Document:

Exhibit 10.12

                                                CONFIDENTIAL TREATMENT REQUESTED

                               SERVICES AGREEMENT

     THIS SERVICES AGREEMENT (this "Agreement") dated as of August 10, 2001 (the
"Effective Date"), is entered into by and between CELLEGY PHARMACEUTICALS, INC.,
a  California  corporation,  having  a place of  business  at 349  Oyster  Point
Boulevard, Suite 200, South San Francisco,  California 94080 ("Cellegy"), VENTIV
HEALTH, INC., a Delaware corporation,  having a place of business at 1114 Avenue
of the Americas,  New York,  New York 10036  ("Ventiv") and VIS FINANCIAL LLC, a
Delaware  limited  liability  company and a wholly owned  subsidiary  of Ventiv,
having a place of business at 1114 Avenue of the  Americas,  New York,  New York
10036  ("VFLLC");  Cellegy  and Ventiv  being  referred to  collectively  as the
"Parties" and each, individually, as a "Party".

                                    RECITALS

     WHEREAS,  Cellegy is a specialty  biopharmaceutical  company engaged in the
development of prescription drugs and skin care products; and

     WHEREAS,  Ventiv is a leading  provider of  outsourced  sales and marketing
services to the healthcare and pharmaceutical industries; and

     WHEREAS,  Ventiv has agreed to provide, or cause its Affiliates to provide,
a combination  of sales,  marketing and  analytical  services,  on the terms and
conditions set forth herein, together with funding for such services, to Cellegy
in connection with Cellegy's  Anogesic(R)  product (the "Product"),  in exchange
for a certain percentage of the revenues generated from the sale of the Product;

     NOW, THEREFORE, in exchange for the mutual covenants and promises set forth
herein,  and  for  other  good  and  valuable  consideration,  the  receipt  and
sufficiency  of which are  hereby  acknowledged,  the  Parties  hereby  agree as
follows:

SECTION 1 Definitions.

         (a)  Certain  terms used but not  otherwise  defined in this  Agreement
shall have the following meanings:

     "Additional Products" shall mean those pharmaceutical  products approved by
the FDA,  other than the  Product,  that a Party  shall in good faith  determine
would be  economically  beneficial  to both Parties if introduced to the Product
Detail Team for marketing in the Territory.

     "Affiliate" shall mean, with respect to any given Person,  any other Person
that directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person.  The term "control"
(including,  with  correlative  meaning,  the terms  "controlled  by" and "under
common control with"), as used with respect to any Person, means the possession,
directly or  indirectly,  of the power to direct or cause the  direction  of the

<PAGE>

management and policies of such Person,  whether through the ownership of voting
securities, by contract or otherwise.

     "Approval  Date" shall mean the date on which Cellegy obtains all necessary
Governmental Body approvals for the sale of the Product in the Territory.

     "Business Day" shall refer to a day, other than a Saturday or a Sunday,  on
which  commercial  banks are not required or  authorized to close in the city of
New York.

     "Call Notice" shall mean the written  notice  delivered to Cellegy upon the
occurrence of any Call Event,  pursuant to which the Funding  Arrangement  (or a
specified  percentage  thereof)  shall  become  immediately  due and  payable in
accordance with the terms of Section 6(d) of this Agreement.

     "Change of Control" shall mean, with respect to any Person,  the occurrence
of any of the following  events:  (a) any "person" or "group" (as such terms are
used in Sections  13(d) and 14(d) of the Exchange  Act) that is not  currently a
shareholder  of the Person as of the date of this  Agreement,  is or becomes the
beneficial  owner (as defined in Rules 13d-3 and 13d-5 under the  Exchange  Act,
except that for the  purposes of this  definition  such person or group shall be
deemed to have  "beneficial  ownership"  of all shares  that any such  person or
group has the right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of more than 50% of the
total voting power of the capital stock of such Person; provided,  however, that
a Person shall not be deemed to have  undergone a Change of Control in the event
that pursuant to any such transaction, a person or group who owned a majority of
the total voting power of the capital stock of such Person  immediately prior to
the  consummation of such  transaction  shall continue to hold a majority of the
total voting power of the capital stock  immediately  following the consummation
of such transaction; (b) during any period of two consecutive years, individuals
who at the beginning of such period constituted the board of directors (together
with any new  directors  whose  election  by such  board of  directors  or whose
nomination  for  election by the  shareholders  of such Person was approved by a
majority  vote of the  directors  of such  Person  then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was  previously  so approved)  cease for any reason to constitute a
majority of the board of  directors  of such  Person then in office;  or (c) the
merger or consolidation of such Person with or into another person or the merger
of another  person with or into such Person or the sale of all or  substantially
all of the assets of such Person to another person, and, in the case of any such
merger or consolidation, where the shareholders of the Person immediately before
the transaction do not,  immediately  after the transaction and as the result of
securities  received  by them as a result  of the  transaction,  hold at least a
majority of the voting  power of the  securities  of the  surviving or acquiring
entity (or its parent).

     "Commercialization  Funding" shall mean the funding in the aggregate amount
of up to $10,000,000,  together with simple interest thereon,  to be provided to
Cellegy by VFLLC in connection with the transactions contemplated hereby.

     "Contribution  Margin"  shall  mean  *,  less  (a)  ** and  (b) ** for  the
applicable period.

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*  Confidential  treatment  has been  requested  for  certain  portions  of this
   document  pursuant to an application for  confidential  treatment sent to the
   Securities  and  Exchange  Commission.  Such  portions  are omitted from this
   filing and filed separately with the Securities and Exchange Commission.

                                      -2-
<PAGE>

     "Economic Value" shall mean *.

     "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

     "Governmental Body" shall mean any supranational body or regulatory body or
successor  thereof;  any country,  government or governmental or regulatory body
thereof or  successor  thereto,  or political  subdivision  thereof or successor
thereto,  whether federal, state, local or foreign; any agency,  instrumentality
or authority of any supranational  body, country or government;  or any court of
competent jurisdiction.

     "Impaired  Labeling" shall mean any material adverse change to the proposed
label   information   for    "indications",    "dosage   and    administration",
"contraindications",  "directions for use" or "adverse  reactions"  contained in
Cellegy's New Drug Application for the Product dated June 26, 2001, which one of
the  Parties  reasonably  expects  will have a  Material  Adverse  Impact on the
Economic Value.

     "Launch  Date" shall mean the date on which the  Parties  begin to actively
market the Product to physicians and end-users, provided that such date shall be
no earlier than the Approval Date.

     "Law" shall mean any federal, state, local or foreign law (including common
law), constitution, statute, code, ordinance, rule, regulation, executive order,
decree, governmental edict or other requirement.

     "Major  Change"  shall mean,  with  respect to a  quantity,  an increase or
decrease of at least * from such quantity over any given three month period.

     "Manufacturing Costs" shall mean the variable costs and expenses associated
with the manufacture of the Product including the costs and expenses of sourcing
and warehousing of raw and packaging  materials,  incoming and outgoing  quality
control,  and other  procedures,  or any part  thereof,  involved  in making and
packaging the Product, all in accordance with good manufacturing practices.

     "Material  Adverse  Impact"  shall  mean,  with  respect to a  quantity,  a
decrease of * or more from such quantity over the applicable period.

     "Net  Sales"  means the gross  dollar  amounts  earned by  Cellegy  (or any
sublicensee,  affiliate,  subsidiary or other related entity of Cellegy) from or
on account of sales of the Product in the  Territory  to any  independent  third
party,  less, to the extent included in such gross dollar amount,  the aggregate
of the following amounts: (i) discounts,  including cash discounts,  off-invoice
allowances  taken by  customers  of  Cellegy,  or  rebates  actually  allowed or
granted,   provided  that  Cellegy  does  not  receive  any  payments  or  other
consideration  for such  discounts,  off-invoice  allowances  or  rebates;  (ii)
reasonable  credits or  allowances  actually  granted by Cellegy  upon claims or
returns;  and (iii) sales and use taxes,  freight,  freight  insurance and other
governmental  charges.  For sake of clarity,  the Parties  acknowledge  that the
costs and expenses  described in clauses (i), (ii) and (iii) are not expected to
exceed * of gross revenues with respect to the Product.

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*  Confidential  treatment  has been  requested  for  certain  portions  of this
   document  pursuant to an application for  confidential  treatment sent to the
   Securities  and  Exchange  Commission.  Such  portions  are omitted from this
   filing and filed separately with the Securities and Exchange Commission.

                                      -3-
<PAGE>

     "Person"  shall  mean any  individual,  corporation,  company,  partnership
(limited or general),  joint venture,  limited liability  company,  association,
trust, Governmental Body or other entity.

     "Product  Budget" shall mean the monthly  budget for all (a) revenues to be
earned and (b) costs and expenses to be incurred,  by the Parties in  connection
with the marketing of the Product.

     "Product  Detail Team" shall mean the group of  individuals  employed  from
time to time by Ventiv or its Affiliates, or, subsequent to an Early Conversion,
employed  from  time  to time by  Cellegy  or its  Affiliates,  which  shall  be
responsible  for  the  marketing  and  sale of the  Product  to  physicians  and
end-users.

     "Product  Marketing  Expenses"  shall  mean the direct  costs and  expenses
associated with the Services.

     "Product  Operating  Income  (Loss)"  shall mean Product  Revenues less (i)
Manufacturing   Costs,   (ii)  Product  Market  Expenses  and  (iii)  any  other
advertising,  marketing  and  distribution  expenses  directly  related  to  the
Product,  either as incorporated into the approved Product Budget or as actually
incurred, as appropriate.

     "Product Price" shall mean the average wholesale price of the Product.

     "Product  Quality  Complaint"  shall mean any complaint  that questions the
purity, identity, potency or quality of the Product, its packaging, or labeling,
or any complaint  that concerns any incident that causes Product or its labeling
to be  mistaken  for,  or applied  to,  another  article or any  bacteriological
contamination,  or any  significant  chemical,  physical,  or  other  change  or
deterioration in the Product,  or any failure of one or more distributed batches
of the Product to meet the  specifications  thereof in the New Drug  Application
for the Product.

     "Product  Revenues" shall mean all Net Sales generated from the sale of the
Product  at  the  point  of  distribution  in the  Territory  from  the  Product
manufacturer, based upon gross wholesale invoices.

     "Product  Samples"  shall mean samples of the Product of equal strength and
lesser quantity (e.g., * gram tubes) than the actual Product.

     "Territory"  shall mean the fifty  states of the United  States of America.
For sake of clarity and avoidance of doubt, Puerto Rico and U.S. territories and
possessions are excluded from the definition of "Territory".

     "Ventiv Competitor" shall mean those entities listed on Schedule C attached
hereto.

         (b) Each of the terms set forth below  shall have the meaning  ascribed
thereto in the following sections:

         "Agreement"..........................................Preamble
         "Auditor"............................................ss.6(h)

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*  Confidential  treatment  has been  requested  for  certain  portions  of this
   document  pursuant to an application for  confidential  treatment sent to the
   Securities  and  Exchange  Commission.  Such  portions  are omitted from this
   filing and filed separately with the Securities and Exchange Commission.

                                      -4-
<PAGE>

         "Call Event".........................................ss. 6(d)
         "Cellegy"............................................Preamble
         "Cellegy Party"......................................ss.14(b)
         "Claim"..............................................ss.16(b)
         "Confidential Information"...........................ss.12(a)
         "Conversion".........................................ss.7(c)
         "Default Conversion".................................ss.7(c)
         "Disclosing Party"...................................ss.12(a)
         "Dispute"............................................ss.5(c)
         "Early Conversion"...................................ss.7(a)
         "Effective Date".....................................Preamble
         "FDA"................................................ss.3(c)
         "Final Decision".....................................ss.5(c)
         "Force Majeure"......................................ss.20
         "Funding Arrangement"................................ss.6(c)
         "Indemnitee".........................................ss.14(c)
         "Indemnitor".........................................ss.14(c)
         "Initial Term".......................................ss.15(a)
         "Introducing Party"..................................ss.9(b)
         "Mandatory Conversion"...............................ss.7(b)
         "Party" or "Parties".................................Preamble
         "Product"............................................Recitals
         "Product Committee"..................................ss.5(b)
         "Recipient"..........................................ss.12(a)
         "Renewal Term".......................................ss.15(a)
         "Services"...........................................ss.2(a)
         "Steering Committee".................................ss.5(a)
         "Supplemental Interest"..............................ss.6(f)
         "Term"...............................................ss.15(a)
         "Tranche I Amount"...................................ss.6(b)
         "Tranche II Amount"..................................ss.6(b)
         "Tranche III Amount".................................ss.6(b)
         "Ventiv".............................................Preamble
         "Ventiv Party".......................................ss.14(a)
         "VFLLC"..............................................Preamble

         Interpretation.  As used in this  Agreement,  neutral  pronouns and any
variations thereof shall be deemed to include the feminine and masculine and all
terms used in the  singular  shall be deemed to  include  the  plural,  and vice
versa, as the context may require. The words "herein," "hereof," and "hereunder"
and other works of similar import refer to this Agreement as a whole,  including
the schedules and exhibits hereto,  as the same may from time to time be amended
or supplemented and not to any subdivision contained in this Agreement. The word
"including"  when  used  herein  is  not  intended  to be  exclusive  and  means
"including, without limitation".

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*  Confidential  treatment  has been  requested  for  certain  portions  of this
   document  pursuant to an application for  confidential  treatment sent to the
   Securities  and  Exchange  Commission.  Such  portions  are omitted from this
   filing and filed separately with the Securities and Exchange Commission.

                                      -5-
<PAGE>

SECTION 2 General Objectives; Joint Responsibilities.

         (a) During the Term of this  Agreement,  Ventiv will, or will cause its
Affiliates  to, * provide  to  Cellegy,  within  the  Territory,  the  strategic
analysis and measurement and outsourced sales and marketing activities set forth
on Schedule A hereto (the "Services," including those listed on Schedule A as it
may be  amended  from  time  to time  by  mutual  agreement  of the  Parties  in
accordance with the terms of this Agreement),  with respect to the Product,  and
VFLLC will provide Cellegy funding  pursuant to the terms and conditions of this
Agreement  and  the  Funding  Arrangement  to the  extent  of *.  In  connection
therewith,  Cellegy  and  Ventiv  will  each use  good  faith  and  commercially
reasonable  efforts to cooperate with and assist each other in the  development,
marketing  and  sale of the  Product,  as more  specifically  described  in this
Agreement.

         (b)  Notwithstanding  anything  to  the  contrary  set  forth  in  this
Agreement,  the  Parties  hereby  acknowledge  and agree  that  nothing  in this
Agreement  shall prevent or limit (i) Ventiv or its Affiliates from offering any
of its  products  and  services  directly  to any  current  or  future  clients;
provided,  however,  such  products  and  services  are not  offered  within the
Territory  with respect to any product  directly  competitive  to the Product or
(ii) Cellegy from  individually  manufacturing,  marketing or selling any of its
products,  except as expressly set forth in this Agreement.  Cellegy agrees that
it will not engage any other Person to provide the Services  with respect to the
Product during the Term.

         (c)  During  the Term of this  Agreement,  the  Parties  shall have the
following joint responsibilities:

              (i)  Development  of a pre-Launch  Date  promotional  plan for the
Product,  including Product management,  resource allocation analysis (including
any adjustment of Product Detail Team size), structure and geographic placement,
advocacy development programs and representative recruiting and training;

              (ii) Development of a post-Launch Date promotional plan, including
Product  management,  the  deployment  of a full time  Product  Detail  Team and
promotional events (e.g., symposia and teleconferences);

              (iii)   Development  of  a  distribution  plan  for  the  Product;
provided,  however,  that  Ventiv  shall at no time be under any  obligation  to
maintain or store any Product stock;

              (iv)  Management  of all matters  relating to managed  care (e.g.,
national  accounts),   including   strategies  and  order  fulfillment  and  the
deployment of a national Product Detail Team, which shall be composed  initially
of no more than seventy five (75) representatives; and

              (v)  Selection  of  appropriate   advertising   agencies  for  the
marketing and promotion of the Product;  provided,  however,  that the costs and
expenses of such advertising  agencies shall be borne by Cellegy,  but funded by
VFLLC, if required under the terms of the Funding Arrangement.

-------------------------
*  Confidential  treatment  has been  requested  for  certain  portions  of this
   document  pursuant to an application for  confidential  treatment sent to the
   Securities  and  Exchange  Commission.  Such  portions  are omitted from this
   filing and filed separately with the Securities and Exchange Commission.

                                      -6-
<PAGE>

         (d) Beginning as of the Launch Date,  each Party shall promptly  notify
the other  Party in  writing of any order,  request or  directive  of a court or
other   Governmental   Authority   to  recall  or  withdraw  a  Product  in  any
jurisdiction.  Cellegy shall be responsible,  at its sole cost and expense,  for
the costs of any recall or withdrawal of a Product.

SECTION 3 Ventiv Obligations.

         (a) During the Term of this Agreement, Ventiv shall:

              (i) provide or cause its Affiliates to provide, as applicable, the
Services of the types and in the amounts set forth on Schedule A attached hereto
with  respect to the Product,  including  the  deployment  and  management  of a
Product Detail Team and related activities,  conferences and symposia, and other
promotional   and  accredited   programs  with  respect  to  the  Product  (e.g.
teleconferences and advisory board meetings);

              (ii) administer and monitor  promotional and educational  projects
with  regard to the  Product,  and  monitor  resource  allocation  plans for the
Product;

              (iii) hire a co-Product manager reasonably acceptable to Cellegy;

              (iv)  distribute  all  collateral  materials  and  samples  to the
Product Detail Team;

              (v)  utilize  good  faith  efforts to  provide  seventy  five (75)
representatives to the Product Detail Team on the Launch Date; and

              (vi) develop and execute an analytic support plan for the Product,
including post-Launch Date strategy adjustments.

         (b) Beginning as of the Launch Date, Ventiv shall notify Cellegy within
twenty four hours of any serious adverse event(s) (e.g., death, life threatening
event,  event  causing  hospitalization  or  prolonging a hospital  stay,  fetal
abnormality, an event signifying new medical information, adverse drug reactions
and governmental  inquiries)  learned by Ventiv that may affect the marketing of
the  Product;   provided,   however,  that  Cellegy  shall  have  the  reporting
responsibility   for  such  adverse  events  to  applicable   regulatory  health
authorities anywhere in the world.

         (c) Upon being contacted by the Food and Drug Administration ("FDA") or
any other federal,  state or local agency for any regulatory  purpose pertaining
to  this  Agreement  or to the  Product,  Ventiv  shall,  if not  prohibited  by
applicable  Law,  immediately  notify Cellegy and will not respond to the agency
until  consulting  with  Cellegy,  to the  maximum  feasible  extent;  provided,
however,  that the foregoing shall not be construed to prevent Ventiv in any way
from complying,  and Ventiv may permit  unannounced  FDA or similar  inspections
authorized  by Law and  respond to the  extent  necessary  to  comply,  with its
obligation under applicable Law.

         (d) Ventiv  shall  inform  Cellegy  of any  Product  Quality  Complaint
received  within three (3) working days but no more than four (4) calendar  days
from the receipt date by Ventiv.

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*  Confidential  treatment  has been  requested  for  certain  portions  of this
   document  pursuant to an application for  confidential  treatment sent to the
   Securities  and  Exchange  Commission.  Such  portions  are omitted from this
   filing and filed separately with the Securities and Exchange Commission.

                                      -7-
<PAGE>

SECTION 4 Cellegy Obligations.

         (a) During the Term of this Agreement, Cellegy shall:

              (i) manage  regulatory review and compliance,  order  fulfillment,
manufacturing and clinical development of the Product and all related matters;

              (ii)  develop  and  assemble an  adequate  distribution  chain and
utilize  reasonable  efforts to ensure the  provision of a sufficient  supply of
commercial  Product  stock as may be  required  for the  distribution  chain and
end-user demand;

              (iii) utilize reasonable efforts to provide a sufficient supply of
Product  Samples for the Product  Detail Team such that, on an annual basis,  at
least ** percent (**%) of targeted physicians are provided with Product Samples;

              (iv) to the extent Cellegy pursues any additional  indications for
the Product,  provide all clinical  support for any such additional  indications
promoted by Ventiv;

              (v) oversee and administer  compliance by the Product manufacturer
with applicable  regulatory and  administrative  cost guidelines,  including the
utilization of reasonable efforts to ensure Manufacturing Costs do not exceed **
percent (**%) of Product Revenues;

              (vi) assess and resolve all trade and wholesale  issues  involving
inventory or distribution of the Product;

              (vii) hire a co-Product manager reasonably acceptable to Ventiv;

              (viii)  seek  in good  faith  to  maximize  Product  Revenues  and
Contribution  Margins,  and  minimize  the  effect  of price  promotions  and/or
rebates;

              (ix) produce all collateral  materials and samples for the Product
Detail Team, and pay all costs and expenses  associated  with the production and
distribution  thereof,  provided that such costs and expenses shall be funded by
VFLLC, if required under the terms of the Funding Arrangement; and

              (x) purchase any  prescription  data  required to monitor  Product
Revenues by distribution channel;  provided,  however, that costs of purchase of
such prescription  data, to the extent included in the Product Budget,  shall be
borne by Ventiv.

         (b) Regulatory Matters.

              (i) All  regulatory  matters  regarding  the Product  shall remain
under the exclusive control of Cellegy,  subject to Section 3(c) hereof. Cellegy
will  have the sole  responsibility,  at its cost and  expense,  to  respond  to
Product  and  medical  complaints  and to handle all  returns and recalls of the
Product.

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*  Confidential  treatment  has been  requested  for  certain  portions  of this
   document  pursuant to an application for  confidential  treatment sent to the
   Securities  and  Exchange  Commission.  Such  portions  are omitted from this
   filing and filed separately with the Securities and Exchange Commission.

                                      -8-
<PAGE>

              (ii)  Cellegy  shall  furnish  Ventiv  with  efficacy  and  safety
information  reasonably  necessary or helpful to assist  Ventiv in promoting the
Product,  including  relevant  clinical and safety data included in the New Drug
Application for the Product and  information  related to the efficacy and safety
profile of the Product.

SECTION 5 Structure.

         (a)  Upon  execution  of  this  Agreement,  Cellegy  and  Ventiv  shall
establish a steering  committee (the "Steering  Committee") which shall have the
responsibilities described in this Section 5(a). The Steering Committee shall be
initially  comprised  of a total of four (4)  members,  of which two (2) members
shall be appointed by Ventiv and two (2) members  shall be appointed by Cellegy.
The total number of Committee  members may be changed by the Steering  Committee
from time to time as  appropriate,  but in all cases it will be  comprised of an
equal  number of members  designated  by each of Cellegy and  Ventiv,  and in no
event shall the  Steering  Committee  be  comprised of an aggregate of less than
four (4) members.  Each of Cellegy and Ventiv may substitute its representatives
from time to time and the  substitution  shall be  effective  upon notice to the
other Party.  The Steering  Committee  shall meet as often as required to ensure
the effective  implementation of this Agreement,  but in no event less than once
every three months during the term of this Agreement,  on such dates and at such
places as to be agreed upon  between the  Parties.  The meetings of the Steering
Committee may be held in person or in any other  reasonable  manner,  including,
without limitation, by telephone, video conference or e-mail. The Committee will
be primarily  responsible for (i) decisions regarding Product  commercialization
and ongoing  clinical  support for the Product,  (ii)  decisions  regarding  the
introduction of Additional  Products to the Product Detail Team,  (iii) approval
of the Product Budget and (iv) resolving any difficulties or disagreements which
may arise between the Parties in the implementation of this Agreement (except as
otherwise provided herein). In connection  therewith,  any representative to the
Steering Committee shall have the right at any time to call a special meeting of
the Steering  Committee in order to vote on the amendment of the Product  Budget
to include any  extraordinary  costs not  theretofore  approved by the  Steering
Committee.

         (b) Upon  execution  of this  Agreement,  Cellegy and Ventiv shall also
establish a product  committee  (the "Product  Committee")  which shall have the
responsibilities described in this Section 5(b); provided,  however, that to the
extent both the Steering Committee and the Product Committee have responsibility
with respect to a given matter,  the decisions of the Steering  Committee  shall
govern. The Product Committee will initially be comprised of a total of four (4)
members  (and shall at all times have a maximum of four (4)  members),  of which
two (2)  members  shall be  appointed  by Ventiv  and two (2)  members  shall be
appointed  by  Cellegy.  The total  number of Product  Committee  members may be
changed by the Product  Committee from time to time as appropriate.  The Product
Committee,  shall be responsible for (i) the day-to-day management and oversight
of  the  transactions   contemplated  by  Agreement,   (ii)  overseeing  Product
development   activities   under  this  Agreement,   (iii)   reviewing   Product
performance,  (iv) reviewing  marketing and sales  arrangements  for the Product
including the formulation of any modifications to such arrangements and (v) such
other  functions  required  to be  performed  by it under this  Agreement  or as
directed to be performed by the Steering Committee.

         (c) Each member of the  Steering  Committee  and the Product  Committee
shall have one vote and all the  decisions  of the  Steering  Committee  and the
Product Committee shall

                                      -9-
<PAGE>

be made by a simple majority of the Steering Committee or the Product Committee,
as the case may be;  provided,  however,  that in the event the  members  of the
Product  Committee are deadlocked  and cannot reach a decision  within three (3)
calendar days after notice of a deadlock with regard to any decision required to
be made by the Product  Committee,  the decision  shall first be referred to the
Steering Committee for resolution. If the Steering Committee cannot resolve such
matter  within  three  (3)  calendar  days,  or if  the  Steering  Committee  is
deadlocked  and  cannot  reach a  decision  with  regard to any  other  decision
required to be made by the Steering  Committee  (each,  a  "Dispute"),  then the
Dispute shall be referred to the Chief Executive  Officer of each Party,  and if
such  Dispute is not  resolved by the Chief  Executive  Officers  within two (2)
calendar days of such referral, Cellegy's Chief Executive Officer (or such other
officer as determined by Cellegy) will be responsible for the tie-breaking  vote
with regard to such Dispute (the "Final Decision");  provided,  further, that in
the  event  that  Ventiv  determines  in good  faith  that a Final  Decision  is
reasonably expected to have a Material Adverse Impact on the Economic Value, the
Final Decision shall trigger a  renegotiation  of this Agreement as set forth in
Section 8(a) hereof.

SECTION 6 Reimbursement and Revenue Sharing; Funding Arrangement.

         (a) During the Initial Term, and prior to the payment by Cellegy of all
Tranche I and Tranche II Amounts,  Ventiv shall invoice Cellegy, within ten (10)
Business  Days of each month end date,  for all costs and  expenses  incurred by
Ventiv (or any third Person) during the prior month in connection with sales and
marketing  activities with regard to the Product;  provided,  however,  that all
such costs and expenses  shall have been included in the Product Budget for such
period or shall  have been  subsequently  approved  by the  Steering  Committee.
Notwithstanding  the foregoing proviso,  Cellegy shall be obligated to reimburse
Ventiv for all of such costs and  expenses to the extent they exceed the Product
Budget by no more than * . Cellegy shall reimburse  Ventiv for all such invoiced
costs and expenses  within  twenty (20) Business Days of the receipt of any such
invoice.  In the event  Cellegy  shall be more than  twenty (20)  Business  Days
delinquent in its payment of any such invoiced costs to Ventiv, after receipt of
a proper  invoice not  otherwise in dispute as to amount,  Cellegy  shall pay to
Ventiv simple interest,  at a rate of ** percent (** %) per annum, on the amount
of any such delinquent reimbursements (or any undisputed portion thereof).

         (b)  Subsequent  to the Launch Date,  and  provided  there is a Product
Operating  Income,  any Product Revenues will be distributed  between Ventiv and
Cellegy as follows:

              (i) Subject to the provisions of the Funding Arrangement,  Cellegy
will retain ** percent  (**%) of all Product  Revenues  until  Ventiv shall have
received  an amount  equal to the  Commercialization  Funding  (the  "Tranche  I
Amount");

              (ii) Upon  receipt by Ventiv of  payments  equal to the  Tranche I
Amount, and subject to the provisions of the Funding  Arrangement,  Cellegy will
retain ** percent (**%) of all Product  Revenues  thereafter  until such time as
Ventiv shall have received $** (such amount, the "Tranche II Amount");

              (iii)  For each ** month  period  following  receipt  by Ventiv of
payments equal to the Tranche I Amount and the Tranche II Amount,  and until the
expiration of the Initial

-------------------------
*  Confidential  treatment  has been  requested  for  certain  portions  of this
   document  pursuant to an application for  confidential  treatment sent to the
   Securities  and  Exchange  Commission.  Such  portions  are omitted from this
   filing and filed separately with the Securities and Exchange Commission.

                                      -10-
<PAGE>

Term (or any Renewal Term, if applicable) or a Mandatory or Default  Conversion,
Cellegy will retain (a) ** percent (**%) of all Product Revenues until such time
as the  Product  has  generated  in excess  of $** of  Product  Revenues  in the
aggregate  during  such ** month  period,  (b) ** percent  (**%) of all  Product
Revenues  thereafter until such time as the Product has generated $** of Product
Revenues in the  aggregate  during such ** month period and (c) ** percent (**%)
of all Product Revenues thereafter (all such amounts, collectively, the "Tranche
III Amount"); and

              (iv)  Following the earlier of the  expiration of the Initial Term
or any Renewal  Term,  if  applicable  (other than as a result of a  termination
pursuant to Section  15) or a  Mandatory  or Default  Conversion,  Cellegy  will
retain (a) ** percent  (**%) of all Product  Revenues  through and including the
date that is ** of the expiration of the Initial Term; provided,  however,  that
if Product  Revenues shall exceed $** during any ** months of the period through
and  including  the date that is the **  anniversary  of the  expiration  of the
Initial  Term,  Cellegy  will retain ** percent  (**%) of the  Product  Revenues
exceeding  $** and (b) ** percent  (**%) of all  Product  Revenues  through  and
including the date that is the **  anniversary  of the expiration of the Initial
Term; provided,  however,  that if Product Revenues shall exceed $** at any time
during,  or prior to, any ** months of the period through and including the date
that is ** of the expiration of the Initial Term, Cellegy will thereafter retain
** percent (**%) of the Product Revenues exceeding $**.

         (c) VFLLC will provide the  Commercialization  Funding  pursuant to the
terms and conditions of a funding arrangement (the "Funding Arrangement") in the
form attached  hereto as Exhibit II, that will accrue simple  interest at a rate
of ** percent (**%) per annum. The initial  Commercialization  Funding shall not
exceed $**. In  addition,  (i) to the extent the Steering  Committee  determines
that an  increase  in the  initial  Commercialization  Funding is  necessary  to
provide funding for post-Launch Date costs and expenses,  to the extent there is
a ** during the period for which such  additional  funds are  required  and (ii)
upon Ventiv's consent,  Ventiv may provide future funding for such period of the
Term; provided,  however, that in no event will the Commercialization Funding in
connection  with the Product  exceed  $10,000,000  in the  aggregate;  provided,
further;  however,  in the event  Ventiv  chooses  not to consent to such future
funding,  the Chief Executive  Officers of the Parties shall meet as promptly as
practicable   thereafter  to  discuss   whether  and  to  what  extent  Ventiv's
compensation as set forth in this Agreement  might be adjusted,  if appropriate,
in respect of any such future  funding  supplied  directly by Cellegy (up to $**
million of future funding).  It is understood that the preceding  sentence shall
not be construed to mean that Cellegy will be entitled to any compensation based
on the foregoing.  The Funding  Arrangement will be repaid by Cellegy out of the
Contribution  Margin in a manner consistent with the revenue sharing percentages
set forth in Section 6(b) above; provided, however, that following the ** period
after the date the Product first achieves Product Operating Income,  Cellegy may
use  proceeds  other  than  the   Contribution   Margin  to  repay  the  Funding
Arrangement;  provided,  further,  that such  repayment does not have a Material
Adverse Impact on the Economic Value.

         (d) In the event of any (i) material  breach by Cellegy of the terms of
this  Agreement,  which  material  breach has not been cured within  thirty (30)
calendar  days of the receipt of notice of such breach by Cellegy,  (ii) failure
of  Cellegy  to  obtain  all  required   Governmental  Body  approvals  for  the
manufacture and sale of the Product on or prior to ** or

-------------------------
*  Confidential  treatment  has been  requested  for  certain  portions  of this
   document  pursuant to an application for  confidential  treatment sent to the
   Securities  and  Exchange  Commission.  Such  portions  are omitted from this
   filing and filed separately with the Securities and Exchange Commission.

                                      -11-
<PAGE>

(iii)  the  Product   receives   Impaired   Labeling   (each  of  the  foregoing
circumstances,  a "Call  Event"),  Ventiv shall have the right to terminate this
Agreement  and,  upon  delivery  of a Call  Notice  to  Cellegy  concerning  the
circumstances  of  the  Call  Event,  the  stated   percentage  of  the  Funding
Arrangement shall be immediately due and payable to VFLLC without further notice
or action by any Party  hereto.  In the event Ventiv shall deliver a Call Notice
pursuant to clause (i) above, then one hundred percent (100%) of the outstanding
principal  and interest  under the Funding  Arrangement  shall be subject to the
Call Notice. In the event Ventiv shall deliver a Call Notice pursuant to clauses
(ii) or (iii)  above,  then * percent  (**%) of the  outstanding  principal  and
interest  under the  Funding  Arrangement  shall be subject to the Call  Notice.
Cellegy  shall have  forty-five  (45)  calendar  days from the date of such Call
Notice to pay an amount in cash to VFLLC equal to the  applicable  percentage of
the Funding  Arrangement  and Cellegy  shall have the right  thereafter,  at its
request,  to receive all  analytical  and other  relevant  data  relating to the
Product, including marketing plans, to the extent such data is held by Ventiv or
the Product Detail Team.

         (e) In the event of termination  of this Agreement by Cellegy  pursuant
to Section  15(b)(ii),  Section 15(c) or Section 15(e), or by Ventiv pursuant to
Section  15(d)(i),  the  obligation to repay any  outstanding  amounts under the
Funding  Arrangement  shall be assumed and assigned to Ventiv and Cellegy  shall
have no further obligation with respect to such amounts; provided, however, that
Cellegy shall be obligated to pay to Ventiv all  outstanding  invoiced costs and
expenses  previously  included  in the  Product  Budget  incurred  by  Ventiv in
connection with sales and marketing activities with regard to the Product.

         (f) In addition to the amounts stated above, the outstanding  principal
amount  of  the  Commercialization  Funding  shall  accrue  supplemental  simple
interest  at  the  rate  of **  percent  (**  %) per  annum  (the  "Supplemental
Interest"),  until such time as the Commercialization Funding has been repaid in
full by  Cellegy  in  accordance  with the  provisions  of this  Section  6. The
Supplemental  Interest  shall be held by Cellegy  for the benefit of VFLLC until
the date that is ** of the termination or expiration of the Services  Agreement,
at which time  Cellegy  shall pay to VFLLC an amount  equal to the  Supplemental
Interest  adjusted  for the future  value of such amount at a rate of ** percent
(** %).

         (g)  Payments of all amounts due pursuant to Section 6(b) shall be made
by Cellegy no later than thirty (30)  calendar days after the end of every month
in which such amounts accrue; provided,  however, that no later than thirty (30)
calendar days  following the end of each three month period of the Initial Term,
the  Parties  shall  review  all of  such  payments  and  promptly  rectify  any
shortfalls  or  overpayments  that have  occurred  during such prior three month
period.  Each payment  pursuant to Section 6(b) shall be accompanied by a report
in the  form  attached  as  Exhibit  A to  the  Funding  Arrangement  containing
reasonably sufficient  information for the calculation of amounts due hereunder.
In the event  there is a dispute  regarding  the  amount due  hereunder,  upon a
Party's reasonable request,  each Party will provide copies of all corporate and
financial records or other documentation  reasonably relevant to the calculation
of such  amounts;  Each Party  agrees to  maintain  records  supporting  amounts
payable  hereunder  for a period of three (3) years  following the date that the
payment was made.  The relevant  portions of such records and accounts  shall be
available for  inspection and audit by each Party or its  representative  and at
such  Party's  expense  during  regular  business  hours and upon  fifteen  (15)
calendar days prior written notice.

-------------------------
*  Confidential  treatment  has been  requested  for  certain  portions  of this
   document  pursuant to an application for  confidential  treatment sent to the
   Securities  and  Exchange  Commission.  Such  portions  are omitted from this
   filing and filed separately with the Securities and Exchange Commission.

                                      -12-
<PAGE>

         (h) Following each anniversary of the Launch Date, Ventiv, upon written
notice to Cellegy given not later than ninety (90) days after such  anniversary,
shall have the right to retain an independent,  nationally recognized accounting
firm reasonably  acceptable to Cellegy (the "Auditor"),  to audit the records of
Cellegy to the extent they relate to the  computation  of Product  Revenues  and
Contribution  Margins for the 12-month  period ended on such  anniversary of the
Launch  Date.  Cellegy  shall make those  records  available  to the Auditor for
inspection during normal business hours at the locations  reasonably  determined
by Cellegy.  The cost of any such  Auditor  shall be borne by Ventiv;  provided,
however,  that Cellegy shall bear the cost of any such Auditor to the extent the
Auditor determines that Cellegy has underreported either the Product Revenues or
Contribution Margins for such 12-month period by more than ten percent (10)%.

         (i) Following  each  anniversary  of the Launch Date, and until Cellegy
has paid all Tranche I and Tranche II Amounts,  Cellegy,  upon written notice to
Ventiv given not later than ninety (90) days after such anniversary,  shall have
the right to retain an Auditor to audit the records of Ventiv to the extent they
relate to the computation of Product Marketing Expenses. Ventiv shall make those
records  available to the Auditor for inspection during normal business hours at
the  locations  reasonably  determined  by Ventiv.  The cost of any such Auditor
shall be borne by Cellegy; provided, however, that Ventiv shall bear the cost of
any  such  Auditor  to  the  extent  the  Auditor  determines  that  Ventiv  has
overreported  Product  Marketing  Expenses for such 12-month period by more than
ten percent (10)%.

SECTION 7 Transfer of Detail Team.

         (a) During the period from the one year  anniversary of the Launch Date
until the  expiration of the Initial Term,  Ventiv shall have the  obligation to
transfer  the  Product  Detail  Team to  Cellegy,  and  Cellegy  shall  have the
obligation to assume such Product  Detail Team  (including  all salary and bonus
obligations with respect thereto) (an "Early Conversion") as follows:

              (i) at the  written  request of  Cellegy,  and within  ninety (90)
calendar  days of the delivery of such  request,  if at the time of such request
the Product  Detail Team shall solely be marketing  those  products  owned by or
licensed to Cellegy; or

              (ii) at the written  request of Cellegy,  and within three hundred
sixty five (365)  calendar days of the delivery of such request,  if at the time
of such  request the Product  Detail Team shall be  marketing  any  products not
owned by or licensed to Cellegy.

              In the event of an Early Conversion,  the Parties shall revise the
terms of Section  6(b)(i)-(iii) hereof such that Ventiv shall receive,  monthly,
an amount equal to (i) monthly * of the Product for indications  approved by the
FDA prior to the date of such Early Conversion,  divided by (ii) the ratio of **
for the ** prior to ** to the total ** for the same ** prior ** period;

         the quotient of which shall be  multiplied  by (iii) the ratio of the *
for the ** period  immediately  preceding ** to the ** in the  applicable ** for
the Product Detail Team

-------------------------
*  Confidential  treatment  has been  requested  for  certain  portions  of this
   document  pursuant to an application for  confidential  treatment sent to the
   Securities  and  Exchange  Commission.  Such  portions  are omitted from this
   filing and filed separately with the Securities and Exchange Commission.

                                      -13-
<PAGE>

related to the Product, based on its proportional share of ** and any additional
** directly related to the Product in the applicable **;

         the  product of which shall be  multiplied  by (iv) the  applicable  **
percentage set forth in Sections ** ;

         the  product of which shall be reduced by (v) the average ** for the **
period immediately  preceding ** with respect to those ** that have been assumed
by Cellegy; and

         the difference of which shall be multiplied by (iv)(A) ** during the **
(or any  portion  of such ** ), if  applicable,  (B) ** , during  the ** (or any
portion of such ** ), if  applicable  and (C) ** , during the ** (or any portion
of such ** ), if applicable, and in each case the provisions of Section 6(b)(iv)
shall  survive.  An example  of this  calculation  is set forth on  Exhibit  III
attached hereto.

         (b) Upon the expiration of the Initial Term or the Renewal Term of this
Agreement, at the written request of Cellegy delivered no later than thirty (30)
calendar  days  thereafter,  Ventiv  shall be  obligated to transfer the Product
Detail Team to Cellegy,  and Cellegy  shall have the  obligation  to assume such
Product Detail Team (a "Mandatory  Conversion"),  such  Mandatory  Conversion to
occur  within  ninety (90)  calendar  days of the delivery of such  request.  In
connection  with any Mandatory  Conversion,  Cellegy shall have the right,  upon
thirty (30)  calendar  days written  notice to Ventiv,  to transfer all district
sales managers having  oversight over the Product Detail Team to Cellegy,  if at
the time of such notice the Product Detail Team shall solely be marketing  those
products owned by or licensed to Cellegy, and any such conversion shall occur no
earlier than six (6) months prior to the  expiration  of the Initial Term or the
Renewal Term, as applicable.

         (c) In the event of a termination of this Agreement by Cellegy pursuant
to Section 15(b)(ii), Section 15(c) or by Ventiv pursuant to Section 15(d)(i) or
Section 15(e),  and upon written notice by Cellegy  delivered within thirty (30)
Business  Days of such  termination,  Ventiv  shall be obligated to transfer the
Product  Detail Team to Cellegy,  and Cellegy shall have the right,  in its sole
discretion,  to  assume  all or part of such  Product  Detail  Team (a  "Default
Conversion," and together with the Early Conversion and Mandatory Conversion,  a
"Conversion").  In connection  with a Default  Conversion,  Cellegy shall notify
Ventiv as to the number of Product  Detail  Team  representatives  that shall be
transferred,  such number to be at the  discretion  of Cellegy and Cellegy shall
have the obligation to assume such number of representatives.

         (d) In the  event of (i) a  termination  of this  Agreement  by  Ventiv
pursuant to Section 15(b), Section 15(d)(ii) or Section 15(d)(iii) or by Cellegy
pursuant  to  Section  15(e) or (ii) a Call Event  pursuant  to (A) a failure of
Cellegy to obtain all required  Governmental  Body approvals for the manufacture
and sale of the Product on or prior to * , or (B) the Product receives  Impaired
Labeling,  Ventiv  shall  retain the  Product  Detail  Team and the  Parties may
negotiate the terms of a Conversion,  including the fee to be paid by Cellegy to
Ventiv in consideration of such Conversion.

-------------------------
*  Confidential  treatment  has been  requested  for  certain  portions  of this
   document  pursuant to an application for  confidential  treatment sent to the
   Securities  and  Exchange  Commission.  Such  portions  are omitted from this
   filing and filed separately with the Securities and Exchange Commission.

                                      -14-
<PAGE>

         (e) The costs of any  Conversion,  including all costs  associated with
salary, benefits,  relocation,  early lease terminations and severance packages,
shall be borne by Cellegy  and, in addition,  Cellegy  shall pay royalty fees to
Ventiv subsequent to such Conversion in an amount such that Ventiv will earn the
same operating  income,  on a per annum basis,  as though the Conversion had not
occurred.  Promptly upon the completion of any such Conversion, but in any event
no later than five (5) Business Days  following the completion  thereof,  Ventiv
shall deliver to Cellegy a written notice setting forth in reasonable detail all
of the costs and expenses  associated  with such  Conversion,  and Cellegy shall
deliver  to Ventiv  the full  amount of such  costs and  expenses  no later than
fifteen (15) Business Days of its receipt of notice thereof.

         (f) Prior to any Conversion,  neither Cellegy nor its Affiliates  shall
solicit  any  active  Product  Detail  Team  member to leave  Ventiv  and become
employed by Cellegy;  provided,  however, that this restriction shall not (i) be
construed  to  prevent or  restrict  Cellegy  from  discussing  and/or  offering
employment to a Product Detail Team member who  independently  contacted Cellegy
regarding possible employment opportunities.

SECTION 8 Renegotiation of Terms.

         (a) The Parties  agree to  renegotiate  the  provisions of Section 6 of
this  Agreement in good faith in the event Cellegy  shall  exercise its right to
cast a tie-breaking  vote in accordance with the terms and conditions of Section
5 hereof and such vote is  determined  in good faith by Ventiv,  pursuant to the
provisions  of  Section  5  hereof,  to have a  Material  Adverse  Impact on the
Economic Value, or in the event the Product receives any additional indications,
including hemorrhoid indications.

         (b) In the event of a Major Change in (i) Product  Marketing  Expenses,
which  results in a Material  Adverse  Impact on  Economic  Value or (ii) market
conditions  which results in a Material  Adverse Impact on Economic  Value,  the
Parties agree to renegotiate the provisions of Section 6 hereof in good faith in
order to ensure that Ventiv and VFLLC  continue  to achieve,  at a minimum,  the
Economic Value.

         (c) In the event the  Parties  are unable to  successfully  renegotiate
this  Agreement  within thirty (30)  calendar  days after a Party  appropriately
requests such renegotiation,  then such failure to successfully renegotiate this
Agreement  shall be  submitted  to  arbitration  in  accordance  with Section 16
hereof.

SECTION 9 Additional Products.

         (a) During the Term, in the event  Cellegy  determines to use a CSO for
future Cellegy products,  Ventiv shall have an exclusive right of first offer to
provide sales and marketing services with respect to additional Cellegy products
to be marketed in the Territory;  provided,  however, that such obligation shall
not be applicable to (i) those products set forth on Schedule D attached  hereto
and (ii) those  products  that do not require  third-Person  marketing  or sales
services.  In that regard,  Cellegy shall promptly notify Ventiv in writing when
any of such  products  has  reached a stage of  development  where such could be
marketed utilizing services substantially similar to the Services. Following the
receipt of such notice by Ventiv, Ventiv shall have thirty (30) calendar days to
deliver written notice to Cellegy of its desire to enter into a

                                      -15-
<PAGE>

services  arrangement for such  additional  products,  and Cellegy shall,  for a
sixty (60) calendar day period thereafter,  negotiate in good faith, exclusively
with  Ventiv,  with  respect  to the  terms  of a  services  agreement  for such
additional  products.  Following the  expiration of such sixty (60) calendar day
period, in the event the Parties are unable to reach an agreement, Cellegy shall
have the right to negotiate with any other Person with regard to such additional
products. Notwithstanding the foregoing, Cellegy shall be under no obligation to
enter into any agreement with Ventiv relating to such additional products.

         (b)  During  the  Term,   the  Parties   shall  use  their   respective
commercially  reasonable  efforts to identify  and propose the  introduction  of
Additional  Products  that the  Party has the  right to  market  (or  reasonably
expects to obtain the right to market) to the Product Detail Team, to the extent
the  Product  Detail  Team has excess  capacity  to market  any such  Additional
Products.  In the event a Party (the "Introducing  Party") shall propose that an
Additional Product be introduced to the Product Detail Team for marketing in the
Territory,  such  proposal  shall  be  brought  to the  Steering  Committee  for
determination  as to whether the Product  Detail  Team shall  perform  marketing
services for such Additional Product. If the Steering Committee shall accept the
Additional  Product for marketing by the Product  Detail Team, the Parties shall
promptly  negotiate and agree upon the revenue sharing  arrangement with respect
to such Additional Product; provided, however, that the final decision as to the
acceptability of such Additional Product shall rest with Cellegy.

         (c) In the event that (i) Ventiv shall propose the  introduction of two
(2) or more  Additional  Products  within any six (6) month  period of the Term,
(ii) the Steering Committee shall determine that such Additional  Products shall
not be  marketed  by the Product  Detail  Team and (iii)  Cellegy  shall fail to
introduce any Additional Products in place of those Additional Products proposed
by Ventiv,  such  determination  shall be brought to the  attention of the Chief
Executive  Officers of each of the Parties.  The Chief Executive  Officers shall
meet as promptly as practicable thereafter to discuss whether and to what extent
Ventiv might be  compensated  for the potential  loss of any profits due to such
rejection by the Steering Committee or Cellegy, if appropriate. It is understood
that this  paragraph,  (c) shall not be  construed  to mean that  Ventiv will be
entitled to any compensation based on the foregoing.

SECTION 10 Costs.  Except as otherwise provided herein, the Parties hereto shall
each be  responsible  for  their  own costs  and  expenses  associated  with the
Agreement and the transactions contemplated hereby.

SECTION 11 Press Release. The parties shall mutually agree on the initial press
release  relating to this Agreement and the transactions  contemplated  thereby,
and  until  after  the  initial  press  release,   no  press  releases,   public
announcements,  communications  or other  promotional  materials related to this
Agreement  or the  transactions  contemplated  hereby  shall  be made or sent by
either Party without the prior written consent of the other Party, which consent
shall not be  unreasonably  withheld  or delayed,  unless such Party  reasonably
concludes that such disclosure may be required by applicable Law.

                                      -16-
<PAGE>

SECTION 12 Confidentiality.

         (a) Confidential Information. Each Party that receives any Confidential
Information (as defined below) (the  "Recipient") from the disclosing Party (the
"Disclosing  Party")  agrees  that during the term of this  Agreement  and for a
period of three (3) years  thereafter  it will not disclose to any third Person,
any Confidential  Information of the Disclosing  Party.  The term  "Confidential
Information"  shall  mean  all  non-public  information,   whether  business  or
technical in nature identified as being confidential  (including but not limited
to, trade secrets, proprietary information, know-how and information relating to
such Party's technology,  personnel,  customers, business plans, promotional and
marketing  activities,  finances and other business affairs of such Party), that
either Party, or such Party's agents or affiliates,  provides to the other Party
or its representatives or affiliates, or is jointly developed by the Parties. If
either Party has any questions as to what comprises Confidential  Information of
the other Party,  it agrees to consult  with such other  Party.  Nothing in this
section shall prohibit or limit the Recipient's  disclosure of information,  and
such information shall not constitute  Confidential  Information,  if (i) at the
time of disclosure  hereunder  such  information  is generally  available to the
public;  (ii) after  disclosure  hereunder such  information  becomes  generally
available  to the  public,  except  through  breach  of  this  Agreement  by the
Recipient;  (iii) the  Recipient can  demonstrate  such  information  was in the
Recipient's  lawful possession prior to the time of disclosure by the Disclosing
Party  as  requested  and was not  acquired  from  the  Disclosing  Party or its
affiliates; (iv) the information becomes available to the Recipient from a third
Person  that  is not  known  by the  Recipient  to be  legally  prohibited  from
disclosing  such  information  or  breaching  a  contractual  obligation  to the
Disclosing Party; (v) such information is developed at any time by the Recipient
independent of Confidential Information disclosed by the Disclosing Party to the
Recipient;  or (vi) such  information  must be disclosed  pursuant to applicable
federal,  state or local law,  regulation,  court order or other legal  process,
provided the  Recipient  has notified the  Disclosing  Party within a reasonable
time prior to such required  disclosure and, to the extent reasonably  possible,
has given the Disclosing  Party an  opportunity to contest or seek  confidential
treatment  of such  required  disclosure.  Each  Party  shall  ensure  that  its
employees  and  agents  are  made  aware  of  the  confidential  status  of  the
Confidential  Information,  and that its  employees  and agents  comply with all
relevant provisions of this Section 12.

         (b) Return of  Confidential  Information;  Disclosure.  Upon request or
upon the  expiration or termination  of this  Agreement,  each Party will either
destroy or return to the other Party all Confidential  Information including all
copies of any Confidential Information and any written materials derived from or
conclusions  based  upon any  Confidential  Information,  in its  possession  or
control. Neither Party will disclose,  furnish, or use in any way whatsoever any
Confidential  Information to which it becomes privy,  except as may be necessary
for that Party to perform  its  obligations  pursuant to this  Agreement  or for
which the prior written consent of the other Party has been obtained. Each Party
shall be permitted  to make such  disclosures  to the public or to  governmental
agencies as its counsel shall deem necessary to maintain  compliance with and to
prevent violation of applicable federal or state securities laws,  provided each
Party shall use reasonable best efforts to obtain confidential  treatment of the
material economic terms hereof.

                                      -17-
<PAGE>

SECTION 13 Representations and Warranties.

         (a) Cellegy represents and warrants to Ventiv as follows:

              (i) Existence,  Good Standing and Power.  Cellegy is a corporation
validly existing and in good standing under the laws of the State of California,
and has all requisite  corporate  power and authority to own,  lease and operate
its  properties.  Cellegy has all  requisite  corporate  power and  authority to
conduct its  business as presently  conducted  and has all  requisite  corporate
power  and  authority  to  execute  and  deliver  this  Agreement  and the other
documents  and  instruments  required  to be  executed  and  delivered  by  this
Agreement and to perform its obligations hereunder and thereunder.

              (ii)  Authority.  The execution,  delivery and performance of this
Agreement  and the  other  agreements  contemplated  hereby to be  executed  and
delivered  by  Cellegy  and the  consummation  by  Cellegy  of the  transactions
contemplated  hereby and  thereby  have been duly  authorized  by all  necessary
corporate action on the part of Cellegy.

              (iii) Execution and Binding  Effect.  This Agreement has been duly
and validly executed and delivered by Cellegy and  constitutes,  and each of the
other  agreements to be executed and delivered by Cellegy  pursuant  hereto upon
its execution and delivery by Cellegy  shall  constitute  (assuming in each case
the due and valid  authorization,  execution  and delivery  thereof by the other
parties thereto),  a valid and legally binding obligation of Cellegy enforceable
against Cellegy in accordance with its respective terms.

              (iv) No Violation.  The  execution,  delivery and  performance  by
Cellegy of this Agreement and the transactions  contemplated  hereby, do not and
will not  conflict  with or result in,  with or without  the giving of notice or
lapse of time or both,  any violation of or  constitute a breach or default,  or
give rise to any right of  acceleration,  payment,  amendment,  cancellation  or
termination, under (i) the articles of incorporation or bylaws of Cellegy or any
resolution adopted by the board of directors of Cellegy and not rescinded,  (ii)
any material  agreement or other  instrument  to which  Cellegy is a party or by
which  Cellegy  or any of its  properties  or  assets  is  bound  or  (iii)  any
applicable  Law of any  Governmental  Body or any rule or policy of any industry
association of competent jurisdiction, to which Cellegy is bound or subject.

              (v) Third Party Approvals. The execution, delivery and performance
by Cellegy of this  Agreement and the  transactions  contemplated  hereby do not
require (i) any material consents,  waivers,  authorizations or approvals of, or
filings with, any third Persons, or (ii) any consents,  waivers,  authorizations
or approvals of, or filings with, any Governmental Body, in each case which have
not previously been obtained by Cellegy.

              (vi) Litigation.  There are no judicial,  administrative  or other
actions,  proceedings  or  claims  pending  or  to  the  knowledge  of  Cellegy,
threatened,  that question the validity of this Agreement or any action taken or
to be taken by Cellegy in connection  with this  Agreement or that, if adversely
determined,  would have a material adverse effect on Cellegy' ability to conduct
its  business in the ordinary  course of business or to perform its  obligations
under this Agreement.

                                      -18-
<PAGE>

         (b) Ventiv represents and warrants to Cellegy as follows:

              (i)  Existence,  Good Standing and Power.  Ventiv is a corporation
validly  existing and in good standing  under the laws of the State of Delaware,
and has all requisite  corporate  power and authority to own,  lease and operate
its  properties.  Ventiv has all  requisite  corporate  power and  authority  to
conduct its  business as presently  conducted  and has all  requisite  corporate
power  and  authority  to  execute  and  deliver  this  Agreement  and the other
documents  and  instruments  required  to be  executed  and  delivered  by  this
Agreement and to perform its obligations hereunder and thereunder.

              (ii)  Authority.  The execution,  delivery and performance of this
Agreement  and the  other  agreements  contemplated  hereby to be  executed  and
delivered  by  Ventiv  and  the  consummation  by  Ventiv  of  the  transactions
contemplated  hereby and  thereby  have been duly  authorized  by all  necessary
corporate action on the part of Ventiv.

              (iii) Execution and Binding  Effect.  This Agreement has been duly
and validly  executed and delivered by Ventiv and  constitutes,  and each of the
other agreements to be executed and delivered by Ventiv pursuant hereto upon its
execution and delivery by Ventiv shall constitute (assuming in each case the due
and valid  authorization,  execution  and  delivery  thereof by the other  Party
thereto), a valid and legally binding obligation of Ventiv,  enforceable against
Ventiv in accordance with its respective terms.

              (iv) No Violation.  The  execution,  delivery and  performance  by
Ventiv of this Agreement and the transactions  contemplated  hereby,  do not and
will not  conflict  with or result in,  with or without  the giving of notice or
lapse of time or both,  any violation of or  constitute a breach or default,  or
give rise to any right of  acceleration,  payment,  amendment,  cancellation  or
termination,  under (i) the certificate of  incorporation or bylaws of Ventiv or
any  resolution  adopted by the board of directors of Ventiv and not  rescinded,
(ii) any material agreement or other instrument to which Ventiv is a party or by
which Ventiv or any of its properties or assets is bound or (iii) any applicable
Law or regulation of any Governmental Body or any rule or policy of any industry
association of competent jurisdiction, to which Ventiv is bound or subject.

              (v) Third Party Approvals. The execution, delivery and performance
by Ventiv of this  Agreement  and the  transactions  contemplated  hereby do not
require (i) any material consents,  waivers,  authorizations or approvals of, or
filings with, any third Persons, or (ii) any consents,  waivers,  authorizations
or approvals of, or filings with, any Governmental Body, in each case which have
not previously been obtained by Ventiv.

              (vi) Litigation.  There are no judicial,  administrative  or other
actions,   proceedings  or  claims  pending  or  to  the  knowledge  of  Ventiv,
threatened,  that question the validity of this Agreement or any action taken or
to be taken by Ventiv in  connection  with this  Agreement or that, if adversely
determined,  would have a material  adverse effect on Ventiv' ability to conduct
its  business in the ordinary  course of business or to perform its  obligations
under this Agreement.

                                      -19-

<PAGE>

         (c) In  addition  to the  other  covenants  of  the  Parties  contained
elsewhere herein, the Parties covenant and agree as follows:

              (i) No  Restrictions.  A Party  shall  not,  and  shall  cause its
Affiliates  not to, become subject to any  contractual  or other  obligations or
restrictions  during the Term which will prohibit that Party from  providing the
Services  or  otherwise  fulfilling  the  obligations  to the other Party to the
extent contemplated hereby.

              (ii)  Other  Actions.   Each  Party  shall  use  its  commercially
reasonable  efforts to take all actions  necessary or  appropriate to consummate
the transactions contemplated by this Agreement.

              (iii)  Additional  Agreements.  In  case  at any  time  after  the
Effective  Date any further  action is  necessary  or desirable to carry out the
purposes of this  Agreement,  the proper  officers  and  directors of each Party
shall take all such necessary or desirable actions.

              (iv)   Representations   and   Warranties.   Neither  Party  shall
affirmatively  take any action that would cause any of the  representations  and
warranties  made  by it in this  Agreement  not to be true  and  correct  in all
material  respects at any time during the Term and,  without  limiting the other
Party's  rights or remedies  hereunder,  each Party shall take all  commercially
reasonable action to cause its representations and warranties to remain true and
correct in all material respects at all times during the Term.

              (v) Cooperation. During the Term, the Parties shall cooperate with
each other and take all reasonable  actions  necessary or appropriate to further
the purposes of this Agreement.

         (d) EXCEPT AS SPECIFICALLY  PROVIDED IN THIS  AGREEMENT,  NEITHER PARTY
MAKES  ANY  REPRESENTATIONS  OR  WARRANTIES,  EXPRESS  OR  IMPLIED,  AS  TO  THE
TRANSACTIONS CONTEMPLATED HEREBY.

SECTION 14 Indemnification; Limitation of Liability.

         (a) Cellegy shall defend,  indemnify and hold Ventiv and its employees,
agents, officers,  directors and Affiliates (a "Ventiv Party") harmless from and
against any and all losses,  liabilities,  obligations,  claims,  damages,  fees
(including,  without  limitation,  attorneys fees),  and expenses  incurred by a
Ventiv Party that are claimed by or become  payable to any third Person and that
result  from or  arise  in  connection  with  (i) the  breach  of any  covenant,
representation  or warranty of Cellegy  contained  in this  Agreement,  (ii) the
manufacturing, sale or distribution of the Product by Cellegy or any licensee or
affiliate thereof, including any claim of patent infringement, (iii) any product
liability  claim related to the Product,  including the use by any Person of any
Product that was manufactured, sold or distributed by Cellegy or any licensee or
Affiliate thereof,  (iv) any contamination of or defect in the Product;  and (v)
negligence or willful misconduct of Cellegy, or any member of the Product Detail
Team subsequent to a Conversion.

         (b) Ventiv shall defend,  indemnify and hold Cellegy and its employees,
agents, officers, directors and Affiliates (a "Cellegy Party") harmless from and
against any and all losses,  liabilities,  obligations,  claims,  damages,  fees
(including, without limitation, attorneys

                                      -20-
<PAGE>

fees) and  expenses  brought  against or  incurred  by a Cellegy  Party that are
claimed by or become  payable  to a third  Person  resulting  from or arising in
connection  with (i) the  breach by Ventiv of any  covenant,  representation  or
warranty  of Ventiv  contained  in this  Agreement  this  Agreement  and/or (ii)
negligence or willful  misconduct by Ventiv, or any member of the Product Detail
Team prior to a Conversion.

         (c) Any Party claiming  indemnification  hereunder  (the  "Indemnitee")
shall notify the indemnifying  Party (the  "Indemnitor") in writing promptly and
in any event within thirty (30) calendar days after receiving  written notice of
the  commencement  of any legal  action or of any  claims or  threatened  claims
against such Indemnitee in respect of which  indemnification  may be sought. The
Indemnitee's  failure to give,  or  tardiness  in giving,  such notice shall not
relieve the Indemnitor from any liability  hereunder  except to the extent it is
actually  prejudiced  hereby. If any such claim or legal action shall be made or
brought  against an Indemnitee and such  Indemnitee  shall notify the Indemnitor
thereof, the Indemnitor may, or if so requested by such Indemnitee, shall assume
the defense  thereof,  without any reservation of rights,  and after notice from
the Indemnitor to such Indemnitee of an election to assume the defense  thereof.
No Indemnitee shall settle any indemnified  claim as to which the Indemnitor has
not been afforded the opportunity to assume the defense without the Indemnitor's
approval,  which approval  shall not be  unreasonably  withheld or delayed.  The
Indemnitor shall control settlement of all claims as to which it has assumed the
defense,  provided,   however,  that  the  Indemnitor  shall  not  conclude  any
settlement  without the prior approval of the  Indemnitee,  which approval shall
not be unreasonably withheld or delayed. The Indemnitee shall provide reasonable
assistance to the Indemnitor  when the  indemnifying  party so requests,  at the
indemnifying party's expense, in connection with such legal action or claim.

         (d) In any  case  in  which  the  Indemnitor  assumes  the  defense  or
settlement of any suit,  action,  claim or proceeding,  the Indemnitee  shall be
entitled  to  continue  to  participate  at its own cost in any such  action  or
proceeding  or in  any  negotiations  or  proceedings  to  settle  or  otherwise
eliminate any claim for which indemnification is being sought and shall have the
right to employ its own counsel in any such case,  but the fees and  expenses of
such  counsel  shall  be at the  expense  of  such  Indemnitee  unless  (i)  the
employment  of such  counsel  shall  have  been  authorized  in  writing  by the
Indemnitor  in  connection  with the  defense  of such  suit,  action,  claim or
proceeding,  (ii) the  Indemnitor  shall not have employed  counsel  (reasonably
satisfactory  to the  Indemnitee)  to take charge of the defense of such action,
suit, claim or proceeding  within 30 calendar days (or such shorter period as is
reasonably  necessary  to avoid  default  for failure to timely  respond)  after
notice of commencement of the action,  suit, claim or proceeding,  or (iii) such
Indemnitee shall have reasonably  concluded that there may be defenses available
to it  which  are  different  from  or  additional  to  those  available  to the
Indemnitor which, if the Indemnitor and the Indemnitee were to be represented by
the same  counsel,  would  reasonably  be  expected  to result in a conflict  of
interest  for such  counsel  or  materially  prejudice  the  prosecution  of the
defenses available to such Indemnitee. If any of the events specified in clauses
(ii) or (iii) of the preceding  sentence shall have occurred or shall  otherwise
be applicable,  then the reasonable  fees and expenses of one counsel or firm of
counsel selected by the Indemnitee shall be borne by the Indemnitor. In no event
shall an  Indemnitor  be liable to any  Indemnitee  for the cost of employing or
using in-house legal counsel  regardless of whether such  Indemnitor has, or has
not, assumed the defense or settlement of such action, proceeding or claim.

                                      -21-
<PAGE>

         (e)  Notwithstanding,  any other  provision  in this  Agreement  to the
contrary, the indemnities set forth in this Section 14 shall survive termination
of this Agreement.

         (f) EXCEPT FOR LIABILITY  UNDER  SECTIONS  14(a) AND (b) HEREOF,  IN NO
EVENT SHALL EITHER PARTY BE LIABLE FOR LOST  PROFITS OR ANY  INDIRECT,  SPECIAL,
INCIDENTAL, OR CONSEQUENTIAL DAMAGES OF ANY KIND ARISING OUT OF OR IN CONNECTION
WITH THIS  AGREEMENT,  WHETHER IN AN ACTION BASED ON CONTRACT,  TORT  (INCLUDING
NEGLIGENCE) OR ANY OTHER LEGAL THEORY, EVEN IF THE PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.

SECTION 15 Term and Termination.

         (a) Term.  This  Agreement  shall commence on the date hereof and shall
continue in force until the fourth  anniversary of the Launch Date (the "Initial
Term"), unless earlier terminated according to the terms of this Agreement. This
Agreement  may be extended  for  additional  one (1) year  periods upon the same
terms and  conditions  hereof upon the mutual consent of the Parties hereto (any
such one-year  period, a "Renewal Term", and together with the Initial Term, the
"Term").

         (b)  Termination  By Any Party.  This  Agreement  may be  terminated by
either Party hereto immediately by written notice to the other Party:

              (i) if  the  other  Party  ceases  to do  business,  or  otherwise
terminates substantially all of its operations;

              (ii) if the other Party materially  breaches any provision of this
Agreement  and fails to cure such breach  within  thirty (30)  calendar  days of
written notice describing such breach; or

              (iii) if the other Party becomes  insolvent,  or seeks  protection
under  any  bankruptcy,   receivership,   trust  deed,  creditor's   arrangement
composition or comparable  proceeding,  or if any such  proceeding is instituted
against such Party.

         (c) Termination by Cellegy.  Cellegy will have a right to terminate the
Services Agreement,  upon ninety (90) calendar days prior written notice, in the
event Ventiv shall fail to meet certain  operational  performance based metrics,
as such metrics are set forth in Schedule B attached  hereto and such failure is
not cured  within  thirty  (30)  calendar  days after the date such  metrics are
required to be met.

         (d) Termination by Ventiv. Ventiv will have the right to terminate this
Agreement:

              (i) at any time after the first anniversary of the Launch Date, in
the event that there is a cumulative  Contribution  Margin of less than zero for
any three  (3)  calendar  month  period of the  Term,  or a  cumulative  Product
Operating Loss for any consecutive  three (3) calendar month period of the Term,
either of which is reasonably expected to result in a Material

                                      -22-
<PAGE>

Adverse  Impact on the Economic  Value,  such  termination  to be effective upon
ninety (90) calendar days prior written notice by Ventiv;

              (ii) upon the  occurrence  of a Call Event as  provided in Section
6(d) hereof; or

              (iii)  upon the  occurrence  of a Change  of  Control  of  Cellegy
pursuant to a transaction with a Ventiv Competitor.

         (e) Additional  Termination  Right. This Agreement may be terminated by
either Party hereto,  upon six (6) months prior written notice if cumulative Net
Sales do not exceed (i) * percent (**%) of cumulative projected Net Sales of $**
for the first ** months  following  the Launch Date or (ii) ** percent  (**%) of
cumulative Net Sales, as projected in the approved annual Product Budget for the
** period  following ** of the Launch Date or (iii) a percentage  of  cumulative
Net Sales,  as projected in the approved annual Product Budget for the ** period
following ** of the Launch Date, or any  subsequent ** period  thereafter,  such
percentage to be agreed upon by the Steering Committee  simultaneously  with the
approval of ** .

         (f) Effect of Termination. Upon termination, each Party will destroy or
return to the other Party,  any of the other Party's  Confidential  Information,
except as otherwise set forth in Section 6(d). Following the termination of this
Agreement, all obligations of the Parties hereto shall cease; provided, however,
that all obligations,  if any,  relating to the revenue sharing  obligations set
forth in Section 6(b)(iv) hereof shall continue as set forth therein.

SECTION 16 Governing Law; Disputes.

         (a) This  Agreement  shall be  governed by the laws of the State of New
York without regard to its conflicts of laws rules.

         (b) All  controversies  or claims  arising  out of or  relating to this
Agreement  or the  subject  matter  hereof,  other (i) than third  party  claims
governed by the procedures  set forth in Section 14 and (ii) Steering  Committee
deadlocks  ("Claims"),  shall first be  submitted to the Product  Committee  for
resolution.  If the Product  Committee  is unable to resolve  any Claims  within
three (3) calendar days of submission (or such other period as determined by the
Product  Committee),  the Claim shall be submitted to the Steering Committee for
resolution.  If the  Steering  Committee  is unable to resolve any Claim  within
three (3) calendar days of submission (or such other period as determined by the
Steering  Committee),  or if the Parties are unable to renegotiate  the terms of
this  Agreement  as  provided  herein,  subject to the  procedures  set forth in
Section 5(c) hereof, such Claim or failure to renegotiate shall be automatically
submitted to arbitration.

         (c) There shall be three (3)  arbitrators.  Each Party shall select one
(1)  arbitrator  and the two  arbitrators  selected by each of the Parties shall
select a third arbitrator.  The arbitrators shall be selected within thirty (30)
calendar  days after  submission  for  arbitration.  Such  arbitrators  shall be
accredited  and shall not be  Affiliates  of either  Party.  In the event of the
failure of the two arbitrators to agree as to the third arbitrator within twenty
(20) Business Days after the  appointment  of the last of said two  arbitrators,
the third arbitrator shall be appointed by

-------------------------
*  Confidential  treatment  has been  requested  for  certain  portions  of this
   document  pursuant to an application for  confidential  treatment sent to the
   Securities  and  Exchange  Commission.  Such  portions  are omitted from this
   filing and filed separately with the Securities and Exchange Commission.

                                      -23-
<PAGE>

the  American   Arbitration   Association  within  fifteen  (15)  Business  Days
thereafter.  If a Party does not  appoint an  arbitrator  who has  consented  to
participate  within  thirty  (30) days after  submission  for  arbitration,  the
American  Arbitration  Association  shall  make the  relevant  appointment.  The
arbitration  tribunal  shall conduct the  arbitration  in Chicago,  Illinois and
apply such  procedural  rules as the  arbitrators  determine  are  necessary  or
appropriate in the  circumstances and shall specify the same at the commencement
of the  arbitration  and the  substantive law set forth in Section 16(a) of this
Agreement.

         (d) The decision of the arbitrators shall be final and binding upon all
Parties,  and not subject to any  appeal,  to the fullest  extent  permitted  by
applicable Law, and shall deal with the question of costs of arbitration and all
matters related  thereto.  The arbitrators may in their  discretion award costs,
including  legal fees, to the  prevailing  party.  Decisions of the  arbitrators
shall be in writing, and shall set forth the reasons therefor and, to the extent
applicable,  the manner in which the amount of the award was calculated,  or, to
the extent the dispute is related to a failure of the Parties to  renegotiate as
provided  herein,  then  the  basis  for  the  arbitrators'  choice  as  to  the
appropriate terms of renegotiation.

         (e) Judgment upon the award rendered by the  arbitration may be entered
in any court having jurisdiction, or application may be made to such court for a
judicial recognition of the award or any order of enforcement thereof.

         (f) Any monetary award arising from the arbitration  proceedings  shall
include  interest  from the date of any  damages  incurred  for  breach or other
violation of this Agreement and from the date of the award,  until paid in full,
at a rate to be fixed by the arbitrators.  Any costs, fees,  including,  without
limitation, attorneys' fees, or taxes incident to enforcing an arbitral decision
rendered  in  accordance  with this  Section  16 shall be  charged  against  the
non-prevailing party.

SECTION 17  Successors  and Assigns.  This  Agreement  shall be binding upon and
inure to the  benefit  of and be  enforceable  by the  Parties  hereto and their
respective successors and assigns. No Party may assign its rights or obligations
under this  Agreement  or the  Funding  Arrangement  without  the prior  written
consent of the other Party hereto;  provided,  however, that no consent shall be
required in connection with a Change of Control of a Party or the sale of all or
substantially  all of the  assets  of a  Party,  in each  case,  so long as such
Party's  successor  or assign  agrees to be, or by operation of law is, bound by
the terms of this Agreement and;  provided,  further,  that any purchaser of the
ownership  rights to the  Product or all or  substantially  all of the assets of
Cellegy,  or any  successor  to Cellegy by merger shall be required to expressly
assume the obligations under this Agreement or the Funding  Arrangement prior to
the consummation of any such transaction.  Any purported assignment in violation
hereof shall be null and void and have no force or effect.

SECTION 18 Notices.  All notices  hereunder  shall be in writing  (including  by
e-mail) and shall be delivered  in person or by  registered  or certified  mail,
return receipt requested,  or sent by a nationally recognized overnight delivery
service  to the  applicable  Party at its  address  set forth  below (or at such
different  address as may be designated  by such Party by written  notice to the
other Party). All notices by mail shall be deemed delivered upon receipt.

                                      -24-
<PAGE>

         If to Ventiv of VFLLC:

         Ventiv Health, Inc.
         1114 Avenue of the Americas
         New York, New York 10036
         Attention:  Mr. Doug Langeland

         With a copy to:

         Weil, Gotshal & Manges, LLP
         767 Fifth Avenue
         New York, New York  10153
         Attention: S. Wade Angus, Esq.
                    Marita Makinen, Esq.

         If to Cellegy:

         Cellegy Pharmaceuticals, Inc.
         349 Oyster Point Boulevard
         Suite 200
         South San Francisco, California 94080
         Attention: Mr. John Chandler
                    Vice President, Business Development

         With a copy to:

         Fenwick & West  LLP
         815 Connecticut Avenue N.W.
         Suite 200
         Washington, D.C.20006
         Attention:  C. Kevin Kelso, Esq.

SECTION  19  Relationship  of the  Parties.  Each of  Cellegy  and  Ventiv is an
independent contractor in the performance of services under this Agreement,  and
shall not be  considered  to be or  permitted  to be an agent,  employee,  joint
venturer  or partner of the other  Party.  Each of Cellegy  and Ventiv  shall be
solely responsible for the compensation and taxes of its employees and the other
Party shall have no  obligations  thereto.  Each Party shall at all times during
the term of this Agreement maintain such supervision, direction and control over
its  employees as is consistent  with and necessary to preserve its  independent
contractor status. Nothing herein shall be construed to create a relationship of
employer and employee, joint venture, partnership or association between Cellegy
and Ventiv,  and the Parties agree (except to the extent  otherwise  required by
law) to treat  Ventiv  as an  independent  contractor  performing  services  for
Cellegy (and not as a partner of Cellegy) for all income tax purposes. Except as
expressly provided herein, neither Party nor any of its employees shall have the
right,  power, or authority to bind or expend funds on behalf of the other Party
without  the  express  authorization  of  the  other  Party  or  to  create  any
obligations, express or implied, on behalf of the other Party.

                                      -25-
<PAGE>

SECTION 20 Force  Majeure.  Each Party shall have no obligation to perform under
this  Agreement  to the  extent  and for the  period of time that such  Party is
prevented from doing so by reason of any cause beyond its reasonable control and
without the  negligence  of the Party with respect to whose  obligations  such a
delay in performance or failure in performance  has occurred.  Such causes shall
include,   without   limitations,   acts  of  God,  fire,   flood,   earthquake,
transportation  disruption,  labor dispute,  war  insurrection,  or other causes
beyond the reasonable control of such Party (collectively  referred to herein as
"force  majeure").  The Party affected by such an event of force  majeure,  upon
giving  prompt  notice to the other  Party,  shall be excused  from  performance
hereunder  on a  day-to-day  basis to the extent of such  prevention,  provided,
however, that the Party so affected shall use commercially reasonable efforts to
avoid or remove such cause of  nonperformance  and to minimize the  consequences
thereof and both Parties shall resume performance  hereunder  forthwith upon the
removal of such causes.

SECTION 21 Survival.  The provisions of Sections  6(b)(iv),  6(f), 7(c), 10, 11,
12, 14, 16 and this Section 21 shall survive the  termination of this Agreement,
and the  termination of this Agreement  shall not terminate any obligation  with
respect  to any fees,  costs or other  amounts  due and owing but  unpaid to one
Party from the other Party or any causes of action arising prior to termination.

SECTION 22  Severability.  If any provision of this Agreement is held invalid or
unenforceable by a Governmental  Body of competent  jurisdiction for any reason,
the invalidity shall not affect the validity of the remaining provisions of this
Agreement,  and the Parties shall substitute for the invalid  provisions a valid
provision which most closely  approximates the intent and economic effect of the
invalid provision.

SECTION 23 Entire Agreement; Waiver; Counterparts.  This Agreement including the
Exhibits attached hereto sets forth all of the promises, agreements,  conditions
and understandings  between the Parties respecting the subject matter hereof and
supersedes all  negotiations,  conversations,  discussions,  correspondence  and
agreements between the Parties concerning the subject matter hereof,  including,
without  limitation,  the  Memorandum of Terms entered into between  Cellegy and
Ventiv,  dated July 12, 2001.  This  Agreement  may not be modified  except by a
writing signed by authorized  representatives of both Parties to this Agreement.
No waiver of any term or provision of this Agreement or right hereunder shall be
valid unless the waiver is in writing and signed by the waiving Party. No waiver
or failure to enforce any provision or right  hereunder  shall be deemed to be a
waiver of the same or any other  provision or right in any other  instance,  nor
shall the waiver by either Party of a breach of any provision hereof be taken or
held to be a waiver of any succeeding breach of such provision or as a waiver of
the  provision  itself.  This  Agreement  may  be  executed  in  any  number  of
counterparts,  each of  which  shall  be  deemed  an  original  but all of which
together shall constitute one and the same instrument.

SECTION 24 Headings.  The  headings of this  Agreement  are intended  solely for
convenience of reference and shall be given no effect in the  interpretation  or
construction of this Agreement.

SECTION 25 Equitable  Relief.  The Parties  hereto  acknowledge  and agree that,
except as otherwise  specifically  provided  herein,  it will be  impossible  to
measure in money the damage that would be suffered if any Party  hereto fails to
comply with any of the  restrictions  or obligations  imposed in this Agreement,
and that the aggrieved Party will not have an adequate

                                      -26-
<PAGE>

remedy at Law. It is therefore agreed that such Person shall be entitled without
posting a bond or other  security  to seek  injunctive  relief to  enforce  such
restrictions  or  obligations,  and that in the event that any action  should be
brought in equity to enforce any of the provisions of this  Agreement,  no party
shall raise the defense that there is an adequate remedy at Law.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      -27-
<PAGE>

         IN WITNESS  WHEREOF,  the Parties have  executed  this  Agreement to be
effective as of the date first written above.

                                       CELLEGY PHARMACEUTICALS, INC.

                                       By:_________________________________

                                       Name:_______________________________

                                       Title:______________________________

                                       VENTIV HEALTH, INC.

                                       By:_________________________________

                                       Name:_______________________________

                                       Title:______________________________

                                       VIS FINANCIAL LLC

                                       By:_________________________________

                                       Name:_______________________________

                                       Title:______________________________

                                      -28-
<PAGE>

                                   Schedule A

                                    Services

Pre-Launch

Co-Product Management

Recruitment and Training 75 detailing representatives

Market Research
Demand Forecast & Product Utilization
Key Opinion Leaders

Resource Optimization

Tactical Plan Development prior to product launch

A launch meeting

*

Development of product website before or immediately after launch

At Launch and/or Annually

Co-Product Management

Deployment and Management of 75 detailing representatives

Tactical Execution & Call Planning
Monthly/Quarterly Cycle

Annual Performance reporting

Market Research
Product Utilization & Tracking
At least ** per year
Message Effectiveness/Adoption Analysis

Annual Promotion Response Measurement  Analysis
Utilize Market Research and Secondary Data Source Analysis

Annual Resource Optimization Analysis

Call Plan and Alignment Revisions, as needed

-------------------------
*  Confidential  treatment  has been  requested  for  certain  portions  of this
   document  pursuant to an application for  confidential  treatment sent to the
   Securities  and  Exchange  Commission.  Such  portions  are omitted from this
   filing and filed separately with the Securities and Exchange Commission.

                                      -29-
<PAGE>

* advisory panel meeting

** clinical update meeting

**

Updates to ** as needed (approximately every ** )

** updates to formulary kit, as necessary

** maintenance of product website

-------------------------
*  Confidential  treatment  has been  requested  for  certain  portions  of this
   document  pursuant to an application for  confidential  treatment sent to the
   Securities  and  Exchange  Commission.  Such  portions  are omitted from this
   filing and filed separately with the Securities and Exchange Commission.

                                      -30-
<PAGE>

                                   Schedule B
                       **Operational Performance Metrics*

Recruiting:                                  75  reps  recruited,  screened  and
                                             employed  on  profile  by  National
                                             Training Meeting.

Annualized *:                                **

Physician   Groups  (%   represents          Colorectal surgeons (~**%), General
approximate  percent  of total time          Surgeons                    (~**%),
spent with the respective physician          Gastroenterologists  (~**%), OB/GYN
specialty):                                  (~**%), GP/FP/Internist (~**%)

Targets:  ** of physicians within a          Colorectal: **/**
segment  we are  targeting  / ** of
total  potential  in  the ** and **          General surgeons: **/**
that  the  **  of  the   physicians
represents:                                  Gastroenterologists: **/**

                                             OB/GYN: **/**

                                             GP/FP/Internist: **/**

Approximate   number  of   **/year/          **/year during the ** of launch, **
targeted physician:                          /year during the next **

Calls on Targeted Physicians:                **  of  all   calls   to   targeted
                                             physicians

Call to Pharmacies:                          ** calls / ** /**.

*    Subject to change based on resource optimization analysis and tactical plan
     development, as approved by the Product Committee.

-------------------------
*  Confidential  treatment  has been  requested  for  certain  portions  of this
   document  pursuant to an application for  confidential  treatment sent to the
   Securities  and  Exchange  Commission.  Such  portions  are omitted from this
   filing and filed separately with the Securities and Exchange Commission.

                                      -31-
<PAGE>

                                   Schedule C

                               Ventiv Competitors

Contract Sales Organizations

*

Other

**

-------------------------
*  Confidential  treatment  has been  requested  for  certain  portions  of this
   document  pursuant to an application for  confidential  treatment sent to the
   Securities  and  Exchange  Commission.  Such  portions  are omitted from this
   filing and filed separately with the Securities and Exchange Commission.

                                      -32-
<PAGE>

                                   Schedule D

                                Excluded Products

All products not requiring a prescription including:

o    Cosmeceutical Products

o    OTC Products

o    Health Supplements

In addition, one Rx product is excluded:

o    Glylorin, monolaurin

                                      -33-
<PAGE>

                                    Exhibit I

                              Economic Value Model

<TABLE>
<CAPTION>
              *               Pre-Launch     Year 1      Year 2     Year 3      Year 4       Year 5      Year 6
                              ----------     ------      ------     ------      ------       ------      ------
<S>                                <C>         <C>         <C>        <C>         <C>          <C>         <C>
                              -------------------------------------------------------------------------------------
Operating Profit before tax        *           **          **         **          **           **          **
                              =====================================================================================

                              ------------
NPV @ 15%                         **
                              ------------
</TABLE>

-------------------------
*  Confidential  treatment  has been  requested  for  certain  portions  of this
   document  pursuant to an application for  confidential  treatment sent to the
   Securities  and  Exchange  Commission.  Such  portions  are omitted from this
   filing and filed separately with the Securities and Exchange Commission.

                                      -34-
<PAGE>

                                   Exhibit II

                               Funding Arrangement

-------------------------
*  Confidential  treatment  has been  requested  for  certain  portions  of this
   document  pursuant to an application for  confidential  treatment sent to the
   Securities  and  Exchange  Commission.  Such  portions  are omitted from this
   filing and filed separately with the Securities and Exchange Commission.

                                      -35-
<PAGE>

                                   Exhibit III

                          Early Conversion Calculation

     As an example,  in the event of an Early  Conversion  in the *  post-Launch
Date,  the Parties shall revise the terms of Section  6(b)(i)-(iii)  hereof such
that Ventiv shall receive, monthly, an amount equal to:

                   (((** / (**/**)) * (**/**) * **) -**) * **

     where:

     X = the ** from ** of the Product for ** prior to the date of **

     Y = the ** from ** for the ** prior to **

     Z = the ** for the ** prior to **

     A = the average ** for the ** period immediately preceding **

     B = the **  incurred  in the  applicable  ** for the  Product  Detail  Team
related  to ** ,  based  on its  proportional  share  of the  total  ** and  any
additional ** directly related to the Product in the applicable **

     C = the applicable ** percentage set forth in Sections 6(b)(i)-(iii)

     D = the  average  monthly ** for the ** period  immediately  preceding  the
Early Conversion with respect to those Product Marketing Expenses that have been
assumed by Cellegy

-------------------------
*  Confidential  treatment  has been  requested  for  certain  portions  of this
   document  pursuant to an application for  confidential  treatment sent to the
   Securities  and  Exchange  Commission.  Such  portions  are omitted from this
   filing and filed separately with the Securities and Exchange Commission.

                                      -36-Exhibit 10.13

                                                CONFIDENTIAL TREATMENT REQUESTED

                               FUNDING ARRANGEMENT

     FOR VALUE  RECEIVED,  the  undersigned,  CELLEGY  PHARMACEUTICALS,  INC., a
corporation   organized   under  the  laws  of  the  State  of  California  (the
"Corporation"),  HEREBY  UNCONDITIONALLY  PROMISES  TO PAY to the  order  of VIS
FINANCIAL LLC, a limited liability company organized under the laws of the State
of Delaware and an indirect,  wholly owned subsidiary of VENTIV HEALTH,  INC., a
company  organized under the laws of the State of Delaware  ("Ventiv"),  and its
successors and permitted  assigns (the "Holder"),  subject to and upon the terms
and   conditions   set  forth  in  this  FUNDING   ARRANGEMENT   (this  "Funding
Arrangement"),  the aggregate  principal sum of up to $*(1) (as such amount may
be reduced from time to time by any repayment  hereunder or increased  from time
to time in accordance  with the terms hereof,  the  "Principal  Amount") at such
times and in such amounts as hereafter  provided in such  currency of the United
States  of  America  as at the time of  payment  shall be legal  tender  for the
payment of public and private debts ("U.S. Dollars"),  plus any accrued interest
thereon.  Capitalized  terms used but not  defined in this  Funding  Arrangement
shall  have  the  meanings  ascribed  to such  terms  in that  certain  Services
Agreement,  dated as of August 10, 2001, among the  Corporation,  Ventiv and the
Holder (the "Services  Agreement").  This Funding Arrangement is referred to in,
and is entitled to the benefits  under,  and subject to the terms and conditions
of, the Services Agreement.

     1. Terms and  Conditions  of Advances  Under the Funding  Arrangement.  The
Holder hereby agrees, on the terms and conditions hereinafter set forth, to make
advances (each,  an "Advance") to the  Corporation  from time to time during the
period from the Effective  Date until the  termination or expiration of the Term
in an aggregate amount not to exceed the Principal  Amount;  provided,  however,
that the maximum  aggregate  Advances during the period prior to the Launch Date
shall be $**.  Each Advance  shall be made by the Holder within thirty (30) days
after the receipt by the Holder of a notice for a monthly  Advance (a "Notice of
Advance"). Each Notice of Advance shall be delivered by the Corporation no later
than two (2) Business  Days after the approval by the Steering  Committee of the
monthly Product Budget,  which shall include the amount of funding in respect of
such monthly period  required  in order to provide * during the period for which
such Advance is required. Each Notice of Advance shall initially be delivered by
telephone and confirmed immediately in writing by facsimile or email, specifying
therein the requested (i) date of such Advance and (ii) aggregate amount of such
Advance,  which amount  shall be no greater than the amount of required  funding
set forth in the monthly Product Budget. The Holder shall, before 2:00 p.m. (New
York City time) on the date of such Advance, make available the Advance in

---------------
*  Confidential  treatment  has been  requested  for  certain  portions  of this
   document  pursuant to an application for  confidential  treatment sent to the
   Securities  and  Exchange  Commission.  Such  portions  are omitted from this
   filing and filed separately with the Securities and Exchange Commission.

<PAGE>

same day funds to the escrow agent (the  "Escrow  Agent") to be appointed by the
Parties pursuant to the escrow agreement to be entered into between the Parties.
Each Notice of Advance  shall be  irrevocable  and  binding on the  Corporation.
Notwithstanding  the foregoing,  in connection  with the payment of any Advance,
the  Corporation  shall  receive the amount of such Advance and (i) the sum of *
for the prior month, less (ii) the amount of the prior month's Advance (if any),
rounded to the nearest $1,000.

     2. Terms and Conditions of Payments Under the Funding Arrangement.

     (a) The outstanding Principal Amount under this Funding Arrangement and any
accrued and unpaid  interest  thereon  shall be repaid by the  Corporation  on a
monthly basis commencing immediately after the Launch Date in the full amount of
the  Contribution  Margin as set forth in the applicable  Monthly  Statement (as
such term is defined in Section  2(b) below),  until such time as the  Principal
Amount  under this  Funding  Arrangement  and all  accrued  and unpaid  interest
thereon shall have been repaid in full; provided,  however,  that from and after
the first  anniversary of the date on which the Product first  achieves  Product
Operating  Income,  the Corporation may use proceeds other than the Contribution
Margin to repay the Principal  Amount;  provided,  further,  however,  that such
repayment does not have a Material Adverse Impact on the Economic Value.

     (b) For each  month of the  Term,  the  Corporation  shall  deliver  to the
Holder,  no later than thirty (30) calendar  days  following the last day of the
prior  month,  (i) a  written  statement  setting  forth  a  calculation  of the
Contribution  Margin, if any,  generated by the Product during such prior month,
and (ii) a certification  by an authorized  officer of the Corporation that such
written statement is true, complete and correct in all respects,  such statement
and  certification  to be substantially in the form attached hereto as Exhibit A
(the "Monthly Statement").  For each month of the Term, the Holder shall deliver
to the  Corporation,  no later than five (5) days following the Holder's receipt
of the Monthly  Statement,  a written  statement  setting  forth the  cumulative
Principal  Amount  borrowed by the  Corporation to date, the cumulative  accrued
interest thereon and the Principal Amount and interest repaid by the Corporation
to date.

     (c) Each  payment  (of  principal,  interest  or any other  amount  payable
hereunder)  made by the  Corporation  under this Funding  Arrangement  (each,  a
"Payment"  and  collectively,  "Payments")  to  the  Holder  shall  be  made  in
immediately  available  funds in U.S.  Dollars  to such  account(s)  as shall be
specified  in  writing  by  the  Holder.   All   Payments   shall  be  delivered
simultaneously with the delivery of the Monthly Statement,  and shall be applied
as follows:  (i) first,  to any accrued and unpaid  interest on the  outstanding
Principal Amount payable pursuant to the provisions of Section 4 below; and (ii)
second, to reduce the Principal Amount of this Funding Arrangement.

     (d) If any  Payment or any notice  hereunder  is required to be made on any
date  which is a  Saturday,  Sunday  or any  other  day on which  banks or stock
exchanges  are  required  or  authorized  by Law to be closed in the City of New
York,  such payment or notice shall be made on the next  succeeding day on which
banks are open for  business  in the City of New York (any such day, a "Business
Day"),  with the same  force  and  effect  as if made on the date as  originally
required.

                                       2
<PAGE>

     3.  Funding  Increases.  The Holder may increase  the  aggregate  Principal
Amount available  pursuant to this Funding  Arrangement (a "Funding  Increase");
provided,  however,  that  in no  event  will  the  aggregate  Principal  Amount
available  hereunder exceed $10,000,000 in the aggregate.  The Holder shall only
agree to a Funding Increase (i) to the extent the Steering Committee  determines
that an  increase  in the  initial  Commercialization  Funding is  necessary  to
provide funding for post-Launch Date costs and expenses  as a result of * in the
Product Budget during the period for which such Funding Increase is required and
(ii) upon Ventiv's consent.  The Corporation shall give notice (the "Notice") to
the Holder no later than 2:00 p.m.  (New York City time) on the second  Business
Day following such determination by the Steering  Committee,  which Notice shall
specify the requested  amount of such Funding  Increase,  which amount shall not
exceed the Product Operating Loss projected in the Product Budget.  Upon receipt
of such Notice, and provided the Holder has agreed to such Funding Increase, the
Holder  shall,  within  thirty  (30) days after the receipt by the Holder of the
Notice,  make  available to the  Corporation,  by wire  transfer of  immediately
available  funds to the Escrow  Agent,  the Funding  Increase,  and such Funding
Increase shall be added to the Principal Amount of the Funding Arrangement. Each
Notice shall be irrevocable and binding on the Corporation.  Notwithstanding the
foregoing,  in  connection  with  the  payment  of  any  Funding  Increase,  the
Corporation shall receive the amount of such Funding Increase and (i) the sum of
the actual Product  Operating  Loss (if any) for the prior month,  less (ii) the
amount of the prior month's Funding Increase or Advance (if any), rounded to the
nearest $1,000.

     4.  Interest.  Simple  interest  shall accrue on any unpaid  portion of the
Principal  Amount at the rate per annum of **(2)  percent (**%) per annum or, if
lower,  the maximum rate permitted by Law (the "Interest  Rate"),  commencing on
the date such Principal Amount is funded by the Holder, and continuing until the
date of payment in full,  together with all interest  accrued  thereon (based on
the actual number of days elapsed over a 360-day year); provided,  however, that
during any period in which an Event of Default has occurred  and is  continuing,
the unpaid  portion of the  Principal  Amount shall accrue at a simple  interest
rate of ** percent (**%) per annum.

     5. Default; Remedy. For purposes of this Funding Arrangement,  an "Event of
Default"  shall occur if: (i) the  Corporation  shall have breached the terms of
the Services Agreement, which breach remains uncured for a period of thirty (30)
days or more; (ii) the Corporation  shall become  insolvent,  or seek protection
under  any  bankruptcy,   receivership,   trust  deed,  creditor's   arrangement
composition  or  comparable  proceeding,  or any such  proceeding  is instituted
against the Corporation, and such proceeding shall not be dismissed within sixty
(60) calendar days (each, "Bankruptcy Event"); or (iii) upon the occurrence of a
Change of Control of the  Corporation  pursuant to a  transaction  with a Ventiv
Competitor (as identified on Schedule C to the Services Agreement).

     In the  event  that any  action,  suit or other  proceeding  is  instituted
concerning  or arising out of this  Agreement  or any  transaction  contemplated
hereunder, the prevailing party shall

----------
(2)  Confidential  treatment  has been  requested  for certain  portions of this
document  pursuant to an  application  for  confidential  treatment  sent to the
Securities and Exchange  Commission.  Such portions are omitted from this filing
and filed separately with the Securities and Exchange Commission.

                                       3
<PAGE>

recover all of such party's  reasonable  costs and  attorneys'  fees incurred in
each such action,  suit or other  proceeding,  including  any and all appeals or
petitions  therefrom.  The Corporation agrees to indemnify and hold harmless the
Holder and its officers,  directors,  employees,  agents and advisors  (each, an
"Indemnified  Party")  from and  against any and all  claims,  damages,  losses,
liabilities and expenses  (including,  without  limitation,  reasonable fees and
expenses of counsel) that may be incurred by or asserted or awarded  against any
Indemnified  Party,  in each case  arising  our of or in  connection  with or by
reason of (including,  without limitation,  in connection with any investigation
or  proceeding  or  preparation  of  a  defense  in  connection  therewith)  the
enforcement  of this  Funding  Arrangement  and the Holder's  rights  hereunder.
Without  prejudice  to the survival of any other  agreement  of the  Corporation
hereunder, the agreements and obligations of this Section 5 and Section 11 below
shall survive the payment in full of the Principal Amount,  interest due thereon
and all other amounts payable hereunder.

     So long as an  obligation  exists  under this Funding  Arrangement  for the
repayment of any  Principal  Amount and any  interest  accrued  thereon,  and in
partial  consideration  of the  economic  benefit of the  Services  Agreement to
Ventiv,  upon the occurrence of a Bankruptcy Event, Ventiv shall have the option
to license  the  Product on an  exclusive  basis,  until the  expiration  of the
Product patent, for such consideration and on such terms and conditions as shall
be agreed upon by the Corporation and Ventiv promptly  following such Bankruptcy
Event.

     6. Call Events.  Notwithstanding anything to the contrary set forth in this
Funding Arrangement,  in the event of any (i) material breach by the Corporation
of the  terms of this  Funding  Arrangement  or the  Services  Agreement,  which
material  breach has not been cured  within  thirty  (30)  calendar  days of the
receipt  of notice  of such  breach by the  Corporation,  or any other  Event of
Default,  (ii) failure of the  Corporation  to obtain all required  Governmental
Body approvals for the manufacture and sale of the Product on or  prior to *  or
(iii)  the  Product   receives   Impaired   Labeling   (each  of  the  foregoing
circumstances,  a "Call  Event"),  the Holder  shall have the right to terminate
this Agreement and, upon delivery of a Call Notice to the Corporation concerning
the  circumstances  of the  Call  Event,  the  stated  percentage  below  of the
outstanding  Principal Amount shall be immediately due and payable to the Holder
without further notice or action by any Party hereto. The Corporation shall have
forty five (45) calendar days from the date of such Call Notice to pay an amount
in cash to the Holder  equal to the  applicable  percentage  of the  outstanding
Principal  Amount.  In the event the Holder shall deliver a Call Notice pursuant
to  clause  (i)  above,  then one  hundred  percent  (100%)  of the  outstanding
Principal  Amount,  and any accrued but unpaid interest thereon shall be subject
to the Call Notice. In the event the Holder shall deliver a Call Notice pursuant
to  clauses  (ii) or (iii)  above,   then *   percent  (* %) of the  outstanding
Principal Amount, and any accrued and unpaid interest thereon,  shall be subject
to the Call Notice and in such case,  the  obligation  to repay the remaining **
percent (** %) of the outstanding  Principal Amount,  and any accrued and unpaid
interest thereon,  shall be assumed and assigned to Ventiv,  and the Corporation
shall have no further  obligation with respect to such amount. In each case, the
stated amount shall become

---------------
*  Confidential  treatment  has been  requested  for  certain  portions  of this
   document  pursuant to an application for  confidential  treatment sent to the
   Securities  and  Exchange  Commission.  Such  portions  are omitted from this
   filing and filed separately with the Securities and Exchange Commission.

                                       4
<PAGE>

immediately due and payable,  without  presentment,  demand,  protest or further
notice of any kind, all of which are hereby expressly waived by the Corporation,
and the Holder  shall  therefore  be entitled  to pursue all  remedies as it may
have, at law or in equity, for the enforcement and collection of such amounts.

     7.  Assignment  of Repayment  Obligation.  Notwithstanding  anything to the
contrary set forth in this Funding Arrangement, in the event of a termination of
the Services  Agreement (i) pursuant to a material breach by Ventiv of the terms
of the Services  Agreement,  which breach shall not be fully cured within thirty
(30) calendar days of written notice describing such breach;  (ii) pursuant to a
failure by Ventiv to meet the operational performance based metrics set forth in
Schedule B to the Services  Agreement,  which  failure  shall not be fully cured
within  thirty (30) calendar days after the date such metrics are required to be
met, (iii) pursuant to Section 15(e) of the Services  Agreement or (iv) pursuant
to Section 15(d)(i) of the Services Agreement,  then the obligation to repay the
outstanding Principal Amount, and any accrued and unpaid interest thereon, shall
be assumed and  assigned to Ventiv,  and the  Corporation  shall have no further
obligation with respect to such amount.

     8. Notices. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given or made (and shall be deemed to
have been duly given or made upon  receipt) by  delivery  in person,  by courier
service,  by facsimile,  or by registered  or certified  mail (postage  prepaid,
return receipt requested) to the respective  parties at the following  addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 8):

     if to the Holder:

          VIS Financial LLC
          c/o Ventiv Health, Inc.
          1114 Avenue of the Americas
          New York, New York 10036
          Facsimile:
          Attention: Ms. Elaine Kloss
                     Mr. Doug Langeland

          with a copy to:

          Weil, Gotshal & Manges LLP
          767 Fifth Avenue
          New York, NY  10153
          Facsimile: (212) 310-8007
          Attention: S. Wade Angus, Esq.
                     Marita Makinen, Esq.

                                       5
<PAGE>

          if to the Corporation:

          Cellegy Pharmaceuticals, Inc.
          349 Oyster Point Boulevard
          Suite 200
          South San Francisco, California 94080
          Facsimile: (650) 616 2222
          Attention: A. R. Juelis

          with a copy to:

          Fenwick & West LLP
          815 Connecticut Avenue N.W.
          Suite 200
          Washington, D.C. 20006
          Facsimile: (202) 463-6520
          Attention: C. Kevin Kelso, Esq.

     9. Waiver.  Failure of the Holder to insist upon strict  performance of the
terms, conditions and provisions of this Funding Arrangement shall not be deemed
a waiver of future compliance therewith or a waiver of such terms, conditions or
provisions.  No waiver of any terms,  conditions or  provisions  hereof shall be
deemed to have been made unless  expressed  in writing and signed by the Holder.
The terms of this  Funding  Arrangement  shall not be amended,  supplemented  or
modified in any manner  without the prior written  consent of the Holder and the
Corporation.

     10.  Set-Off;  Waiver.  All  payments  made by the  Corporation  under this
Funding  Arrangement  shall be without set-off or counterclaim.  The Corporation
hereby irrevocably waives presentment,  protest,  notice of dishonor,  notice of
protest  and  other  notices  of  any  kind  in  connection  with  this  Funding
Arrangement.

     11. Taxes. Any and all payments by the Corporation hereunder shall be made,
in  accordance  with  Sections  3 and 4  above,  free and  clear of and  without
deduction for any and all present or future taxes, levies, imposts,  deductions,
charges or  withholdings,  and all liabilities  with respect thereto (all taxes,
levies, imposts, deductions, charges, withholdings and liabilities in respect of
payments  hereunder,  excluding  income tax and income  tax  withholding,  being
hereinafter referred to as "Taxes"). If the Corporation shall be required by law
to deduct any Taxes from or in respect  of any sum  payable  hereunder  or under
this  Funding  Arrangement,  (i) the sum payable  shall be  increased  as may be
necessary  so that after making all required  deductions  (including  deductions
applicable to additional sums payable under this Section 11) the Holder receives
an amount equal to the sum it would have  received had no such  deductions  been
made, (ii) the Corporation  shall make such deductions and (iii) the Corporation
shall pay the full amount deducted to the relevant  taxation  authority or other
authority in accordance with applicable law.

     In  addition,  the  Corporation  shall pay any  present or future  stamp or
documentary  taxes or any other  excise or  property  taxes,  charges or similar
levies that arise from any payment made

                                       6
<PAGE>

hereunder or from the execution,  delivery or registration of, performing under,
or otherwise with respect to, this Funding Arrangement  (hereinafter referred to
as "Other Taxes").

     The Corporation shall indemnify the Holder for and hold it harmless against
the full amount of Taxes or Other Taxes (including, without limitation, taxes of
any kind,  excluding  income  tax and  income  tax  withholding,  imposed by any
jurisdiction on amounts payable under this Section 11) imposed on or paid by the
Holder and any liability  (including  penalties,  interest and expenses) arising
therefrom or with respect thereto.  This indemnification shall be made within 30
days from the date the Holder makes written demand therefor.

     The Holder shall,  on or prior to the date of the  Corporation's  execution
and delivery of this Funding Arrangement and from time to time thereafter as may
be  reasonably  necessary,  in each  case  upon the  reasonable  request  of the
Corporation,  deliver to the Corporation any applicable forms or  certifications
specified by the relevant tax authority of the  Corporation's  jurisdiction,  or
reasonably  requested by the Corporation,  to claim the elimination or reduction
of the rate of withholding  tax otherwise  applicable in respect of a payment or
payments made by the Corporation under this Funding Arrangement to the Holder.

     12. Assignment;  Transfer.  This Funding  Arrangement shall be binding upon
and inure to the benefit of and be  enforceable  by the parties hereto and their
respective successors and assigns. No party may assign its rights or obligations
under this Funding  Arrangement  without the prior written  consent of the other
party hereto; provided, however, that no consent shall be required in connection
with a Change of Control of a party or the sale of all or  substantially  all of
the assets of a party, in each case, so long as such party's successor or assign
agrees to be, or by operation  of law is,  bound by the terms of this  Agreement
and;  provided,  further,  that any  purchaser  of the  ownership  rights to the
Product or all or  substantially  all of the assets of the  Corporation,  or any
successor to the Corporation by merger shall be required to expressly assume the
obligations under this Funding Arrangement prior to the consummation of any such
transaction.  Notwithstanding  the foregoing,  the Corporation shall require the
consent of the  Holder  with  respect to a Change of Control of the  Corporation
involving a Ventiv  Competitor.  Any purported  assignment  in violation  hereof
shall be null and void and have no force or  effect.  Any  permitted  assignment
shall be effected by surrender of the old  instrument  and either the reissuance
by the  Corporation  of the old  instrument to the new holder or the issuance by
the Corporation of a new instrument to the new holder. The Corporation agrees to
keep a register in which  provision  shall be made for the  registration of this
Funding   Arrangement   and  the   registration  of  transfer  of  this  Funding
Arrangement.  Upon consent of the  Corporation (if required) and due presentment
for  registration  or transfer of this Funding  Arrangement at the office of the
Corporation,  a new  funding  arrangement  will be issued to the  transferee  in
exchange  herefor  without  charge.   The  Corporation  and  any  agent  of  the
Corporation  may deem and treat the  registered  holder  hereof as shown on such
register as the absolute  owner of this Funding  Arrangement  for the purpose of
receiving any payment on this Funding Arrangement,  as herein provided,  and for
all other purposes, and neither the Corporation nor any agent of the Corporation
shall be affected by any notice to the  contrary.  All payments  made to or upon
the order of such  registered  holder  shall,  to the  extent of the sum or sums
paid,  effectively  satisfy and discharge  liability for moneys  payable on this
Funding Arrangement.

                                       7
<PAGE>

     13. Governing Law. This Funding Arrangement and its validity,  construction
and  performance  shall  be  governed  in all  respects  by,  and  construed  in
accordance with, the laws of the State of New York,  without regard to conflicts
of law.

     14.  Miscellaneous.  If any provision of this Funding  Arrangement shall be
held to be invalid,  illegal or  unenforceable,  such invalidity,  illegality or
unenforceability   shall  not  affect  any  other  provisions  of  this  Funding
Arrangement,  and this Funding Arrangement shall be construed as if any invalid,
illegal or unenforceable provisions had not been contained herein.

     If this Funding  Arrangement is mutilated,  lost, stolen or destroyed,  the
Corporation  shall  issue a new Funding  Arrangement  of like form to the Holder
hereof upon presentment and surrender of the mutilated Funding  Arrangement,  in
the  case of  mutilation,  and  upon  receipt  of  evidence  of  loss,  theft or
destruction  and of  indemnity  in all  other  cases,  each in  form  reasonably
satisfactory to the Corporation.

     15.  Waiver  of  Jury  Trial.  Each  of  the  Holder  and  the  Corporation
irrevocably  and  unconditionally  waives  trial by jury in any legal  action or
proceeding  relating  to this  Funding  Arrangement  and  for  any  counterclaim
therein.

     16. Disputes.

     (a) All  controversies or claims arising out of or relating to this Funding
Arrangement or the subject matter hereof  ("Claims") shall first be submitted to
the Steering  Committee for resolution.  If the Steering  Committee is unable to
resolve any Claim within three (3) calendar  days of  submission  (or such other
period as determined by the Steering Committee), or if the Parties are unable to
renegotiate  the terms of this  Agreement  as  provided  herein,  subject to the
procedures  set forth in Section 5(c) of the Services  Agreement,  such Claim or
failure to renegotiate shall be automatically submitted to arbitration.

     (b) There shall be three (3)  arbitrators.  Each Party shall select one (1)
arbitrator and the two arbitrators  selected by each of the Parties shall select
a third  arbitrator.  The  arbitrators  shall be  selected  within  thirty  (30)
calendar  days after  submission  for  arbitration.  Such  arbitrators  shall be
accredited  and shall not be  Affiliates  of either  Party.  In the event of the
failure of the two arbitrators to agree as to the third arbitrator within twenty
(20) Business Days after the  appointment  of the last of said two  arbitrators,
the third arbitrator shall be appointed by the American Arbitration  Association
within  fifteen (15)  Business Days  thereafter.  If a Party does not appoint an
arbitrator  who has  consented  to  participate  within  thirty  (30) days after
submission for arbitration,  the American Arbitration Association shall make the
relevant appointment.  The arbitration tribunal shall conduct the arbitration in
Chicago,  Illinois and apply such procedural rules as the arbitrators  determine
are necessary or appropriate in the  circumstances and shall specify the same at
the  commencement  of the  arbitration and the substantive law set forth in this
Funding Arrangement.

     (c) The  decision of the  arbitrators  shall be final and binding  upon all
Parties,  and not subject to any  appeal,  to the fullest  extent  permitted  by
applicable law, and shall deal with the question of costs of arbitration and all
matters related thereto. The arbitrators

                                       8
<PAGE>

may in their  discretion  award costs,  including  legal fees, to the prevailing
party. Decisions of the arbitrators shall be in writing, and shall set forth the
reasons therefor and, to the extent  applicable,  the manner in which the amount
of the award was calculated.

     (d) Judgment upon the award rendered by the  arbitration  may be entered in
any court having  jurisdiction,  or application  may be made to such court for a
judicial recognition of the award or any order of enforcement thereof.

     (e) Any monetary  award  arising  from the  arbitration  proceedings  shall
include  interest  from the date of any  damages  incurred  for  breach or other
violation of this Agreement and from the date of the award,  until paid in full,
at a rate to be fixed by the arbitrators.  Any costs, fees,  including,  without
limitation, attorneys' fees, or taxes incident to enforcing an arbitral decision
rendered  in  accordance  with this  Section  16 shall be  charged  against  the
non-prevailing party.

                            [signature page follows]

                                       9
<PAGE>

     IN WITNESS WHEREOF,  the Corporation has caused this Funding Arrangement to
be duly executed on the date first above written.

                           CELLEGY PHARMACEUTICALS, INC.

                                    By: ___________________________
                                    Name:
                           Title:

                           VIS FINANCIAL LLC

                                    By: ___________________________
                                    Name:
                           Title:

                           VENTIV HEALTH, INC.

                                    By: ___________________________
                                    Name:
                                    Title:

<PAGE>

                                    EXHIBIT A

                                MONTHLY STATEMENT

VIS FINANCIAL LLC
1114 Avenue of the Americas
New York, New York 10036

     The undersigned, the [TITLE OF OFFICER] of Cellegy Pharmaceuticals,  Inc. a
California corporation ("Corporation"),  gives this certificate to VIS Financial
LLC  ("Holder")  in  accordance  with the  requirements  of Section 2(b) of that
certain  Funding   Arrangement  dated  as  of  August  ___,  2001,  between  the
Corporation,  the Holder and Ventiv Health,  Inc., (the "Funding  Arrangement").
Capitalized  terms used in this  Certificate,  unless otherwise  defined herein,
shall have the meanings ascribed to them in the Funding Arrangement.

     1. Based upon my review of the balance  sheets and  statements of income of
the Corporation for the monthly period ending _______, 20__, copies of which are
attached hereto,  I hereby certify that the Contribution  Margin for such period
is calculated and set forth on Exhibit A hereto.

     2. The calculation of Contribution  Margin set forth on Exhibit A hereto is
true, complete and correct in all respects.

     The foregoing  certifications,  together with the computations set forth in
Exhibit A hereto, are made and delivered this ___ day of _________, 200_.

                                           Very truly yours,

                                           CELLEGY PHARMACEUTICALS, INC.

                                           By:  _______________________________

<PAGE>

                         EXHIBIT A TO MONTHLY STATEMENT

                                                                       $
                                                                       -
Product Revenues

Less: Cellegy Tranche I Revenue Share
      Reimbursement of Product Marketing Expenses

                                                                 --------------
Contribution Margin
                                                                 ==============

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00034-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00034-of-00352.parquet"}]]