Exhibit 10.6

                                  May 15, 2003


K. Michael Forrest
18 Farm Lane
Hillsborough, CA  94010

         Re:      Your Employment With Cellegy Pharmaceuticals, Inc.

Dear Mike,

         This letter will set forth the binding  agreement  of  employment  (the
"Agreement"), effective as of January 1, 2003 (the "Effective Date") between you
and Cellegy  Pharmaceuticals,  Inc., a California  corporation ("Cellegy" or the
"Company").  This  Agreement  replaces the earlier  Employment  Agreement  dated
December 1, 1996, between you and the Company

1.       EMPLOYMENT AND DUTIES

         (a)  Employment.  During the  Employment  Term (as defined in Section 3
below),  the Company  agrees to employ you, and subject to Section 3 below,  you
agree to serve,  as President and Chief Executive  Officer of Cellegy.  You will
have such duties and authority as are customary for, and commensurate with, such
positions,  including general management and direction of the Company,  and such
other reasonable  duties and authority as the Board of Directors of Cellegy (the
"Board")  prescribes  from  time to time.  The  Company  agrees  to use its best
efforts to cause you to be nominated  for  re-election  as a director of Cellegy
for each of the years corresponding to the Employment Term.

         (b)  Exclusive  Service.  Except for your  current  participation  as a
Director of INEX  Pharmaceuticals  Corporation (or, in lieu of such company, one
other  corporation  on whose board you serve as long as the  corporation  is not
competitive  with the business of the Company or such service would otherwise be
inappropriate),  you agree to devote your full  working time and efforts to this
employment  and apply all your skill and  experience to the  performance of your
duties and advancing the Company's  interests in accordance with your experience
and skills. In addition, during the Employment Term you will not act as a member
of the Board of Directors  for any  corporation  (except as described  above) or
engage in any other  consulting  activity  without the prior written approval of
Company (which approval shall not be withheld


<PAGE>

unreasonably)  unless so  directed by the  Company,  and you will  otherwise  do
nothing inconsistent with the performance of your duties hereunder.


2.       COMPENSATION

         (a) Salary. For your services under this Agreement, Cellegy will pay as
base Salary to you the amount of $31,666.67 per month (an  annualized  salary of
$380,000.00)  (plus  any  adjustments  made  pursuant  to  this  Agreement  (the
"Salary")  during each of the calendar years of the  Employment  Term, pro rated
for any year in which  this  Agreement  is in effect  for only a portion  of the
calendar  year.  Your Salary will be paid in conformity  with  Cellegy's  normal
payroll periods. The Board (or the Compensation Committee thereof) shall, in its
discretion,  review your Salary and other  compensation at least  annually.  The
Salary may, in the sole discretion of the Board (or the Compensation Committee),
be adjusted upwards to take into consideration your performance and the economic
circumstances of the Company.  A downward  adjustment of your Salary can only be
effected by your written consent.

         (b) Incentive Compensation. In the event the Board (or the Compensation
Committee  thereof) agrees to the  implementation  of an Incentive  Compensation
Program  for  senior  executives  of  the  Company,  you  will  be  entitled  to
participate  in such  program  and be  eligible  to receive an annual cash bonus
equal to a target percentage of your annual base Salary to be agreed upon by you
and the Board or the Compensation Committee thereof (the "Incentive Compensation
Target").  Such  bonus  will be paid on the  basis  of  accomplishment  measured
against  objective  criteria to be  determined by the Board of Directors (or the
Compensation Committee thereof).

         (c)  Signing  Bonus.  As an  incentive  for  you  to  enter  into  this
employment agreement,  within 90 days of execution of the Agreement, the Company
will pay you the  amount  of  $325,000.00.  Such  payment  will be made,  at the
Company's option, in the form of fully registered unrestricted shares of Cellegy
common stock pursuant to the Company's 1995 Equity  Incentive  Plan,  cash, or a
combination of stock and cash.

         (d) Stock  Options.  As an employee of the Company since December 1996,
you have  been  issued a number  of  incentive  stock  options  (singularly  and
collectively, the "Options"). You are entitled to continue to participate in all
of the  Company's  employee  stock  option and equity  incentive  plans that are
generally available to executive  employees,  and the issuance of any such stock
options pursuant to the plans will be considered Options.

         (e) Other Benefits.  You will be entitled to participate in and receive
the maximum  benefits  available to Cellegy  employees under Cellegy's  standard
company  benefits plans as in effect from time to time which currently  include:
medical,  dental and  health  insurance,  a 401K  savings  plan and a  long-term
disability  plan.  You will also be entitled to four weeks of vacation  time (20
business  days) per year,  subject to  applicable  Company  policies;  provided,
however,  that no more than 200% of the annual vacation days you earn in a given
year shall carry over from year to year (in other words,  the maximum  number of
vacation days in any year shall be limited to two times the base annual vacation
to which you are entitled).

         (f)  Health  Benefits  after Term of  Agreement.  In the event that you
remain  employed


                                      -2-
<PAGE>

by Cellegy  throughout  the  initial  three-year  term of this  Agreement,  then
provided that you elect coverage under the  Consolidated  Budget  Reconciliation
Act of 1985 (or, if applicable,  any applicable corresponding state statute that
provides for more favorable  benefits;  in either event,  "COBRA"),  the Company
will,  to the maximum  extent  permitted  under its  health,  medical and dental
insurance benefit plans, pay for continued  coverage for you and your wife under
such  plans or, to the  extent  not so  permitted,  pay to you the amount of the
premium   payments  to  obtain   continued   provision  under  health  insurance
substantially  equivalent to the Company's health,  medical and dental insurance
benefit  plans  as  are  in  effect   immediately  before  your  termination  of
employment,  in each of the above cases for the maximum period of time permitted
by COBRA or, if longer,  until you reach age 65 (with you remaining  responsible
for such percentage of payments under such insurance as you were responsible for
contributing immediately before the employment termination).

         (g) Expenses.  During the term of your employment under this Agreement,
you will be  entitled  to receive  prompt  reimbursement  from  Cellegy  for all
reasonable  business-related  expenses  incurred  by  you,  in  accordance  with
Cellegy's policies and procedures as in effect from time to time,  provided that
such expenses are properly  documented and accounted for in accordance  with the
requirements of the Internal Revenue Service.

         (h) Deductions  and  Withholding.  All amounts  payable or which become
payable under any provision of this  Agreement will be subject to and reduced by
any deductions  authorized in writing by you and any deductions and withholdings
required by law (including without limitation employment and withholding taxes).


3.       TERM OF EMPLOYMENT

         (a) Term.  This  Agreement  will continue in full force and effect from
and  including the  Effective  Date through and  including  three years from the
Effective  Date  unless your  employment  is sooner  terminated  pursuant to the
provisions  of this  Agreement.  Thereafter,  the term of this  Agreement  shall
automatically  be renewed for two successive  one-year terms on each anniversary
of the  Effective  Date unless either party gives notice of the  non-renewal  of
such annual term at least 90 days before  commencement of the one-year term. The
term of this Agreement (the  "Employment  Term") shall include the initial three
years and both automatic renewals,  unless your employment is terminated earlier
as provided herein,  in which case the Employment Term shall cease upon the date
of such termination.

         (b) Extension of Term. The Employment Term may be extended by a written
amendment to this Agreement signed by both parties.

         (c) Termination  Without Cause. Your employment with Cellegy under this
Agreement may be terminated by Cellegy at any time during the Employment Term by
a majority vote of the Board, for any reason or for no reason,  such termination
to be  effective  upon  delivery  of written  notice by  Cellegy of  Termination
Without Cause. For purposes of this Agreement, a Termination Without Cause shall
include  termination  for Good  Reason,  but shall not  include  your  voluntary
termination  of your  employment  (other than for Good Reason) or termination of
your employment for Cause.  Termination Without Cause shall be deemed to include
termination  by reason of the  non-renewal  by either party of either  automatic
extension of


                                      -3-
<PAGE>

the term of this  Agreement.  "Good Reason" shall mean the  occurrence of any of
the following  without your written  consent:  (a)  assignment to you of a title
position,  responsibilities  or duties that are  materially  less than the title
position,  responsibilities or duties which you occupied  immediately  preceding
any  termination  of employment,  except that  following a Change of Control,  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 as long as you are in charge of that
subsidiary as its President and Chief  Executive  Officer or if part of a larger
entity  you  remain  the  head of a group  that  is at a  minimum  substantially
equivalent  to the Company,  (b) a material  reduction  in your base  Salary,  a
material  reduction in your target bonus  opportunity  after the occurrence of a
Change of Control  compared  to the amount of the target  bonus  opportunity  in
effect before the occurrence of the Change of Control,  or a material  reduction
in employee benefits other than a reduction  applicable to employees  generally,
(c) the Company's  requiring you to be based at any office or location more than
40 miles from 349 Oyster Point Boulevard,  South San Francisco,  California;  or
(d) any  material  breach by the Company of the terms of any written  employment
agreement  between the Company and you (including this Agreement),  which breach
is not cured  within  twenty (20) days  following  written  notice by you to the
Company of such breach,  including but not limited to the failure by the Company
to  require a  successor  (whether  direct or  indirect,  by  purchase,  merger,
consolidation or otherwise) to all or  substantially  all of the business and/or
assets of the Company to assume  expressly  and agree to perform  the  Company's
Change of Control obligations,  as if no such succession had taken place. If you
decide  to  terminate  your  employment  for  Good  Reason  (whether  or  not in
connection with a Change of Control),  you must terminate your employment within
six (6)  months of the date of the  occurrence  of the event  constituting  Good
Reason.

         (d) Termination for Cause.  Your employment may be terminated for Cause
by the Board,  immediately  upon delivery of termination  notice thereof to you.
For the purposes of this Agreement,  "Cause" for your  termination will exist at
any  time  after  the  happening  of one or more  of the  following  events,  as
determined  by the  Company in its  reasonable  judgment:  (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 Board of Directors,  and
provided that written notice,  in reasonable detail as to the alleged failure or
refusal,  has been given to you by the Board and,  if the  failure is capable of
cure,  you have had a reasonable  opportunity  to cure such  failure;  (ii) your
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 or ethical duties, determined by the Board of
Directors in  accordance  with this  Agreement or the  customary  duties of your
employment of which you have or reasonably should have had prior knowledge,  and
provided that written notice,  in reasonable detail as to the alleged failure or
refusal,  has been given to you by the Board 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 the Company in violation
of any legal or ethical  policy  standard or regulation  set by the Board;  (iv)
your  deliberate  failure to obtain Board approval for any Company act requiring
Board approval; (v) any unprofessional,  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;  (vi)
dishonest


                                      -4-
<PAGE>

conduct or a deliberate attempt to do injury to the Company; (vii) your material
breach  of  this  Agreement  or any  invention  assignment  and  confidentiality
agreement between you and the Company;  or (viii) your conviction of an unlawful
or criminal  act  (serious in nature)  which the Board of  Directors  reasonably
concludes would reflect adversely on the Company, or your conviction of a felony
or other crime involving embezzlement,  fraud or any offense involving the money
or property of the Company; provided,  however, that with respect to clauses (i)
and (ii) above,  if your failure or refusal was the result of a reasonable  good
faith  objection  by you,  which you set forth to the Board of  Directors of the
Company,  that such compliance or performance would not be in the best interests
of the  Company  and its  shareholders  or would  violate an  applicable  law or
regulation or ethical duty,  then any such  termination by the Board as a result
of such failure or refusal shall be deemed to be a termination Without Cause.

         (e) Termination Due to Death or Disability.  Your employment under this
Agreement  will  terminate  immediately  upon your  death.  The Company may also
terminate your employment by notice to you in the event of your Disability.  For
purposes of this Agreement,  "Disability"  means (i) you have been incapacitated
by bodily injury, illness or disease so as to be prevented thereby from engaging
in the performance of your Executive's  duties, (ii) such total incapacity shall
have  continued  for a  period  of  four  consecutive  months,  and  (iii)  such
incapacity  will, in the opinion of your qualified  physician,  be permanent and
continuous during the remainder of your life.

         (f) Resignation as a Director. Upon termination of your employment, you
agree,  if the Company  requests,  to deliver to the Company  promptly a written
resignation as a director of the Company,  effective upon the date of employment
termination.

4.       PAYMENTS AND BENEFITS AFTER TERMINATION OF EMPLOYMENT.

         (a) Upon termination of your  employment,  the Company will pay you all
unpaid salary and accrued vacation earned through the date of termination,  less
applicable federal and state withholding, and within ten (10) days of submission
of proper  expense  reports,  the Company  will  reimburse  you for all expenses
incurred by you before the date of termination  in connection  with the business
of the Company and pursuant to applicable Company policies.  Upon termination of
this Agreement under either (i) Section 3(d) of this Agreement ("Termination for
Cause"),  or (ii) your voluntary  termination of employment (other than for Good
Reason  or any  non-renewal  of  either  of the  automatic  extensions  of  this
Agreement),  all Salary,  benefits and stock option vesting under this Agreement
will cease immediately.

         (b)  Upon  termination  of this  Agreement  pursuant  to  Section  3(e)
"Termination Due to Death or Disability", you will receive the benefits provided
by the Company's  health,  life insurance,  long term disability and other plans
which may be in effect. In addition,  you or your estate will receive additional
compensation in the form of a payment of your Salary for a period of twelve (12)
months  (paid at the times that your Salary  would  otherwise  be payable if you
remained an employee), reduced by the amount of any life or disability insurance
proceeds payable to you, your wife or your estate under paid-for Company life or
disability insurance policies or plans. In addition, the period during which you
or your  estate may  exercise  any  Options  issued to you by the  Company  will
continue until 12 months after the date of such termination.


                                      -5-
<PAGE>

         (c)  Upon  termination  pursuant  to  Section  3(c) of  this  Agreement
("Termination Without Cause" including  "Termination for Good Reason") after the
Effective  Date,  you will be paid severance by Cellegy in the form of a payment
of your Salary for a period of  eighteen  (18) months from and after the date of
such  termination  and one and one-half  times (1.5x) the dollar  amount of your
Incentive Compensation Target (at the 100% level) corresponding to the Salary in
effect  for the year in which  the  termination  occurred.  In the event of your
Termination  Without Cause or for Good Reason during the period commencing on or
after the date that the Company first publicly announces (or, if earlier, signs)
a  definitive  agreement  that would  result in a Change of Control  (as defined
below) and ending on the date which is twelve (12) months  after the  occurrence
of the Change of Control (a "Termination Upon a Change of Control"), you will be
paid  severance  by Cellegy in the form of a  continuation  of your Salary for a
period of  twenty-four  (24) months from and after the date of such  termination
(paid at the times that your Salary  would  otherwise be payable if you remained
an  employee),   plus  two  times  (2x)  the  dollar  amount  of  the  Incentive
Compensation  Target (at the 100% level)  corresponding  to the Salary in effect
for the year in which the termination  occurred,  even if you have secured other
employment (pro rated for the first and last month of such monthly  periods,  if
your employment is terminated other than at the end of a calendar  month).  Nine
(9) months or, in the case of Termination Upon a Change of Control,  twelve (12)
months,  of this  severance pay shall be paid in one lump sum upon  termination,
with the  remainder  being paid monthly in equal  increments  over the severance
period. In addition, during the period that you are receiving severance payments
and as long as you have not secured  full-time  employment with another employer
(such period referred to as the "Eligibility  Period"),  to the extent permitted
by  applicable  Company  plans and policies and unless  prohibited  by law, your
medical and dental,  disability,  and life insurance  benefits will be continued
(and  paid  by the  Company)  under  such  Company  plans  (with  you  remaining
responsible  for such  percentage of payments  under such  insurance as you were
responsible for contributing immediately before the employment termination).  If
health,  medical and dental  insurance  benefits  cannot be so  continued,  then
provided that you elect coverage under COBRA,  the Company or its successor will
pay you the amount of the premium  payments  to obtain  continued  provision  of
health insurance  substantially  equivalent to the Company's health, medical and
dental  insurance  benefit  plans  as  are in  effect  immediately  before  your
termination  of  employment,  for the maximum  period  permitted by COBRA or, if
longer,  until  you  reach  age 65  (with  you  remaining  responsible  for such
percentage  of  payments  under  such  insurance  as you  were  responsible  for
contributing immediately before the employment termination),  and shall also pay
you an additional sum to cover any federal or state income or employment tax due
on such  premium  payments.  Your 401K and  vacation  accrual  will cease on the
termination  date.  During  the  period of  payment  of  severance  pay you will
cooperate  with Cellegy in providing  for the orderly  transition of your duties
and responsibilities to other individuals, as reasonably requested by Cellegy.

         (d) Moreover,  if you are terminated for reasons other than Cause,  the
period  during which you may  exercise  any Option  issued to you by the Company
will  continue   until  eighteen  (18)  months  after  the  date  of  employment
termination  (but  in all  events  no  longer  than  the  original  term of such
Options).

         (e) Moreover,  in the event of a Termination  Upon a Change of Control,
all of the remaining balance of unvested Options will, to the extent not already
vested  and   exercisable,   accelerate  and  become   immediately   vested  and
exercisable,  and you will have  twenty-four  (24)


                                      -6-
<PAGE>

months after the date of such termination  within which to exercise such Options
(but in all events no longer than the original term of such Options).

         (f) If there is a Change of Control  transaction  in which  outstanding
Options  granted (or  restricted  stock  awards made) under the  Company's  1995
Equity  Incentive  Plan  before the  transaction  are not fully  assumed  by, or
replaced by fully  equivalent  substitute  options or  restricted  stock of, the
surviving,  successor or acquiring person or entity,  then (i) all such unvested
Options and  restricted  stock shall have their vesting fully  accelerated to be
100% vested and exercisable  immediately before the effective date of the Change
of Control, and (ii) the Company shall provide reasonable prior notice to you of
(A) the date such  unexercised  Options will terminate and (B) the period during
which you may exercise the fully vested Options.

         (g) The Company may condition  payment of the cash  severance  payments
and the stock  option  acceleration  described  in this Section 4 above upon the
delivery by you of a signed general release of claims, in substantially the form
attached to the Company's  Retention and Severance Plan or such other form as is
reasonably satisfactory to the Company,  covering the Company and its parent and
subsidiary entities, officers, directors and agents; provided, however, that you
shall not be required to release any rights that you may have to be  indemnified
by the Company.

         (h) If  (1)  any  amounts  payable  to you  under  this  Agreement  are
characterized  as excess  parachute  payments  pursuant  to Section  4999 of the
Internal  Revenue  Code of 1986,  as amended (the  "Code"),  and (2) you thereby
would  be  subject  to  any  United  States  federal  excise  tax  due  to  that
characterization,  then you may elect,  in your sole  discretion,  to reduce the
amounts  payable  under this  Agreement  or to have any  portion  of  applicable
options or  restricted  stock not vest in order to avoid any  "excess  parachute
payment" under Section 280G(b)(1) of the Code.

         (i) For purposes of this Agreement, "Change of Control" means:

                  (i)      any "person" (as such term is used in Sections  13(d)
                           and 14(d) of the Securities  Exchange Act of 1934, as
                           amended (the "Exchange  Act")),  other than a trustee
                           or other fiduciary holding  securities of the Company
                           under  an  employee  benefit  plan  of  the  Company,
                           becomes  the  "beneficial  owner" (as defined in Rule
                           13d-3 promulgated  under the Exchange Act),  directly
                           or   indirectly,   of   securities   of  the  Company
                           representing  50%  or  more  of (A)  the  outstanding
                           shares  of  common  stock of the  Company  or (B) the
                           combined    voting    power    of    the    Company's
                           then-outstanding securities;

                  (ii)     the Company is party to a merger or consolidation, or
                           series of related transactions,  which results in the
                           voting   securities   of  the   Company   outstanding
                           immediately  prior  thereto  failing to  continue  to
                           represent  (either  by  remaining  outstanding  or by
                           being   converted  into  voting   securities  of  the
                           surviving entity) at least fifty (50%) percent of the
                           combined voting power of the voting securities of the
                           Company   or  such


                                      -7-
<PAGE>

                           surviving entity  outstanding  immediately after such
                           merger or consolidation;

                  (iii)    the sale or disposition of all or  substantially  all
                           of  the  Company's  assets  (or  consummation  of any
                           transaction,   or  series  of  related  transactions,
                           having similar effect);

                  (iv)     the   dissolution  or  liquidation  of  the  Company;
                           provided,    however,   that   the   dissolution   or
                           liquidation  of the  Company  shall be deemed to be a
                           Change of Control only if the Company has  sufficient
                           cash to pay all amounts it is obligated to pay to any
                           federal,  state or local  taxing or other  authority,
                           all of its creditors,  and all amounts required to be
                           paid to  employees  in  respect  of  compensation  or
                           benefits,  and  only  if the  Board  determines  that
                           treatment  of such  event as a Change of  Control  is
                           consistent with its fiduciary duties; or

                  (v)      any  transaction  or series of  related  transactions
                           that has the substantial effect of any one or more of
                           the foregoing.

5.       OBLIGATIONS NOT TO COMPETE: NO SOLICITATION.

         (a)  Noncompetition.  You hereby  agree that while you are  employed by
Company,  you shall not engage in or provide  services to any  business  that is
directly  or  indirectly  competitive  with or  detrimental  to any  present  or
contemplated  business  of the  Company  known  to you.  Each  of the  following
activities  shall,  without  limitation,  be deemed to  constitute  engaging  in
business  within the meaning of this Section:  to engage in, work with,  have an
interest  or  concern  in,  advise,  lend  money  to,  guarantee  the  debts  or
obligations  of,  or  permit  one's  name  or any  part  thereof  to be  used in
connection with, an enterprise or endeavor, either individually, in partnership,
or in conjunction with any person or persons, firms, associations, companies, or
corporations,  whether as a principal,  agent, shareholder,  employee,  officer,
director,  partner,  consultant  or in any other  manner  whatsoever;  provided,
however,  that you shall  retain the right to invest in or have an  interest  in
entities traded on any public market or offered by any national brokerage house,
provided  that said  interest  does not exceed five  percent  (5%) of the voting
control  of said  entity.  In  addition,  you may make  passive  investments  in
privately  held  entities  that are  determined by the Board of Directors of the
Company not to be competitors of Company. You also agree that if your employment
is  terminated  in  connection  with a Change  of  Control,  then to the  extent
permitted  by  applicable  law,  for a period of one year after the date of such
Change of Control  transaction,  you shall not engage in (as defined  above) any
activity  with,  or provide  services  to,  any  persons,  firms,  associations,
companies,  corporations,  partnerships,  or  entities  that the Company in good
faith  reasonably  determines  are directly or indirectly  competitive  with the
then-present or contemplated  business of the Company following  notification by
you to the  Company  (which  prior  notification  you  agree to  provide  before
engaging in any such  activity or service and which  notice  shall  describe the
company,  the title of the position and the general area of responsibility only)
that you in good faith  desire to accept to engage in such  activity or service;
provided,  however,  that the Company  may not make more than five (5)  separate
such determinations.


                                      -8-
<PAGE>

         (b) Nonsolicitation; Transition Services. You agree that as long as you
are an  employee of the Company  and for one year  thereafter  (the  "Restricted
Period"),  (i) you shall not directly or indirectly,  either for yourself or for
any other person or entity,  directly or indirectly,  solicit, induce or attempt
to induce any employee of the Company to terminate  his or her  employment  with
the  Company;  and (ii) you will not in any  manner  attempt to induce or assist
others to attempt to induce any employee,  distributor,  vendor, representative,
business partner, distributor, licensee, manufacturer, customer, or other person
or entity with whom the Company has a business  relationship to discontinue that
person's  or  entity's  relationship  with or to the  Company,  nor do  anything
directly or indirectly to interfere  with the  relationship  between the Company
and any such persons or concerns.  If the Company  performs its  obligations  to
deliver the severance benefits set forth in this Agreement, then for a period of
(i) one (1) year in the case of a Termination Upon a Change of Control, and (ii)
six (6)  months  in the case of a  Termination  in the  absence  of a Change  of
Control, after your termination of employment, to the maximum extent enforceable
by law, you agree to provide  reasonable  transition  consulting  services  (not
involving  travel) as requested by the Company,  provided  that such services do
not require you to devote any  significant  amount of your business time to such
services.

6.       MISCELLANEOUS.  This Agreement contains  the entire  understanding  and
sole and entire  agreement  between us with respect to the subject matter of the
Agreement, supersedes any and all prior agreements, negotiations and discussions
between us with respect to the subject matter covered hereby,  including but not
limited to the Agreement  dated December 1, 1996, and may only be modified by an
agreement  in  writing  signed  by  Cellegy  and you.  If any  provision  of the
Agreement is held to be invalid or otherwise unenforceable, in whole or in part,
the remainder of such  provision and the remainder of this Agreement will not be
affected  thereby and will be enforced to the fullest  extent  permitted by law.
Neither this Agreement nor the rights or  obligations  under this Agreement will
be  assignable  by you.  Cellegy may assign the  Agreement  to any  successor of
Cellegy without your consent. This Agreement will be binding upon our respective
successors and assigns and upon your heirs,  executors and administrators.  This
Agreement  will be  governed by and  constructed  under the laws of the State of
California  without regard to conflict of laws. Any notice,  request,  demand or
other communication required or permitted under this Agreement will be deemed to
be properly given when personally  served in writing,  or two days after deposit
in the United States mail,  postage pre-paid,  or one business day after deposit
with  a  reputable   national  courier  service  for  overnight   delivery  with
confirmation of receipt, addressed to Cellegy at its principal executive office,
or to you at the address shown at the beginning of this letter,  or by facsimile
upon confirmation of receipt.  Each of us may change our respective  address for
notice purposes by written notice to the other in accordance with this Section.

7.       ARBITRATION.  Cellegy   and  you  shall  submit  to  mandatory  binding
arbitration  in any  controversy  or claim  arising out of, or relating to, this
Agreement or any breach hereof or your employment relationship with the Company;
provided,  however,  that both you and the  Company  retain the right to seek or
obtain, and shall not be prohibited, limited or in any other way restricted from
seeking or obtaining, equitable relief from a court having jurisdiction over the
parties in order to enforce the nonsolicitation and noncompetition provisions of
Section 5 above or any  disputes  or claims  relating  to or arising  out of the
misuse  or  misappropriation  of  the  Company's  intellectual  property.   Such
arbitration  shall be  conducted  in  accordance  with the rules of the American
Arbitration Association then in effect. Judgment upon the determination


                                      -9-
<PAGE>

or  award  rendered  by the  arbitrator  may be  entered  in  any  court  having
jurisdiction  thereof. The parties shall each pay one-half of all fees and costs
of the arbitration. Punitive damages shall not be awarded.

8.       ATTORNEY  FEES.  In any action  arising  out  of or  relating  to  this
Agreement,  the non-prevailing  party shall pay the reasonable attorney fees and
costs of the prevailing party.



Sincerely,

CELLEGY PHARMACEUTICALS, INC.




By: The Compensation Committee of Cellegy Pharmaceuticals



         Jack Bowman
                          ---------------------


         Alan Steigrod
                          ---------------------



ACCEPTED AND AGREED:



----------------------------------
K. Michael Forrest


                                      -10-