**Exhibit 10.2**

 

**ExecutionCopy**

 

**AMENDEDAND RESTATED EMPLOYMENT AGREEMENT**

 

**THISAMENDED AND RESTATED EMPLOYMENT AGREEMENT** (this “Agreement”) is made and entered into asof April 22 , 2008 (the “ Effective Date ”), by and betweenMacroChem Corporation, Inc., a Delaware corporation (the “ Company ”),and David P. Luci, an individual who resides at 270 Benedict Road, StatenIsland, New York 10304 (the “ Executive ”).

 

**RECITALS:**

 

WHEREAS, the Company isengaged in the business of acquiring and developing small moleculepharmaceuticals for oncology indications (the “ Business ”); and

 

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

 

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

 

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

 

**NOW,THEREFORE**, inconsideration of the foregoing premises and of the respective covenants andagreements 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 Officerof the Company.  The Executive will also be a member of the Board ofDirectors of the Company (the “ Board ”) so long as he is employed inthis capacity or any other capacity and Executive will report directly to theBoard.  The Executive will be responsible for and perform such servicescustomary to these offices (e.g. services traditionally performed by a ChiefOperating Officer and Chief Financial Officer and General Counsel), and suchother duties and services as shall from time to time be reasonably assigned tohim by the Board, consistent with such positions and this Agreement, including,without limitation, primary responsibility for day-to-day operating activitiesas well as primary responsibility for the Company’s finance, accounting andlegal matters.  It is understood that Executive may participate on up tothree Boards of Directors or Advisory Boards of other companies and otherwiseparticipate in personal investments, to the extent such activities do notmaterially interfere with the performance of his duties with the Company and tothe extent that the Executive has the prior approval of the Board toparticipate in any such activity.  The Executive will perform his dutieshereunder faithfully and to the best of his abilities and in furtherance of thebusiness of the Company and its subsidiaries, and will devote his time andenergies to the business and affairs of the Company and its subsidiaries.

 

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2.             **Term**.  The Executive’s employmenthereunder 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 RelatedMatters**.

 

(a)           **Salary**.  As compensation for servicesrendered under this Agreement, the Executive shall receive an annual salary ofnot less than $250,000 (as may be increased pursuant to the immediatelysucceeding sentence, the “ Base Salary ”), which salary shall be paid inaccordance with the Company’s then prevailing payroll practices.  TheExecutive’s annual salary is eligible for increase annually in accordance withthe Company’s compensation practices and increases will be evaluated at thediscretion of the Compensation Committee of the Board.

 

(b)           **Bonus**.  During the term of thisAgreement, and at the sole discretion of the Compensation Committee of theBoard, the Executive shall be eligible to receive an annual bonus up to fiftypercent (50%) of the Executive’s Annual Salary at the conclusion of each fiscalyear based on the Executive and the Company successfully achieving targetedannual performance objectives (the “ Annual Bonus ” and, together withthe Annual Salary, the “Annual Compensation”).  To receive such AnnualBonus, the Executive must still be employed with the Company as of December 31of the year for which the Annual Bonus is payable and not be in breach of thisAgreement.  In addition, the parties agree that Executive shall beentitled 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 $5million or more in gross proceeds during the term of this Agreement; provided,however, the parties acknowledge and agree such payment shall be a one-timepayment only which shall be due promptly upon consummation of the first equityfinancing so consummated and such one-time bonus shall be prorated for anyportion of such equity financing which is consummated (for example, if theCompany consummates an equity financing in the amount of $3 million in grossproceeds such bonus shall be equal to $45,000).

 

(c)           **Equity Compensation**.  In addition to the option grantin the Original Agreement, as of the Effective Date, the Executive shall begranted Stock Options pursuant to the terms and conditions of a Stock OptionAward Agreement in the form approved by the Company’s Board as of the datehereof and subject to amendment as set forth therein.  These options willbe issued from a valid stock option plan approved by the stockholders andregistered under an S-8 within eighteen months from the date hereof (the “GrantDate”).  The Stock Option shall be for the purchase of 2,290,000 shares ofthe Company’s common stock, no par value (the “Common Stock”) at a price pershare equal to the closing price on the OTC BB on the Grant Date.  Of theStock Options to purchase 2,290,000 shares of the Company’s Common Stock, stockoptions to purchase 572,500 shares of Common Stock shall vest immediately uponexecution of this Agreement, and stock options to purchase 143,124 shares ofCommon Stock shall vest and become exercisable every 90 days following theEffective Date for the next three years from the Effective Date and as fullydefined in the Stock Option Award Agreement; provided that Executive isemployed by the Company on such vesting date.

 

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

 

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

 

(e)           **Expenses**.  The Executive will be reimbursedfor all reasonable out-of-pocket expenses actually incurred by him in thefurtherance of his duties under this Agreement and consistent with the Company’spolicies concerning the reimbursement of such expenses.  Such expensesshall be reimbursed upon submission to the Company of invoices containingoriginal receipts for all such expenditures and upon review by the Company ofthe reasonable nature of such expenditures.

 

4.             **Termination**.

 

**Alltermination provisions require a 60 day written notice.**

 

(a)           **Disability**.  If, as a result of the incapacityof the Executive due to physical or mental illness, the Executive is unable toperform the duties of his or her position of employment or any substantiallysimilar position of employment by reason of any medically determinable physicalor mental impairment that can be expected to result in death or can be expectedto last for a continuous period of not less than six months, the Executive willbe deemed to have a Disability.  The Company may terminate the Executive’semployment for Disability upon written notice to the Executive or the Executive’slegal representative, and such termination shall not constitute terminationwithout Cause (as defined below) for purposes of this Agreement.

 

(b)           **Death**.  The Executive’s employment shallterminate immediately upon the death of the Executive.

 

(c)           **Termination with Cause**.  The Company shall be entitled toterminate the Executive’s employment for Cause.  “ Cause ” shallmean (i) the willful and continued failure by the Executive to performsubstantially his duties hereunder, other than by reasons of Disability, afterdemand for substantial performance is delivered by the Company that identifiesthe manner in which the Company believes the Executive has not substantially performedhis duties; (ii) the Executive will have been indicted by any federal,state or local authority in any jurisdiction for, or will have pleaded guiltyor nolo contendere to, an act constituting a felony, (iii) the Executivewill have habitually abused any controlled substance (such as narcotics oralcohol), or (iv) the Executive will have (A) engaged in acts offraud, material dishonesty or gross misconduct in connection with the businessof the Company, or (B) committed a material breach of this Agreement whichshall remain uncured for a period of at least thirty (30) days followingreceipt of written notice thereof which sets forth in reasonable detail thebasis for such claim of material breach.

 

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

 

(e)           **Resignation for Good Reason**.  The Executive shall have theright to terminate his employment for “Good Reason,” which shall mean aresignation of his employment and his Separation from Service (as defined forpurposes of §409A of the Internal Revenue Code) within less than one yearfollowing the initial existence of one or more of the following conditionsarising without his consent:

 

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

 

(ii) anyother material breach by the Company of any of its obligations to the Executiveunder this Agreement; or

 

(iii) anyrelocation of the Executive’s primary place of employment more than 50 milesfrom Manhattan;

 

(iv) anyfailure of the Company to have any successor to all or substantially all of thebusiness and properties of the Company assume all of the liabilities andobligations of the Company under this Agreement (and any stock option orrestricted stock agreement referred to herein, under such awards as have fullyvested);

 

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

 

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

 

5.             **Compensation Upon Termination orDuring Disability**.

 

(a)           **Disability**.  During any period of Disability,the Executive shall continue to receive his Annual Salary, less anycompensation payable to the Executive under any applicable disability insuranceplan during such period, until this Agreement is terminated, but in no eventlonger than 12 months from the date the Disability began, as determined by theCompany.  Thereafter, the Executive’s benefits shall be determined underthe Company’s insurance and other compensation programs then in effect, and theCompany shall have no further obligation to the Executive under this Agreement,except that the Company shall pay to the Executive, or the Executive’s legalrepresentative, as appropriate, (i) any accrued but unpaid base salary andvacation, (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) reimbursementof business expenses incurred prior to the date of termination.

 

(b)           **Death**.  In the event of the Executive’sdeath, the Company shall pay the Executive’s estate his Annual Salary throughthe date of death.  Thereafter, the Company shall have no furtherobligation to the Executive or the Executive’s beneficiary under thisAgreement, except that the Company shall pay to the Executive’s estate (i) anyearned but unpaid bonus from a prior fiscal year (subject, if applicable, tothe terms of any deferred compensation arrangements), and (ii) reimbursementof business expenses incurred prior to the date of the Executive’s death.

 

(c)           **Cause**.  If the Company terminates theExecutive’s employment for “Cause” as defined in Paragraph 4(c) of thisAgreement, the Company shall continue to pay the Executive his Annual Salarythrough the date of termination of the Executive’s employment and shall pay forall accrued but unused vacation time.  All Stock Options which have vestedprior to the effective time of the termination for “Cause” shall remain vestedand exercisable for the period of time set forth in Executive’s Option AwardAgreement. At the effective time of the termination for Cause, all unvestedStock Options shall immediately be terminated.  Thereafter, the Companyshall have no further obligation to the Executive under this Agreement.

 

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

 

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

 

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

 

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

 

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

 

Payment of the Executive’sseparation pay benefit under this Section 5(d) shall be made asfollows:

 

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

 

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

 

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

 

(e)           **Resignation With Good Reason**.  If the Executive resigns hisemployment 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 toparticipate in all other benefit plans of the Company during the SeverancePeriod, except to the extent prohibited by law or any applicable employeebenefit plan. All Stock Options granted to Executive prior to Executive’sdeparture for “Good Reason” shall remain vested and exercisable for the periodof time set forth in Executive’s Option Award Agreement.  The Companyshall continue to vest options and stock awards during the Severance Period inaccordance 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 thisAgreement.  Payment of the Executive’s separation pay benefit under this Section 5(e) shallbe 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) shallbe 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 hisemployment without “Good Reason” pursuant to Paragraph 4(f) of thisAgreement, the Company shall continue to pay the Executive his Annual Salarythrough the effective date of the Resignation Notice unless the Executive isotherwise terminated earlier pursuant to the terms of this Agreement.  Atthat time, Stock Options which have been granted and have vested prior to thedate of the Resignation Notice shall remain vested and exercisable for theperiod of time specified in Executive’s Option Award Agreement.  At theeffective time of the resignation without Good Reason, all unvested StockOptions shall immediately be terminated.  Thereafter, the Company shallhave no further obligation to the Executive under this Agreement.

 

(g)           **Release of Claims**.  As a condition for the paymentsas provided in Sections 5(d) and 5(e) above, theExecutive mustexecute a release of all claims (including but not limited to state, federaland foreign laws) that the Executive has or may have against the Company, itsdirectors, officers, employees, agents, representatives, its affiliatedcompanies (incorporated or otherwise) and the members of its board ofdirectors.  Such release shall be in such form and include such provisionsas the Company may require in its reasonable discretion.  The paymentsprovided for in Sections 5(d) and 5(e) shall not be made until suchrelease is effective and is no longer subject to rescission under anyapplicable law.

 

**6.****            ****Change in Control****.**

 

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

 

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

 

(ii)        any outstanding Restricted Shares shall become fullyvested;

 

(iii)       the Executive shall be entitled to additional or otherbenefits (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 timesExecutive’s then-current Annual Compensation (based upon Executive’sthen-current base salary and target bonus) (two years constituting the “AmendedSeverance Period”) in lieu of the severance governed by Section 5(d) or5(e).

 

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

 

(i)  Payment of theseparation pay benefit shall commence as of the 30th day after the Executive’sSeparation from Service, and shall continue in monthly installments thereafteruntil all 18 payments are made.

 

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

 

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

 

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

 

**7.****        ****Agreement Not to Compete or Solicit**

 

(a)           **Covenant Not to Compete****.**  The Employee hereby covenants andagrees 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 resultingin payments pursuant to Section 6(a)(iv) ) immediately following thetermination of the Employee’s employment will he for himself or on behalf ofany other person, partnership, company or corporation, directly or indirectly,acquire any financial or beneficial interest in (except as provided in the nextsentence), provide consulting or other services to, be employed by, or own,manage, operate or control any entity engaged in the Business.  Notwithstandingthe preceding sentence, the Employee will not be prohibited from owning lessthan five percent (5%) of any corporation, whether or not such corporation isin competition with the Company.

 

(b)           **Non-Solicitation****.**  The Employee hereby covenants andagrees 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 atermination resulting in payments pursuant to Section 6(a)(ii))immediately following the termination thereof, the Employee will not directlyor indirectly employ or seek to employ any person or entity employed at thattime by the Company or any of its subsidiaries, or otherwise encourage orentice such person or entity to leave such employment.

 

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(c)           **Intellectual Property**.  The Executive assigns to theCompany, without additional compensation, all right, title and interest in allcreations, inventions, ideas, designs, copyrightable materials, trademarks, andother 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 theCompany that are conceived or developed by the Executive in the course of hisemployment, whether alone or with others, and, if based on ConfidentialInformation, after the termination of this Agreement for any reason.  SuchInventions shall be the sole property of the Company and, to the maximum extentpermitted by applicable law, shall be deemed “ works made for hire ” asthe term is used in the United States Copyright Act.   The Executivemay list specific technologies that are to be excluded from IntellectualProperty, as listed in Exhibit A. The Executive shall provide evidence tothe Company of any assignment of any specific Invention as may be requested bythe Company from time to time.

 

**8.****        ****Confidential Information.**

 

The Employee agrees tokeep secret and retain in the strictest confidence all confidential matterswhich relate to the Company or any affiliate of the Company, including, withoutlimitation, customer lists, client lists, trade secrets, pricing policies andother business affairs of the Company and any affiliate of the Company learnedby him from the Company or any such affiliate or otherwise before or after thedate of this Agreement, and not to disclose any such confidential matter toanyone outside the Company, or any of its affiliates, whether during or afterhis period of service with the Company, except as may be required in the courseof a legal or governmental proceeding.  Upon request by the Company, theEmployee agrees to deliver promptly to the Company upon termination of hisservices 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 copiesthereof) relating to the Company’s or any affiliate’s business and all propertyof the Company or any affiliate associated therewith, which he may then possessor have under his control.

 

9.          **Remedy.**

 

(a)             Should the Employee engage in or perform, eitherdirectly 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 hereundershall immediately terminate and the Company will also be entitled to fullinjunctive relief, to be issued by any competent court of equity, enjoining andrestraining the Employee and each and every other person, firm, organization,association, or corporation concerned therein, from the continuance of suchviolative acts. The foregoing remedies available to the Company will not bedeemed to limit or prevent the exercise by the Company of any or all furtherrights and remedies which may be available to the Company hereunder or at lawor in equity.

 

(b)             The Employee acknowledges and agrees that thecovenants contained in this Agreement are fair and reasonable in light of theconsideration paid hereunder, and the invalidity or unenforceability of anyparticular provision, or part of any provision, of this Agreement will notaffect the other provisions or parts hereof.  If any provision hereof is

 

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

 

10.        **Miscellaneous**.

 

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

 

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

 

If to the Company:

 

MacroChem Corporation

80 Broad Street, 22nd Floor

New York, NY 10004

Attn:  GeneralCounsel

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 & MoringLLP

153 East 53rd Street, 31st Floor

New York, New York 10022

Tel: (212) 895-4200

Fax: (212) 895-4201

 

or to such other addressas either party may designate by notice to the other, which notice shall bedeemed to have been given upon receipt.

 

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

 

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

 

(e)           **Severability**.  The invalidity orunenforceability of any provision of this Agreement shall not affect thevalidity or enforceability of any other provision of this Agreement, whichshall otherwise remain in full force and effect.  Moreover, if any one ormore of the provisions contained in this Agreement is held to be excessivelybroad as to duration, scope or activity, such provisions shall be construed bylimiting and reducing them so as to be enforceable to the maximum extentcompatible with applicable law.

 

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

 

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

 

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

 

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

 

(j)            **Capacity**.  The Executive represents andwarrants that he is not a party to any agreement that would prohibit him fromentering into this Agreement or performing fully his obligations under thisAgreement.

 

(k)           **Survival**.  The obligations and rights setforth in Paragraphs 6, 7 and 8 shall survive the termination of this Agreementfor any reason.

 

**[SignaturePage Follows]**

 

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IN WITNESS WHEREOF, theCompany and the Executive have executed this Agreement as of the date firstwritten 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.                                                                           |                 |
|                                                                                                     |                      |  |  |  |

 

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APPENDIX A

 

(1)     **“****Affiliate****”** of a Person shall mean any Person thatdirectly or indirectly controls, is controlled by, or is under common controlwith, 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 theCompany.

 

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

 

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

 

b.             a majority of the Board consists of individuals otherthan “Incumbent Directors,” which term means the members of the Board onthe Effective Date;  provided  that any individual becoming a directorsubsequent to such date whose election or nomination for election was supportedby two-thirds of the directors who then comprised the Incumbent Directors shallbe considered to be an Incumbent Director; or

 

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

 

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(6)     **“****Code****”** shall mean the Internal Revenue Code of1986, as amended.  Any reference to a particular section of the Code shallinclude any provision that modifies, replaces or supersedes such section.

 

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

 

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

 

(9)     **“****Executive****”** shall have the meaning set forth in thepreamble 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 orreasonably anticipated action, suit or proceeding, whether civil, criminal,administrative, investigative, appellate, formal, informal or other.

 

(12)   **“****Restricted Shares****”** shall mean any compensatory restrictedsecurities of the Company or any of its Affiliates; any compensatory shareunits, phantom securities or analogous rights granted by or on behalf of theCompany or any of its Affiliates; and any security or right received in respectof any of the foregoing securities or rights.

 

(13)   **“****Stock Option****”** or “**StockOptions**” shall mean any compensatory option to acquiresecurities of the Company or of any of its Affiliates; any compensatory stockappreciation right, phantom stock option or analogous right granted by or onbehalf of the Company or any of its Affiliates; and any security or rightreceived 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 theExecutive’s employment hereunder terminates in accordance with this Agreement.

 

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

 

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