**Exhibit4.2.3**
|   | STRINGER SAUL LLP |
|--------|-------------------|

**DATED 1 MARCH 2006**

**(1)  SKYEPHARMA PLC**

**and**

**(2)  DR KENNETHCUNNINGHAM**

----

**SERVICEAGREEMENT**

----

17 HanoverSquare  London  W1S 1HUTel: 020 7917 8500  Fax: 020 7917 8555

This Agreement is made onthe 1 day of March 2006

**BETWEEN:**

1.                                       **SKYEPHARMA PLC**a company incorporated within England andWales (registered number company No.00107582) whose registered office is at 105Piccadilly, London W1J 7NJ (the “Company”)

and

2.                                       **DR KENNETH CUNNINGHAM**of Springwood House, Penn Road,Beaconsfield, Buckinghamshire HP9 2TS (“theExecutive”)

**IT ISHEREBY AGREED AS FOLLOWS:**

**1****                                         Interpretation**

1.1                                 Inthis Agreement the following words and expressions shall have the followingmeanings:

1.1.1                                                “GroupCompany” - a company which is from time to time a Subsidiary or a HoldingCompany of the Company or a Subsidiary (other than the Company) of a HoldingCompany of the Company

1.1.2                                                “Group”the Company and any Group Companies from time to time;

1.1.3                                                “theBoard” - the board of directors from time to time of the Company including anycommittee of the board duly appointed by it;

1.1.4                                                “Subsidiary”and “Holding Company” - the meanings respectively ascribed thereto by s. 736 ofthe Companies Act 1985 as originally enacted;

1.1.5                                                “theERA”- the Employment Rights Act 1996; and

1.1.6                                                “TerminationDate” means the date of termination of the Executive’s employment.

1.2                                 Referencesin this Agreement to statutes shall include any statute modifying, re-enacting,extending or made pursuant to the same or which is modified, re-enacted, orextended by the same.

1.3                                 Headingsare for ease of reference only and shall not be taken into account in theconstruction of this Agreement.

**2****                                         Appointment**

2.1                                 TheCompany hereby appoints the Executive and the Executive agrees to serve theCompany as Chief Operating Officer or in such position as the Board may specifyfrom time to time in its absolute discretion. It is the intention that theExecutive will be appointed as a Director of the Company by not later than 31 July 2006.Any breach by the Company of the obligation to 

                                                appointthe Executive as a director by 31 July 2006 shall be regarded as arepudiatory breach of contract by the Company.

2.2                                 The Company may from time to time appoint anyother person or persons to act jointly with the Executive.

2.3                                 If the Executive is unable to fully carry outhis duties for whatever reason the Company may, at its absolute discretion,engage or employ any other person or persons to perform some or all of theExecutive’s duties on a temporary basis until the Executive is able fully toresume the proper performance of his duties hereunder.

2.4                                 Nothing in this Agreement shall mean or bedeemed to mean that the Company is obliged to provide work to the Executive orthat the Executive has the right to perform services for the Company or theGroup Company.

**3****                                         Secondment**

The Company shall be entitled to second the Executive’sservices on a full or part time basis to any Group Company and the Executiveshall hold such offices of the Company and of any Group Company and performsuch duties and fulfil such obligations for a Group Company for such periods asthe Company may require but such secondments shall not release the Executive orthe Company from their respective obligations under this Agreement.

**4****                                         Warranties On Appointment**

4.1                                 Thefollowing warranties will be deemed to be given by the Executive to the Companyon the date of this Agreement and the said warranties will be deemed tocontinue to be accurate during the course of the Executive’s employment underthis Agreement until and unless he informs the Board in writing to thecontrary: -

4.1.1                                                tothe best of his knowledge he is physically and mentally fit to be employed bythe Company. He will disclose to the Board or to the Company’s nominated doctorany information, which may lead the Company to believe otherwise. He herebyconsents to the disclosure of his medical records on request by the Company atany time prior to or during the course of his employment hereunder;

4.1.2                                                heis legally entitled to reside and work in the United Kingdom and will produceto the Company (who will take copies of the same) before commencement of hisemployment all documents that the Company reasonably requires to ensure itscompliance with the provisions of theAsylum and Immigration Act 1996.

4.1.3                                                byaccepting the terms of this Agreement he will not thereby breach any express orimplied term of any other contract and he agrees to indemnify the Companyagainst all costs claims or demands suffered by it as a result of any suchbreach or any allegation of such a breach;

4.1.4                                                hehas disclosed to the Board all information which might lead to a conflictbetween his personal interests and the interests of the Company in the light ofhis knowledge of the Company’s current plans and activities. The saiddeclaration includes without limitation a list of all his current substantialshareholdings directorships, partnerships and appointments;

4.1.5                                                thecontents of his CV and any other documents which he has disclosed to theCompany concerning his past history are true;

4.1.6                                                heholds and will continue to hold any qualifications which he has indicated tothe Company that he holds and any qualifications which the Company has indicatedto him as being necessary for the performance of his duties under thisAgreement;

4.1.7                                                heknows of no circumstances which could either:

4.1.7.1                                                               leadto a claim by a third party against the Company as a result of something doneby  him; or

4.1.7.2                                                               beviewed by the Company as a breach by him of his obligations under anyemployment agreement with the Company.

**5****                                         Termof Appointment**

5.1                                 Subjectto clause 18 hereof, the Executive’s employment shall commence on 24 April 2006and continue until terminated by the Company giving to the Executive not lessthan twelve months written notice, or by the Executive giving to the Companynot less than six months written notice.

5.2                                 Oncenotice to terminate has been given by either party in accordance with clause5.1 hereof, or any other purported termination of the Agreement by either partyor if notice of a shorter period than that required by clause 5.1 hereof hasbeen given, the Company reserves the right, exercisable in its absolutediscretion, to terminate the Executive’s employment by making a payment in lieuof the notice required by clause 5.1 or any unexpired part of such notice.

5.3                                 Anypayment in lieu of notice shall consist of a sum equivalent to the Executive’sbasic salary (at the rate applicable at the date notice is given) and thefollowing benefits provided by the Company: car allowance, pension contributions,and any insurance benefits which the Executive is receiving at the date noticeis given, or a payment of the monetary value in lieu thereof, for the noticeperiod required by clause 5.1 or any unexpired period thereof and shall besubject to such statutory deductions as the Company is required to make. Forthe avoidance of doubt, the payment in lieu of notice shall not include anybenefits not specified in this clause 5.3, or entitlement to annual or otherbonuses or any rights under the Company’s share plans from time to time.

5.4                                 TheCompany reserves the right to make such payment in lieu of notice (or any partthereof) in equal instalments at monthly intervals in advance during 

                                                therelevant period. The Executive undertakes to inform the Company in writing assoon as he receives an offer of suitable alternative employment during therelevant period and of the amount of the salary and benefits he will beentitled to receive and to commence that employment as soon as is reasonablypracticable. The Executive agrees that the amount of the payment in lieu ofnotice shall be reduced or extinguished by the gross amount of any moniespayable and the value of any benefits provided directly or indirectly to theExecutive arising out of such alternative employment with effect from the firstday of his paid alternative employment and the Executive undertakes to repay tothe Company within 14 days of receipt any monies paid in advance which relateto any period of paid alternative employment. The Executive agrees to provideto the Company within 14 days of written demand for the same written evidence(in a form reasonably satisfactory to the Company) of salary and benefitsreceived by the Executive from his new employment during the relevant period.

5.5                                 Inthe event that the employment of the Executive is terminated by the Companywithout notice on or before 31 July 2006 (other than for one of thereasons detailed in clause 18.1 hereof) the Company will pay to the Executive alump sum payment in lieu of 12 months’ notice within 28 days of the TerminationDate.

5.6                                 Inthe event that the employment of the Executive is terminated by the Company onor after 1 August 2006 without notice (other than for one of the reasonsdetailed in clause 18.1 hereof) the Company will pay to the Executive a lumpsum payment in lieu of 6 months’ notice within 28 days of the Termination Dateand the remaining balance of six months’ notice will be paid in instalmentsstarting 6 months after the Termination Date, pursuant to clause 5.4 above.

5.7                                 Inthe event that the employment of the Executive is terminated by the Company onor after 1 August 2006 on notice (other than for one of the reasons detailedin clause 18.1 hereof) the Company will be entitled to place the Executive onGarden Leave for up to 6 months (pursuant to clause 6 hereof), and will pay tothe Executive a lump sum payment in lieu of 6 months’ notice within 28 days ofthe Termination Date and the remaining balance of notice (if any) will be paidin instalments starting 6 months after the Termination Date, pursuant to clause5.4 above.

5.8                                 Forthe avoidance of doubt:

5.8.1                                                Ifthe Company terminates the Executive’s employment other than in accordance withits rights under this Agreement any entitlement to damages for breach ofcontract will be assessed on the normal common law principles (including theExecutive’s obligation to mitigate his loss); and

5.8.2                                                Theright of the Company to make a payment in lieu of notice does not give rise toany right for the Executive to receive such a payment.

5.9                                 TheExecutive’s continuous employment with the Company will begin on 24 April 2006.No employment with a previous employer will count as part of the Executive’speriod of continuous employment with the Company.

5.10                          TheExecutive’s employment will terminate automatically without notice being givenon his 65th birthday.

**6****                                         GardenLeave Provision**

6.1                                 TheCompany reserves the right where either party to this Agreement gives notice(including short or no notice) to terminate this Agreement or otherwisepurports to terminate the Executive’s employment, to:

6.1.1                                                excludethe Executive from all or any of the Company or any Group Company’s places ofbusiness; or

6.1.2                                                torequire him to attend one of the Group Company’s offices to carry out specialprojects which are reasonably commensurate with his position and within hisskill and competence as directed by the Board; or

6.1.3                                                toforbid him to contact the employees, clients or suppliers of the Company or anyGroup Company, in relation to the business of the Company or any Group Companywith which he was concerned in the 12 months prior to being put on garden leave

for period(s) of upto 6 months of the Executive’s contractual notice period (the “Garden LeavePeriod”).

6.2                                 Wherethe Company exercises its rights under clause 6.1 above, it is relieved fromany obligation whatsoever to provide the Executive with work to do, or to allowthe Executive access to any premises of the Company or any Group Company, or tohave contact with or dealings with employees, clients or suppliers of theCompany or any Group Company in relation to the business of the Company or anyGroup Company, or to allow the Executive to carry out his normal duties and theExecutive’s normal duties under this Agreement will be suspended during suchperiod.

6.3                                 Duringany Garden Leave Period the Executive will, if requested, remain readilycontactable by providing telephone and other contact details and be availableto work for the Company save when the Executive is on holiday by prioragreement with the Company.

6.4                                 Duringthe Garden Leave Period the Executive’s salary and all other contractualbenefits shall not cease to be payable or provided by reason only of theCompany exercising its rights pursuant to sub clauses 6.1 and 6.2 of thisClause 6. The Executive’s holiday will continue to accrue during the GardenLeave period subject to clause 6.6 hereof. This Clause shall not affect thegeneral right of the Company to suspend in accordance with Clause 20.2 noraffect the rights and obligations of the parties prior to the service of such anotice.

6.5                                 Duringthe Garden Leave Period the Executive remains an employee of the Company and isbound by the terms of this Agreement (other than to perform work for theCompany unless specifically required to do so). In particular, the Executiveremains bound by his obligations of confidentiality, loyalty, good faith, andexclusive service to the Company, including those obligations set out inclauses 7 which obligations, inter alia, preclude the Executive from taking upany other employment during the Garden Leave Period if it would conflict withsuch obligations.

6.6                                 TheCompany reserves the right to require the Executive to take any accrued oroutstanding holiday entitlement during the Garden Leave period.

**7****                                         Powers,Duties, Workplace and Working Hours**

7.1                                 Duringthe continuance of his employment hereunder the Executive shall owe a duty offidelity and good faith to the Company which shall include the following:

7.1.1                                                unlessprevented by ill health or other unavoidable cause during Normal Working Hours(as defined in clause 7.3) the Executive shall devote the whole of his workinghours and of his attention and abilities to carrying out his duties hereunderand to the business of the Company and any Group Company, and use his bestendeavours to develop the business and interests of the Company and any GroupCompany and will not extend, develop or evolve the business of the Company andany Group Company other than through the Company and any Group Company and willbring to the attention of the Company any relevant business opportunities forthe Company or any Group Company of which the Executive becomes aware;

7.1.2                                                theExecutive shall diligently and faithfully serve the Company and its GroupCompanies to the best of his ability and carry out his duties in a proper andefficient manner and use his best endeavours to promote and maintain theinterests and reputation of the Company and of its Group Companies;

7.1.3                                                theExecutive shall exercise such powers and perform such duties in relation to thebusiness of the Company and/or of its Group Companies as may from time to timebe vested in or assigned to him by the Board;

7.1.4                                                theExecutive shall comply with all reasonable requests and directions from time totime given to him by the Board and with all rules and regulations fromtime to time laid down by the Company concerning its employees;

7.1.5                                                theExecutive shall keep the Board promptly and fully informed (in writing if sorequested) of his conduct of the business or affairs of the Company and/or itsGroup Companies and provide such explanations as the Board may reasonablyrequire;

7.1.6                                                theExecutive shall not at any time directly or indirectly and whether on his ownbehalf or on behalf of any third party entice or encourage or seek to entice orencourage any other employee of the Company or any other Company in the Groupto leave their employment;

7.1.7                                                theExecutive shall not at any time directly or indirectly and whether on his ownbehalf or on behalf of any third party entice or encourage or seek to entice orencourage any other consultant or contractor of the Company or any otherCompany in the Group to leave their engagement;

7.1.8                                                theExecutive shall promptly disclose to the Board any of the following informationwhich comes into his possession during his employment:

7.1.8.1                                                               theplans of any employees to leave the Company or any Group Company (whether aloneor in concert with other employees);

7.1.8.2                                                               theplans of any employee (whether alone or in concert with other employees) tojoin a competitor or to establish a business in competition with the Company orany Group Company;

7.1.8.3                                                               anysteps taken by any employee to implement either of such plans in clause7.1.8.1. and 7.1.8.2 above, including but not limited to any attempts toapproach or solicit clients or customers of the Company or any Group Company;

7.1.8.4                                                               themisuse by any employee or any third party of any confidential information (asdefined in clause 17) belonging to the Company or any Group Company;

7.1.8.5                                                               themisconduct of any employee or consultant or agent of the Company.

7.1.9                                                theExecutive shall be obliged to make disclosure under clause 7.1.6 notwithstandingthat to do so would involve disclosure of information pertaining to theExecutive’s own activities, including breaches by him of his contract ofemployment;

7.1.10                                          notat any time to knowingly make any untrue or misleading statements in any mediarelating to the Company or any Group Companies or do anything that is harmfulto the Company or any Group Company or any employee, clients or suppliers;

7.1.11                                          informthe Company Secretary of any change in his home address or telephone number,bank or building society details (for payment purposes) relevant qualificationsand licences or any criminal charges or convictions.

7.2                                 Subjectto clauses 2.4 and 3 the Executive’s normal place of work shall be the Company’spremises at 105 Piccadilly, London W1V 9FN but the Company reserves the rightto require the Executive to change his normal place of work to such otherpremises of the Company or Group Company within the Home Counties of the UnitedKingdom as the Company may from time to time require. The Executive will berequired to travel to such places (both within and outside the UK) in suchmanner and on such occasions as the Company may from time to time be requiredfor the proper performance of his duties.

7.3                                 Inperforming his duties, the Executive may be required to work outside the UK forconsecutive periods of up to two months. In that event, the Executive’sremuneration will continue to be paid by the Company in accordance with thisAgreement and there will be no changes to his other benefits, save as may benotified to him.

7.4                                 Subjectto clauses 2.4 and 3, the Executive’s normal working hours shall be five dayseach week from 9 am to 5.30 pm with a one-hour break for lunch together withsuch additional hours outside these hours as may be necessary for the properand efficient performance of the Executive’s duties. No payment will be madefor any additional hours worked by the Executive, nor will time off in lieu bepermitted except with the agreement of the Board.

**8****                                         WorkingTime Regulations Opt-Out**

The Executive acceptsthat by signing this agreement he has agreed that regulation 4(1) of theWorking Time Regulations 1998 (which limits the Executive’s working time to anaverage of 48 hours for each 7 days) shall not apply. The Executive accepts thatthis opt-out will be for an indefinite period but may be terminated by theExecutive giving 3 months written notice of termination of the opt-out to theCompany at any time

**9****                                         RestrictionsDuring Employment**

The Executive shall notduring the continuance of his employment hereunder (whether during or outsideof his employment or his working hours) without the prior consent in writing ofthe Board either alone or jointly with or on behalf of the another and whetherdirectly or indirectly and whether as principal, partner, agent, shareholder,director, employee, consultant or otherwise howsoever shall not engage in,carry on or be interested or concerned in any other business, trade,profession, occupation or fee-earning activity which is similar to or competeswith or may compete with the business of the Company or any Group Company orwhich may, in the opinion of the Board, cause a conflict of interest inconnection with the Executive’s duties to the Company or any Group Company. Thisshall not preclude him from holding not more than three per cent of any classof issued shares or other securities which are listed or dealt in on anyrecognised stock exchange by way of bona fide investment only.

**10****                                  Remuneration**

10.1                          Duringhis appointment the Company shall pay the Executive a basic salary at the rateof £250,000 per annum which shall accrue from day to day. Salary will accruefrom day to day and shall be payable in equal monthly 

                                               instalmentsin respect of the current month, on or before the last day of each month or thenearest working day thereto and shall be subject to all lawful deductions. Thesalary shall be deemed to include any fees receivable by the Executive as aDirector of the Company or any Group Companies.

10.2                           For thepurposes of the ERA the Executive authorises the Company at any time during hisemployment, and in any event upon termination howsoever arising, to deduct fromthe Executive’s remuneration under this Agreement any sums from time to timeowed by him to the Company or any Group Company, including but not limited toany outstanding loans, advances, excess holiday, the cost of repairing anydamage or loss of the Company’s property caused by the Executive (and ofrecovering it) and any other monies owed by the Executive to the Company.

**11****                                  Expenses**

The Company shallreimburse to the Executive all travelling, hotel, entertainment and otherout-of-pocket expenses reasonably incurred by him in the proper performance ofhis duties hereunder subject to his compliance with the Company’s guidelines asamended from time to time relating to expenses and to the production (ifrequired) of receipts, vouchers or other evidence of actual payment of theexpenses.

**12****                                ****Benefits**

Pension

12.1                           TheExecutive is eligible to participate in the Company’s stakeholder compliantpension scheme (“the Scheme”) subject to the rules of the Scheme for thetime being in force. Brief details of the Scheme a can be obtained from theCompany Secretary. The Company reserves the right at any time to change the rules ofthe Scheme, to terminate its participation in the Scheme or to substituteanother pension scheme.

12.2                           TheCompany will pay contributions at the rate of an amount equivalent to 17.5% perannum of the Executive’s basic salary to an Inland Revenue approved personalpension scheme of his choice.

12.3                           Thereis not a contracting-out certificate in force in respect of the Executive’semployment.

Car Allowance 

12.4                           TheExecutive will receive a car allowance of £9,000 per annum. This will be paidin 12 equal monthly instalments net of tax and National Insurance contributionswith the Executive’s salary each month.

Life Assurance

12.5                           TheCompany shall pay the premiums for providing the Executive with Life Assurancecover of four times his annual salary payable under clause 10.1, subject to anylimits imposed by HM Revenue a & Customs from time to time, to theapproval of the Company’s insurers to provide such insurance on terms 

                                                consideredreasonable by the Company and any terms and conditions they may impose and tothe rules of the Policy from time to time in force. The Executive agreesto undergo a medical examination if required to obtain such insurance cover.

Other Insurances

12.6                           Duringthe period of this Agreement, the Executive shall be entitled to participate inany private medical expenses insurance, permanent health insurance and criticalillness insurance schemes which the Company may make available to employees ofthe Executive’s status and which the Board expressly offer to the Executive. Anysuch participation shall be subject to and in accordance with the rules ofthe relevant scheme from time to time in force and participation in any suchscheme shall not affect the right of the Company to terminate the employmentunder any other provision of this Agreement.

12.7                           TheCompany will have not liability to pay any benefit to the Executive under anyscheme referred to in clause 12 above, unless it first receives payment of thebenefit from the insurers of the benefits under the relevant scheme.

12.8                           Anybenefits provided by the Company or any Group Company to the Executive whichare not expressly referred to in this Agreement shall be regarded as ex gratiaand made at the absolute discretion of the Company and shall not confer anycontractual entitlement upon the Executive.

Participation in SharePlans and Bonus Arrangements

12.9                           TheExecutive shall be entitled to participate in any bonus or share plan operatedby the Company from time to time at a level commensurate with his position inthe Company subject always to the rules of the relevant plan from time totime. For the avoidance of doubt and without prejudice to the generality of theforegoing the Executive will currently be entitled to participate in thefollowing arrangements:-

The SkyePharma PLCDeferred Share Bonus Plan;

The SkyePharma PLC2004 Long-Term Incentive Plan; and

The SkyePharma PLCInternational Share Purchase Plan.

Under the SkyePharma PLC Deferred Share Bonus Plan the Executive’scurrent maximum annual bonus potential will be 100% of his basic annual salaryfrom time to time.

Special SharePurchase & Matching Clause

12.10                     The Companyrequires executives at this level to hold a significant number of shares in thecapital of the Company. In the case of the Chief Operating Officer, the targetfor share ownership is shares in the Company with an aggregate purchase priceof 2 x the Executive’s annual salary (as specified in clause 10.1), such targetto be achieved within 3 years of the date his employment with the Companystarted. If the Executive acquires ordinary shares in the Company during 

                                                theperiod commencing on 6 February 2006 and finishing prior to 24 February 2006,the number of shares acquired during this period with an aggregate purchaseprice up to a maximum of 1/3rd of the Executive’s salary as set out in Clause10.1 of this Agreement (the “Executive Shares”), shall qualify for an award ofshares provided by the Company (“Matching Shares”). After completion of thisAgreement, the Company will grant an award of Matching Shares as soon aspracticable after the acquisition of the Executive Shares. The maximum MatchingShare award shall be 2 Matching Shares for every Executive Share. The minimumMatching Share award shall be one Matching Share for every Executive Share.  Matching Shares shall be released as follows:-

12.10.1                                    50%of the total number of Matching Shares granted shall be released to theExecutive on the first anniversary of their date of grant subject to theExecutive satisfying the following conditions:-

12.10.1.1                                                   continuedemployment by a Group Company over this period; and

12.10.1.2                                                   retentionof his associated Executive Shares over this period;

12.10.2                                    thebalance of Matching Shares not released in accordance with clause 12.10.1 aboveshall be released to the Executive on the second anniversary of their date ofgrant subject to the Executive satisfying the following conditions:-

12.10.2.1                                                   continuedemployment by a Group Company over this period; and

12.10.2.2                                                   retentionof his associated Executive Shares over this period.

It should be noted thatthis Clause is a summary of the Share Purchase & Matching Agreement.If there is any conflict between this Clause and the terms of the SharePurchase & Matching Agreement, the terms of the Share Purchase &Matching Agreement shall have precedence. In the event that the Executive’semployment is terminated by the Company (other than for one of the reasonsdetailed in clause 18.1 hereof) the Company will ensure that shares purchasedby the Executive between 6 and 24 February 2006 shall be matched by the Companyon a one for one basis.

**13****                                  Holidays**

13.1                           The Company’sholiday year runs from 1 January to 31 December (“Holiday Year”).

13.2                           Inaddition to normal bank and other public holidays in England, the Executiveshall be entitled in every Holiday Year to 25 working days paid holiday whichshall be calculated pro rata, to be taken at such time or times as may beapproved by the Chairman of the Board (“the Chairman”). As much notice aspossible should be given and no firm arrangements made until the Chairman’s agreementhas been given. For the purposes of the Working Time Regulations, the Executiveis required to take a minimum of 20 

                                                daysholiday (pro rata) including normal bank and public holidays in England in eachHoliday Year.

13.3                           TheExecutive may, with the consent of the Chairman, carry forward up to 5 days ofhis annual holiday entitlement to the next Holiday Year. No payment in lieu ofuntaken holiday entitlement will be made except in accordance with clause 13.4.

13.4                           Paidholiday entitlement shall accrue at the rate of 2.08 working days per month ofcompleted service in each calendar year and on the determination of hisemployment hereunder the Executive shall be entitled to pay in lieu ofoutstanding holiday entitlement in respect of that calendar year or shall berequired to repay to the Company for holiday taken in excess of his actualentitlement and for the purposes of this clause the basis of calculation shallbe 1/260 annual salary for each day’s holiday entitlement. The Company reservesthe right to require the Executive to take any accrued unused holidayentitlement during his period of notice.

13.5                           TheExecutive may not convert a period of holiday into a period of absence due tosickness or injury if he becomes incapacitated immediately before or during aperiod of holiday, without the prior agreement of the Board.

13.6                           If theExecutive is dismissed and the principal reason for his dismissal is misconductor if the Executive fails to give sufficient notice to terminate hisemployment, the Executive will not be entitled to any payment in lieu of anyaccrued holiday entitlement in excess of the statutory minimum to which he isentitled under the Working Time Regulations 1998.

**14****                                  Incapacity**

14.1                           If theExecutive is absent from work due to illness or accident he shall notify theChairman as soon as possible and if this incapacity continues for seven or moreconsecutive days he shall on the seventh day of such absence and on eachsucceeding seventh day submit a doctor’s certificate to the Company. If theExecutive is absent from work for less than seven days, the Company may requirethe Executive to provide a sickness report form as evidence of his illness orincapacity.

14.2                           Withoutprejudice to the Company’s right to terminate this Agreement pursuant to clause18.2, if the Executive is absent from work due to Incapacity duly notified andcertified in accordance with clause 14.1 the Company will pay the Executive’sremuneration and benefits due under this Agreement for a maximum of a totalaggregate period of 90 working days in any period of 12 calendar months. Thereafter,the payment of remuneration and provision of benefits shall be at the absolutediscretion of the Company. Exercise of discretion on one occasion, shall notimply a contractual entitlement.

14.3                           Theremuneration paid under clause 14.2 for absence due to Incapacity shall includeany statutory sick pay (SSP) payable and when this is exhausted shall bereduced by the amount of social security sickness benefit or other benefitsrecoverable by the Executive (whether or not recovered). For SSP purposes theExecutive’s qualifying days are Monday to Friday.

14.4                           For thepurposes of clauses 14.2 and 14.3 above, “Incapacity” shall mean any illness,accident or other likely cause but excluding any illness or accident caused bythe Executive’s own negligence which prevents the Executive from performing hisduties hereunder.

14.5                           TheCompany reserves the right to require the Executive at any time to submithimself for examination by a doctor appointed by the Company at the Company’sexpense.

14.6                           If theExecutive is caused to be incapable of performing his duties andresponsibilities hereunder by a third party and the Company wishes to bring anaction against such third party the Executive will (at the Company’s expense)provide all such assistance and co-operation as the Company may reasonablerequire for the purpose of prosecuting such an action.

**15****                                  Inventionsand Improvements**

15.1                           If theExecutive creates or discovers or participates in the creation or discovery ofany inventions or Intellectual Property during the course of his employmentwith the Company, the Executive shall promptly give to the Company full detailsof such inventions or Intellectual Property and if such inventions or IntellectualProperty in the opinion of the Company relate to or are capable of being usedin the business for the time being carried on by the Company or any GroupCompany or if such inventions or Intellectual Property shall be an inventionbelonging to the employer as defined in Section 39 (1) of the *Patents Act* 1977, then without prejudice to any other rightof the Company or any Group Company any such inventions or IntellectualProperty shall be the absolute property of the Company and the Executive shallforthwith and from time to time both during his employment and thereafter atthe request and expense of the Company:

15.1.1                                          giveand supply all such information, data, drawings and assistance as may benecessary to enable the Company to exploit such inventions or IntellectualProperty to the best advantage;

15.1.2                                          executeall documents and do all things which may be necessary or desirable forobtaining patent or other protection for the inventions or IntellectualProperty in such parts of the world as may be specified by the Company and forvesting the same in the Company or as it may direct;

15.1.3                                          notdo any act or fail to do any act which might invalidate or adversely affect anyinventions or Intellectual Property.

15.2                           TheExecutive irrevocably appoints the Company to be his attorney in his name andon his behalf to sign execute or do any such instrument or thing and generallyto use his name for the purpose of giving to the Company (or its nominee) thefull benefit of the provisions of this clause 15 and in favour of any thirdparty a certificate in writing signed by any director or the Secretary of theCompany that any instrument or act falls within the authority conferred by thisclause shall be conclusive evidence that such is the case.

15.3                           TheExecutive waives all of his moral rights as defined in the *CopyrightDesigns and Patents Act*1988 in respect of any acts of the Companyor any acts of third parties done with the Company’s authority in relation tothe inventions and Intellectual Property which are the property of the Company(or are the property of the Company by virtue of clause 15.2 hereof).

15.4                           Rightsand obligations under this clause shall continue in force after termination ofthis Agreement in respect of inventions or Intellectual Property made ordiscovered during the Executive’s employment under this Agreement and shall bebinding upon his representatives.

15.5                           Anylegal proceedings issued by the Company or any Group Company in respect of anyinfringement or dispute or threatened dispute or infringement will be conductedat the Company’s discretion and expense and the Executive agrees to give allreasonable assistance in any such legal proceedings.

15.6                           In thisclause 15, “Intellectual Property” includes letters patent, trade marks,service marks, trade names, designs, utility models, copyrights (existing andfuture), design rights, applications for registration of any of the foregoingand the right to apply for them in any part of the world, moral rights,inventions, improvements to procedures, confidential information, know-how, andrights of like nature arising or subsisting anywhere in the world, in relationto all of the foregoing, whether registered or unregistered.

**16****                                 RestrictionsAfter Employment**

16.1                           Forthe purposes of this clause the following definitions shall apply:

“Business”shall mean the business of theCompany carried on by the Company at the Termination Date and during the periodof 12 months prior thereto in which the Executive had been involvedduring the course of his employment at any time within a period of 12 monthsbefore the Termination Date and anyother business of the Company or any Group Company carried on duringsuch period in which the Executive was involved during the course of hisemployment at any time within a period of 12 months before the TerminationDate;.

“Client” shall mean anyperson, firm, company or organisation to whom the Company or any Group Companyhas supplied Services or with whom they have entered into licensing and/orcollaboration arrangements in relation to the Business within a period of 12months before the Termination Date and with whom or which, during such periodthe Executive had significant dealings in the course of the Executive’semployment by the Company or any Group Company at any time within a period of12 months before the Termination Date;

“Prospective Client”means any potential client with whom, to the Executive’s knowledge the Companyor any Group Company has been in active negotiations for the supply ofServices, or in connection with licensing or collaboration arrangements at anytime within a period of 6 months before the Termination Date;

“Services” means anyproduct or service (including, without limitation, licensing and collaborationarrangements) developed or being developed or marketed sold or provided by theCompany during the 12 months immediately preceding the Termination Date withwhich the Executive’s duties were concerned or for which the Executive wasresponsible or which was provided to the Executive’s knowledge during the 12months immediately preceding the Termination Date;

“Supplier” shall mean thesuppliers of technical consultancy services, specialist laboratory equipment,and/or the manufacturers of specialist raw materials and components to theCompany or any Group Company with whom the Executive had significant dealings,in the course of his employment within a period of 6 months before theTermination Date;

“Termination Date” shallmean the date of termination of the Executive’s employment.

16.2                           Inorder to protect the legitimate business of the Company and any Group Companywith which the Executive shall be significantly involved during the course ofhis employment, the Executive hereby undertakes that (without the prior writtenconsent of the Board) he shall not:

16.2.1                                          fora period of six months after the Termination Date whether directly orindirectly in any capacity whatsoever (on his own behalf or on behalf of anyother person, firm or company) solicit or entice away or seek to solicit orentice away from the Company or any Group Company whether by means of thesupply of names or expressing views on suitability or otherwise, any person whois and was at the Termination Date employed or engaged by the Company or anyGroup Company:

16.2.1.1                                                         asa Director;

16.2.1.2                                                         asa member of the Executive committee or as one of the direct reports to theExecutive committee; or

16.2.1.3                                                         ina business development capacity;

and with whom theExecutive had dealings, in the course of his employment, within a period of 6months before the Termination Date;

16.2.2                                          fora period of 6 months after the Termination Date whether directly or indirectlyin any capacity whatsoever (whether on the Executive’s own behalf or on behalfof any other person, firm or company) solicit or seek in any capacitywhatsoever any business, order or custom for any services which are competitivewith the Services from any Client or otherwise interfere with the relationshipbetween the Company or any Group Company and any Client;

16.2.3                                          fora period of 3 months after the Termination Date whether directly or indirectlyin any capacity whatsoever (whether on the Executive’s own behalf or on behalfof any other person, firm or 

                                                                        company)solicit or seek in any capacity whatsoever any business, order or custom for anyservices which are competitive with the Services from any Prospective Client orotherwise interfere with the relationship between the Company or any GroupCompany and any Prospective Client;

16.2.4                                          fora period of 6 months after the Termination Date whether directly or indirectlyin any capacity whatsoever (whether on the Executive’s own behalf or on behalfof any other person, firm or company) seek to entice away from the Company orotherwise interfere with the terms of dealing or the relationship between theCompany and any Group Company and any Supplier;

16.2.5                                          fora period of 6 months after the Termination Date whether directly or indirectlyin any capacity whatsoever (whether on the Executive’s own behalf or on behalfof any other person, firm or company) carry on or be directly or indirectlyengaged or concerned or interested whether as principal agent, shareholder,employee, consultant or otherwise in any business or concern which providesservices competitive with the Services and which competes with (or which isintended once operational to compete with) the Business;

16.2.6                                          fora period of 6 months after the Termination Date not to be employed or engagedby a Client or a Prospective Client of the Company in any capacity in which theBoard believes that the Executive’s knowledge of the confidential informationof the Company (as defined in clause 17 of this agreement) may prejudice theinterests of the Company or any Group Company.

16.3                           Afterthe termination of the Executive’s employment, for any reason whatsoever theExecutive shall not for any reason represent himself as still connected withthe Company or any Group Company or as still authorised to conduct business onbehalf of the Company or any Group Company.

16.4                           Theperiods of the restrictions referred to in the sub-clauses of clause 16.2 aboveshall in each case be reduced by the period during which the Company exercisesits right to place the Executive on garden leave pursuant to Clause 6 hereof.

16.5                           TheExecutive agrees and undertakes that in the event of receiving an offer ofemployment or engagement during the continuance of this Agreement or during thecontinuance in force of any of the restrictions set out in the clause 16, hewill forthwith provide to the offeror a copy of the restrictions in thisAgreement.

16.6                           Each ofthe restrictions in the sub-clauses of this clause shall be construed asseparate and individual restrictions and shall each be capable of being severedwithout prejudice to the other restrictions or the remaining provisions of thisAgreement.

**17****                                  ConfidentialInformation**

17.1                           Inaddition and without prejudice to the Executive’s common law obligations tokeep information secret the Executive shall not (except for the purpose ofproperly performing his duties hereunder or with the prior express writtenconsent of the Company or unless ordered to do so by a Court) during hisemployment or after its termination use, disclose or communicate and shall useall reasonable endeavours to prevent the improper use, disclosure or communicationof:

17.1.1                                          anyinformation of a confidential nature (including but not limited to informationregarding the business, inventions or Intellectual Property, confidential unpublished information aboutthe business, accounts, finances, trading, data, surveys or results of anytrials, product formulations, details or lists of Clients or ProspectiveClients and their contact details and their requirements, the prices charged toand terms of business with the Company’s suppliers, future strategies, marketingand sales plans, sales forecasts, product information, marketing plans andsales forecasts, financial information, results and forecasts (save to theextent that these are included in published audited accounts) businessdevelopment plans and strategies, commercial strategies, any information whichhas been given to the Company in confidence by any of it’s Clients, Suppliersor other persons, details of employees, and contractors, software, marketingstrategies of the Company or any Group Company;

17.1.2                                          anyconfidential report or research undertaken by or for the Company or any GroupCompany during the course of his employment;

17.1.3                                          anyinformation designated as confidential by the Company or any Group Company orwhich to his knowledge has been supplied to the Company or any Group Companysubject to an obligation of confidentiality.

17.2                           In thisclause “information” and “confidential report or research” refer toconfidential information and confidential reports and research which came tothe knowledge of the Executive during the course of his employment.

17.3                           Inorder to protect the Company’s confidential information, the Executive agreesthat he will not at any time make or arrange to have made any copy, abstract,summary or precis of the whole or any part of any document, computer programmeor record belonging to the Company except when required to do so for thepurpose of properly performing his duties hereunder, and the Executiveacknowledges that any such copy, disk, programme, abstract, summary or precisshall belong to the Company and shall be delivered up to the Company ontermination of his employment.

17.4                           Therestrictions contained in this clause shall cease to apply with respect to anyinformation, confidential report or research which comes into the public domainotherwise than through an unauthorised disclosure by the Executive 

                                                ora third party or to information which is required to be disclosed by operationof law.

17.5                           TheExecutive shall not without the prior written consent of the Board eitherdirectly or indirectly publish any opinion, fact or material or deliver anylecture or address or participate in the making of any film radio broadcast ortelevision transmission or communicate with any representative of the media orany third party relating to the business affairs of the Company or any GroupCompany or to any of its officers, employees, clients, suppliers, agents orshareholders. For the purposes of this clause “media” shall include television(terrestrial, satellite and cable) radio, internet, newspapers and otherjournalistic publications.

**18****                                  Termination**

18.1                           If theExecutive commits any fundamental breach of the Agreement, including withoutlimitation any of the following:

18.1.1                                          theExecutive is adjudged bankrupt or enters into any composition or arrangementwith or for the benefit of his creditors including a voluntary arrangementunder the Insolvency Act 1986;

18.1.2                                          theExecutive shall commit any act of dishonesty whether relating to the Company,any Group Company, an employee or otherwise;

18.1.3                                          theExecutive is guilty of any serious misconduct or commits any serious or (havingbeen given notice in writing) persistent breach of any of his obligations tothe Company or any Group Company (whether under this Agreement or otherwise) orrefuses or neglects to comply with any reasonable and lawful orders ordirections given to him by the Board;

18.1.4                                          theExecutive shall be convicted of any criminal offence (other than an offenceunder the road traffic legislation in the United Kingdom or elsewhere for whicha penalty other than imprisonment (either immediate or suspended) is imposed)or other than one which in the opinion of the Board does not adversely affecthis position as a director;

18.1.5                                          theExecutive is guilty of any serious mis-conduct tending in the reasonableopinion of the Board to prejudicially affect the interests or reputation of theCompany or any Group Company;

18.1.6                                          theExecutive shall fail, after due and proper warning, to perform his dutiescompetently;

18.1.7                                          beingsuspended/disqualified by any relevant regulatory authority which would preventthe Executive from carrying out his duties;

18.1.8                                          theExecutive shall be or become prohibited by law from being a director;

18.1.9                                          theExecutive shall resign as a director of the Company or any Group Companywithout the consent of the Board;

then the Company shall beentitled by written notification  to theExecutive to forthwith determine his employment under this Agreement. In theevent of termination pursuant to this sub-clause 18.1 the Executive shall haveno claim against the Company or any Group Company for pay in lieu of notice ordamages or otherwise by reason of such termination. The provisions of thissub-clause 18.1 are without prejudice to any rights, which the Company may haveat common law to terminate the employment of the Executive summarily.

18.2                          NotwithstandingClause 5.1, the Company may terminate this Agreement by notice of not less thanone week plus the statutory minimum notice given at any time whilst theExecutive is incapacitated by ill health or accident from performing his dutiesunder this Agreement and he has been so incapacitated for any period of morethan 6 months or for periods aggregating 9 months in the preceding period of 24months, provided that the Company shall withdraw any such notice if during thecurrency of the notice the Executive returns to full time duties and provides amedical practitioner’s certificate satisfactory to the Board to the effect thathe has fully recovered his health and no recurrence of his illness orincapacity can reasonably be anticipated;

18.3                          Uponwhichever is the first to occur of (a) the Company exercising its rightspursuant to Clause 6 [*Garden Leave*]and requesting the Executive’s resignation, (b) termination howsoeverarising of his employment and/or this Agreement, or (c) upon request, theExecutive shall immediately tender his resignation from all offices he holds inthe Company and in any Group Company without prejudice to any other rightsaccruing to either party hereto and without claim for compensation. In theevent of the Executive failing so to resign as required herein, the Company ishereby irrevocably authorised to appoint some person in his name and on hisbehalf to sign and deliver such resignations.

18.4                           Afterthe termination of the Executive’s employment hereunder he shall not at anytime thereafter represent himself as being in any way connected with orinterested in the business of or employed by the Company or any Group Companyother than as a shareholder; or use for trade or other purposes the name of theCompany or any Group Company or any name capable of confusion therewith otherthan as a shareholder.

18.5                           TheExecutive will both during and at any time after the termination of his employmentunder this Agreement provide the Company or any Group Company with suchassistance as it may require in the conduct of such proceedings in any Court,Tribunal or other body of competent jurisdiction as may arise in respect ofwhich the Company or any Group Company or its or their legal advisers believethe Executive may be able to provide assistance. The Company shall pay theExecutive’s reasonable expenses necessarily incurred in providing suchassistance.

18.6                           The termination of theExecutive’s employment hereunder for whatever reason shall not affect thoseterms of this Agreement which are expressed to 

                                                haveeffect thereafter and shall be without prejudice to any accrued rights orremedies of the parties.

18.7                           Upon termination of theExecutive’s employment howsoever arising the Executive shall have no rights asa result of this Agreement or any alleged breach of this Agreement to anycompensation under or in respect of any share or bonus plan in which he mayparticipate or have received grants or allocations at or before the TerminationDate. Any rights which he may have under such plans shall be exclusivelygoverned by the rules of such plans.

18.8                           The Executive agrees thatafter termination, howsoever occurring, he will not make or publish any adverse,derogatory, misleading or untrue comments on the Company or any member of theGroup, and members of their respective Board of Directors or any of theiremployees and agrees that he will not take part in any conduct conducive orpotentially conducive to the bringing of the Company or any member of the Groupits directors and/or employees into disrepute.

**19****                                  Returnof Company Property**

19.1                           Uponwhichever is the first to occur of (a) the Company exercising its rightspursuant to Clause 6 or (b) termination howsoever arising of hisemployment and/or this Agreement, the Executive shall subject to clause 20.2upon demand:

19.1.1                                          deliverup to the Company Secretary all property in his possession or under his controlbelonging to the Company or any Group Company including but nor limited to allmotor cars, credit cards, keys and passes, equipment, details of clientrecords, Company manuals, records made by the Executive in the course of hisemployment, address lists, address books, diaries, computer lists, disks, programmesand software, correspondence, documents, books, papers, files, records,training records and reports and other property or material belonging to orrelating to the business of the Company and any Group Company or theirsuppliers or clients which may have come into his possession, custody orcontrol in the course of or in consequence of his employment (and whether ornot belonging to the Company or any Group Company) and the Executive shall notbe entitled to and shall not retain any copies thereof in whatever form

19.1.2                                          irrevocablydelete any information belonging to the Company or any Group Company from anycomputer system in his possession or under his control which computer system isnot directly or indirectly the property of the Company or any Group Company.

19.2                           TheExecutive will, on being requested to do so, send to the Company addressed tothe Board a signed statement confirming that he has complied with theobligations in clause 19.1 above.

19.3                           Wherethe Company exercises its rights pursuant to Clause 6 the Executive shall notbe obliged to return any property provided to him as a contractual 

                                                benefit.The Executive shall return such property forthwith on the termination of thisAgreement.

**20****                                  Grievanceand Disciplinary Procedure**

20.1                           The Executiveis subject to the Company’s disciplinary rules and disciplinary proceduresin force from time to time. Such rules and procedures shall not form partof the Executive’s contract of employment.

20.2                           TheCompany reserves the right to suspend the Executive for the purposes ofinvestigating any allegation of misconduct or breach of this Agreement. Theperiod of suspension shall not normally exceed one month. Whilst suspended theExecutive shall continue to be entitled to his salary and all other contractualbenefits. During any period of suspension pursuant to this clause the Executiveshall not, except with the prior written consent of the Board attend anypremises of the Company or any Group Company, conduct any business on behalf ofthe Company or any Group Company or contact any employee or customer of theCompany or any Group Company.

20.3                           If theExecutive wishes to seek redress of any grievance relating to his employment heshould refer such grievance to the Board. Appeal against warnings issued underthe disciplinary or performance improvement procedures should be notified tothe Company Secretary, in writing, within five working days of receipt of thewarning setting out in full the grounds of the Executive’s appeal.

**21****                                  DataProtection**

The Executive agrees to acquaint himself with andabide by the Company’s Data Protection Policy from time to time in force,breach of which will be treated as a serious disciplinary matter, which mayresult in his dismissal.

**22****                                  ShareDealings**

22.1                           The Executive shall comply, where relevant, withevery rule of law, every requirement of the London Stock Exchange and every regulation of the Company from time totime in force in relation to dealings in shares, debentures or other securitiesof the Company or any Group Company and unpublished price sensitive informationaffecting the shares, debentures or other securities of any other company and,in relation to overseas dealings, the Executive shall also comply with all lawsof the state and all regulations of the stock exchange, market or dealingsystem in which such dealings take place.

22.2                           The Executive shall not (and shall procure so faras he is able that his spouse and children shall not) deal or become or ceaseto be interested (within the meaning of Part I of Schedule XIII to theCompanies Act 1985) in any securities of the Company except in accordance withany Company rules or guidelines from time to time relating to securitiestransactions by directors.

**23****                                  Reconstructionor Amalgamation**

If the employment of theExecutive under this Agreement is terminated by reason of the liquidation ofthe Company for the purpose of reconstruction or 

amalgamation and theExecutive is offered reasonable alternative employment with any concern orundertaking resulting from the reconstruction or amalgamation on terms andconditions not less favourable than the terms of this Agreement then theExecutive shall have no claim against the Company in respect of the terminationof his employment under this Agreement.

**24****                                  General**

24.1                           No failureor delay by the Company in exercising any right, power or privilege under thisAgreement shall operate as a waiver thereof nor shall any single or partialexercise by the Company of any right, power or privilege preclude any furtherexercise thereof or the exercise of any other right, power or privilege.

24.2                           Thereare no collective agreements which directly affect the terms and conditions ofthe Executive’s employment.

**25****                                  Notices**

25.1                           Anynotice or other communication given or made under this Agreement shall be inwriting and may be delivered to the relevant party or sent by first classprepaid letter to the address of that party specified in this Agreement or tothat party’s facsimile number thereat or at such other address or facsimilenumber as may be notified by that party from time to time for this purpose. Serviceat the last notified address or facsimile number shall be effective for thepurposes of this Agreement notwithstanding the fact that either party maysubsequently have changed its address or facsimile number without havingnotified the other party under the provisions of this clause.

25.2                           Unlessthe contrary shall be proved each such notice or communication shall be deemedto have been given or made and delivered, if by letter, 72 hours after postingand, if by delivery or facsimile, when respectively delivered or transmitted.

**26****                                  OtherAgreements**

ThisAgreement supersedes all other agreements other than those expressly referredto in this Agreement whether written or oral between the Company or any GroupCompany and the Executive relating to the employment of the Executive and theExecutive acknowledges and warrants to the Company that he is not entering intothis Agreement in reliance on any representation not expressly set out herein.

**27****                                  GoverningLaw**

This Agreement shall be governed by andconstrued in all respects in accordance with English law and the parties agreeto submit to the non-exclusive jurisdiction of the English courts as regardsany claim or matter arising in respect of this Agreement.

**28****                                  PowerOf Attorney**

TheExecutive hereby appoints the Company to act as his attorney with authority inhis name and on his behalf to execute any deed or instrument and/or any suchthing and generally to use his name for the purposes of resigning as a directorof the Company and taking such steps as are necessary to implement theExecutive’s obligation under clause 15. The Executive hereby declares that thisPower of Attorney is given to secure his obligations under this Agreement andshall be irrevocable in accordance with Section 4 of the Powers ofAttorney Act 1971.

**29****                                  Execution**

ThisAgreement may be executed in two or more counterparts and the counterpartsshall together constitute one agreement provided that each party has executedone or more counterparts.

In witness whereofthis Agreement has been duly executed by the parties as a deed the day and yearfirst above written.
| Executed by as a deed                   | )      |                                      |
|-----------------------------------------|--------|-------------------------------------------|
| by **SKYEPHARMA PLC)**                  | )      | . . . . . . . . . . . . . . . . . . . . . |
| ** **                              |   |                                      |
|                                    |   | Director                                  |
|                                    |   |                                      |
|                                    |   | . . . . . . . . . . . . . . . . . . . . . |
|                                    |   |                                      |
|                                    |   | Director/Secretary                        |
|                                    |   |                                      |
| Signed and  delivered as a deed         | )      |                                      |
| by the said **KENNETH CUNNINGHAM** | )      |                                      |
| in the presence  of:                    | )      |                                      |

 

Witness signature:

Witness name:

Witness address:

Witnessoccupation:

 

----