Exhibit 10.2


 


Execution
Copy


 


AMENDED
AND RESTATED EMPLOYMENT AGREEMENT


 


THIS
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as
of April 22 , 2008 (the “ Effective Date ”), by and between
MacroChem Corporation, Inc., a Delaware corporation (the “ Company ”),
and David P. Luci, an individual who resides at 270 Benedict Road, Staten
Island, New York 10304 (the “ Executive ”).


 


RECITALS:


 


WHEREAS, the Company is
engaged in the business of acquiring and developing small molecule
pharmaceuticals for oncology indications (the “ Business ”); and


 


WHEREAS, the Company and
Executive entered into that certain employment agreement, dated December 6,
2007 (the “ Original Agreement ”), pursuant to which the Company engaged
Executive to serve as the Company’s General Counsel & Vice President,
Corporate Development; and


 


WHEREAS, the Company
promoted Executive on March 19, 2008 to serve in the additional capacity
as the Company’s Chief Financial Officer, and Executive agreed to serve in such
capacity and has since served in said capacity; and


 


WHEREAS, the Company
desires to continue to employ the Executive, and the Executive desires to be
employed by the Company, in several new capacities, in each case, on the terms
and subject to the conditions hereinafter set forth.


 


NOW,
THEREFORE, in
consideration of the foregoing premises and of the respective covenants and
agreements herein set forth, the Company and the Executive agree as follows:


 


1.             Employment.  The Company will employ the Executive,
and the Executive will serve as the President & Chief Business Officer
of the Company.  The Executive will also be a member of the Board of
Directors of the Company (the “ Board ”) so long as he is employed in
this capacity or any other capacity and Executive will report directly to the
Board.  The Executive will be responsible for and perform such services
customary to these offices (e.g. services traditionally performed by a Chief
Operating Officer and Chief Financial Officer and General Counsel), and such
other duties and services as shall from time to time be reasonably assigned to
him by the Board, consistent with such positions and this Agreement, including,
without limitation, primary responsibility for day-to-day operating activities
as well as primary responsibility for the Company’s finance, accounting and
legal matters.  It is understood that Executive may participate on up to
three Boards of Directors or Advisory Boards of other companies and otherwise
participate in personal investments, to the extent such activities do not
materially interfere with the performance of his duties with the Company and to
the extent that the Executive has the prior approval of the Board to
participate in any such activity.  The Executive will perform his duties
hereunder faithfully and to the best of his abilities and in furtherance of the
business of the Company and its subsidiaries, and will devote his time and
energies to the business and affairs of the Company and its subsidiaries.


 

















 


2.             Term.  The Executive’s employment
hereunder shall be “at will” and is terminable at any time by either party,
subject to the provisions of Sections 4, 5 and 6 hereof.


 


3.             Compensation and Other Related
Matters.


 


(a)           Salary.  As compensation for services
rendered under this Agreement, the Executive shall receive an annual salary of
not less than $250,000 (as may be increased pursuant to the immediately
succeeding sentence, the “ Base Salary ”), which salary shall be paid in
accordance with the Company’s then prevailing payroll practices.  The
Executive’s annual salary is eligible for increase annually in accordance with
the Company’s compensation practices and increases will be evaluated at the
discretion of the Compensation Committee of the Board.


 


(b)           Bonus.  During the term of this
Agreement, and at the sole discretion of the Compensation Committee of the
Board, the Executive shall be eligible to receive an annual bonus up to fifty
percent (50%) of the Executive’s Annual Salary at the conclusion of each fiscal
year based on the Executive and the Company successfully achieving targeted
annual performance objectives (the “ Annual Bonus ” and, together with
the Annual Salary, the “Annual Compensation”).  To receive such Annual
Bonus, the Executive must still be employed with the Company as of December 31
of the year for which the Annual Bonus is payable and not be in breach of this
Agreement.  In addition, the parties agree that Executive shall be
entitled to a one-time bonus in the amount of seventy-five thousand dollars
($75,000) in the event the Company consummates an equity financing of $5
million or more in gross proceeds during the term of this Agreement; provided,
however, the parties acknowledge and agree such payment shall be a one-time
payment only which shall be due promptly upon consummation of the first equity
financing so consummated and such one-time bonus shall be prorated for any
portion of such equity financing which is consummated (for example, if the
Company consummates an equity financing in the amount of $3 million in gross
proceeds such bonus shall be equal to $45,000).


 


(c)           Equity Compensation.  In addition to the option grant
in the Original Agreement, as of the Effective Date, the Executive shall be
granted Stock Options pursuant to the terms and conditions of a Stock Option
Award Agreement in the form approved by the Company’s Board as of the date
hereof and subject to amendment as set forth therein.  These options will
be issued from a valid stock option plan approved by the stockholders and
registered under an S-8 within eighteen months from the date hereof (the “Grant
Date”).  The Stock Option shall be for the purchase of 2,290,000 shares of
the Company’s common stock, no par value (the “Common Stock”) at a price per
share equal to the closing price on the OTC BB on the Grant Date.  Of the
Stock Options to purchase 2,290,000 shares of the Company’s Common Stock, stock
options to purchase 572,500 shares of Common Stock shall vest immediately upon
execution of this Agreement, and stock options to purchase 143,124 shares of
Common Stock shall vest and become exercisable every 90 days following the
Effective Date for the next three years from the Effective Date and as fully
defined in the Stock Option Award Agreement; provided that Executive is
employed by the Company on such vesting date.


 


(d)           Other Benefits.  The fringe benefits, perquisites
and other benefits of employment to be provided to the Executive shall be
equivalent to such benefits and


 


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perquisites as are
provided to other employees of the Company, as those benefits are amended from
time to time.  In addition, the Executive shall be entitled to participate
in any other executive compensation or employee bonus plans implemented by the
Company on such terms and conditions as shall have been determined by the Board
or the Compensation Committee thereof.  Participation in any such benefit
programs shall be subject to any applicable probationary or similar periods.


 


(e)           Expenses.  The Executive will be reimbursed
for all reasonable out-of-pocket expenses actually incurred by him in the
furtherance of his duties under this Agreement and consistent with the Company’s
policies concerning the reimbursement of such expenses.  Such expenses
shall be reimbursed upon submission to the Company of invoices containing
original receipts for all such expenditures and upon review by the Company of
the reasonable nature of such expenditures.


 


4.             Termination.


 


All
termination provisions require a 60 day written notice.


 


(a)           Disability.  If, as a result of the incapacity
of the Executive due to physical or mental illness, the Executive is unable to
perform the duties of his or her position of employment or any substantially
similar position of employment by reason of any medically determinable physical
or mental impairment that can be expected to result in death or can be expected
to last for a continuous period of not less than six months, the Executive will
be deemed to have a Disability.  The Company may terminate the Executive’s
employment for Disability upon written notice to the Executive or the Executive’s
legal representative, and such termination shall not constitute termination
without Cause (as defined below) for purposes of this Agreement.


 


(b)           Death.  The Executive’s employment shall
terminate immediately upon the death of the Executive.


 


(c)           Termination with Cause.  The Company shall be entitled to
terminate the Executive’s employment for Cause.  “ Cause ” shall
mean (i) the willful and continued failure by the Executive to perform
substantially his duties hereunder, other than by reasons of Disability, after
demand for substantial performance is delivered by the Company that identifies
the manner in which the Company believes the Executive has not substantially performed
his duties; (ii) the Executive will have been indicted by any federal,
state or local authority in any jurisdiction for, or will have pleaded guilty
or nolo contendere to, an act constituting a felony, (iii) the Executive
will have habitually abused any controlled substance (such as narcotics or
alcohol), or (iv) the Executive will have (A) engaged in acts of
fraud, material dishonesty or gross misconduct in connection with the business
of the Company, or (B) committed a material breach of this Agreement which
shall remain uncured for a period of at least thirty (30) days following
receipt of written notice thereof which sets forth in reasonable detail the
basis for such claim of material breach.


 


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(d)           Termination Without Cause.  The Company shall, in its sole
discretion, have the right to terminate the Executive’s employment without
Cause at any time.


 


(e)           Resignation for Good Reason.  The Executive shall have the
right to terminate his employment for “Good Reason,” which shall mean a
resignation of his employment and his Separation from Service (as defined for
purposes of §409A of the Internal Revenue Code) within less than one year
following the initial existence of one or more of the following conditions
arising without his consent:


 


(i) any
material reduction in his Base Salary under Section 3(a), above;


 


(ii) any
other material breach by the Company of any of its obligations to the Executive
under this Agreement; or


 


(iii) any
relocation of the Executive’s primary place of employment more than 50 miles
from Manhattan;


 


(iv) any
failure of the Company to have any successor to all or substantially all of the
business and properties of the Company assume all of the liabilities and
obligations of the Company under this Agreement (and any stock option or
restricted stock agreement referred to herein, under such awards as have fully
vested);


 


provided, in each case,
that a prior written notice specifying the reasons within ninety (90) after the
initial existence of the condition and an opportunity to cure such condition
(if curable) shall be afforded the Company, and that “Good Reason” shall exist
only if the Company shall fail to cure such condition within 31 days after its
receipt of such prior written notice.


 


(f)            Resignation Without Good Reason.  The Executive shall have the
right to resign his employment without “Good Reason” at any time upon thirty
(30) days’ prior written notice to the Board (a “Resignation Notice”) in which
case the Executive’s employment shall terminate upon effectiveness of such
Resignation Notice unless otherwise terminated earlier pursuant to the terms of
this Agreement.


 


5.             Compensation Upon Termination or
During Disability.


 


(a)           Disability.  During any period of Disability,
the Executive shall continue to receive his Annual Salary, less any
compensation payable to the Executive under any applicable disability insurance
plan during such period, until this Agreement is terminated, but in no event
longer than 12 months from the date the Disability began, as determined by the
Company.  Thereafter, the Executive’s benefits shall be determined under
the Company’s insurance and other compensation programs then in effect, and the
Company shall have no further obligation to the Executive under this Agreement,
except that the Company shall pay to the Executive, or the Executive’s legal
representative, as appropriate, (i) any accrued but unpaid base salary and
vacation, (ii) any earned but unpaid bonus from a prior fiscal year


 


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(subject, if applicable,
to the terms of any deferred compensation arrangements), and (iii) reimbursement
of business expenses incurred prior to the date of termination.


 


(b)           Death.  In the event of the Executive’s
death, the Company shall pay the Executive’s estate his Annual Salary through
the date of death.  Thereafter, the Company shall have no further
obligation to the Executive or the Executive’s beneficiary under this
Agreement, except that the Company shall pay to the Executive’s estate (i) any
earned but unpaid bonus from a prior fiscal year (subject, if applicable, to
the terms of any deferred compensation arrangements), and (ii) reimbursement
of business expenses incurred prior to the date of the Executive’s death.


 


(c)           Cause.  If the Company terminates the
Executive’s employment for “Cause” as defined in Paragraph 4(c) of this
Agreement, the Company shall continue to pay the Executive his Annual Salary
through the date of termination of the Executive’s employment and shall pay for
all accrued but unused vacation time.  All Stock Options which have vested
prior to the effective time of the termination for “Cause” shall remain vested
and exercisable for the period of time set forth in Executive’s Option Award
Agreement. At the effective time of the termination for Cause, all unvested
Stock Options shall immediately be terminated.  Thereafter, the Company
shall have no further obligation to the Executive under this Agreement.


 


(d)           Termination Without Cause by the Company.  During the term of this
Agreement, if the Company terminates the Executive’s employment without Cause
pursuant to Paragraph 4(d) of this Agreement (a “Termination without Cause”),
under circumstances that constitute a Involuntary Separation from Service with
the Company (as defined for purposes of §409A of the Internal Revenue Code),
the Company shall pay the Executive the total amount of Executive’s Annual
Compensation (then-current base salary plus Executive’s target bonus level)
(the “Severance Payment”).  Executive shall continue to participate in all
other benefit plans during the twelve (12) month period following the
Termination without Cause (the “Severance Period”), except to the extent
prohibited by law or any applicable employee benefit plan.  All Stock
Options granted to Executive which have vested prior to the final day of
Executive’s employment under this Agreement (the “Termination Date”) shall
remain vested and exercisable for the exercise period set forth in Executive’s
Option Award Agreement.  The Company will continue to vest Stock Options
and stock awards during the Severance Period in accordance with the following
vesting schedule:


 


(1)        If a Termination without Cause occurs during the first
year of the term of this Agreement, all unvested Stock Options that would have
vested during the calendar quarter within which the Termination without Cause
occurs shall vest and become exercisable on the Termination Date for the
exercise period set forth in Executive’s Option Award Agreement and, in
addition, all unvested Stock Options that would have vested during the calendar
quarter after the occurrence of the Termination without Cause also shall vest
and become exercisable for the exercise period set forth in Executive’s Option
Award Agreement; and


 


(2)        If a Termination without Cause occurs during the
second year of the term of this Agreement, all unvested Stock Options that
would have vested during the calendar quarter within which the Termination
without Cause occurs shall vest and become exercisable on the


 


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Termination Date for the
exercise period set forth in Executive’s Option Award Agreement and, in
addition, all unvested Stock Options that would have vested during the two (2) calendar
quarters after the occurrence of the Termination without Cause also shall vest
and become exercisable for the exercise period set forth in Executive’s Option
Award Agreement; and


 


(3)           If a Termination without Cause occurs during the third
year of the term of this Agreement or thereafter, all unvested Stock Options
that would have vested during the calendar quarter within which the Termination
without Cause occurs shall vest and become exercisable on the Termination Date
for the exercise period set forth in Executive’s Option Award Agreement and, in
addition, all unvested Stock Options that would have vested during the three (3) calendar
quarters after the occurrence of the Termination without Cause also shall vest
and become exercisable for the exercise period set forth in Executive’s Option
Award Agreement.


 


Payment of the Executive’s
separation pay benefit under this Section 5(d) shall be made as
follows:


 


(i)  Payment of the
separation pay benefit shall commence as of the 30th day after the Executive’s
Separation from Service (as defined in the IRC, as amended), and shall continue
in monthly installments thereafter until all 6 payments are made.


 


(ii)  In the event
the value of the separation pay benefit shall exceed two times the lesser of
the Executive’s annualized compensation or the maximum amount that may be taken
into account for qualified plan purposes (in each case, as determined in
accordance with Treas. Reg. §1.409A-1(b)(9)(iii)(A)), the excess shall not be
paid as provided in (i), above, but instead shall be paid in 6 equal monthly
installments commencing as of the first of the month after the date that is six
months after the Executive’s Separation from Service date.


 


(iii)  In no event
shall payments be accelerated, nor shall the Executive be eligible to defer
payments to a later date.


 


(e)           Resignation With Good Reason.  If the Executive resigns his
employment for “Good Reason” pursuant to Paragraph 4(e) of this Agreement,
then the Company shall pay the Executive the Severance Payment described in Section 5(d) above.
..  Following the resignation for Good Reason, Executive shall continue to
participate in all other benefit plans of the Company during the Severance
Period, except to the extent prohibited by law or any applicable employee
benefit plan. All Stock Options granted to Executive prior to Executive’s
departure for “Good Reason” shall remain vested and exercisable for the period
of time set forth in Executive’s Option Award Agreement.  The Company
shall continue to vest options and stock awards during the Severance Period in
accordance with the vesting schedule set forth in Section 5(d) above
(e.g. the same as if Executive were Terminated for Cause).  Thereafter,
the Company shall have no further obligation to the Executive under this
Agreement.  Payment of the Executive’s separation pay benefit under this Section 5(e) shall
be made in accordance with the payment provisions of Section 5(d),
above.  Payment of the Executive’s separation pay benefit under this Section 5(e) shall
be made in accordance with the payment provisions of Section 5(d), above.


 


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(f)            Resignation Without Good Reason.  If the Executive resigns his
employment without “Good Reason” pursuant to Paragraph 4(f) of this
Agreement, the Company shall continue to pay the Executive his Annual Salary
through the effective date of the Resignation Notice unless the Executive is
otherwise terminated earlier pursuant to the terms of this Agreement.  At
that time, Stock Options which have been granted and have vested prior to the
date of the Resignation Notice shall remain vested and exercisable for the
period of time specified in Executive’s Option Award Agreement.  At the
effective time of the resignation without Good Reason, all unvested Stock
Options shall immediately be terminated.  Thereafter, the Company shall
have no further obligation to the Executive under this Agreement.


 


(g)           Release of Claims.  As a condition for the payments
as provided in Sections 5(d) and 5(e) above, theExecutive must
execute a release of all claims (including but not limited to state, federal
and foreign laws) that the Executive has or may have against the Company, its
directors, officers, employees, agents, representatives, its affiliated
companies (incorporated or otherwise) and the members of its board of
directors.  Such release shall be in such form and include such provisions
as the Company may require in its reasonable discretion.  The payments
provided for in Sections 5(d) and 5(e) shall not be made until such
release is effective and is no longer subject to rescission under any
applicable law.


 


6.             Change in Control.


 


(a)           In the event that the Executive’s employment hereunder
ends either voluntarily or by termination, in each case, upon, in anticipation
of, or within six (6) months following, a Change in Control (defined in
Appendix A), then in lieu of the benefits described in Section 5, the
Executive shall be entitled to receive the following benefits, provided,
however that for purposes of this Section 6(a), a termination will be
deemed to occur “in anticipation of a Change in Control” only if it occurs
after the date on which a Change in Control is formally proposed to the Company’s
Board of Directors:


 


(i)         any outstanding Stock Options shall become fully vested
and exercisable at the effective time of the Change of Control and shall remain
exercisable for at least the lesser of one year following such event and the
maximum stated term of such Stock Option;


 


(ii)        any outstanding Restricted Shares shall become fully
vested;


 


(iii)       the Executive shall be entitled to additional or other
benefits (if any) in accordance with the applicable terms of applicable plans,
programs and arrangements of the Company and its Affiliates.


 


(iv)       the Company shall promptly pay the Executive two times
Executive’s then-current Annual Compensation (based upon Executive’s
then-current base salary and target bonus) (two years constituting the “Amended
Severance Period”) in lieu of the severance governed by Section 5(d) or
5(e).


 


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(b)           Payment of the Executive’s separation pay benefit
under this Section 6 shall be made as follows:


 


(i)  Payment of the
separation pay benefit shall commence as of the 30th day after the Executive’s
Separation from Service, and shall continue in monthly installments thereafter
until all 18 payments are made.


 


(ii)  In the event
the value of the separation pay benefit shall exceed two times the lesser of
the Executive’s annualized compensation or the maximum amount that may be taken
into account for qualified plan purposes (in each case, as determined in
accordance with Treas. Reg. §1.409A-1(b)(9)(iii)(A)), the excess shall not be
paid as provided in (i), above, but instead shall be paid in 18 equal monthly
installments commencing as of the first of the month after the date that is six
months after the Executive’s Separation from Service date.


 


(iii)  In no event
shall payments be accelerated, nor shall the Executive be eligible to defer
payments to a later date.


 


(c)           If any portion of the payments which the Executive has
the right to receive from the Company, or any affiliated entity or successor,
hereunder would constitute “excess parachute payments” (as defined in Section 280G
of the Internal Revenue Code) subject to the excise tax imposed by Section 4999
of the Internal Revenue Code, such excess parachute payments shall be reduced
to the largest amount that will result in no portion of such excess parachute
payments being subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code.


 


7.         Agreement Not to Compete or Solicit


 


(a)           Covenant Not to Compete.  The Employee hereby covenants and
agrees that at no time during the Term of Employment nor for a period of six (6) months
(such period to be eighteen (18) months in the case of a termination resulting
in payments pursuant to Section 6(a)(iv) ) immediately following the
termination of the Employee’s employment will he for himself or on behalf of
any other person, partnership, company or corporation, directly or indirectly,
acquire any financial or beneficial interest in (except as provided in the next
sentence), provide consulting or other services to, be employed by, or own,
manage, operate or control any entity engaged in the Business.  Notwithstanding
the preceding sentence, the Employee will not be prohibited from owning less
than five percent (5%) of any corporation, whether or not such corporation is
in competition with the Company.


 


(b)           Non-Solicitation.  The Employee hereby covenants and
agrees that, at all times during the Term of Employment and for a period of six
(6) months (such period to be one (1) year in the case of a
termination resulting in payments pursuant to Section 6(a)(ii))
immediately following the termination thereof, the Employee will not directly
or indirectly employ or seek to employ any person or entity employed at that
time by the Company or any of its subsidiaries, or otherwise encourage or
entice such person or entity to leave such employment.


 


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(c)           Intellectual Property.  The Executive assigns to the
Company, without additional compensation, all right, title and interest in all
creations, inventions, ideas, designs, copyrightable materials, trademarks, and
other technology and rights (and any related improvements or modifications),
whether or not subject to patent or copyright protection (collectively, “
Inventions ”), relating to the Business or any other activities of the
Company that are conceived or developed by the Executive in the course of his
employment, whether alone or with others, and, if based on Confidential
Information, after the termination of this Agreement for any reason.  Such
Inventions shall be the sole property of the Company and, to the maximum extent
permitted by applicable law, shall be deemed “ works made for hire ” as
the term is used in the United States Copyright Act.   The Executive
may list specific technologies that are to be excluded from Intellectual
Property, as listed in Exhibit A. The Executive shall provide evidence to
the Company of any assignment of any specific Invention as may be requested by
the Company from time to time.


 


8.         Confidential Information.


 


The Employee agrees to
keep secret and retain in the strictest confidence all confidential matters
which relate to the Company or any affiliate of the Company, including, without
limitation, customer lists, client lists, trade secrets, pricing policies and
other business affairs of the Company and any affiliate of the Company learned
by him from the Company or any such affiliate or otherwise before or after the
date of this Agreement, and not to disclose any such confidential matter to
anyone outside the Company, or any of its affiliates, whether during or after
his period of service with the Company, except as may be required in the course
of a legal or governmental proceeding.  Upon request by the Company, the
Employee agrees to deliver promptly to the Company upon termination of his
services for the Company, or at any time thereafter as the Company may request,
all Company or affiliate memoranda, notes, records, reports, manuals, drawings,
designs, computer files in any media and other documents (and all copies
thereof) relating to the Company’s or any affiliate’s business and all property
of the Company or any affiliate associated therewith, which he may then possess
or have under his control.


 


9.          Remedy.


 


(a)             Should the Employee engage in or perform, either
directly or indirectly, any of the acts prohibited by Sections 7 or 8 hereof,
it is agreed that any and all severance payments and related benefits hereunder
shall immediately terminate and the Company will also be entitled to full
injunctive relief, to be issued by any competent court of equity, enjoining and
restraining the Employee and each and every other person, firm, organization,
association, or corporation concerned therein, from the continuance of such
violative acts. The foregoing remedies available to the Company will not be
deemed to limit or prevent the exercise by the Company of any or all further
rights and remedies which may be available to the Company hereunder or at law
or in equity.


 


(b)             The Employee acknowledges and agrees that the
covenants contained in this Agreement are fair and reasonable in light of the
consideration paid hereunder, and the invalidity or unenforceability of any
particular provision, or part of any provision, of this Agreement will not
affect the other provisions or parts hereof.  If any provision hereof is


 


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determined to be invalid
or unenforceable and if any such provision will be so determined to be invalid
or unenforceable by reason of the duration or geographical scope of the
covenants contained therein, such duration or geographical scope, or both, will
be reduced to a duration or geographical scope solely to the extent necessary
to cure such invalidity.


 


10.        Miscellaneous.


 


(a)           Successors; Binding Agreement.  This Agreement and the
obligations of the Company under this Agreement and all rights of the Executive
under this Agreement shall inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns; provided,
however, that the duties of the Executive under this Agreement are personal to
the Executive and may not be delegated or assigned by him.


 


(b)           Notice.  All notices of termination and
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered by hand or mailed by United
States registered mail, return receipt requested, addressed as follows:


 


If to the Company:


 


MacroChem Corporation


80 Broad Street, 22nd Floor


New York, NY 10004


Attn:  General
Counsel


Tel: (212) 514-8094


Fax: (212) 514-8613


 


with a copy to:


 


Luke P. Iovine, III, Esq.


Paul, Hastings, Janofsky &
Walker LLP


75 East 55th Street


New York, NY 10022


Tel: (212) 318-6000


Fax: (212) 319-4090


 


If to Executive:


 


David P. Luci, Esq.


270 Benedict Road


Staten Island, NY 10304


 


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With a copy to:


 


William J. McSherry, Jr.


Crowell & Moring
LLP


153 East 53rd Street, 31st Floor


New York, New York 10022


Tel: (212) 895-4200


Fax: (212) 895-4201


 


or to such other address
as either party may designate by notice to the other, which notice shall be
deemed to have been given upon receipt.


 


(c)           Choice of Law; Disputes.  The validity, interpretation,
construction and performance of this Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard
to the conflict of law rules thereof.  Regardless of which party
hereto initiates any dispute which may arise under this Agreement, the
non-prevailing party in any dispute hereunder shall promptly pay and/or
reimburse the prevailing party for any and all reasonable costs and expenses
incurred in bringing or defending such dispute, as applicable, upon receipt of
an order provided by a court of competent jurisdiction whether or not such
order is subject to further appeal. Any accrued but unpaid amounts under this
section shall accrue interest at the rate of 12% per annum until such amounts
are fully paid.


 


(d)           Waivers.  The waiver of either party hereto
of any right under this Agreement or of any failure to perform or breach by the
other party hereto shall not be deemed a waiver of any other right under this
Agreement or of any other failure or breach by the other party hereto, whether
of the same or a similar nature or otherwise.  No waiver shall be deemed
to have occurred unless set forth in writing executed by or on behalf of the
waiving party.  No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that
specifically waived.


 


(e)           Severability.  The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which
shall otherwise remain in full force and effect.  Moreover, if any one or
more of the provisions contained in this Agreement is held to be excessively
broad as to duration, scope or activity, such provisions shall be construed by
limiting and reducing them so as to be enforceable to the maximum extent
compatible with applicable law.


 


(f)            Counterparts.  This Agreement may be executed in
several counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.


 


(g)           Entire Agreement.  This Agreement sets forth the
entire agreement and understanding of the parties in respect of the subject
matter contained herein, and supersedes all prior agreements, promises,
covenants, arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of either party in
respect of said subject matter.


 


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(h)           Modifications.  This Agreement may only be
modified in a writing signed by both the Company and the Executive.


 


(i)            Headings Descriptive.  The headings of the several
paragraphs of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any of this Agreement.


 


(j)            Capacity.  The Executive represents and
warrants that he is not a party to any agreement that would prohibit him from
entering into this Agreement or performing fully his obligations under this
Agreement.


 


(k)           Survival.  The obligations and rights set
forth in Paragraphs 6, 7 and 8 shall survive the termination of this Agreement
for any reason.


 


[Signature
Page Follows]


 


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IN WITNESS WHEREOF, the
Company and the Executive have executed this Agreement as of the date first
written above.


 


	
  The Company:

  	
   

  
	
   

  	
   

  
	
  MACROCHEM CORPORATION

  	
   

  
	
   

  
	
  By:

  	
  /s/ Jeffrey B. Davis

  	
   

  
	
  Name:        Jeffrey
  B. Davis

  
	
  Title:          Chairman,
  Compensation Committee

  
	
   

  
	
   

  
	
  Executive:

  	
   

  
	
   

  	
   

  
	
  /s/ David P.
  Luci, Esq.

  	
   

  
	
   

  	
   

  
	
  David P.
  Luci, Esq.

  	
   

  
					



 

















 


APPENDIX A


 


(1)     “Affiliate” of a Person shall mean any Person that
directly or indirectly controls, is controlled by, or is under common control
with, such Person.


 


(2)     “Agreement” shall mean this Employment Agreement,
which includes for all purposes its Exhibits.


 


(3)     “Base Salary” shall have the meaning set forth in Section 3(a).


 


(4)     “Board shall mean the Board of Directors of the
Company.


 


(5)     “Change in Control” shall mean the occurrence of any of the
following events:


 


a.             any “person,” as such term is currently used in
Section 13(d) of the 1934 Act, becomes (directly or indirectly) a “
beneficial owner ,” as such term is currently used in Rule 13d-3
promulgated under that Act, of a percentage of the Voting Securities of the
Company, measured either by number of Voting Securities or by number of votes
entitled to be cast, that is at least  30 
percentage points larger than the percentage (if any) of the Voting
Securities of the Company, measured in either fashion, that such person
beneficially owned (directly or indirectly) on the Effective Date, unless the
acquisition of such Voting Securities is approved by a majority of Incumbent
Directors (as defined below);


 


b.             a majority of the Board consists of individuals other
than “Incumbent Directors,” which term means the members of the Board on
the Effective Date;  provided  that any individual becoming a director
subsequent to such date whose election or nomination for election was supported
by two-thirds of the directors who then comprised the Incumbent Directors shall
be considered to be an Incumbent Director; or


 


c.             (x) the Company combines with another entity and
is the surviving entity, or (y) all or substantially all of the assets or
business of the Company is disposed of pursuant to a sale, merger,
consolidation, liquidation or other transaction or series of transactions, in
each of cases (x) or (y),  unless  the holders of Voting Securities of the
Company immediately prior to such combination, sale, merger, consolidation,
liquidation or other transaction or series of transactions (collectively, a “Triggering
Event”) own, directly or indirectly and immediately following such Triggering
Event, more than fifty percent (50%) of the Voting Securities (measured both by
number of securities and by voting power) of: (q) in the case of a
combination in which the Company is the surviving entity, the surviving entity
and (r) in any other case, the entity (if any) that succeeds to
substantially all of the business and assets of the Company.


 


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(6)     “Code” shall mean the Internal Revenue Code of
1986, as amended.  Any reference to a particular section of the Code shall
include any provision that modifies, replaces or supersedes such section.


 


(7)     “Company” shall have the meaning set forth in the
preamble to this Agreement.


 


(8)     “Effective Date” shall have the meaning specified in the
preamble of this Agreement.


 


(9)     “Executive” shall have the meaning set forth in the
preamble to this Agreement.


 


(10)   “Person” shall mean any individual, corporation,
partnership, limited liability company, joint venture, trust, estate, board,
committee, agency, body, employee benefit plan, or other person or entity.


 


(11)   “Proceeding” shall mean any actual, threatened or
reasonably anticipated action, suit or proceeding, whether civil, criminal,
administrative, investigative, appellate, formal, informal or other.


 


(12)   “Restricted Shares” shall mean any compensatory restricted
securities of the Company or any of its Affiliates; any compensatory share
units, phantom securities or analogous rights granted by or on behalf of the
Company or any of its Affiliates; and any security or right received in respect
of any of the foregoing securities or rights.


 


(13)   “Stock Option” or “Stock
Options” shall mean any compensatory option to acquire
securities of the Company or of any of its Affiliates; any compensatory stock
appreciation right, phantom stock option or analogous right granted by or on
behalf of the Company or any of its Affiliates; and any security or right
received in respect of any of the foregoing options or rights.


 


(14)   “Term of Employment” shall mean the period specified in Section 2.


 


(15)   “Termination Date” shall mean the date on which the
Executive’s employment hereunder terminates in accordance with this Agreement.


 


(16)   “Voting Securities” shall mean issued and outstanding
securities of any class or classes having general voting power, under ordinary
circumstances in the absence of contingencies, to elect one or more members of
the Board of the issuer.


 


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