November
      14, 2007 

     

    Mr.
      Robert J. Caso

    c/o
      Cellegy Pharmaceuticals, Inc.
      2085
      Quaker Pointe Drive

    Quakertown,
      PA 18951

    


    Re:     Retention
      Agreement 

    


    


    Dear
      Mr.
      Caso:

     

    This
      letter agreement (the “Agreement”)
      will
      confirm the terms of certain matters relating to your employment
      with
      Cellegy
      Pharmaceuticals, Inc. (the "Company"
      or“Cellegy”).


     

    1. Retention
      Payment.
      As an
      incentive for you (sometimes referred to as “Employee”)
      to
      remain employed with the Company through the Retention Period (defined below)
      or
      such earlier time as the Company in its discretion may determine, the Company
      agrees that if you do not voluntarily terminate your employment with the Company
      and are not terminated for cause or performance related reasons (or
      as
      result of death or disability), in each case before the earlier to occur of
      (i)
      June 30, 2008 and (ii) the closing of a Change in Control transaction (as
      defined below) (the period from the date of
      this
      letter through such date referred to as the "Retention
      Period"), then
      the
      Company will pay you, on or before the date of the next normal payroll period
      after the end of the Retention Period when the Company processes payments,
      a sum
      equal to six (6) months of your base salary in effect on the date of this
      Agreement (the "Retention
      Payment"). In
      consideration for the foregoing, you agree that during the Retention Period
      you
      will cooperate with the Company in implementing such strategic alternatives
      as
      the Company may choose to pursue and, in connection with any such alternative,
      in providing for the orderly transition of your duties and responsibilities
      to
      other individuals, as reasonably requested by the Company. 

    


    For
      purposes of this letter, “Change
      of Control”
      means:

     

    
      	 	
              (a)

            	
              consummation
                of 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 surviving entity outstanding
                immediately after such merger or
                consolidation;

            


    

     

    
      
         

      

      
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              (b)

            	
              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);

            


    

     

    
      	 	
              (c)

            	
              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

            


    

     

    
      	 	
              (d)

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

            


    

    


    2. No
      Other Payments.
      The
      Retention Payment shall be in lieu of all other severance or similar payments
      that the Company may be obligated to make under any agreement, arrangement
      or
      understanding applicable to you relating to termination of your employment,
      including without limitation, under the Company's Retention and Severance
      Plan for Employees, if
      you
      were a participant in that plan. Your signature
      below will constitute your
      agreement to terminate any agreement, arrangement or understanding that you
      may
      have with the Company regarding severance payments upon termination of your
      employment with the Company. You waive and terminate your right to any cash
      severance (other than the Retention Payment) under any agreement with the
      Company in connection with termination of employment. Notwithstanding the
      foregoing, upon your employment termination the Company will pay to you all
      salary and accrued vacation earned through the date of termination and
      reimbursement for any unreimbursed business expenses incurred by you,
consistent
      with past practices, in connection with the business of the Company and in
      accordance
      with
      Company reimbursement policies. In addition, in connection with any employment
      termination
      you will receive such medical and insurance benefits as are required by law
      or
      provided
      for in the Company's health insurance plans.

    


    3. Taxes.
      The
      Company may deduct from all amounts payable pursuant to this Agreement all
      federal,
      state, local and other taxes required by law to be withheld or paid with respect
      to the Retention
      Payment.

    


    4. Release
      of Claims; Other Termination Documents; NonDisparagement.
      Payment
      of the Retention Payment is conditioned upon your execution, at the time of
      your
      employment termination (or if earlier, if the Company so requests then at the
      end of the Retention Period), of a general release of claims in favor of the
      Company in the form of the release attached to the Retention Plan or such other
      form as the Company may reasonably request. In addition, if the Company pays
      you
      the Retention Payment, you agree that you will refrain from engaging in any
      activities or making any statements that may disparage or reflect negatively
      on
      the Company, its directors, officers or employees or its business or prospects.
      Upon employment termination, you agree to execute such other customary documents
      as the Company may reasonably request, including confirming return of all
      Company property and Company proprietary or trade secret information and
      materials. Nothing in this letter is intended to reduce the scope of your
obligation
      under the Employee Invention Agreement or any similar agreement with the
      Company
      that you
      have previously executed or under any other Company policy or agreement in
      connection with termination of employment.

    


    
      
         

      

      
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    5. At-Will
      Employment.
      You
      agree that notwithstanding the above, your employment with the Company continues
      to be at-will, the Company may assign to you other duties,
      and the Company can terminate your employment at any time either before or
      after the
      Retention Period, for any reason or no reason; and that nothing in this letter
      will be deemed
      to
      provide any continued right to employment with the Company.

    


    6. Section
      280G.
      In the
      event that the severance and other benefits provided for in this Agreement
      or
      otherwise payable to Employee (i) constitute “parachute payments” within the
      meaning of Section 280G of the (Internal Revenue Code of 1986, as amended (the
      “Code”)
      and
      (ii) but for this Section, would be subject to the excise tax imposed by Section
      4999 of the Code, then Employee’s severance benefits under this Agreement shall
      be payable either (i) in full, or (ii) as to such lesser amount which would
      result in no portion of such severance benefits being subject to excise tax
      under Section 4999 of the Code, whichever of the foregoing amount, taking into
      account the applicable federal, state and local income taxes and the excise
      tax
      imposed by Section 4999, results in the receipt by Employee on an after-tax
      basis, of the greatest amount of severance benefits under this Agreement,
      notwithstanding that all or some portion of such severance benefits may be
      taxable under Section 4999 of the Code. Unless the Company and Employee
      otherwise agree in writing, any determination required under this Section shall
      be made in writing, by the Company’s independent public accountants (the
“Accountants”),
      whose
      determination shall be conclusive and binding upon Employee and the Company
      for
      all purposes. For purposes of making the calculations required by this Section,
      the Accountants may make reasonable assumptions and approximations concerning
      applicable taxes and may rely on reasonable, good faith interpretations
      concerning the application of Section 280G and 4999 of the Code. The Company
      and
      Employee shall furnish to the Accountants such information and documents as
      the
      Accountants may reasonably request in order to make a determination under this
      Section. The Company shall bear all costs the Accountants may reasonably request
      in order to make a determination under this Section. The Company shall bear
      all
      costs the Accountants may reasonably incur in connection with any calculations
      contemplated by this Section.

    


    7. Compliance
      With Code Section 409A.
      The
      compensation and benefits payable pursuant to this Agreement are intended to
      be
      exempt from the provisions of Section 409A of the Code and the regulations
      and
      guidance issued thereunder and shall be interpreted and administered in a manner
      consistent with that intent. However, to the extent any compensation and
      benefits payable under this Agreement are subject to and not otherwise exempt
      from Code Section 409A: (a) if Employee is a “specified employee” within the
      meaning of Section 409A(a)(2)(B)(i) of the Code as of the date of his separation
      from service with Company, no distribution of such compensation and benefits
      shall be made or commence under this Agreement sooner than the date six months
      from Employee’s separation from service (or if earlier, the date of the
      Employee’s death); and in such case, any payments that were otherwise required
      to be made within such period shall be accumulated and paid in a single lump
      sum
      on the first day of the month immediately following the end of such period;
      and
      (b) the Company and Employee agree in good faith to amend or modify the
      applicable provisions of this Agreement to avoid the application of any Section
      409A tax, with the goal that any such amendment or modification shall not reduce
      the economic value to the Employee of the Retention Payment.

     

    
      
         

      

      
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    8. General:
      Miscellaneous.
      This
      Agreement may be executed in one or more counterparts, each of which shall
      constitute an original but all of which taking together shall constitute one
      and
      the same agreement. This Agreement contains the entire understanding and sole
      and entire agreement between us with respect to the subject matter hereof,
      supersedes any and all prior agreements, negotiations and discussions between
      us
      with respect to the subject matter covered hereby, and may only be modified
      by
      an agreement in writing signed by the Company and you. You acknowledge that
      neither the Company nor any of its directors or, officers or attorneys have
      made
      any promise, representation or warranty whatsoever, either express or implied,
      written or oral, which is not contained in this agreement for the purpose of
      inducing you to execute this agreement, and you acknowledge that you have
      executed this Agreement in reliance only upon such promises, representations
      and
      warranties as are contained herein. If any provision of this 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. Nothing
      in
      this Agreement will be construed to limit or otherwise affect in any manner
      whatsoever the right or power of the Company to terminate your employment or
      other relationship with the Company at any time, for any reason or no reason,
      with or without cause.

    


    


    


     

    


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    Please
      acknowledge your agreement to the above by signing and returning a copy of
      this
      letter.

    


    
      	
              CELLEGY
                PHARMACEUTICALS, INC.

               

               

              By:
                /s/
                Richard C.
                Williams                   
                

              Richard
                C. Williams

            	
              ACKNOWLEDGED,
                AGREED AND ACCEPTED:

               

              EMPLOYEE

              /s/
                Robert J.
                Caso                               
                

              Robert
                J. Caso

            


    

    


     

    
      
         

      

      
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