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                              July 8, 1999


Mr. Charles A. Baker
Chairman and Chief Executive Officer
The Liposome Employer, Inc.
One Research Way
Princeton, NJ 08540-6619

Dear Chuck:

     This letter agreement (the "Letter Agreement") will serve to
amend and modify the agreement (the "Agreement"), dated as of
June 1, 1995, by and between you and The Liposome Employer, Inc.,
a Delaware corporation (the "Employer"), by the addition of the
following terms and conditions thereto:

     1.   The Agreement is hereby amended by the addition of a new
       Section 20 to read as follows:

       "20. Excise Tax Gross-Up.

                 "(a) Equalization Payment.  In the event that
       the Employee becomes subject to the tax (the "Excise
       Tax") imposed by Section 4999 of the Internal Revenue
       Code of 1986, as amended (the "Code") (or any similar tax
       that may hereafter be imposed), with regard to any
       amounts received in connection with Employee's
       termination of employment with the Employer or any other
       payments and benefits provided by the Employer that
       constitute "excess parachute payments" within the meaning
       of Section 280G(b)(1) of the Code (including, but not
       limited to, any and all excess parachute payments
       associated with outstanding long-term incentive grants
       (including, but not limited to, early vesting of stock
       options or restricted stock)) (the "Total Payments"), the
       Employer shall pay to the Employee in cash an additional
       amount (the "Gross-Up Payment") such that the net amount
       retained by the Employee after deduction of any Excise
       Tax or compensation on the Total Payments and any
       federal, state, and local income tax and Excise Tax upon
       the Gross-Up Payment, shall be equal to the Total
       Payments.  Such payment shall be made by the Employer to
       the Employee as soon as practicable following the event
       triggering the Excise Tax, but in no event beyond 30 days
       from such date.




                 "(b) Tax Computation.  For purposes of
       determining whether any of the Total Payments will be
       subject to the Excise Tax and the amounts of such Excise
       Tax:

                      "(i)  Any other payments or benefits
       received or to be received by the Employee in connection
       with a Change in Control of the Employer or the
       Employee's termination of employment (whether pursuant to
       the terms of this Agreement or any other plan,
       arrangement, or agreement with the Employer, or with any
       Person whose actions result in a Change in Control of the
       Employer or any Person affiliated with the Employer or
       such Persons) shall be treated as "parachute payments"
       within the meaning of Section 280G(b)(2) of the Code, and
       all "excess parachute payments" within the meaning of
       Section 280G(b)(1) of the Code shall be treated as
       subject to the excise tax, unless in the opinion of tax
       counsel selected by the Employer's independent auditors
       and acceptable to the Employee, such other payments or
       benefits (in whole or in part) do not constitute
       parachute payments, or unless such excess parachute
       payments (in whole or in part) represent reasonable
       compensation for services actually rendered within the
       meaning of Section 280G(b)(4) of the Code in excess of
       the base amount within the meaning of Section 280G(b)(3)
       of the Code, or are otherwise not subject to the Excise
       Tax;

                      "(ii)  The amount of the Total Payments
       which shall be treated as subject to the Excise Tax shall
       be equal to the lesser of: (1)  the total amount of the
       Total Payments; or (2)  the amount of excess parachute
       payments within the meaning of Section 280G(b)(1) (after
       applying clause (i) above); and

                      "(iii)  The value of any noncash benefits
       or any deferred payment or benefit shall be determined by
       the Employer's independent auditors in accordance with
       the principles of Sections 280G(d)(3) and (4) of the
       Code.

       "For purposes of determining the amount of the Gross-Up
       Payment, the Employee shall be deemed to pay Federal
       income taxes at the highest marginal rate of Federal
       income taxation in the calendar year in which the Gross-
       Up Payment is to be made, and state and local income
       taxes at the highest marginal rate of taxation in the
       state and locality of the Employee's residence on the
       Effective Date of Termination, net of the maximum
       reduction in Federal income taxes which could be obtained
       from deduction of such state and local taxes.

               "(c)  Subsequent Recalculation.  In the event the
Internal Revenue
       Service adjusts the computation of the Employer under
       Section 20(b) hereof, so that the Employee did not
       receive the greatest net benefit, the Employer shall
       reimburse the Employee for the full amount necessary to
       make the Employee whole, plus an appropriate market rate
       of interest, as determined by the Employer's independent
       auditors."

     2.   Section 9(a) of the Agreement is hereby amended by the
       addition of subsection (v) to read as follows:

       "(v) Termination After Age 65.  For purposes of any stock
       options, restricted stock or other equity grants and for
       purposes of any benefit plans in which the Employee
       participates, any termination of the Employee's
       employment (other than by death or, to the extent that
       the Employee would receive greater benefits than upon a
       retirement under a specific plan or grant, a disability
       under such plan or grant) after the Employee has attained
       age 65, whether by the Employer or the Employee and
       notwithstanding the reason for such termination, shall
       constitute a retirement, within the meaning of such
       equity and benefit plans and grants."

     3.   The Agreement is hereby amended by the deletion of
       subsection 9(a)(iv) and the substitution therefor of the language
       annexed hereto as Exhibit A.

     The Agreement, as amended herein, shall remain in full force
and effect.

                              Very truly yours,

                              THE LIPOSOME EMPLOYER, INC.


                              By: _________________________


                              Title: ________________________

Agreed:


_____________________
Charles A. Baker



L:\LEGALDPT\LEGAL\AGREEMEN\CAB Letter Agreement.doc
                            EXHIBIT A

(iv)    "Change in Control" of the Employer shall be deemed to
   have occurred as of the first day that any one or more of the
   following conditions shall have been satisfied:

   (i)When  a  "person,"  as  defined  in  Sections  3(a)(9)  and
      13(d)(3)  of  the  Exchange  Act,  becomes  the  beneficial
      owner,  directly  or  indirectly,  of  securities  of   the
      Employer  representing  (I) more than  thirty-five  percent
      (35%)  of the combined voting power of the Employer's  then
      outstanding  securities, unless such person is  subject  to
      contractual  restrictions that would preclude  him  or  her
      from  voting  such  shares  in a  manner  to  influence  or
      control   the   management  of  the  Employer's   business,
      provided  that  in the event such contractual  restrictions
      are  removed,  a Change of Control will be deemed  to  have
      occurred on the effective date of such removal or  on  such
      later date as the Executive receives actual notice of  such
      removal,  or  (II)  one  hundred  percent  (100%)  of   the
      combined  voting  power of the Employer's then  outstanding
      securities  regardless  of  any  contractual  restrictions.
      For  purposes of this provision, "person" shall not include
      the  Employer, any subsidiary of the Employer, any employee
      benefit  plan  or employee stock plan of the  Employer,  or
      any  person holding the Employer's Common Stock by, for  or
      pursuant  to  the terms of such a plan; and "voting  power"
      shall mean the power under ordinary circumstances (and  not
      merely upon the happening of a contingency) to vote in  the
      election  of  directors.   For the purpose  of  subsections
      9(a)(iv)(A)(I)  and 9(a)(iv)(A)(II) of this Agreement,  the
      right   to   vote  shares  in  a  transaction   for   which
      stockholder   approval  is  required  under  Sections   251
      through  258  (mergers),  271  (sale  of  assets),  or  275
      (dissolution) of the Delaware General Corporation  Law,  as
      the  same  may be amended from time to time, will  not,  in
      themselves,  be  deemed, to constitute the  right  to  vote
      such  shares  "in  a  manner to influence  or  control  the
      management  of  the  Employer's business".   Whether  other
      voting  rights may be granted to a beneficial owner without
      enabling it to influence or control the management  of  the
      Employer's business will depend on the totality  of  rights
      granted in each case.

   (B)When,  as  a  result  of a vote of stockholders  for  which
      proxies  are solicited by or on behalf of any person  other
      than  the Employer in accordance with the SEC rules  issued
      under  Section 14 of the Exchange Act, or which  is  exempt
      from the SEC proxy rules by reason of Rule 14a-2 under  the
      Exchange  Act,  or  as  a result of an  action  by  written
      consent  of  stockholders without a meeting, the "incumbent
      directors" cease to constitute at least a majority  of  the
      authorized  number of members of the Board.   For  purposes
      of  this  provision, "incumbent directors" shall  mean  the
      persons who were members of the Board on January 22,  1998,
      and  the  persons  who were elected or nominated  as  their
      successors  or  pursuant to increases in the  size  of  the
      Board  by a vote of at least an absolute majority (and  not
      just  the  majority of a quorum) of the Board  members  who
      were  then  Board  members  (or  successors  or  additional
      members so elected or nominated).

   (C)When  the  stockholders of the Employer approve  a  merger,
      consolidation,  or  reorganization,  whether  or  not   the
      Employer  is the surviving entity in such transaction,  (I)
      other than a merger, consolidation, or reorganization  that
      would  result  in  the voting securities  of  the  Employer
      outstanding   immediately  prior  thereto   continuing   to
      represent  (either  by remaining outstanding  or  by  being
      converted  into voting securities of the surviving  entity)
      at  least  sixty-five percent (65%) of the combined  voting
      power  of  the voting securities of the Employer  (or  such
      surviving   entity)  outstanding  immediately   after   the
      merger,  consolidation, or reorganization; and  (II)  other
      than  a merger, consolidation or reorganization that  would
      result   in   the   voting  securities  of   the   Employer
      outstanding   immediately  prior  thereto   continuing   to
      represent less than sixty-five percent (65%) but more  than
      one  percent  (1%)  of  the combined voting  power  of  the
      voting  securities  of  the  Employer  (or  such  surviving
      entity)   outstanding   immediately   after   the   merger,
      consolidation  or reorganization if the holder  or  holders
      of   the  shares  in  the  surviving  entity  that  do  not
      represent the securities of the Employer outstanding  prior
      to  the  merger, consolidation or reorganization is or  are
      subject  to  contractual restrictions that  would  preclude
      such  holder or holders from voting such shares in a manner
      to  influence  or control the management of the  Employer's
      (or  such  surviving entity's) business, provided  that  in
      the  event  such  contractual restrictions are  removed,  a
      Change  of Control will be deemed to have occurred  on  the
      effective  date of such removal or on such  later  date  as
      the Executive receives actual notice of such removal.

   (D)When  the stockholders of the Employer approve (I) the sale
      or  other  disposition of all or substantially all  of  the
      assets  the  Employer  or  (II) a complete  liquidation  or
      dissolution of the Employer.

   (E)When  the Board adopts a resolution to the effect that  any
      person  has acquired effective control of the business  and
      affairs of the Employer.

   However, in no event shall a Change in Control be deemed to
   have occurred, with respect to the Executive, if the
   Executive is part of a purchasing group which consummates the
   Change-in-Control transaction.  The Executive shall be deemed
   "part of a purchasing group" for purposes of the preceding
   sentence if the Executive is an equity participant in the
   purchasing Employer or group (except for: (x) passive
   ownership of less than three percent (3%) of the stock of the
   purchasing Employer; or (y) ownership of equity participation
   in the purchasing Employer or group which is otherwise not
   significant, as determined prior to the Change in Control by
   an absolute majority of the non-employee Directors who were
   Directors prior to the transaction, and who continue as
   Directors following the transaction).