**Exhibit 10.1**

 

**EMPLOYMENTAGREEMENT**

 

**THIS EMPLOYMENT AGREEMENT** isentered into as of the 27th day of August 2005 (the “Effective Date”) byand between Bentley Pharmaceuticals, Inc., a Delaware corporation (the “Employer”),and John A. Sedor, (the “Employee”).

 

## **RECITALS**

## ** **

The Employer desires to employ the Employee, and theEmployee desires to be employed by the Employer, all upon the terms andprovisions and subject to the conditions set forth in this Agreement.

 

**WITNESSETH**

 

**NOW THEREFORE**, in considerationof the foregoing premises and other good and valuable consideration, thereceipt and sufficiency of which are hereby acknowledged, the parties heretoagree to be legally bound as follows:

 

**1.****                                      Employment**.  The Employer hereby employs the Employee, andthe Employee hereby accepts such employment, as President of the Employer upon the terms and subject to theconditions set forth in this Agreement. The Employee shall perform such functions as are consistent with thesepositions under the supervision of the Chief Executive Officer or the Board ofDirectors of the Employer.  The Employeeshall, without any compensation in addition to that which is specificallyprovided in this Agreement, serve in such further offices or positions withEmployer or any subsidiary or affiliate of Employer (collectively, the “EmployerGroup”) as shall from time to time be reasonably requested by the ChiefExecutive Officer or the Board of Directors of Employer.

 

**2.****                                      Term**.  Subject to the termination provisionshereinafter contained, the term of employment under this Agreement shall be foran initial term commencing on the Effective Date and terminating on December 31,2006.  This Agreement shall thereafter beautomatically renewed for successive one (1) year terms, unless theEmployee’s employment with the Employer has been terminated, as hereinafterprovided, or unless either party shall have given the other party prior noticeof termination of this Agreement effective as of the date of expiration of itsthen applicable Term.  The initial termof employment hereunder, and any extension thereof pursuant to this paragraph,are referred to as the “Term”.

 

**3.****                                      Compensation,Reimbursement, Etc.**

 

**a.****                                      ***Base Salary. *Commencingon the Effective Date, the Employer shall pay to the Employee as compensationfor all services rendered by the Employee a base salary of $37,500.00 per month (“Base Salary”), payable inaccordance with the Employer’s regular payroll practices, plus annualbonuses on a calendar year basis as determined by the Compensation Committee ofthe Board of Directors (the “Compensation Committee”), subject to Sections 3(d) and3(e).  If an increase in

 

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Base Salary is determined for a calendar year after January 1and before April 30 of that year, the increase shall be retroactive to thebeginning of that year.** **Any bonus for 2005 will beprorated based on the portion of 2005 that the Employee is employed by theEmployer.  Annual reviews of the Employeewill be on a calendar year basis.

 

**b.****                                      ***Expense Reimbursement. *TheEmployer shall reimburse the Employee on a semi-monthly basis for allreasonable expenses incurred by the Employee in the performance of his dutiesunder this Agreement; provided however, that the Employee shall have previouslyfurnished to the Employer an itemized account, satisfactory to the Employer, insubstantiation of such expenditures.

 

**c.****                                      ***Benefits. *TheEmployee shall be entitled to health and other benefits on the same terms andconditions as the Employer has made available to other senior executives ofEmployer, including participation in the Employer’s health plans.  If the Employee elects not to participate inthe Employer’s health plans, Employee shall be entitled to reimbursement forthe premiums paid for an alternate plan in amounts not to exceed the premiumsthat would have been paid on behalf of the Employee for Employer’s healthplan.  The Employer shall obtain a termlife insurance and disability policy for the Employee with a value equal to atleast two year’s Base Salary payable to the estate or beneficiaries of theEmployee upon the Employee’s death or to the Employee in the event ofdisability as provided in Section 7(b) hereof.

 

**d.****                                      ***Bonuses. *The Employeeshall be eligible for a bonus each year of the Term of up to 50% of his annualBase Salary, based upon achievement of the bonus targets for the year, payablein cash and/or common stock, as determined by the Compensation Committee,subject to the terms of the applicable year’s bonus incentive plan approved bythe Board of Directors and/or Compensation Committee of the Employer.  The bonus target for 2005 is 50% of annualBase Salary and shall be subject to the terms of the “Bonus Targets under the2005 Annual Bonus Incentive Plan”, which has been approved by the Board ofDirectors and/or Compensation Committee of the Employer and previously providedto Employee.   Such annual bonus will beprorated as provided in Section 3(a) for 2005, and the annual bonuswill be awarded for each year as soon as practicable after the Company’s annualresults of operations are publicly reported in the following year.

 

**e.****                                      ***Automobile Allowance.* The employee will receive a monthlyallowance of $1,000 for an automobile of his own use.

 

**f.****                                        ***Annual Review. *TheEmployee shall be reviewed by the CEO who will give recommendations to theCompensation Committee on an annual (calendar year) basis.

 

**g.****                                     ***Equity Incentives. *Uponcommencement of employment, the Employee will be granted an award ofnonstatutory stock option (the “Initial Option”) under the

 

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Employer’s2005 Equity and Incentive Plan (the “Plan”) to purchase 150,000 shares ofcommon stock of the Employer, which option shall be immediately exercisable andnot subject to vesting as to 100,000 of the shares and shall become exercisableand vested as to the remaining 50,000 shares on December 31, 2005, andotherwise shall contain the customary terms and conditions for options grantedunder the Plan to executive employees. Thereafter, so long as the Employee continues to be employed as anexecutive officer of the Employer, the Employee will be entitled to receive:

 

(i)                                     subjectto stockholder approval of one or more increases after the date hereof totalingat least 600,000 shares in the number of shares reserved under the Plan (whichis planned for the 2006 annual meeting of stockholders of the Employer), anonstatutory stock option (the “Follow-On Option Award”) under the Plan topurchase 150,000 shares of common stock of the Employer, which option shall beon substantially the same terms as the Initial Option except that it (A) willbe granted as of the date such increase in the reserved shares is approved bystockholders, (B) have an exercise price determined based on the fairmarket value of the common stock as of the date of grant, (C) will vest inequal quarterly installments over five years from the date of grant, and (D) inaddition to any acceleration provided for in Section 8 hereof, willcontain a provision that if the Employee is terminated by the Company for anyreason other than “good cause” (as defined herein) after December 31, 2006(the end of the initial term of this Agreement), on the date of suchtermination such number of unvested options that would have vested under the termsof the applicable option agreement had the Employee continued to be employed bythe Company for the six (6) month-period following the date of terminationshall immediately become vested; and

 

(ii)                                  subjectto stockholder approval from time to time of an increase of a sufficient numberof additional shares of common stock reserved under the Plan for annual grantsto all eligible employees of the Employer, annual equity awards in each of thefour years after 2005 with respect to no fewer than 50,000 shares (200,000shares in the aggregate) (the “Annual Equity Awards”) under the Plan, andfurther subject to substantially same terms and conditions (and, if more thanone type of award is granted, in the same proportions) as the annual equityawards made generally to the other executive officers of the Employer, asdetermined in good faith by the Compensation Committee, which awards shall bemade on the same date as when annual equity awards are made generally to theother executive officers of the Employer; and

 

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(iii)                               all of the foregoingoptions and common stock shall be subject to equitable adjustment in light ofany stock split or stock dividend with respect to the Employer’s common stockand to reduction in the case of substitution of full value awards underthe  Plan, such as Restricted Stock, inplace of stock option awards, in each case as determined in good faith by theCompensation Committee.

 

**4.****                                      Duties**.  The Employee will be engaged initially as President of the Employer.  In addition, the Employee shall have suchother duties and hold such offices as may from time to time be reasonablyassigned to him by the Chief Executive Officer or the Board of Directors of theEmployer.

 

**5.****                                      Extentof Services**.  During the Term, theEmployee shall devote his full time, energy and attention to the benefit andbusiness of the Employer and its affiliates and shall not be employed byanother entity, either directly or as a consultant to or in any other capacity,except as approved in advance by the Employer’s Board of Directors; provided,however, that no such approval shall be required to serve as a director,officer or trustee of any trade association or of any civic or charitableorganization so long as such service does not significantly interfere with theEmployee’s performance of his duties at the Employer.

 

**6.****                                      Vacation**.  The Employee may take a maximum of four weeksof vacation each calendar year, at times to be determined in a manner mostconvenient to the business of the Employer, as approved by the Chief ExecutiveOfficer.  A maximum of one week of unusedvacation may be carried over from one calendar year to the next.

 

**7.****                                      TerminationFollowing Death or Incapacity**.

 

**a.****                                      ***Death. *All rights ofthe Employee under this Agreement shall terminate upon death (other than rightsaccrued prior thereto).  All Plan Awardsshall vest in accordance with the Plan and shall be exercisable for a period oftime as set forth in the Plan.  TheEmployer shall pay to the estate of the Employee any unpaid salary and otherbenefits due as well as reimbursable expenses accrued and owing to the Employeeat the time of his death.  The Employeragrees to maintain life insurance coverage on the Employee in an amountequivalent to two year’s salary, which insurance will be payable to theEmployee’s estate or beneficiaries upon his death as the Employee maydesignate.  The Employer shall have noadditional financial obligation under this Agreement to the Employee or hisestate beyond the term-life insurance benefit describe above.

 

**b.****                                      **Disability.

 

i.                                          Duringany period of disability, illness or incapacity during the Term which rendersthe Employee at least temporarily unable to perform the services required underthis Agreement, the Employee shall receive his salary payable under Section 3of this Agreement, less any benefits received by him under any insurancecarried by or provided by the Employer; provided however, all rights of theEmployee under this

 

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Agreement (other than rights already accrued) shallterminate as provided below upon the Employee’s permanent disability (asdefined below).

 

ii.                                       Theterm “permanent disability” as used in this Agreement shall mean the inabilityof the Employee, as determined by the Board of Directors of the Employer, byreason of physical or mental disability to perform the duties required of himunder this Agreement after a period of:  (a) 120consecutive days of such disability; or (b) disability for at least six monthsduring any twelve month period.  Uponsuch determination, the Board of Directors may terminate the Employee’semployment under this Agreement upon ten (10) days prior writtennotice.  In the event of permanentdisability all Plan Awards shall vest in accordance with the terms of the Planand shall be exercisable for a period of time as set forth in the Plan.

 

iii.                                    Ifany determination of the Board of Directors with respect to permanentdisability is disputed by the Employee, the parties hereto agree to abide bythe decision of a panel of three physicians. The Employee and Employer shall each appoint one member, and the thirdmember of the panel shall be appointed by the other two physicians.  If the physicians appointed by the partieshave not agreed upon the third physician within fifteen (15) days, either partymay  petition the New Hampshire MedicalSociety to appoint a third physician. The Employee agrees to make himself available for and to submit toreasonable examinations by such physicians as may be directed by theEmployer.  Failure to submit to any suchexam shall constitute a material breach of this Agreement.  In the event such a panel is convened, theparty whose position is not sustained will bear all the associated costs.

 

**8.****                                      OtherTerminations**.

 

**a.****                                      ***Without Cause*.

 

i.                                          Eitherthe Employee or the Employer may terminate the Employee’s employment hereunderat any time upon written notice.

 

ii.                                       Ifthe Employee gives notice pursuant to paragraph (i) above, the Employershall have the right to either (a) relieve the Employee, in whole or inpart, of his duties under this Agreement or (b) to accelerate the date oftermination of employment to coincide with the date on which the written noticeis received.

 

iii.                                    Notwithstandingany provisions hereof to the contrary, the Employer may terminate Employee’semployment hereunder without cause at any time. If the Employer terminates the Employee’s Employment pursuant to theprovisions of this section 8(a), it shall pay to the Employee as aseverance benefit, in cash, an amount equal to the Employee’s annual BaseSalary

 

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plus bonus (the higher of the bonus target****for the current year or the bonus paid in the prior year).  Additionally, the vesting of Plan Awardsshall be accelerated on a pro rata basis determined by the number of completedmonths of service during the then current annual vesting period, and all othervesting of Plan Awards shall cease.

 

**b.****                                      ***For Cause*.

 

i.                                          TheEmployer may terminate the Employee’s employment hereunder without notice (a) uponthe Employee’s breach of any material provision of this Agreement, or (b) forother “good cause” (as defined below).

 

ii.                                       Theterm “good cause” as used in this Agreement shall include, but shall not be limitedto:  (a) conduct which breaches theEmployee’s fiduciary duties to the Employer; (b) a significant performanceshortcoming, which has been brought to the Employee’s attention in writing byhis supervisor, where the supervisor has provided the Employee with writtenperformance improvement objectives and a timeline of at least three months toachieve these objectives and the Employee fails to remedy the shortcomingwithin such period (or such extended period as the supervisor may determinebased on the employee’s progress towards achievement of the improvement plan); (c) convictionof any crime involving moral turpitude; and (d) substantial dependence, asdetermined by the Board of Directors of the Employer, on any addictivesubstance, including but not limited to alcohol, amphetamines, barbiturates,methadone, cannabis, cocaine, PCP, THC, LSD, or any other narcotic drug;provided, however, that after a Change in Control (as defined below) “goodcause” termination shall not include termination for the cause set forthin the preceding clause (b).  Should theEmployee dispute such a determination, the parties hereto agree to abide by thedecision of a panel of three physicians as described in Section 7(b)(iii).

 

iii.                                    Ifthe Employee’s employment is terminated pursuant to Section 8(b), theEmployer shall pay to the Employee any unpaid salary and other benefits andreimbursable expenses accrued and owing to the Employee.  Such payment shall be in full and completedischarge of any and all liabilities or obligations of the Employer to theemployee hereunder.  The Employee shallbe entitled to no further benefits under this Agreement other than extension ofhealth benefits as required by law, at the Employee’s expense. All Plan Awardsshall cease vesting in accordance with the terms thereof and the Plan**.**

 

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**9.****                                      Terminationof Employment Upon Change in Control**.

 

**a.****                                      **Forpurposes hereof, a “Change in Control” shall be deemed to have occurred if:

 

i.                                          therehas occurred a “change in control” as such term is used in Item 6(e) of Schedule 14Aof Regulation 14A promulgated under the Securities Exchange Act of 1934, as ineffect as of the date hereof (hereinafter referred to as the “1934 Act”);

 

ii.                                       ifthere has occurred a change in “control” as the term “control” is defined in Rule 12b-2promulgated under the 1934 Act;

 

iii.                                    whenany person (as such term is defined in Section 3(a)(9) and 13(d)(3) ofthe 1934 Act, a “Person”), during the Term, becomes a beneficial owner, directlyor indirectly, of securities of the Employer representing 20% or more of theEmployer’s then outstanding securities having the right to vote on the electionof directors if such person did not have 20% or more of the Employer’s thenoutstanding securities at the commencement of the Term; or if a Person havingmore than 20% of the Employer’s then outstanding securities increases his orits holdings by more than 15% of the Employer’s then outstanding securitiesduring the Term;

 

iv.                                   ifthe stockholders of the Employer approve a plan of complete liquidation ordissolution of the Employer, or a merger or consolidation (a) in which thevoting securities of the Employer outstanding immediately prior thereto do notrepresent (either by remaining outstanding or by being converted into votingsecurities of the surviving entity) at least 50.1% of the combined votingsecurities of the Employer or such surviving entity outstanding immediatelyafter such merger or consolidation or (b) in which no Person acquires 30%or more of the combined voting power of the Employer’s then outstandingsecurities**;** or

 

v.                                      ifduring any period of twenty-four (24) consecutive months (not including anyperiod prior to the date of this Agreement), individuals who at the beginningof such period constitute the Board and any new director (other than a directordesignated by a person who has entered into an agreement with the Employer toeffect a transaction described in paragraphs i, ii or iii of this section 9(a))whose election by the Board or nomination for election by the stockholders ofthe Employer was approved by a vote of at least two-thirds (2/3) of thedirectors then still in office who either were directors at the beginning ofsuch period or whose election or nomination for election was previously soapproved by the stockholders, cease for any reason to constitute a majoritythereof; provided, however, in no event shall any mere action (other than salesor purchases of the Employer’s outstanding securities) by Michael McGovern andthe Employer be deemed to be a Change in Control.

 

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**b.****                                      **TheEmployee may terminate his employment at any time within 12 months after aChange in Control and any of the following events has occurred:

 

i.                                          anassignment to the Employee of any duties inconsistent with the status of theEmployee’s office and/or position with the Employer as constituted immediatelyprior to the Change in Control or a significant adverse change in the nature orscope of the Employee’s authority, power, compensation, functions or duties asconstituted immediately prior to the Change in Control,

 

ii.                                       afailure by the Employer, after having received written notice from the Employeespecifying a material breach of its obligations pursuant to this Agreement, tocure such breach within 30 days after receipt of such notice; or

 

iii.                                    theEmployer requires Employee to move Employee’s primary place of employment to alocation more than 30 miles from Employer’s primary place of business beforethe Change in Control (other than temporary relocation or business travel inthe ordinary course).

 

An election by the Employee to terminate hisemployment following a Change in Control shall not be deemed a voluntarytermination of employment by the Employee for the purpose of interpreting theprovisions of this Agreement or any of the Employer’s employee benefit plansand arrangements.  The Employee’scontinued employment with the Employer for any period of time during the Termof this Agreement after a Change in Control shall not be considered a waiver ofany right he may have to terminate his employment to the extent permitted underthis Section 9(b).

 

If the Employer terminates the Employee without cause pursuant to Section 8(a) hereofwithin 12 months after a Change in Control has occurred, such termination shallbe deemed an election by the Employee to terminate his employment pursuant tothis Section 9(b) and Employee shall have the right to thecompensation set forth in Section 9(c) instead of the compensationset forth in Section 8(a).  Inaddition, in the event of such termination, the Employee shall continue to havethe obligations provided for in Sections 11 and 12 hereof.

 

**c.****                                      **Ifthe Employee’s employment with the Employer is terminated under Section 9(b) hereof,

 

i.                                          theEmployee shall be paid in a lump sum, within 30 days after termination ofemployment, in cash, severance pay in an amount equal to two times (2x) theaverage of his aggregate cash compensation paid during the two prior calendaryears (consisting of annual Base Salary and bonuses, if any).

 

ii.                                       Ifany of the Annual Equity Awards contemplated by Section 3(g) have notyet been granted because the Change in Control occurred before the

 

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grant of the Annual Equity Award would have otherwiseoccurred, the Employee shall also be paid in connection with payment of thelump sum an amount equal to:

 

(1)                                  thedollar amount, if any, that remains after subtracting the exercise price of themost recent Annual Equity Award made to the Employee (or if none has occurred,the Initial Option) from the fair market value of the Employer’s common stockas of the date of the Change in Control (or, if the Change in Control occurs inconnection with an acquisition or other transaction in which all outstandingAwards granted to Employer’s employees under the Plan are terminated if notexercised pursuant to their terms, the consideration per share of the Employer’scommon stock delivered for each share of common stock underlying suchoutstanding Awards, multiplied by

 

(2)                                  theremainder of (A) 200,000 (or, if the Follow-On Option Award has not beengranted before the Change in Control, 350,000), less (C) the number ofshares of Employer’s common stock that are subject to Annual Equity Awardsgranted to the Employee before the Change in Control (which amount shall besubject to equitable adjustment for any equitable adjustments in the number ofshares subject to Annual Equity Awards previously made in accordance with Section 3(g));

 

iii.                                    allstock options and other equity Awards under the Plan held by the Employeeimmediately prior to the effective date of the Change in Control shallimmediately vest and become fully exercisable for the period of time indicatedin the option contract;

 

iv.                                   healthbenefits as provided in Section 3(c) shall continue for up to twoyears from the date of termination, including reimbursement of COBRA paymentsto the extent no longer covered under the Employer’s plans; provided, however,that benefits will be subject to mitigation to the extent of comparablebenefits at a new job; and

 

v.                                      lifeinsurance benefits may be continued for up to two years from the date oftermination at the option of the Employee and at the Employee’s expense.

 

The lump sum severance payment described in clause (i), and anyadditional amount described in clause (ii) of this Section 9(c) arehereinafter referred to collectively as the “Termination Compensation.”  The amount of the Termination Compensationshall be determined, at the expense of the Employer, by its regular outsidecertified public accountants.  If aChange in Control has occurred before the Follow-On Option Award and all of theAnnual Equity Awards provided in Section 3(g) have been granted tothe Employee, the Employer’s obligation to make any such award or awards shallbe satisfied in full by payment of the amount to be paid in lieu thereofpursuant to Section 9(c)(ii).  Uponpayment of

 

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the Termination Compensation and any other accrued compensation, thisAgreement shall terminate (except for the Employee’s obligations pursuant toSections 10, 11, 12, 13 and 14 hereof and the continuing obligations to providethe benefits set forth in clauses (ii) – (v) of this Section 9(c) inaccordance with the terms thereof) and be of no further force or effect.

 

**d.****                                      **Aftera Change in Control has occurred, the Employer shall honor the Employee’sexercise of the Employee’s outstanding stock options and any other equity relatedrights, in accordance with this Employment Agreement.  After a Change in Control has occurred andthe Employee’s employment is terminated as a result thereof, the Employee (orhis designated beneficiary or personal representative(s) shall also receive, exceptto the extent already paid pursuant to Section 9(c)(i) hereof orotherwise, the sums the Employee would otherwise have received (whether underthis Agreement, by law or otherwise) by reason of termination of employment asif a Change in Control had not occurred.

 

**e.****                                      **TheEmployee shall not be required to mitigate the payment of the TerminationCompensation or other benefits or payments by seeking other employment.  To the extent that the Employee shall, afterthe Term of this Agreement, receive compensation from any other employment, thepayment of Termination Compensation or other benefits or payments shall not beadjusted (except as set forth in Section 9(c)(iii)).

 

**10.****                               Disclosure,Proprietary Rights**.  The Employeeagrees that during the Term of his employment by the Employer, he will discloseonly to the Employer all ideas, methods, plans, formulas, processes, tradesecrets, developments, or improvements known by him which relate directly orindirectly to the business of the Employer, including any lines of business,acquired by the Employee during his employment by the Employer; provided, thatnothing in this Section 10 shall be construed as requiring any suchcommunication where the idea, plan, method or development is lawfully protectedfrom disclosure, including but not limited to trade secrets of thirdparties.  For purposes of the Agreement,the term “the business of the Employer” shall include, without limitation, thefollowing:  the design, development,obtaining regulatory approval, production, manufacturing, marketing, andlicensing of prescription and non-prescription drugs, medical devices, andmethods for the diagnosis, evaluation, treatment or correction of any disease,injury, illness or other medical or health condition and such other lines ofbusiness as the Employer shall engage in during the Term hereof.  The parties further agree that anyinventions, formulas, trade secrets, ideas, or secret processes which shallarise from any disclosure made by the Employee pursuant to this paragraph,whether or not patentable, shall be and remain the sole property of theEmployer.

 

**11.****                               Confidentiality**.  The Employee agrees to keep in strict secrecyand confidence any and all information the Employee assimilates or to which hehas access during his employment by the Employer and which has not beenpublicly disclosed and is not a matter of common knowledge in the fields ofwork of the Employer.  The Employeeagrees that both during and after the Term of his employment by the Employer,he will not, without prior written consent of the Employer, disclose any suchconfidential information to any third person, partnership, joint venture,company, corporation, or other organization.

 

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**12.****                               Non-Competition**.  If the Employee is terminated for good causethe Employee covenants that he will not engage, directly or indirectly, aloneor in conjunction with others, as an agent, employee, investor, director,shareholder or partner in any business which provides products, informationand/or services to the public which are competitive with those provided by theEmployer Group; provided, however, that the ownership by the Employee of *5%*or less of the issued and outstanding shares of any classof securities which is traded on a national securities exchange or, in the overthe counter market shall not constitute a breach of the provisions of thissection.  The Employee will not on hisown behalf or on behalf of any other business enterprise, directly orindirectly, solicit or induce any creditor, customer, client, supplier,officer, employee or agent of the Employer Group to sever his/her or itsrelationship with or leave the employ of the Employer Group.  The covenants in this Section 12 shallcontinue in full force and effect throughout the Term hereof and for a one yearperiod subsequent to the termination hereof.

 

**13.****                               Conflictof Interest**.  The employee shalldevote his full time, energy and attention to the benefit and business of theemployer and its affiliates and shall not be employed by another entity, exceptas permitted in Section 5.  It isunderstood by and between the parties hereto that the foregoing restrictivecovenants set forth in Sections 10, 11, 12, 13 and 14 are essential elements ofthis Agreement, and that but for the agreement of the Employee to comply withsuch covenants, the Employer would not have entered into this Agreement.  Notwithstanding anything to the contrary inthis Agreement, the terms and provisions of Sections 11, 12, 13 and 14 of thisAgreement, together with any definitions used in such terms and provisions,shall survive the termination or expiration of this Agreement.  The existence of any claim or cause of actionof the Employee against the Employer, whether predicated on this Agreement orotherwise, shall not constitute a defense to the enforcement by the Employer ofsuch covenants.

 

**14.****                               SpecificPerformance**.  The Employee agreesthat damages at law will be insufficient remedy to the Employer if the employeeviolates the terms of Sections 10, 11, 12 or 13 of this Agreement and that theEmployer shall be entitled, upon application to a court of competentjurisdiction, to obtain injunctive relief to enforce the provisions of suchSections, which injunctive or other equitable relief shall be in addition toany other rights or remedies available to the Employer, and the Employee agreesthat he will not raise and hereby waives any objection or defense that there isan adequate remedy at law.

 

**15.****                               Compliancewith Other Agreements**.  The Employeerepresents and warrants that the execution of this Agreement by him and hisperformance of his obligation hereunder will not conflict with, result in thebreach of any provision of, terminate, or constitute a default under anyagreement to which the Employee is or may be bound.

 

**16.****                               Waiverof Breach**.  The waiver by theEmployer of a breach of any of the provisions of this Agreement by the Employeeshall not be construed as a waiver of any subsequent breach by theEmployee.  The waiver by the Employee of abreach of any of the provisions of this Agreement by the Employer shall not beconstrued as a waiver of any subsequent breach by the Employer.

 

**17.****                               D&OInsurance; Indemnification**.  TheEmployer hereby agrees to maintain in full force and effect for the duration ofthis Agreement, Director’s and Officer’s Liability Insurance

 

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of at least$5,000,000 and to indemnify and hold harmless to the full extent permitted bylaw, the Employee for acts performed by him in carrying out his duties andresponsibilities in accordance with this Agreement.

 

**18.****                               BindingEffect, Assignment**.  The rights andobligations of the Employer under this Agreement shall inure to the benefit ofand shall be binding upon the successors and assigns of the Employer.  This Agreement is a personal employmentcontract and the rights, obligations and interests of the Employee hereundermay not be sold or assigned or hypothecated. Whenever in this Agreement reference is made to any party, such referenceshall be deemed to include the successors, assigns, heirs, and legalrepresentatives of such party, and without limiting the generality of theforegoing, all representations, warranties, covenants and other agreements madeby or on behalf of the Employee in this Agreement shall inure to the benefit ofthe successors and assigns of the Employer; provided, however, thatnothing herein shall be deemed to authorize or permit the Employee to assignany of his rights or obligations under this Agreement to any other person(whether or not a family member or other affiliate of the Employee, other thanas specifically provided in this Agreement), and the Employee covenants andagrees that he shall not make any such assignments.

 

**19.****                               Modification,Amendment, Etc**.  Each and everymodification and amendment of this Agreement shall be in writing and signed byall of the parties hereto, and each and every waiver of, or consent to anydeparture from, any representation, warranty, covenant or other term orprovision of this Agreement shall be in writing and signed by each affectedparty hereto.

 

**20.****                               Notice**.  Any notice required or permitted to be givenunder this Agreement shall be sufficient if in writing and if sent by certifiedor registered mail, first class, return receipt requested, to the Employer, atits executive offices as set forth in its filings with the Securities andExchange Commission and, to the Employee, at his address as set forth on thecurrent employment records of the Employer.

 

**21.****                               Severability**.  It is agreed by the Employer and Employeethat if any portion of the provisions set forth in this Agreement are held tobe unreasonable, arbitrary or against public policy, then that portion of suchcovenants shall be considered divisible both as to time and geographicalarea.  The Employer and Employee agreethat if any court of competent jurisdiction determines the specific time periodor the specified geographical area applicable to this Agreement to be unreasonable,arbitrary or against public policy, then a lesser time period or geographicalarea which is determined to be reasonable, non-arbitrary and not against publicpolicy may be enforced against the Employee. The Employer and Employee agree that the foregoing covenants areappropriate and reasonable when considered in light of the nature and extent ofthe business conducted by the Employer.

 

**22.****                               EntireAgreement**.  This Agreement containsthe entire agreement between the Employer and the Employee and supersedes allprior agreements and understandings, oral or written, with respect to thesubject matter hereof.

 

**23.****                               Headings**.  The headings contained in this agreement arefor reference purposes only and shall not affect the meaning or interpretationof the Agreement.

 

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**24.****                               GoverningLaw; Forum**.  This Agreement shall beconstrued and enforced in accordance with the laws of the State of NewHampshire.  Any action brought pursuantto this Agreement or in relation to its breach may be heard by any court ofcompetent jurisdiction having jurisdiction thereof.

 

**25.****                               Counterparts**.  This Agreement may be executed in twocounterpart copies of the entire document or of signature pages to thedocument, each of which may be executed by one or more of the parties hereto,but all of which when taken together, shall constitute a single agreementbinding upon all of the parties hereto.

 

IN WITNESS WHEREOF, the parties hereto have executedthis Agreement effective as of the day and year first written above.

 
| Employer:                     | Employee:                         |
|-------------------------------|-----------------------------------|
| BENTLEY PHARMACEUTICALS, INC. |                              |
|                          |                              |
|                          |                              |
| By:                           | /s/ James R.  Murphy              |   | By: | /s/ John A.  Sedor |   |
|                          | James R. Murphy  Chairman and CEO |   |  John A. Sedor |
|                               |                                   |  |  |  |  |

 

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