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.


 





















 


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.


 


11





















 


(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]


 


12





















 


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


 


15





















 


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:


 


16





















 


(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.


 


17





















 


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.


 


 


 


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18





















 


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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