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                                                                   Exhibit 10.39


                           DURA PHARMACEUTICALS, INC.
                  BOARD OF DIRECTORS DEFERRED COMPENSATION PLAN


                                    ARTICLE I
                                     PURPOSE

         This Deferred Compensation Plan is designed to provide members of the
Board of Directors at Dura Pharmaceuticals, Inc. (the "Company") who are not
employees of the Company an opportunity to defer certain compensation received
by them from the Company in accordance with the terms and conditions set forth
herein. This Plan shall be effective January 1, 2000.

         In order for the Plan to accomplish its objective, it must meet certain
requirements to insure that Eligible Directors are not taxed on their deferred
compensation until paid. If the Plan is found not to comply with the
requirements for income tax deferral, the Plan will be "unwound" and all
deferred amounts will be paid to the Participants in accordance with their
interests under the Plan. This will cause the recipients to lose the benefit of
the deferral of taxable income and to recognize taxable income.

                                   ARTICLE II
                                   DEFINITIONS

         In this Plan, the following terms have the meanings indicated below:

         2.01 "ACCOUNT" means amounts credited to a Participant under Article
III of the Plan, as adjusted for any earnings and losses thereon under Article
IV of the Plan and distributions under Article VI of the Plan. To the extent it
considers necessary or appropriate, the Committee or its delegate shall maintain
a separate sub-account for each type of deferral under the Plan or shall
otherwise provide a means for determining that portion of an Account
attributable to each type.

         2.02 "BENEFICIARY" means the person or persons, natural or otherwise,
designated in writing, to receive a Participant's vested Account if the
Participant dies before distribution of his or her entire vested Account. A
Participant may designate one or more primary Beneficiaries and one or more
secondary Beneficiaries. A Participant's Beneficiary designation will be made in
writing pursuant to such procedures as the Committee may establish and delivered
to the Committee before the Participant's death. The Participant may revoke or
change this designation at any time before his or her death by following such
procedures as the Committee will establish. If the Committee has not received a
Participant's Beneficiary designation before the Participant's death or if the
Participant does not otherwise have an effective Beneficiary designation on file
when he or she dies, the Participant's vested Account will be distributed to the
Participant's estate.

         2.03 "BOARD" means the board of directors of Dura Pharmaceuticals, Inc.

         2.04 "CASH SUB-ACCOUNT" means amounts credited to a Participant's
Account under Article III that shall earn interest in accordance with Article
IV.


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         2.05 "COMPENSATION" means the annual retainer, board meeting fees,
committee meeting fees and, if applicable, any other cash compensation received
by a Participant from the Company during the Plan Year.

         2.06 "COMPENSATION DEFERRAL" means a Participant's deferral of all or
any portion of his or her Compensation pursuant to Article III.

         2.07 "CESSATION OF SERVICE" means cessation of service as a
non-employee Director of the Company, by reason other than death.

         2.08 "CODE" means the Internal Revenue Code of 1986, as amended.

         2.09 "COMMITTEE" means the Dura Pharmaceuticals, Inc. Board of
Directors Deferred Compensation Plan Committee, as constituted from time to
time. The Committee has full discretionary authority to administer and interpret
the Plan, to determine eligibility for Plan benefits, to select employees for
Plan participation, and to correct errors. The Committee may delegate its duties
and responsibilities and, unless the Committee expressly provides to the
contrary, any such delegation will carry with it the Committee's full
discretionary authority to accomplish the delegation. Decisions of the Committee
and its delegate will be final and binding on all persons.

         2.10 "COMPANY" means Dura Pharmaceuticals, Inc.

         2.11 "COMMON STOCK UNIT SUB-ACCOUNT" means amounts credited to a
Participant's Account under Article III that are converted to units whose value
tracks changes in the Fair Market Value of the common stock of Dura
Pharmaceuticals, Inc.

         2.12 "ELIGIBLE DIRECTOR" means a non-employee Director of the Company.

         2.13 FAIR MARKET VALUE" means the closing market price per share of the
Company's common stock as reported on the NASDAQ Stock Market on the preceding
trading day.

         2.14 "PARTICIPANT" means a current or former Eligible Director who
retains an Account.

         2.15 "PLAN" means this Dura Pharmaceuticals, Inc. Board of Directors
Deferred Compensation Plan, as amended from time to time.

         2.16 "PLAN YEAR" means the calendar year, beginning with the calendar
year 2000.

                                   ARTICLE III
                             COMPENSATION DEFERRALS

         3.01 COMPENSATION DEFERRALS.

              (a) ELECTIONS. In order to be eligible for Compensation Deferrals
for a Plan Year, an Eligible Director must make an election to make Compensation
Deferrals for such Plan Year. Such election generally must be made by an
Eligible Director and received by the Company before the calendar year in which
the Compensation is earned. However, if an individual first becomes an Eligible
Director during a Plan Year, an Eligible Director may elect, within thirty (30)
days after he or she is first notified that he or she is eligible to participate
in the Plan, to elect Compensation Deferrals with respect to Compensation for
services performed after the


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election during such Plan Year. Elections will remain in effect for one Plan
Year or, if the Committee so permits, all subsequent Plan Years during which the
individual remains an Eligible Director. Such election may be revoked, but any
revocation cannot be made effective before the first day of the Plan Year
beginning after the date the revocation is filed.

              (b) LATE ELECTION. If an Eligible Director does not make a timely
election for a Plan Year, no Compensation Deferrals will be made under the Plan
on behalf of that Eligible Director with regard to that election for that Plan
Year.

              (c) AMOUNT. An Eligible Director may elect to defer receipt of any
whole percentage or whole dollar amount of his or her Compensation.

              (d) CREDITING. Compensation Deferrals will be credited to Eligible
Directors' Accounts as of the last day of the calendar quarter in which such
Compensation would otherwise have been paid.

                                   ARTICLE IV
                       EARNINGS ON COMPENSATION DEFERRALS

         4.01 EARNINGS METHODS. An Eligible Director must irrevocably elect at
the time that he or she elects Compensation Deferrals whether those Compensation
Deferrals will be credited to his or her Cash Sub-Account or Common Stock Unit
Sub-Account. Amounts credited to either Sub-Account will remain in such
Sub-Account until distributed to the Eligible Director or his or her Beneficiary
pursuant to Article VI. No transfers will be made between Sub-Accounts.

         4.02 CASH SUB-ACCOUNT. Compensation Deferrals directed by a Participant
to his or her Cash Sub-Account shall earn interest at the rate of prime plus one
percent, compounded quarterly. The prime interest rate shall be determined as of
the first day of each calendar quarter as quoted in the Wall Street Journal.

         4.03 COMMON STOCK UNIT SUB-ACCOUNT. Compensation Deferrals directed by
a Participant to his or her Common Stock Unit Sub-Account shall be converted to
units as of the effective date of each deferral. The number of units credited to
the Common Stock Unit Sub-Account shall be determined by dividing the amount of
the Compensation Deferral by the Fair Market Value of the Company's common stock
as of the effective date of the deferral. The number of units credited to a
Participant's Common Stock Sub-Account will change only by subsequent deferrals
into or distributions from this Sub-Account. Units credited to a Participant's
Common Stock Unit Sub-Account shall be converted to an equal number of shares of
the Company's common stock upon distribution to the Participant in accordance
with Article VI.

                                    ARTICLE V
                                     VESTING

         Each Participant shall at all times have a fully-vested and
non-forfeitable right to his or her Account.


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                                   ARTICLE VI
                                  DISTRIBUTIONS

         6.01 DISTRIBUTION OF BENEFITS. Eligible Directors must elect the manner
in which their Accounts will be paid out by following the procedures described
below and by satisfying such additional requirements as the Committee may
determine.

              (a) ELECTIONS. When an Eligible Director first confirms his or her
initial participation in the Plan the Eligible Director must elect, in writing,
which of the distribution options described below will govern payment of the
Eligible Director's Account.

              (b) TIMING. A Participant may elect to have his or her Account
distributed, based on the Participant's election under (a) above, within the 30
to 60 day period following one of the following distribution events: (i) the
date of the Participant's Cessation of Service, (ii) the date of the
Participant's death, (iii) the date, if any, specified by the Participant in his
or her election or (iv) the earliest of any (i), (ii) or (iii) above elected by
the Participant. Under option (iii) above, the date specified must be at least
twelve (12) months from the date of initial election to defer and in no event
later than the fifth (5th) anniversary of Participant's Cessation of Service.

              (c) FORM. A Participant's Account will be distributed, based on
the Participant's election under (a) above, in one of the following forms: (i) a
lump sum, (ii) a series of annual installments, not in excess of five (5) or
(iii) a distribution schedule specified by the Participant and approved by the
Committee. The amount of each installment will be the amount, if any, specified
by the Participant or the remaining balance of the Participant's Account divided
by the number of installments remaining (including the installment to be made).
Amounts credited to a Participant's Cash Sub-Account reflecting Compensation
Deferrals (including earnings thereon) shall be distributed in cash. Units
credited to a Participant's Common Stock Unit Sub-Account will be paid in
registered shares of the Company's common stock. For purposes of distribution,
each unit shall be equal to one share of common stock.

              (d) SUBSEQUENT ELECTIONS. A Participant may change a distribution
election with respect to his or her Account by submitting the change to the
Committee, in writing, at least twelve (12) months before the Participant was
originally to receive such distribution. The subsequent election will be valid
only if the distribution does in fact occur more than twelve (12) months after
the date of such subsequent election.

              (e) DEFAULT. If, upon a Participant's Cessation of Service, the
Committee does not have a proper distribution election on file for that
Participant, that Participant's Account will be distributed to the Participant
in one lump sum within the 30 to 60 day period after the Participant's Cessation
of Service.

         6.02 DEATH. If a Participant dies with an amount in his or her Account,
whether or not the Participant was receiving payouts from that Account at the
time of his or her death, the Participant's Beneficiary will receive that
Participant's Account, in accordance with the time and form of distribution set
forth in (b) and (c) above.

         6.03 ACCELERATED DISTRIBUTIONS. Pursuant to the following restrictions,
a Participant may accelerate the timing and form of distribution:


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              (a) HARDSHIP WITHDRAWAL. If a Participant has an immediate and
heavy financial need and has no other resources reasonably available to meet
this need, Participant may request a hardship withdrawal. An immediate and heavy
financial means an unanticipated emergency caused by events beyond the control
of the Participant that would result in a severe financial hardship to the
Participant if withdrawal were not permitted. The total hardship withdrawal must
be approved by the Committee, and shall be limited to the amount necessary to
meet the financial need, and in no event may such amount exceed the
Participant's Account.

              (b) FORFEITURE. Absent a demonstration of immediate and heavy
financial need described above in paragraph (a), a Participant may elect to
receive ninety percent (90%) of his or her entire Account in an early
distribution at any time upon thirty (30) days written request, in which case
the remaining ten percent (10%) of the Participant's entire Account shall be
permanently forfeited. A Participant electing to receive a forfeiture
distribution may not again participate in the Plan until the Plan Year that
begins at least twelve (12) months following the end of the Plan Year in which
such distribution occurred.

                                   ARTICLE VII
                        AMENDMENT OR TERMINATION OF PLAN

         7.01 AMENDMENT OF PLAN. The Company shall have the right to amend the
Plan, at any time from time to time, in whole or in part. Any amendment must be
made in writing; no oral amendment will be effective. No amendment may, without
the consent of an affected Participant (or, if the Participant is deceased, the
Participant's Beneficiary), adversely affect the Participant's or the
Beneficiary's rights and obligations under the Plan with respect to amounts
already credited to a Participant's Account. The Company shall notify each
Participant in writing of any Plan amendment.

         7.02 TERMINATION. Although the Company has established this Plan with
the intention and expectation to maintain the Plan indefinitely, the Company may
terminate or discontinue the Plan in whole or in part at any time without any
liability for such termination or discontinuance. Upon Plan termination, all
Compensation Deferrals shall cease. The Company shall retain each Participant's
Compensation Deferrals (and earnings and losses thereon) until distribution of
benefits commences under Article VI. Notwithstanding the foregoing, if the Plan
is terminated, the Company retains the right to determine that all Accounts will
be paid out as soon as practicable thereafter in single sum distributions.

                                  ARTICLE VIII
                                  MISCELLANEOUS

         8.01 LIMITATION OF RIGHTS. Participation in this Plan does not give any
individual the right to be retained in the service of the Company or of any
related entity or to continue to serve as a member of the Board.

         8.02 CLAIMS PROCEDURE. If a Participant or Beneficiary ("Claimant")
believes that he or she is entitled to a greater benefit under the Plan, the
Claimant may submit a signed, written application to the Committee within 90
days of having been denied such a greater benefit. The Claimant will generally
be notified of the approval or denial of this application within 90 days of the
date that the Committee receives the application. If the claim is denied, the
notification will state specific reasons for the denial and the Claimant will
have 60 days to file a signed, written request for a review of the denial with
the Committee. This request will include the reasons for


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requesting a review, facts supporting the request and any other relevant
comments. The Committee, operating pursuant to its discretionary authority to
administer and interpret the Plan and to determine eligibility for benefits
under the terms of the Plan, will generally make a final, written determination
of the Claimant's eligibility for benefits within 60 days of receipt of the
request for review.

         8.03 INDEMNIFICATION. The Company will indemnify and hold harmless the
Directors, the members of the Committee, and employees of the Company who may be
deemed fiduciaries of the Plan, from and against any and all liabilities,
claims, costs and expenses, including attorneys' fees, arising out of an alleged
breach in the performance of their fiduciary duties under the Plan, other than
such liabilities, claims, costs and expenses as may result from the gross
negligence or willful misconduct of such persons. The Company shall have the
right, but not the obligation, to conduct the defense of such persons in any
proceeding to which this Section applies.

         8.04 ASSIGNMENT. To the fullest extent permitted by law, benefits under
the Plan and rights thereto are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors of a Participant or a Beneficiary.

         8.05 INABILITY TO LOCATE RECIPIENT. If a benefit under the Plan remains
unpaid for two years from the date it becomes payable, solely by reason of the
inability of the Committee to locate the Participant or Beneficiary entitled to
the payment, the benefit shall be treated as forfeited. Any amount forfeited in
this manner shall be restored without interest upon presentation of an
authenticated written claim by the person entitled to the benefit.

         8.06 APPLICABLE LAW. To the extent not governed by Federal law, the
Plan is governed by the laws of the State of California. If any provision of the
Plan is held to be invalid or unenforceable, the remaining provisions of the
Plan will continue to be fully effective.

         8.07 NO FUNDING. The Plan constitutes a mere promise by the Company to
make payments in the future in accordance with the terms of the Plan.
Participants and Beneficiaries have the status of general unsecured creditors of
the Company. Plan benefits will be paid from the general assets of the Company
and nothing in the Plan will be construed to give any Participant or any other
person rights to any specific assets of the Company. In all events, it is the
intention of the Company and all Participants that the Plan be treated as
unfunded for tax purposes.




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