KEY EMPLOYEE AGREEMENT

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To:      Thomas C. K. Chan, Ph.D.                     Date:  September 24, 2001

         7 Stoney Brook Road

         Hopkinton, Massachusetts  01748



         The undersigned, MacroChem Corporation, a Delaware corporation (the

"Company"), hereby agrees with you as follows:



        1. POSITION AND RESPONSIBILITIES.



           1.1 You shall serve as Vice President, Research and Technology of the

Company, (or in such other executive capacity as shall be designated by the

Board of Directors and reasonably acceptable to you) and shall perform the

duties customarily associated with such capacity from time to time and at such

place or places as the Company shall designate are appropriate and necessary in

connection with such employment.



           1.2 You will, to the best of your ability, devote your full time and

best efforts to the performance of your duties hereunder and the business and

affairs of the Company. You agree to perform such executive duties as may be

assigned to you by the Company from time to time.



           1.3 You will duly, punctually and faithfully perform and observe any

and all reasonable rules and regulations which the Company may now or shall

hereafter establish governing the conduct of its business.



        2. TERM OF EMPLOYMENT.



           2.1 Subject to the provisions hereof, specifically including, without

limitation, Section 2.2, the term of your employment shall be indefinite.



           2.2 The Company shall have the right to terminate your employment at

any time under this Agreement in any of the following ways:



           (a) on thirty (30) days prior written notice to you upon your

disability (disability shall be defined as your inability to perform duties

under this Agreement for an aggregate of sixty (60) days, which need not be

consecutive, out of any one hundred twenty (120) day period due to mental or

physical disability or incapacity); you shall be provided benefits under the

Company's workers compensation and disability insurance policies, to the extent

and upon the terms and conditions of such plans that are in effect at the time;



           (b) immediately without prior notice to you by the Company for

"Cause", as hereinafter defined, provided however, that prior to any such

termination for Cause, you have had a reasonable opportunity to be heard

thereon; or



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           (c) at any time without Cause, provided the Company shall be

obligated to pay to you after such termination an amount equal to six (6)

months' Base Salary, plus benefits provided by the Company to you at the time of

such termination for such period, less applicable taxes and other required

withholdings and any amounts you may owe to the Company.



           2.3 You shall have the right to terminate your employment hereunder

for any reason, upon not less than four (4) weeks' prior written notice to the

Company.



           2.4 "Cause" for the purpose of Section 2 of this Agreement shall

include: (a) willful malfeasance or gross negligence in the performance of your

duties, resulting in harm to the Company, (b) fraud or dishonesty by you with

respect to the Company, or (c) your conviction for a criminal offense carrying a

potential sentence of more than twelve months in jail.



           2.5 If your employment is terminated because of your death, all

obligations of the Company hereunder shall cease, except with respect to amounts

and obligations accrued to you, including accrued vacation pay, insurance,

vested stock options, and out-of-pocket expenses, through the last day of the

month during which your death has occurred.



        3. COMPENSATION. You shall receive the compensation and benefits set

forth on Exhibit A hereto ("Compensation and Benefits") for all services to be

rendered by you hereunder and for your transfer of property rights if any,

pursuant to an agreement relating to proprietary information and inventions of

even date herewith attached hereto as Exhibit B between you and the Company (the

"Confidential Information, Inventions and Noncompetition Agreement").



        4. CONFIDENTIAL INFORMATION, INVENTIONS AND NONCOMPETITION. You agree to

execute, deliver and be bound by theprovisions of the Confidential Information,

Inventions and Noncompetition Agreement attached hereto as Exhibit B.



        5. REMEDIES. Your obligations under the Confidential Information,

Inventions and Noncompetition Agreement and the provisions of Sections 5 and 6

of this Agreement (as modified by Section 7, if applicable) shall survive the

expiration or termination of your employment with the Company in accordance with

the terms thereof. You acknowledge that a remedy at law for any breach or

threatened breach by you of the provisions of the Confidential Information,

Inventions and Noncompetition Agreement would be inadequate and you therefore

agree that the Company shall be entitled to injunctive relief in case of any

such breach or threatened breach.



        6. ASSIGNMENT. Subject to Section 2.2(c), this Agreement and the rights

and obligations of the parties hereto shall bind and inure to the benefit of any

successor or successors of the Company by reorganization, merger or

consolidation and any assignee of all or substantially all of its business and

properties, but, except as to any such successor or assignee of the Company,

neither this Agreement nor any rights or benefits hereunder may be assigned by

the Company or by you, except by operation of law or by a further written

agreement by the parties hereto.

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