AMENDED AND RESTATED EMPLOYMENT AGREEMENT

EXHIBIT 10.1

AMENDED AND RESTATED
EMPLOYMENT AGREEMENT

      THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT is entered into effective as of August 20, 2007 (the “Effective Date”) by and between Bentley Pharmaceuticals. Inc., a Delaware corporation (the “Employer”), and James R. Murphy (the “Employee”).

RECITALS

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

WITNESSETH

      NOW THEREFORE , in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree to be legally bound as follows:

1. Employment . The Employer hereby employs the Employee, and the Employee hereby accepts such employment, as Chairman and Chief Executive Officer of the Employer upon the terms and subject to the conditions set forth in this Agreement. The Employee shall perform such functions as are consistent with these positions under the supervision of the Board of Directors of the Employer. The Employee shall, without any compensation in addition to that which is specifically provided in this Agreement, serve in such further offices or positions with Employer or any subsidiary or affiliate of Employer (collectively, the “Employer Group”) as shall from time to time be reasonably requested by the Board of Directors of Employer.

2. Term . Subject to the termination provisions hereinafter contained, the term of this Agreement shall be for an initial term commencing on the Effective Date and terminating on December 31, 2008. This Agreement shall thereafter be automatically renewed for successive one (1) year terms, unless the Employee’s employment with the Employer has been terminated, as hereinafter provided, or unless either party shall have given the other party notice at least one year before the then applicable date of expiration that this Agreement will terminate as of its then applicable date of expiration. The initial term of this Agreement, and any extension thereof pursuant to this paragraph, are referred to as the “Term”.

a.

Base Salary. Commencing on the Effective Date, the Employer shall pay to the Employee as compensation for all services rendered by the Employee a base salary of $56,059.92 per month (the “Monthly Base Salary”), payable in accordance with the Employer’s regular payroll practices, plus annual bonuses on a calendar year basis as determined by the Compensation Committee of the Board of Directors (the “Compensation Committee”), subject to Sections 3(d) and 3(e). If an increase in Monthly Base Salary is determined for a calendar year after January 1 and before May 31 of that year, the increase shall be retroactive to the

b.

beginning of that year. Annual review of the Employee’s Monthly Base Salary will be on a calendar year basis, and the results of such review will be provided to the Employee no later than May of the following year.

c.

Expense Reimbursement. The Employer shall reimburse the Employee on a semi-monthly basis for all reasonable expenses incurred by the Employee in the performance of his duties under this Agreement; provided however, that the Employee shall have previously furnished to the Employer an itemized account, satisfactory to the Employer, in substantiation of such expenditures.

d.

Benefits. The Employee shall be entitled to health and other benefits on the same terms and conditions as the Employer has made available to other senior executives of Employer, including without limitation participation in the Employer’s health plans and a supplemental executive health insurance policy issued by Boston Mutual or a comparable carrier. The Employer agrees to maintain (i) life insurance and disability coverage on the Employee in an amount equivalent to 24 times the Monthly Base Salary, which insurance will be payable to the Employee’s estate or beneficiaries (as the Employee may designate) upon the Employee’s death or to the Employee in the event of disability as provided in Section 7(b) hereof, as well as (ii) an additional term life insurance policy in the amount of $1,000,000.

e.

Bonuses. The Employee shall be eligible for a bonus each year of the Term, payable in cash, common stock and/or other equity awards as determined by the Compensation Committee. Such annual bonus will be awarded for each year as soon as practicable after March 15, but not later than June 30, of the following year.

f.

Annual Review. The Employee shall be reviewed by the Compensation Committee on an annual (calendar year) basis.

g.

Equity Awards. The Employee will be eligible for periodic equity awards (“Equity Awards”) under the Employer’s 2005 Equity and Incentive Plan or another plan as determined by the Compensation Committee of the Board of Directors (collectively, the “Plan”), which shall include annual Equity Awards having a value of not less than 50,000 stock options under the Plan, the value of which shall be determined based upon the fair value of such Equity Awards as of the date of grant, as determined by the Compensation Committee.

4. Duties . The Employee is engaged as Chairman and Chief Executive Officer of the Employer. In addition, the Employee shall have such other duties and hold such offices as may from time to time be reasonably assigned to him by the Board of Directors of the Employer.

5. Extent of Services . During the Term, the Employee shall devote his full time, energy and attention to the benefit and business of the Employer and its affiliates and shall not be employed by another entity, either directly or as a consultant to or in any other capacity, except as approved in advance by the Employer’s Board of Directors; provided, however, that no such

approval shall be required to serve as a director, officer or trustee of any trade association or of any civic or charitable organization so long as such service does not significantly interfere with the Employee’s performance of his duties at the Employer.

6. Vacation . The Employee may take a maximum of four weeks of vacation each calendar year, at times to be determined in a manner most convenient to the business of the Employer. A maximum of one week of unused vacation may be carried over from one calendar year to the next.

7. Termination Following Death or Incapacity .

a.

Death. All rights of the Employee under this Agreement shall terminate upon death (other than rights accrued prior thereto). All Equity Awards shall be exercisable for a period of twelve (12) months from death, in accordance with the Plan. The Employer shall pay to the estate of the Employee any unpaid salary and other benefits due as well as reimbursable expenses accrued and owing to the Employee at the time of his death. The Employer shall have no additional financial obligation under this Agreement to the Employee or his estate beyond the term-life insurance benefit described in Section 3(c) above.

b.

Disability .

	i.		During any period of disability, illness or incapacity during the Term which renders the Employee at least temporarily unable to perform the services required under this Agreement, the Employee shall receive his salary payable under Section 3 of this Agreement, less any benefits received by him under any insurance carried by or provided by the Employer; provided however, all rights of the Employee under this Agreement (other than rights already accrued) shall terminate as provided below upon the Employee’s permanent disability (as defined below).
	ii.		The term “permanent disability” as used in this Agreement shall mean the inability of the Employee, as determined by the Board of Directors of the Employer, by reason of physical or mental disability to perform the duties required of him under this Agreement after a period of: (a) 120 consecutive days of such disability; or (b) disability for at least six months during any twelve month period. Upon such determination, the Board of Directors may terminate the Employee’s employment under this Agreement upon ten (10) days prior written notice. In the event of permanent disability all Equity Awards shall vest, and be exercisable for a period of time, in accordance with their respective terms and the terms of the Plan.
	iii.		If any determination of the Board of Directors with respect to permanent disability is disputed by the Employee, the parties hereto agree to abide by the decision of a panel of three physicians. The Employee and Employer shall each appoint one member, and the third member of the panel shall be

appointed by the other two physicians. If the physicians appointed by the parties have not agreed upon the third physician within fifteen (15) days, either party may petition the New Hampshire Medical Society to appoint a third physician. The Employee agrees to make himself available for and to submit to reasonable examinations by such physicians as may be directed by the Employer. Failure to submit to any such exam shall constitute a material breach of this Agreement. In the event such a panel is convened, the party whose position is not sustained will bear all the associated costs.

8. Other Terminations .

a.

Without Cause .

	i.		Either the Employee or the Employer may terminate the Employee’s employment hereunder at any time upon written notice.
	ii.		If the Employee gives written notice pursuant to paragraph (i) above, the Employer shall have the right to either (a) relieve the Employee, in whole or in part, of his duties under this Agreement or (b) to accelerate the date of termination of employment to coincide with the date on which the written notice is received.
	iii.		Notwithstanding any provisions hereof to the contrary, the Employer may terminate Employee’s employment hereunder without cause at any time. If the Employer terminates the Employee’s Employment pursuant to the provisions of this section 8(a), it shall pay to the Employee as a severance benefit, in cash, an amount equal to (a) twelve months of the Employee’s Monthly Base Salary plus (b) the higher of the bonus target for the current year or the bonus paid for the prior year, which amount shall be due and payable in a lump sum within not more than ten (10) days after such termination or such later date as the Employee delivers the release contemplated by Section 18 . Additionally , the vesting of Equity Awards shall be accelerated on a pro rata basis determined by the number of completed months of service during the then current annual vesting period, the vested portions of such Equity Awards shall be exercisable for the period of time indicated in the terms of the Equity Award, and all other vesting of Equity Awards shall cease unless otherwise determined by the Compensation Committee.

b.

For Cause .

	i.		The Employer may terminate the Employee’s employment hereunder without notice (a) upon the Employee’s breach of any material provision of this Agreement, or (b) for other “good cause” (as defined below).
	ii.		The term “good cause” as used in this Agreement shall mean: (a) any breach by Employee of any of Employee’s fiduciary duties to Employer or

			material obligations under this Agreement (other than as a result of incapacity due to physical or mental illness), in each case if such breach is not cured within ten (10) days after written notice thereof to Employee by Employer, (b) conviction of a felony or a crime involving moral turpitude or other commission of any act or omission of Employee involving, fraud, embezzlement, theft, substance abuse or sexual misconduct with respect to the Employer or any of its subsidiaries or any of their employees, vendors, suppliers or customers, (c) Employee’s substantial neglect of duties or failure to follow an explicit, lawful directive of the Board of Directors of Employer, provided that such act of neglect or failure is not cured within ten (10) days after written notice thereof to Employee by Employer, (d) the Employee’s willful, knowing or deliberate misappropriation of funds or assets of Employer or one of its subsidiaries for personal use, or (e) the Employee’s willful, knowing or deliberate misconduct in the performance of Employee’s duties.
	iii.		If the Employee’s employment is terminated pursuant to Section 8(b), the Employer shall pay to the Employee any unpaid salary and other benefits and reimbursable expenses accrued and owing to the Employee in accordance with law, but in any event within not more than ten (10) days after such termination. Such payment shall be in full and complete discharge of any and all liabilities or obligations of the Employer to the employee hereunder. The Employee sh