more flexible rules of
evidence, all disputes between you and the Company arising out of or concerning
the interpretation of application of this Agreement or its subject matter shall
be resolved exclusively by binding arbitration in Philadelphia, Pennsylvania
pursuant to the National Rules for the Resolution of Employment Disputes of the
American Arbitration Association.  The Company and you hereby waive their rights
to have a jury trial for any such disputes.  Arbitration must be demanded within
180 days of the time when the demanding party knows or should have known of the
events giving rise of the claim.  The arbitration opinion and award shall be in
writing and shall be final, binding and enforceable by any court under the
Federal Arbitration Act.  Each party shall pay their own fees and costs in
connection with any such arbitration and shall pay one-half of the fees of the
arbitrator, but the arbitrator shall have discretion to make a different award
of fees and costs in connection with rendering the arbitrator’s opinion and
award.  The foregoing provisions are intended to supersede any provisions in the
Retention Plan, including Section 9 thereof, concerning arbitration of disputes.

 

17.                                 General.

 

(a)                                  Assignment.  You may not assign this
Agreement or any of its rights and privileges hereunder to any other person,
firm or corporation.  Cellegy may assign this Agreement without your consent in
connection with any sale of all or substantially all of Cellegy’s business or
assets, whether by merger, consolidation, sale of assets, sale or stock, or
other similar transaction provided that the successor company agrees in writing
to assume the Company’s obligations under this Agreement in their entirety (and
any change in employers resulting from the fact that the successor or acquiring
company, rather than Cellegy, becomes the employer shall not by itself be deemed
a termination of employment hereunder).  This

 

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Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, successors and permitted assigns.

 

(b)                                 Entire Agreement.  This Agreement (together
with any nondisclosure, noncompetition, proprietary information and/or invention
assignment agreement(s) with Biosyn or the Company that you have executed or
will execute and all other agreements and documents referred to herein)
constitutes the entire agreement between the parties with reference to the
subject matter hereof and, except as expressly set forth in Section 2 above,
supersedes all prior negotiations, understandings, representations and
agreements, if any, relating to your employment by Biosyn or Cellegy. If and to
the extent any such other agreements or documents shall be inconsistent in any
respect with the provisions of this Agreement, the provisions of this Agreement
shall prevail.

 

(c)                                  Governing Law; Consent to Jurisdiction. 
The provision of this Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Pennsylvania, notwithstanding
any application of any doctrine of conflicts of laws.  Without limiting the
effect of the other provisions in this Agreement requiring arbitration of
disputes arising hereunder, each party irrevocably consents to the exclusive
jurisdiction and venue of the state and federal courts for the federal and state
judicial district in which such party is entitled to initiate an arbitration
proceeding in accordance with Section 16 above in connection with any action to
enforce the provisions of this Agreement, to recover damages or other relief for
breach or default of this Agreement, or otherwise arising under or by reason of
this Agreement, and agrees that service of process in any such action may be
effected by the means provided in this Agreement for delivery of notices.

 

(d)                                 Severability.  If any provision contained in
this Agreement is determined to be void, invalid or unenforceable in whole or in
part for any reason whatsoever, such determination shall not affect or impair
the validity of any other provision herein, nor the validity of this Agreement
as a whole.  Each provision of this Agreement shall be deemed to be separate and
distinct.  Without limiting the foregoing, you acknowledge and agree that the
covenants set forth in Section 15 above are reasonable and valid in geographical
and temporal scope and in all other respects.  If any of such covenants or such
other provisions are found to be invalid or unenforceable by a final
determination of a court of competent jurisdiction, (i) the remaining terms and
provisions hereof shall be unimpaired and (ii) the invalid or unenforceable term
or provision shall be deemed replaced by a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision.

 

(e)                                  Counterparts.  This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original and all of which together shall be deemed to be one and the same
instrument.

 

(f)                                    Termination of Exchange Agreement.  If
the Exchange Agreement is terminated in accordance with its terms, then this
Agreement and the obligations of the parties hereunder shall immediately
terminate.

 

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(g)                                 Notices.  All notices and other
communications required or permitted under this Agreement will be in writing and
hand delivered, sent by telecopier, sent by certified first class mail, postage
pre-paid, or sent by nationally recognized express courier service.  Such
notices and other communications will be effective:  (a) upon receipt if hand
delivered; or (b) three (3) days after mailing if sent by mail; and (c) one (l)
business day after delivery to a national overnight courier service for next
business day delivery, to the following addresses, or such other addresses as
any party may notify the other parties in accordance with this Section:

 

If to Cellegy or Employee:

With a copy to:

 

 

Cellegy Pharmaceuticals, Inc.

Weintraub Genshlea Chediak Sproul

349 Oyster Point Boulevard

400 Capitol Mall, Eleventh Floor

South San Francisco, CA 94080

Sacramento, CA 95814

Attention: Chief Financial Officer

Attention: C. Kevin Kelso, Esq.

 

 

If to Employee:

With a copy to:

 

 

Anne-Marie Corner

Duane Morris LLP

586 West Mermaid Lane

One Liberty Place

Philadelphia, PA 19118

Philadelphia, PA 19103-7396

 

Attention: Kathleen M. Shay, Esq.

 

or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.

 

[Remainder of this page intentionally left blank]

 

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Please confirm your acceptance of the foregoing by signing this Agreement where
indicated below.  Your signature below indicates your acceptance of this
Agreement and its terms and conditions, and we both intend, acknowledge and
agree that this is a binding contract enforceable in accordance with these
terms.

 

 

Yours very truly,

 

CELLEGY PHARMACEUTICALS, INC.

 

 

By:

/s/ K. Michael Forrest

 

 

K. Michael Forrest,

 

Chief Executive Officer

 

 

I accept the terms of the agreement as outlined above:

 

 

/s/ Ann-Marie Corner

 

Date: October    , 2004

Anne-Marie Corner

 

 

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EXHIBIT A

 

EMPLOYMENT RESPONSIBILITIES

 

1.                                       Assume direct responsibility for the
strategic direction and management of the Company’s microbicide business, as
well as administrative management of all employees located at the Huntingdon
Valley, PA facility.

 

2.                                       Prepare, obtain approval for and manage
annual budgets for the microbicide business.  As requested, prepare longer-range
forecasts and projections.

 

3.                                       Participate proactively in Cellegy’s
overall strategic planning process, working cooperatively with the CEO,
Corporate Development, Regulatory Affairs, Clinical Research, R&D, Finance,
Human Resources and Marketing/Sales.

 

4.                                       As requested, attend Cellegy’s Board of
Directors meetings in order to provide updates and input into the strategic
direction and operations of the microbicide business.

 

5.                                       Assume direct responsibility for
coordination with granting agencies to effectively manage relationships and
ensure that adequate resources are available to support core programs.

 

6.                                       As requested, attend conferences,
conventions, road shows and meetings with members of the investment and medical
community, as well as with other constituents in order to obtain information
and/or make presentations relevant to the microbicide business.

 

7.                                       Implement a proactive program designed
to educate and keep the CEO and/or his designates current regarding all aspects
of the microbicide business, including a planned program to meet with potential
licensing partners, granting and potential granting agencies, CROs and other key
organizations to accomplish objectives agreed upon from time to time.

 

8.                                       As directed, and in coordination with
the Vice President, Corporate Development, meet with potential licensing
partners an/or M&A targets to accomplish objectives agreed upon from time to
time with the CEO.

 

9.                                       Seek advice and actively provide
assistance to and cooperation with employees of Cellegy from various
disciplines, in particular Clinical, Regulatory, Research, Development, and
Finance in order to effectively manage the microbicides business.

 

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EXHIBIT B

 

RELEASE OF CLAIMS

 

THIS RELEASE OF CLAIMS (“Release”) is entered into between
                              (“Employee”) and Cellegy Pharmaceuticals, Inc.
(“Cellegy”).

 

1.                                       Payment of Separation Benefits.  I
understand that my employment with Cellegy has terminated.  Cellegy has agreed
that if I choose to sign this Release on or after my last day of employment,
Cellegy will provide me separation benefits (the “Separation Benefits”) set
forth in pursuant to the employment letter agreement between Cellegy and me
dated                     , 2004 (the “Agreement”).  I understand that I am not
entitled to these Separation Benefits unless I sign this Release.  Employee
agrees to waive or terminate his or her rights to any cash severance or option
or restricted stock acceleration or continued vesting under any agreement, other
than as described in the Agreement (whether written or oral), with Cellegy that
provides that upon a change of control or termination of employment Employee
would be entitled to receive any cash severance or acceleration or continued
vesting.  This Release and the Agreement contain the entire understanding of
Cellegy and Employee with respect to cash severance or option or restricted
stock acceleration or continued vesting and supersede any prior agreements with
respect to these matters.  I understand that in addition to the Separation
Benefits and regardless of whether I sign this Release, Cellegy has paid me all
of my accrued salary and vacation earned through my date of termination and any
remaining unpaid balance of my bonus that I am entitled to receive and that has
not been paid.

 

2.                                       Release.

 

(a)                                  Each of (i) Employee and Employee’s
respective heirs, executors, successors and assigns, and (ii) Cellegy and its
parents, subsidiaries, successor, agents, officers and directors, hereby fully
and forever release each other and their respective heirs, executors,
successors, agents, officers and directors, from and agree not to sue
concerning, any and all claims, actions, obligations, duties, causes of action,
whether now known or unknown, suspected or unsuspected, that either of them may
possess based upon or arising out of any matter, cause, fact, thing, act, or
omission whatsoever occurring or existing at any time prior to and including the
date of Employee’s termination of employment (collectively, the “Released
Matters”), as follows:

 

(i)                                     any and all claims relating to or
arising from Employee’s employment relationship with Cellegy and the termination
of that relationship;

 

(ii)                                  any and all claims relating to, or arising
from, Employee’s right to purchase, or actual purchase of, shares of stock of
Cellegy, including, without limitation, any claims of fraud, misrepresentation,
breach of fiduciary duty, breach of duty under applicable state corporate law,
and securities fraud under any state or federal law;

 

(iii)                               any and all claims for wrongful discharge of
employment; termination in violation of public policy; discrimination; breach of
contract, both express and

 

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implied; breach of a covenant of good faith and fair dealing, both express and
implied or promissory estoppel;

 

(iv)                              any and all claims for violation of any
federal, state or municipal statute, including, but not limited to, Title VII of
the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age
Discrimination in Employment Act of 1967, the Americans with Disabilities Act of
1990, the Fair Labor Standards Act, the Employee Retirement Income Security Act
of 1974, the Worker Adjustment and Retraining Notification Act, Older Workers
Benefit Protection Act, and the California Fair Employment and Housing Act, and
Labor Code section 201, et. seq.;

 

(v)                                 any and all claims for violation of the
federal, or any state, constitution;

 

(vi)                              any and all claims arising out of any other
laws and regulations relating to employment or employment discrimination; and

 

(vii)                           any and all claims for attorneys’ fees and
costs.

 

This Release does not extend to, and does not result in, a waiver or release of
any of the following:  (a) any claim by Employee for workers’ compensation or
unemployment benefits; (b) Employee’s rights to indemnity under any indemnity
agreement signed by the parties, as well as under Labor Code section 2802; and
(c) all rights and benefits to which Employee is entitled under the Agreement.

 

(b)                                 Employee and Cellegy acknowledge that they
have been advised by legal counsel and are familiar with Section 1542 of the
Civil Code of the State of California, which states:

 

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

 

Employee expressly waives any right or benefit that he has or may have under
Section 1542 of the California Civil Code or any similar provision of the
statutory or non-statutory law of any other jurisdiction, including Pennsylvania
and Delaware.

 

3.                                       Acknowledgment of Waiver of Claims
under ADEA.  Employee acknowledges that Employee is waiving and releasing any
rights Employee may have under the Age Discrimination in Employment Act of 1967
(“ADEA”) and that this waiver and release is knowing and voluntary.  Employee
and Cellegy agree that this waiver and release does not apply to any rights or
claims that may arise under ADEA after the Effective Date (defined below) of
this Release.  Employee acknowledges that the consideration given for this
Release is in addition to anything of value to which Employee was already
entitled.  Employee further acknowledges that Employee has been advised by this
writing that:

 

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(a)                                  Employee should consult with an attorney
prior to executing this Release;

 

(b)                                 Employee has at least twenty-one (21) days
within which to consider this Release, although Employee may accept the terms of
this Release at any time within those 21 days;

 

(c)                                  Employee has at least seven (7) days
following the execution of this Release by the parties to revoke this Release;
and

 

(d)                                 This Release will not be effective until the
revocation period has expired (the “Effective Date”).

 

4.                                       Indemnity and Employee Invention
Agreement.  Employee and Cellegy agree that all rights and obligations of the
parties under any indemnity agreement between the parties and under any
invention assignment and confidentiality agreement will continue in effect.

 

5.                                       Voluntary Execution of Agreement.  This
Release is executed voluntarily and without any duress or undue influence on the
part or behalf of the parties hereto, with the full intent of releasing all
claims.  The parties acknowledge that:

 

(a)                                  they have read this Release;

 

(b)                                 they have been represented in the
preparation, negotiation, and execution of this Release by legal counsel of
their own choice or that they have voluntarily declined to seek such counsel;

 

(c)                                  they understand the terms and consequences
of this Release and of the releases it contains;

 

(d)                                 they are fully aware of the legal and
binding effect of this Release.

 

EXECUTIVE HAS CONSULTED WITH AN ATTORNEY BEFORE SIGNING THIS RELEASE AND
UNDERSTANDS THAT, BY SIGNING THIS RELEASE, EXECUTIVE IS GIVING UP ANY LEGAL
CLAIMS EXECUTIVE HAS AGAINST CELLEGY PHARMACEUTICALS, INC. EXCEPT AS SET FORTH
HEREIN.  EXECUTIVE FURTHER ACKNOWLEDGES THAT EXECUTIVE DOES SO KNOWINGLY,
WILLINGLY, AND VOLUNTARILY IN EXCHANGE FOR THE BENEFITS DESCRIBED IN THE
AGREEMENT.

 

6.                                       Return of Company Property.  Employee
represents and warrants to Cellegy that Employee has returned all real or
intangible property or data of Cellegy of any type whatsoever that has been in
Employee’s possession or control.

 

7.                                       Nondisparagement.  Employee agrees that
Employee will not disparage Cellegy or its products, services, agents,
directors, officers, shareholders, attorneys, employees, affiliates, successors
or assigns, or any persons acting by, through, or in concert with any of them,
with any written or oral statement.

 

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8.                                       Arbitration.  The mandatory binding
arbitration provisions set forth in the Agreement are hereby incorporated by
referenced.

 

9.                                       Confidentiality.  The contents, terms
and conditions of this Release shall be kept confidential by Employee and may
not be disclosed by Employee except to Employee’s accountant or attorneys or
pursuant to court order or subpoena.  Employee agrees that if Employee is asked
for information concerning this settlement, Employee will state only that
Employee and Cellegy have reached an amicable resolution of any disputes
concerning Employee’s separation from Cellegy.

 

10.                                 Entire Agreement.  This Release sets forth
the entire agreement between Employee and Cellegy with respect to the subject
matter hereof and supersedes all prior negotiations and agreements, whether
written or oral, relating to such subject matter.

 

 

 

[Remainder of this page intentionally left blank]

 

 

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IN WITNESS WHEREOF, the parties have executed this Release as of the date set
forth below.

 

 

EXECUTIVE

CELLEGY PHARMACEUTICALS, INC.

 

 

 

 

 

 

 

 

By:

 

 

 

Title:

 

 

 

 

 

 

 

Signature

 

 

 

 

 

 

 

Date:

 

 

Date:

 

 

 

 

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