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                                                                  Exhibit 10.26

                          FORM OF EMPLOYMENT AGREEMENT

                                    Parties

   This Employment Agreement (the "Agreement") made as of     , 2000 is entered
into by and between Endo Pharmaceuticals Holdings Inc., with its principal
business address at 223 Wilmington-West Chester Pike, Chadds Ford, Pennsylvania
19317 (the "Company"), and John W. Lyle, residing at 28 Inlet Terrace, Belmar,
New Jersey 07719 ("Executive").

                                    Recitals

   A. The Company has entered into an Agreement and Plan of Merger as may be
amended and restated from time to time, dated as of November 26, 1999 (the
"Merger Agreement") among the Company, Endo Inc., a Delaware corporation and a
newly formed wholly owned subsidiary of the Company ("Sub"), and Algos
Pharmaceutical Corporation, a Delaware Corporation ("Algos"), pursuant to
which, among other things, Algos will merge with and into Sub.

   B. The Company desires to retain Executive to provide the services
hereinafter set forth.

   C. Executive is willing to continue to provide such services to the Company
on the terms and conditions hereinafter set forth.

                               Terms of Agreement

   The parties agree as follows:

1. Employment.

   1.1 The Company hereby retains Executive's employment (subject to the
provisions of Section 6) in a senior executive capacity with the Company. The
Executive shall perform such duties and services, consistent with his
positions, as may be assigned to him from time to time by the Board of
Directors of the Company or its designee. In furtherance of the foregoing, the
Executive hereby agrees to perform well and faithfully the aforesaid duties and
responsibilities and the other reasonable senior executive duties and
responsibilities assigned to him from time to time by the Board of Directors of
the Company or its designee. During the Employment Period, the Company shall
provide the Executive with an office, secretarial and other support services
comparable to those provided to other senior executive officers of the Company
at its headquarters and at the Company's facility at 1333 Campus Parkway,
Neptune, New Jersey 07753 for so long as the Company maintains such facility
and afterward at another facility of the Company convenient to the Executive to
be chosen at Executive's discretion.

   1.2 Executive hereby accepts this employment on and subject to the terms and
conditions set forth in this Agreement, and shall use his reasonable best
efforts to promote the Company's interests.

2. Compensations Benefits.

   2.1 Salary. During the Employment Period, as compensation for Executive's
performance of Executive's duties under this Agreement, the Company shall pay
Executive a Base Salary ("Base Salary") at the annual rate of $325,000 from the
date of this Agreement through December 31, 2000. Thereafter, the Base Salary
shall be subject to increase at the option and in the sole discretion of the
Board of Directors of the Company annually. The Base Salary shall be payable in
installments pursuant to the Company's executive payroll policies in force at
the time of payment (but not less frequently than monthly) for the month or
shorter pay period then ended, subject to applicable withholding for FICA,
income taxes and other required payroll deductions.

     2.1.1 The Executive's Base Salary will be supplemented by payment of
  performance bonuses at the option and in the sole discretion of the Board
  of Directors of the Company annually.

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   2.2 Expenses. During the Employment Period, to the extent such expenditures
meet the requirements and the policies of the Company for senior executives,
the Company shall reimburse Executive promptly for all reasonable travel,
entertainment, parking, business meeting and similar expenditures in pursuance
and furtherance of the Company's business, upon presentation of proper vouchers
or receipts therefor and in accordance with the Company's customary procedures.
During the Employment Period, the Company shall provide Executive with a mobile
phone, facsimile machine and photocopying machine for his home office, and the
Company shall reimburse Executive for expenses incurred in the use thereof by
Executive in pursuance and furtherance of the Company's business, upon
presentation of proper vouchers or receipts therefor and in accordance with the
Company's customary procedures.

   2.3 Other Benefits. Executive shall be entitled to participate, at
Executive's option and as eligible, in any Company plans for the benefit of
officers and key employees as from time to time established, including, without
limitation, profit sharing, pension plan, stock option plans, performance bonus
plans, disability, medical and group life insurance. If the Company shall not
provide coverage for comprehensive family major medical, family dental,
disability and life insurance to Executive, he shall be reimbursed for the cost
of such coverage acquired by him elsewhere.

3. Employment Period; Termination.

   3.1 Employment Period. Executive's employment term ("Employment Period")
shall terminate on the fifth anniversary of the date of this Agreement unless
earlier terminated pursuant to Section 3.2.

   3.2 Termination.

     3.2.1 Termination for Cause. The Company may, upon the approval of a
  majority of the members of the Board of Directors of the Company, discharge
  Executive and terminate the Employment Period for cause. Discharge for
  cause shall be effective ten (10) days after Executive's receipt of written
  notice of discharge or at such later date as may be specified in that
  notice, provided such notice contains the specific reasons and the specific
  events upon which discharge is predicated. If Executive is discharged for
  cause, Executive shall only be entitled to Base Salary through the
  effective date of the discharge or termination. As used in this paragraph,
  "cause" shall mean any or all of the following:

       (i) Willful and grossly negligent action taken by Executive which
    materially harms, or can reasonably be expected to harm, the Company;

       (ii) Commission of a fraud, misappropriation, embezzlement, or
    criminal misconduct that would constitute a felony or adversely affect
    the reputation of the Company or any of its affiliates (for purposes of
    this Employment Agreement the term "affiliates" shall be deemed to
    include, but not necessarily be limited to the corporation to which the
    Company assigns its rights to the name, "Endo Pharmaceuticals" or any
    variation thereof); or

       (iii) If Executive shall be in breach of, or in default under, any
    material provision, term or covenant of Article 4 of this Agreement
    (other than a breach or default described in clauses (i) and (ii)) and
    shall fail to cure such breach or default within a reasonable time
    after written notice describing such breach or default in particular by
    the Company; provided, however, that the Company need not give such
    notice of, and Executive shall not have such opportunity to cure, any
    material breach or default of any provision, term or covenant of
    Article 4 of this Agreement if Executive had previously committed such
    material breach or default and received notice thereof pursuant to this
    clause (iii). The Employment Agreement shall only be terminable by the
    Company with cause; provided, however, that "cause" shall in no event
    include failure by Executive to perform services under this Agreement
    because the Company and Executive have failed to agree on the nature,
    amount, scope or timing of his services.

   3.2.2 Termination for other than Cause. During the Employment Period, the
Company may terminate Executive's employment at any time for other than cause
on 30 days' written notice to Executive. Such termination shall be deemed
effective 30 days after Executive's receipt of the written notice of
termination or at such later date as may be specified in such notice.

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   3.2.3 Involuntary Termination. If, during the Employment Period, Executive
becomes ill, disabled or otherwise incapacitated so as to be unable regularly
to perform his usual duties for a period in excess of 120 consecutive days, or
more than 150 days in any consecutive twelve-month period (such condition being
hereinafter referred to as "Disability"), the Company shall have the right,
with the approval of a majority of the members of the Board of Directors, to
terminate Executive's employment on 30 days' written notice to Executive (such
termination, or Executive's death, being herein referred to as "Involuntary
Termination"). If the Executive dies during the Employment Period, his
employment hereunder shall be deemed to have ceased as of the date of his
death.

   3.2.4 Voluntary Termination. Any termination of the employment of the
Executive hereunder effectuated by the Executive shall be deemed to be a
"Voluntary Termination." A Voluntary Termination shall be deemed to be
effective immediately upon such termination.

   3.3 Effect of Termination of Employment.

     3.3.1 Upon the termination of the Executive's employment hereunder
  pursuant to a Voluntary Termination or a Termination for Cause, neither the
  Executive nor his beneficiary or estate shall have any further rights or
  claims against the Company under this Agreement except to receive:

       (i) the unpaid portion of the Base Salary provided for in Section
    2.1, computed on a pro rata basis to the date of termination; and

       (ii) reimbursement for any expenses for which the Executive shall
    not have theretofore been reimbursed as provided in Section 2.2.

     3.3.2 Upon the termination of the Executive's employment hereunder
  pursuant to an Involuntary Termination or a Termination for other than
  Cause, neither the Executive nor his beneficiary or estate shall have any
  further rights or claims against the Company under this Agreement except to
  receive:

       (i) the unpaid portion of the Base Salary provided for in Section
    2.1, to the fifth anniversary of the date of this Agreement;

       (ii) reimbursement for any expenses for which the Executive shall
    not have theretofore been reimbursed as provided in Section 2.2; and

       (iii) the continuation of the benefits afforded pursuant to Section
    2.3(i) through the fifth anniversary of the date of this Agreement.

4. Executive's Covenants.

   4.1 Executive agrees that he will not from and after the date hereof through
the fifth anniversary of the termination of the Employment Period (for whatever
reason), directly or indirectly, through any other person, firm or corporation,
solicit, raid, entice, induce or encourage any employee, sales representative,
agent or consultant of or for the Company or its affiliates, to (i) cease his
or her association with or leave the employ of the Company or its affiliates,
(ii) solicit customers or suppliers of the Company or its affiliates for
Executive's or any other person's or entity's benefit or (iii) otherwise act in
violation of that person's obligations to the Company or its affiliates, and
Executive shall not authorize or knowingly approve the taking of such actions
by any other person.

   4.2 Executive acknowledges that, by reason of his employment with the
Company, he will obtain confidential or non-public proprietary knowledge or
information pertaining to the business and policies of the Company and its
affiliates. Executive agrees that during and after the term of this Agreement,
he shall not disclose, without the prior written consent of the Board of
Directors of the Company or the Chairman of the Board, any confidential or non-
public proprietary knowledge or information pertaining to the Company and its
affiliates ("Confidential Information"), including, but not limited to (1)
trade secrets concerning the business and affairs of the Company and its
affiliates, product specifications, data, know-how, formulae, compositions,
processes, designs, sketches, photographs, graphs, drawings, samples,
inventions and ideas, past, current and

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planned research and development, current and planned manufacturing or
distribution methods and processes, customer lists, information regarding
customers of the Company (including such customers' requirements), price lists,
market studies, business plans, computer software and programs (including
object code and source code), computer software and database technologies,
systems, structures, and architectures (and related formulae, compositions,
processes, improvements, devices, know-how, inventions, discoveries, designs,
methods and information); (2) information concerning the business and affairs
of the Company and its affiliates (which includes historical financial
statements, financial projections and budgets, historical and projected sales,
capital spending budgets and plans, the names and backgrounds of key personnel,
personnel training and techniques and material) however documented; and (3)
notes, analyses, compilations, studies, summaries and other materials prepared
by or for the Company and its affiliates containing or based, in whole or in
part, on any information included in the foregoing. Confidential Information
shall not include information that: (a) was known to Executive prior to his
first employment with the Company or its affiliates, or (b) is public
knowledge, or becomes public knowledge other than by action (or omission) of
(i) Executive or persons obtaining access to such information directly or
indirectly from Executive or (ii) other persons disclosing such information in
breach of obligations to the Company.

   4.3 Executive acknowledges and agrees that all memoranda, notes, reports,
records and other documents made or compiled by Executive, or made available to
Executive prior to or during the term of this Agreement concerning the
Company's and its affiliates, business, shall be the Company's or its
affiliates' property and shall be delivered to the Company on the termination
of this Agreement or at any other time on request by the Board of Directors or
Chairman of the Board of the Company.

   4.4 Executive agrees that he will not, from and after the date hereof
through the fifth anniversary of the termination of the Employment Period (for
whatever reason), (i) directly or indirectly engage in, represent in any way,
or be connected with, any business or activity (such business or activity being
hereinafter called a "Competing Business"), which engages in pain management,
generic pharmaceuticals or such other activities that (during Executive's
Employment Period) the Company engages in or intends to engage in and is set
forth in a detailed written business plan that has been submitted to the
Company's Board of Directors prior to the termination of the Executive's
Employment Period, within any state in which the Company or its affiliates
transact business, whether such engagement shall be as an officer, director,
owner, employee, partner, affiliate or other participant in any Competing
Business; or (ii) assist others in engaging in any Competing Business in the
manner described in the foregoing clause (i); provided, however, that it shall
not be a violation of this Section 4.4 for Executive (a) to be the registered
or beneficial owner of up to twelve percent (12%) of any class of capital stock
of U.S. Dermatalogics, Inc., and the amount and percentage ownership of shares
beneficially owned by Executive, as of the date of this Agreement is set forth
on Schedule 4.4 hereto, (b) to be the registered or beneficial owner of shares
of any class of capital stock of a Competing Business that Executive owns as of
the date of this Agreement, the amounts and percentage ownership of which is
set forth on Schedule 4.4 hereto or (c) to become the registered or beneficial
owner of up to five percent (5%) of any class of the capital stock of a
Competing Business, provided that in the case of each of clauses (a), (b) and
(c) Executive does not actively participate in the business of such Competing
Business until such time as this covenant expires. The Executive acknowledges
and understands that the foregoing restrictions may limit his ability to earn a
livelihood in a business similar to the business of the Company, but he
nevertheless believes that he has received and will receive sufficient
consideration and other benefits in connection with the Company's issuance of
certain stock to the Executive, as an employee of the Company and as otherwise
provided hereunder to clearly justify such restrictions which, in any event
(given his education, skills and ability), the Executive does not believe would
prevent him from earning a living; provided, however, that the Executive may
actively engage in a Competing Business during the term of the covenant set
forth in this Section 4.4 if the Executive provides written notice to the
Company prior to engaging in any such Competing Business and the Executive
thereafter receives the written consent of the Board of Directors of the
Company to engage in such Competing Business. Notwithstanding the foregoing,
during the period from and after the date of this Agreement through the fifth
anniversary of the termination of the Employment Period, the Executive shall
keep the Board of Directors apprised of his business activities.


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   4.5 The Executive shall promptly disclose, grant and assign to the Company
for its sole use and benefit any and all inventions, improvements, technical
information and suggestions relating in any way to the business of the Company,
which he may develop or acquire during the Employment Period (whether or not
during usual working hours), together with all patent applications, letters
patent, copyrights and reissues thereof that may at any time be granted for or
upon any such invention, improvement or technical information. In connection
therewith:

     (i) The Executive shall without charge, but at the expense of the
  Company, promptly at all times hereafter execute and deliver such
  applications, assignments, descriptions and other instruments as may be
  reasonably necessary or proper in the reasonable opinion of the Company to
  vest title to any such inventions, improvements, technical information,
  patent applications, patents, copyrights or reissues thereof in the Company
  and to enable it to obtain and maintain the entire right and title thereto
  throughout the world; and

     (ii) The Executive shall render to the Company at its expense (including
  a reasonable payment for the time involved in case he is not then in its
  employ) all such assistance as it may reasonably require in the prosecution
  of applications for said patents, copyrights or reissues thereof, in the
  prosecution or defense of interferences which may be declared involving any
  said applications, patents or copyrights and in any litigation in which the
  Company may be involved relating to any such patents, inventions,
  improvements or technical information.

   4.6 The provisions of this paragraph 4 shall survive the termination or
expiration of this Agreement irrespective of the reason therefor.

   4.7 Executive acknowledges that the services to be rendered by him are of a
special, unique and extraordinary character and, in connection with such
services, he will have access to Confidential Information vital to the
Company's business. By reason of this, Executive consents and agrees that if he
violates any of the provisions of this Agreement with respect to the diversion
of the Company's or its affiliates' employees or confidentiality, the Company
or its affiliates would sustain irreparable harm and, therefore, in addition to
any other remedies which the Company may have under this Agreement or
otherwise, the Company shall be entitled to apply to any court of competent
jurisdiction for an injunction restraining Executive from committing or
continuing any such violation of this Agreement, and Executive shall not object
to any such application.

   5. Indemnification. The Company agrees to indemnify and hold harmless
Executive on the terms set forth in the Company's Bylaws and Certificate of
Incorporation as they exist on the date of this Agreement and in any event to
the same extent that the Company provides indemnification for its other
executive employees.

   6. Conflicting Duties. The Company acknowledges that during his tenure
pursuant to this Employment Agreement, Executive shall not be required to work
"full-time" for the Company and shall work on an as-needed basis, the dates and
times of which to be mutually agreed upon by the Company and Executive. In
addition, the Company acknowledges that during the Employment Period Executive
shall retain the right to pursue and/or fulfill other business opportunities,
commitments and obligations so long as such opportunities, commitments and
obligations would not constitute a breach by Executive of his obligations under
Section 4 of this Employment Agreement.

7. Miscellaneous.

   7.1 Notices. Any notice or communication given by either party hereto to the
other party shall be in writing and shall be deemed duly given (i) when
personally delivered, or (ii) when five days have elapsed after its
transmittal, by registered or certified mail, return receipt requested, postage
prepaid, or (iii) if transmitted by telecopy, when sent, or (iv) if transmitted
by telex (or equivalent service), when the sender's receiving apparatus has
printed the answerback of the addressee on a copy of the telex message. Notices
shall be addressed as follows:

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   If to the Company:

     Endo Pharmaceutical Holdings Inc.
     223 Wilmington-West Chester Pike
     Chadds Ford, Pennsylvania 19317
     Telecopier No.: 610-558-9683
     Attention: Chief Executive Officer

   If to Executive:

     Mr. John W. Lyle
     28 Inlet Terrace
     Belmar, New Jersey 07719

   With copies in each case to:

     Kleinberg, Kaplan, Wolff & Cohen, P.C.
     551 Fifth Avenue
     New York, New York 10176
     Telecopier No.: 212-986-8866
     Attention: James R. Ledley, Esq.

     Skadden, Arps, Slate, Meagher & Flom LLP
     Four Times Square
     New York, New York 10036-6522
     Telecopier No.: 212-735-2000
     Attention: Eileen T. Nugent, Esq.

Any person entitled to receive notice (or a copy thereof) may designate in
writing, by notice to the others, such other address to which notices to such
person shall thereafter be sent.

   7.2 Entire Agreement; Amendment; Waiver. This Agreement contains the entire
understanding of the parties covering its subject matter and supersedes all
prior agreements between the parties. This Agreement may be amended or waived
only by a writing signed by both parties. The waiver by either party of a
breach of any provision of this Agreement shall not operate or be construed as
a waiver of any other breach of that provision nor as a waiver of any breach of
another provision.

   7.3 Headings. The headings of the paragraphs of this Agreement are inserted
for convenience only and shall not be considered a part of or be referred to in
interpreting this Agreement.

   7.4 Governing Law; Interpretation; Service of Process. This Agreement shall
be construed in accordance with and governed for all purposes by the laws and
public policies of the State of New Jersey applicable to contracts executed and
to be wholly performed in that State. Service of process in any dispute shall
be effective: (a) upon the Company, if service is made on any officer of the
Company; and (b) upon Executive, if service is made to Executive's residence
last known to the Company with an information copy to Executive at any other
residence, or care of a subsequent employer, of which the Company may be aware.

   7.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original, but all of which
together shall constitute one and the same instrument.

   7.6 Assignment. Assignment of the rights and obligations of this Agreement
shall bind and enure to the benefit of any successor of the Company by
reorganization, merger or consolidation, or any assignee of all or
substantially all of the Company's business and properties, provided that the
successor shall assume the obligations of the Company under this Agreement.
Executive's rights or obligations under this Agreement may not be assigned by
Executive.

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   7.7 Further Assurances. Each of the parties agrees to execute, acknowledge,
deliver and perform, and/or cause to be executed, acknowledged, delivered and
performed, at any time and/or from time to time, as the case may be, all such
further acts, deeds, assignments, transfers, conveyances, powers-of-attorney
and/or assurances as may be necessary and/or proper to carry out the provisions
and/or intent of this Agreement.

   7.8 Severability. If any one or more of the terms, provisions, covenants or
restrictions of this Agreement shall be determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated,
unless the parties hereto would not have entered into this Agreement without
said invalid, void or unenforceable term, provision, covenant or restriction.
If, moreover, any one or more of the provisions contained in this Agreement
shall for any reason be determined by a court of competent jurisdiction to be
excessively broad as to duration, geographical scope, activity or subject, it
shall be construed by limiting or reducing it, so as to be enforceable to the
extent compatible with then applicable law.

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                                   Execution

   The parties have duly executed this Agreement as of the date first above
written whereupon this Agreement enters into full force and effect in
accordance with its terms.

   ATTEST:                                ENDO PHARMACEUTICALS HOLDINGS INC.,
                                          a Delaware Corporation


By: _________________________________     By: _________________________________
  Name:                                     Name:
  Title:                                    Title:

                                          -------------------------------------
                                          John W. Lyle

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                                  Schedule 4.4

<TABLE>
<CAPTION>
Competing Business        Shares Beneficially Owned   Percentage Ownership
------------------        -------------------------- -----------------------
<S>                       <C>                        <C>
U.S. Dermatalogics, Inc.  970,250 shares of common   7.9%, fully diluted for
                          stock                      the exercise of the
                                                     options and issuance
                          23,944 shares of common    the issuance of the
                          issuable under a           23,944 shares issuable
                          convertible note           shares issuable upon
                                                     conversion of the note
                          Options to purchase 25,000
                          shares of common stock
Warner Lambert            Less than 500 shares       Less than 1.0%
American Home Products    Less than 500 shares       Less than 1.0%
</TABLE>

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