Document:

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                                                                 EXHIBIT 10.6.6

                              EMPLOYMENT AGREEMENT

            AGREEMENT made as of the 3rd day of August, 1998, by and between
Sheffield Pharmaceuticals, Inc., a Delaware corporation (the "Corporation"), and
Thomas A. Armer, who currently resides at 5619 Overbrook, Ann Arbor, MI 48105
("Employee").

                                   WITNESSETH:

            WHEREAS, in July 1998, the Corporation, through a wholly-owned
subsidiary acquired from Aeroquip Corporation certain intellectual property
relating to an aerosol enhancement technology (the ADDS Technology");

            WHEREAS, Employee was employed by Aeroquip Corporation in the
development of the ADDS Technology;

            WHEREAS, the Corporation desires to employ and retain Employee as
Vice President - Pulmonary Delivery Systems. upon the terms and subject to the
conditions of this Agreement;
and

            NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto agree as follows:

            1. Employment of Employee. The Corporation hereby employs Employee
as Vice President - Pulmonary Delivery Systems to perform the duties and
responsibilities incidental to such office, subject at all times to the control
and direction of the Board of Directors of the Corporation.

            2. Acceptance of Employment; Time and Attention, Etc. (a) Employee
hereby accepts such employment and agrees that throughout the period of his
employment hereunder, except as hereinafter provided, he will devote his full
business and professional time in utilizing his business and professional
expertise, with proper attention, knowledge and skills faithfully, diligently
and to the best of his ability in furtherance of the business of the Corporation
and its subsidiaries and will perform the duties assigned to his pursuant to
Paragraph 1 hereof. As Vice President - Pulmonary Delivery Systems, Employee
shall also perform such specific duties and shall exercise such specific
authority related to the business and operations of the Corporation and its
subsidiaries as may be reasonably assigned to Employee from time to time by the
Chief Executive Officer or his designee.

            (b) Employee shall at all times be subject to, observe and carry out
such rules, regulations, policies, directions and restrictions as the Board of
Directors of the Corporation shall from time to time establish. During the
period of his employment hereunder, Employee shall not, directly or indirectly,
accept employment or compensation from, or perform services of any nature for,
any business enterprise other than the Corporation and its subsidiaries.
Notwithstanding the foregoing in this Paragraph 2, Employee shall not be
precluded from engaging in recreational, educational (including, but not limited
to, teaching or attending educational classes, seminars or other educational
endeavors) and other activities, which activities do not materially interfere
with his duties hereunder and shall occur during vacations, holidays and other
periods outside of business hours.

            3. Term. Except as otherwise provided herein, the term of Employee's
employment hereunder shall commence on the date hereof and shall continue to and
including July 31, 2000. Unless terminated earlier in accordance with the terms
hereof, this Agreement shall automatically be extended for one or more
additional consecutive one year terms unless either party notifies the other
party in writing at least 60 days before the end of the then current term
(including the initial term) of its or his desire to terminate this Agreement.
The last day of the term of this Agreement pursuant to this Paragraph 3
(including any early termination pursuant to the terms hereof) is referred to
herein as the "Termination Date."

            4. Compensation. (a) As compensation for his services hereunder, the
Corporation shall pay to Employee (i) a base annual salary at the rate of
$120,000, payable in equal installments in accordance with the normal payroll
practices of the Corporation but in no event less frequently than semi-monthly,
and (ii) such bonuses based on performance criteria relating to the development
of the Corporation's pulmonary development program as may he agreed to between
the Employee and the Corporation. All compensation paid to Employee shall be
subject to withholding and other employment taxes imposed by applicable law.

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            (b) During the period of Employee's employment hereunder, Employee
shall not be entitled to any additional compensation (other than as to stock
options granted pursuant to this Agreement) for rendering employment services to
subsidiaries of the Corporation or for serving in any office of the Corporation
or any of its subsidiaries to which he is elected or appointed.

            5. Stock Options. (a) As additional compensation for his services
hereunder, the Corporation shall grant to Employee an option to acquire a total
of 125,000 shares of Sheffield Pharmaceuticals, Inc. common stock at an exercise
price per share equal to the closing sale price of the Corporation's common
stock as reported by the American Stock Exchange on the date hereof, with the
terms of such option to be evidenced by an option letter agreement in the form
annexed as Exhibit "A" hereto.

            (b) On the date that the Corporation receives market approval from
the U.S. Food and Drug Administration (FDA) for its initial product based on the
ADDS Technology (the "Market Approval Date"), the Corporation shall grant to
Employee an option to acquire an additional 40,000 shares of Sheffield
Pharmaceuticals, Inc. common stock, with the terms of such option to be
evidenced by an option letter agreement in the form annexed as Exhibit "A"
containing such modification to such form as are set forth in the following
sentence. Such option shall (i) have an exercise price per share equal to the
closing sale price of the Corporation's common stock as reported by the American
Stock Exchange (or another exchange that constitutes the principal exchange for
the Corporation's common stock) on the Market Approval Date, (ii) be first
exercisable on the first anniversary of the Market Approval Date and (iii)
expire on the fifth anniversary of the Market Approval Date. "ADDS Technology"
means the aerosol enhancing technology purchased by the Corporation from
Aeroquip Corporation.

            6. Additional Benefits; Vacation. (a) In addition to such base
salary, Employee shall receive and be entitled to participate, to the extent he
is eligible under the terms and conditions thereof, in any profit sharing,
pension, retirement, hospitalization, disability, medical service, insurance or
other employee benefit plan generally available to employees of the Corporation
that may be in effect from time to time during the period of Employee's
employment hereunder.

            (b) Employee shall be entitled to two (2) weeks' paid vacation in
respect of each 12-month period during the term of his employment hereunder,
such vacation to be taken at times mutually agreeable to Employee and the Chief
Executive Officer or his designee.

            (c) Employee shall be entitled to recognize as holidays all days
recognized as such by the Corporation.

            7. Reimbursement of Expenses. The Corporation shall reimburse
Employee in accordance with applicable policies of the Corporation for all
expenses reasonably incurred by his in connection with the performance of his
duties hereunder and the business of the Corporation, upon the submission to the
Corporation of appropriate receipts or vouchers.

            8. Restrictive Covenant. (a) In consideration of the Corporation's
entering into this Agreement, Employee agrees that during the period of his
employment hereunder and, in the event of termination of this Agreement (i) by
the Corporation upon Employee becoming Disabled (as such term is defined in
Paragraph 13), (ii) by the Corporation for Cause (as that term is defined in
Paragraph 13 hereof) or (iii) by Employee otherwise than for Employer Breach (as
that term is defined in Paragraph 14 hereof), for a further period of six (6)
months thereafter, he will not (x) directly or indirectly own, manage, operate,
join, control, participate in, invest in, whether as an officer, director,
employee, partner, investor or otherwise, any business entity that is engaged in
a directly competitive business (as hereinafter defined) to that of the
Corporation or any of its subsidiaries within the United States of America (or
any of its territories or possessions), any country located in the Caribbean,
the United Kingdom, the Republic of Ireland or Italy, (y) for himself or on
behalf of any other person, partnership, corporation or entity, call on any
customer of the Corporation or any of its subsidiaries for the purpose of
soliciting away, diverting or taking away any customer from the Corporation or
its subsidiaries, or (z) solicit any person then engaged as an employee,
representative, agent, independent contractor or otherwise by the Corporation or
any of its subsidiaries, to terminate his or her relationship with the
Corporation or any of its subsidiaries. For purposes of this Agreement, the term
"directly competitive business" shall mean any business that is then involved in
the research, development, manufacturing or commercialization in any way of any
product, compound, device or method that is or becomes a part of the

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Corporation's business or the business of any of its subsidiaries during
Employee's employment by the Corporation or any of its subsidiaries, including
such products, compounds, devices, methods or other intellectual property which
constitute the Predisclosed Technologies (as defined in Paragraph 10 below).
Nothing contained in this Agreement shall be deemed to prohibit Employee from
investing his funds in securities of an issuer if the securities of such issuer
are listed for trading on a national securities exchange or are traded in the
over-the-counter market and Employee's holdings therein represent less than 10%
of the total number of shares or principal amount of the securities of such
issuer outstanding.

            (b) Employee acknowledges that the provisions of this Paragraph 8
are reasonable and necessary for the protection of the Corporation, and that
each provision, and the period or periods of time, geographic areas and types
and scope of restrictions on the activities specified herein are, and are
intended to be, divisible. In the event that any provision of this Paragraph 8,
including any sentence, clause or part hereof, shall be deemed contrary to law
or invalid or unenforceable in any respect by a court of competent jurisdiction,
the remaining provisions shall not be affected, but shall, subject to the
discretion of such court, remain in full force and effect.

            9. Confidential Information.

            (a) Employee shall hold in a fiduciary capacity for the benefit of
the Corporation and its subsidiaries all confidential information, knowledge and
data relating to or concerned with its research, development, information and
projects, as well as its operations, sales, business and affairs, and he shall
not, at any time during his employment hereunder and for two years thereafter,
use, disclose or divulge any such information, knowledge or data to any person,
firm or corporation other than to the Corporation and its subsidiaries or their
respective designees or except as may otherwise be reasonably required or
desirable in connection with the business and affairs of the Corporation and its
subsidiaries.

            (b) Notwithstanding anything to the contrary contained herein,
Employee's obligations under Paragraph 9(a) hereof shall not apply to any
information which:

            (i) becomes rightfully known to Employee subsequent or prior to his
            employment by the Corporation;

            (ii) is or becomes available to the public other than as a result of
            wrongful disclosure by Employee;

            (iii) becomes available to Employee subsequent to his employment by
            the Corporation on a confidential basis from a source other than the
            Corporation or its agents which source has a right to disclose such
            information; or

            (iv) results from research and development and/or commercial
            operations at any time by or on behalf of any person, company or
            other entity with which or with whom Employee shall become
            associated (in a manner consistent with the terms of this Agreement)
            subsequent to his employment by the Corporation or its agents
            totally independent from any disclosure from the Corporation or its
            agents.

            (c) Notwithstanding anything to the contrary contained herein, in
the event that Employee becomes legally compelled to disclose any confidential
information, Employee will provide the Corporation with prompt notice so that
the Corporation may seek a protective order or other appropriate remedy. In the
event that such protective order or other remedy is not obtained, Employee shall
furnish only such confidential information which is legally required to be
disclosed.

            10. Intellectual Property/Assignment. (a) Any idea, invention,
design, written material, manual, system, procedure, improvement, development or
discovery conceived, developed, created or made by Employee alone or with
others, during the period of his employment hereunder and applicable to the
business of the Corporation or any of its subsidiaries, whether or not
patentable or registrable, shall become the sole and exclusive property of the
Corporation or such subsidiary. Employee shall disclose the same promptly and
completely to the Corporation and shall, during the period of his employment
hereunder and at any time and from time to time hereafter at no cost to Employee
(i) execute all documents reasonably requested by the Corporation for vesting in
the Corporation or any of its subsidiaries the entire right, title and interest
in and to the same, (ii) execute all documents reasonably requested by the
Corporation for filing and prosecuting such applications for patents,
trademarks, service marks and/or copyrights the Corporation, in its sole
discretion, may desire to prosecute, and (iii) give the Corporation all

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assistance it reasonably requires, including the giving of testimony in any
suit, action or proceeding, in order to obtain, maintain and protect the
Corporation's right therein and thereto.

(b) The Corporation will consider existing intellectual property developed
collaboratively by Employee, Dr. Nahed Mohsen and Mr. Richard Pavkov and
disclosed to the Corporation prior to employment and set forth in Schedule A
hereto, provided such intellectual property is unencumbered (the "Predisclosed
Technologies"). At the Corporation's discretion, the Corporation may choose to
progress, to patent, and to commercialize any such Predisclosed Technology. Such
technology shall be the property of the Corporation. Employee agrees to execute
all necessary assignments to transfer any of the Predisclosed Technologies to
Corporation ownership. In the event that the Corporation commercializes this
technology, Dr. Armer, Dr. Mohsen, and Mr. Pavkov shall, collectively, be
granted a single royalty of two percent (2%) of the sales or revenue received by
the Corporation for such commercialization and payable for the life of the
applicable patent from the Predisclosed Technologies as a finders fee. The
allocation of the two percent (2%) royalty shall be equally divided amongst
Employee, Dr. Mohsen, and Mr. Pavkov.

            11. Equitable Relief. The parties hereto acknowledge that Employee's
services are unique and that, in the event of a breach or a threatened breach by
Employee of any of his obligations under Paragraphs 8, 9 or 10 this Agreement,
the Corporation shall not have an adequate remedy at law. Accordingly, in the
event of any such breach or threatened breach by Employee, the Corporation shall
be entitled to such equitable and injunctive relief as may be available to
restrain Employee and any business, firm, partnership, individual, corporation
or entity participating in such breach or threatened breach from the violation
of the provisions of Paragraph 8, 9 or 10 hereof. Nothing herein shall be
construed as prohibiting the Corporation from pursuing any other remedies
available at law or in equity for such breach or threatened breach, including
the recovery of damages and the immediate termination of the employment of
Employee hereunder, if and to the extent permitted hereunder.

            12. Termination of Agreement; Termination of Employment; Severance;
Survival. (a) This Agreement and Employee's employment hereunder shall terminate
upon the first to occur of the following: (i) Employee becoming Disabled (as
such term is defined in Paragraph 13); (ii) Employee's death; (iii) termination
of Employee's employment by the Corporation for Cause or pursuant to
subparagraph (b) of this Paragraph 12; (iv) termination of Employee's employment
for Employer Breach; and (v) the termination of this Agreement at the end of the
term of this Agreement on the Termination Date pursuant to Paragraph 3.

            (b) Notwithstanding anything to the contrary contained in this
Agreement, in the event of the termination of the Employee's employment by the
Corporation for any reason (other than for Cause or by reason of Employee
becoming Disabled), Employee shall be paid a severance payment in an amount
equal to $5,000 multiplied by the number of full months that Employee has been
employed by the Corporation prior to such termination, with such amount not to
exceed $60,000, payable in six equal monthly installments, with the first
installment being payable on the date falling two weeks after the date of such
termination and each additional installment being paid every month after such
date until such severance is paid in full.

            (c) Paragraphs 7-12 of this Agreement shall survive the termination
of Employee's employment hereunder, except in the case of termination pursuant
to Paragraph 15. Notwithstanding anything contained in this Agreement to the
contrary, the royalty payable pursuant to Paragraph 10 (b) shall be payable to
Employee regardless of any termination of this Agreement.

            13. Disability. In the event that during the term of his employment
by the Corporation Employee shall become Disabled (as that term is hereinafter
defined) he shall continue to receive the full amount of the base salary to
which he was theretofore entitled for a period of six months after he shall be
deemed to have become Disabled (the "First Disability Payment Period"). If the
First Disability Payment Period shall end prior to the Termination Date,
Employee thereafter shall be entitled to receive salary at an annual rate equal
to 80% of his then current base salary for a further period ending on the
earlier of (i) six months thereafter or (ii) the Termination Date (the "Second
Disability Payment Period"). Upon the expiration of the Second Disability
Payment Period, Employee shall not be entitled to receive any further payments
on account of his base salary until he shall cease to be Disabled and shall have
resumed his duties hereunder and provided that the Corporation shall not have
theretofore terminated this Agreement as hereinafter provided. The Corporation
may terminate Employee's employment hereunder at any time after Employee is
Disabled, upon at least 10 days' prior written notice; provided, however, that
such termination shall not relieve the Corporation from its obligation to make
the payments to Employee described above in this Paragraph 13. For the purposes
of this Agreement, Employee shall be deemed to have become Disabled when (x) by
reason of

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physical or mental incapacity, Employee is not able to perform his duties
hereunder for a period of 90 consecutive days or for 120 days in any consecutive
180-day period and (y) Employee's physician or a physician designated by the
Corporation shall have determined that it is unlikely that Employee will be
able, by reason of physical or mental incapacity, to perform a substantial
portion of his duties hereunder for the following 120 days. In the event that
Employee shall dispute any determination of his disability pursuant to clauses
(x) or (y) above, the matter shall be resolved by the determination of three
physicians qualified to practice medicine in the United States of America, one
to be selected by each of the Corporation and Employee and the third to be
selected by the designated physicians. If Employee shall receive benefits under
any disability policy maintained by the Corporation, the Corporation shall be
entitled to deduct the amount equal to the benefits so received from base salary
that it otherwise would have been required to pay to Employee as provided above.

            14. Termination for Cause. The Corporation may at any time upon
written notice to Employee terminate Employee's employment for Cause. For
purposes of this Agreement, the following shall constitute Cause: (i) the
willful and repeated failure of Employee to perform any material duties
hereunder or gross negligence of Employee in the performance of such duties, and
if such failure or gross negligence is susceptible to cure by Employee, the
failure to effect such cure within twenty (20) days after written notice of such
failure or gross negligence is given to Employee; (ii) except as permitted
hereunder, unexplained, willful and regular absences of Employee from the
Corporation; (iii) excessive use of alcohol or illegal drugs, interfering with
the performance of Employees duties hereunder; (iv) indictment for a crime of
theft, embezzlement, fraud, misappropriation of funds, other acts of dishonesty
or the violation of any law or ethical rule relating to Employee's employment;
(v) indicted for any other felony or other crime involving moral turpitude by
Employee; or (vi) the breach by Employee of any of the provisions of paragraphs
8, 9 or 10 and if such breach is susceptible of cure by Employee, the failure to
effect such cure within twenty (20) days after written notice of such breach is
given to Employee. For purposes of this Agreement, an action shall be considered
"willful" if it is done intentionally, purposely or knowingly, distinguished
from an act done carelessly, thoughtlessly or inadvertently. In any such event,
Employee shall be entitled to receive his base salary to and including the date
of termination.

            15. Termination for Employer Breach. Employee may upon written
notice to the Corporation terminate this Agreement in the event of the breach by
the Corporation of any material provision of this Agreement, and if such breach
is susceptible of cure, the failure to effect such cure within 20 days after
written notice of such breach is given to the Corporation (an "Employer
Breach"). Employee's right to terminate this Agreement under this Paragraph 14
shall be in addition to any other remedies Employee may have under law or
equity.

            16. Insurance Policies. The Corporation shall have the right from
time to time to purchase, increase, modify or terminate insurance policies on
the life of Employee for the benefit of the Corporation, in such amounts as the
Corporation shall determine in its sole discretion. In connection therewith,
Employee shall, at such time or times and at such place or places as the
Corporation may reasonably direct, submit himself to such physical examinations
and execute and deliver such documents as the Corporation may reasonably deem
necessary or desirable; provided that such examinations shall be performed by,
and that such documents shall be delivered only to, qualified physicians and/or
medical representatives of licensed insurance companies. At Employee's written
request upon the termination of Employee's employment under this Agreement
(other than for Cause or as result of Employee's death), the Corporation shall
assign to Employee the Corporation's interest in such life insurance policies
(to the extent such policies are so assignable by their terms), whereupon
Employee shall assume all obligations of the Corporation in respect thereof.

            17. Entire Agreement; Amendment. This Agreement constitutes the
entire agreement of the parties hereto relating to the subject matter hereof and
any prior agreement between the Corporation and Employee is hereby superseded
and terminated effective immediately and shall be without further force or
effect. No amendment or modification himself shall be valid or binding unless
made in writing and signed by the party against whom enforcement thereof is
sought.

            18. Notices. Any notice required, permitted or desired to be given
pursuant to any of the provisions of this Agreement shall be delivered in person
or sent by responsible overnight delivery service or sent by certified mail,
return receipt requested, postage and fees prepaid, if to the Corporation, at
its address set forth above to the attention of the Corporation's Chief
Executive Officer and, if to Employee, at his address set forth above. Either of
the parties hereto may at any time and from time to time change the address to
which notice shall be sent hereunder by notice to the other party given under
this Paragraph 18. Notices shall be deemed effective upon receipt.

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            19. No Assignment; Binding Effect. Neither this Agreement, nor the
right to receive any payments hereunder, may be assigned by either party without
the other party's prior written consent. This Agreement shall be binding upon
Employee, his heirs, executors and administrators and upon the Corporation, its
successors and assigns.

            20. Waivers. No course of dealing nor any delay on the part of
either party in exercising any rights hereunder shall operate as a waiver of any
such rights. No waiver of any default or breach of this Agreement shall be
deemed a continuing waiver or a waiver of any other breach or default.

            21. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, except that body of law
relating to choice of laws.

            22. Invalidity. If any clause, paragraph, section or part of this
Agreement shall be held or declared to be void, invalid or illegal, for any
reason, by any court of competent jurisdiction, such provision shall be
ineffective but shall not in any way invalidate or affect any other clause,
paragraph, section or part of this Agreement.

            23. Further Assurances. Each of the parties shall execute such
documents and take such other actions as may be reasonably requested by the
other party to carry out the provisions and purposes of this Agreement in
accordance with its terms.

            24. Headings. The headings contained in this Agreement have been
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.

            25. Publicity. The Corporation and Employee agree that they will not
make any press releases or other announcements prior to or at the time of
execution of this Agreement with respect to the terms contemplated hereby,
except as required by applicable law, without the prior approval of the other
party, which approval will not be unreasonably withheld.

            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.

                                      SHEFFIELD PHARMACEUTICALS, INC.

                                      BY:  /s/ Carl F. Siekmann
                                           ----------------------------
                                           Name: Carl F. Siekmann
                                           Title: Executive VP

                                      /s/ Thomas A. Armer
                                      ----------------------------------
                                      Thomas A. Armer

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                                                                   Schedule A to
                                                            Employment Agreement

                              Intellectual Property

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                              INVENTION DESCRIPTION

                   METHOD AND APPARATUS FOR PRECISELY METERING
                       AND GENERATING DRY POWDER AEROSOLS

HISTORY:

            Carlos Mastrangelo (Univ. of Michigan), Richard Pavkov, Nahed
            Mohsen, June 1997 - request for proposal describes apparatus
            metering and actuation method.

            Nahed Mohsen, Richard Pavkov, Neal Lii, Tom Garver, Tom Armer,
            September 1997 - aerosol generation and actuation method.

            Tom Armer, Nahed Mohsen, December 1997 - method for deposition of
            precisely metered powders.

            Don Frei (Wood, Herron & Evans) and Tom Armer - May 1998,
            prosecution strategy.

DESCRIPTION:

            This invention teaches a method to precisely meter unit-doses of a
dry, powdered compound and to disperse it as an aerosol into an air stream. It
also describes the apparatus and a method to load powdered doses into the
apparatus.

Unit doses are defined as individual powder caches, precisely measured to
contain a specific amount of the powder compound. The amount can range from 5
micrograms up to 500 milligrams. The dose precision ranges from 1 microgram for
the smallest dose size, to 50 micrograms for the largest dose size.

The dry powder is composed of finely disperse compound(s) with median diameters
ranging from 0.5 micron to 20 microns. The powder is loaded into precisely
partitioned cells on a substrate by electrostatic deposition (such as the
commercial system from Delsys). Each cell in the partitioned zones constitutes a
unit dose. The cells are separated from each other by a finite distance or a
physical barrier to avoid overlap and intermixing. For example the partitioned
cells can be an array of cylindrical, rhombohedral, tetrahedral or pyramidal
mounds or bumps. Alternatively they can be rectangular or circular, octagonal,
hexagonal or other polygonal-perimeter walled-cells. The substrate can be a flat
surface or it can be preformed into shallow-walled lattice. The volume of the
partitions and deposit density control the mass of powder in each partition. The
deposit packing density is sufficiently low to minimize irreversible
agglomeration of the powder particles, but high enough to minimize settling.
Ideally the packing density corresponds to a level just at the threshold of the
critical packing fraction characteristic of the powder shape and size
distribution.

One (1) to several thousand cells could be formed on the substrate. The
substrate can be formed into three-dimensional shapes. For example it could be
cylindrical with the cells on the internal surface or on the external surface.
The substrate can be polymer, metallic or compose of silicon, alumina or other
ceramic material. The cells can be etched, pressed, stamped or machined
(optically or mechanically) into the surface. In certain embodiment it may be
desirable to render the substrate porous so that air may flow, under the
influence of an applied pressure gradient, through the cell to aid in evacuating
the deposited powder.

After deposition the cells are sealed with a thin foil of plastic and/or metal.
The foil can be applied by lamination, vapor deposition, gas phase
polymerization or by spraying. The foil serves to protect the powder deposit
from spilling, contamination, and mechanical or environmental disruption due to
the effects of handling, humidity, temperature and exposure to uncontrolled
environments. In preferred embodiments a polymer foil, coated with a vapor
deposited metal can practically package the powder cell array for up to several
years of storage.

Thus the above description discloses a method to precisely meter, package and
store unit doses of powdered compound(s). The method of aerosol actuation and
generation is next described.

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The partitioned cells and foil covering incorporate features which allow each
partition to be individually opened. For example the foil can be embossed with a
grid of conductors such as aluminum, graphite, nichrome. Alternatively the grid
can be incorporated into the shallow-walled partitions, or into the surface of
the substrate. The grid pattern is correspondent to the perimeters or a portion
or the perimeters of the cells. Electrical current passed selectively through
the grid on the partition perimeters heats sufficiently to melt or degrade the
foil to that the covering disintegrates, melts, or otherwise fails mechanically
to rupture the cell cover. The heating is sufficiently localized to avoid
degradation of the physical, chemical or biological properties of the powder
inside the cell. Simultaneously, a force field is applied to the deposit so that
as the cell ruptures the powder is ejected into the media above the substrate.
This force field can be: an electrostatic field, a mechanical force such as
vibrations from an electromechanical or an acoustic generator, or a convective
gradient such as a fluid flowing through the cell or tangentially above the
cell. The force field is sufficient to disperse the powder into the media
adjacent to the substrate. Thus each cell can individually ruptured and the
contents discharged into the media. The medium into which the cells are
discharged is typically gaseous, but it could be vapor or liquid state fluid.

Multiple partitions could be discharged simultaneously or in a specific
combinatorial sequence. Different compounds can be deposited into different
cells in the same array and discharged in a specific sequence or combination.

ADVANTAGES:

Existing dry powder dispersing technology relies either on a propellant or a
carrier powder to disperse the target compound into a carrier media. The
described invention eliminates the need for the propellant by using
electromechanical or other fluid propulsion mechanisms. This can increase the
precision and consistency of dispersion, while reducing cost, size and
complexity of the dispersing device.

The elimination of the powder carrier increases the dispersion efficiency and
affords more precise control of dose metering and particle size distribution. It
can also eliminate the presence of unnecessary species in the dispersed aerosol.

The partitioning and deposition method provides a highly accurate, pre-metering
system to generate precise dose sizes. It eliminates problems with typical unit
dose packages (e.g. blister packages or capsules) such as retention of powder in
the package, while providing the same packaging and storage stability. The
multiplicity of cells provides the equivalent to a reservoir of powder, but
provides an accuracy of measurement not available in existing reservoir devices.

The ability to discharge cells in specific sequences and combinations enables
the ability to customize dosing quantity and composition, while using a single
apparatus or powder supply.

Because the production of the substrate and filling with powder is comparable to
existing blister or capsule packaging, there should be no cost penalty.

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                              INVENTION DESCRIPTION

           METHOD AND APPARATUS FOR USING POROUS PLASTICS TO DISPERSE
                        AND DISPENSE DRUGS FOR INHALATION

HISTORY:

Disclosed 2/27/98:   Thomas Armer, Richard Pavkov

DESCRIPTION:

Porous material used to control airflow through a conduit thus creating a
laminar flow across the cross sectional area of a conduit. Due to the nature of
the porous material, it can be molded and machined into numerous shapes allowing
for various air flow boundary conditions, i.e. pipes, baffles, frits, plugs,
etc. Depending on the shape of the material, the air flow boundary, created by
the air moving through the pores, can be used to inhibit deposition on the inner
surfaces of a medical device such as a metered dose inhaler (MDI), dry powder
inhaler (DPI), nebulizer, etc. The airflow through the material can also be used
to displace the momentum of an aerosol burst, such as the bolus of an MDI, to
promote dispersion and/or evaporation.

Description of Material:
Porous plastic consisting of various polymers with a range of pore diameters:

o    High-density polyethylene (HDPE)
            Pore size: 35 - 250um

o    Ultra high molecular weight Polyethylene (UHMW)
            Pore size: 7 - 40um

o    Polypropylene (PP)
            Pore size: 125 - 350um

o    Polyvinylidene fluoride (PVDF)
            Pore size: 25um average size

o    Polytetrafluoroethylene (PTFE)
            Pore size: 25um average size

o    Nylon 6 (N6)
            Pore size: 200um average size

o    Polyethersulfone (PES)
            Pore size: 100um average size

ADVANTAGES:

o    Dispersion of air flow

o    Material creates a boundary of air flow extending from material surface
     thus allowing counteraction of opposing flows

o    Molded plastics shapes

o    Chemical resistant

o    Machinable

o    Low cost

o    Various pore sizes for controlled air flow

o    Minimizes drug deposition due to surface characteristics

                                       10
<PAGE>

OTHER APPLICATIONS:

Impregnation of a suitable geometrical shape of the porous plastic with a dry
powder drug, such as albuterol. Impregnated plastic is then loaded into a device
for dispensing of the drug. Once air is pushed or pulled through the porous
plastic the entrapped drug would be carried out by the air flow. Due to the
nature of the porous plastic, the drug dose will dispense as a function of the
porosity, air flow, time of inhalation, and bulk of the material. The most
practical design of this dispensing method would be for single use dosage with a
disposable device. The design embodiment would be that of a pack of cigarettes
in which each single use device is sealed until the desired time of need. This
would be ideal for third world applications (low cost) and for conditions with
high humidity since the devices would be sealed until used.

                                       11
<PAGE>

                              INVENTION DESCRIPTION

       A METHOD TO GENERATE DROPLETS OF PRECISE SIZE AND PRECISE EJECTION
                                    VELOCITY

HISTORY:

Nahed Mohsen, Tom Armer, Rich Pavkov, Richard Oeftering, March 1997- discussion
of potential application for acoustic radiation pressure.

Nahed Mohsen, Tom Armer, Rich Pavkov, Richard Oeftering and Dan Demiglio (NASA
Lewis Research Center), June 1997 - Discussion of experimental design and
protocols to generate droplets of insulin.

DESCRIPTION:

This is a disclosure of a method to generate droplets of precise size and
precise ejection velocity.

This invention teaches a method to generate precisely uniform size of droplets
at a controlled velocity. The method uses acoustic radiation pressure to
generate droplets for any liquid medicament. The generator consists of an
acoustic transducer that emits a focused tone burst from below a pool of liquid
directed at the pools' surface. The burst causes the surface to erupt and form a
droplet, which is ejected with an initial velocity. The droplet size can vary
over a wide range, since the generator is nozzleless and is not bound strictly
to a fixed nozzle diameter. The droplet size can be controlled, since it is
proportional to the acoustic wavelength, thus, varying the input frequency
varies the droplet size inversely. The droplet size produced can range from 1um
to 50um. For finer droplet size, multiple transducer may be used. The acoustic
radiation pressure droplet generator can create droplets from liquid solution as
well as from liquid suspension systems without clogging since the generator is
nozzleless. In addition, the particles in the suspension system would cross the
ejection point and would either get ejected along with the liquid or swept a way
from the ejection point, thus creating a self cleaning system.

The droplet generator consists of a piezoelectric transducer mounted on the end
of a buffer rod (sapphire). A spherical focusing lens is positioned at the
opposite end of the rod. The lens of the device is submerged below the surface
of a liquid pool. The transducer generates a high frequency acoustic tone burst
which propagates down the length of the sapphire rod. When it reaches the
opposing end, the acoustic waves encounter a spherical focusing lens that
transmits the acoustic energy into the liquid pool. The lens causes the acoustic
waves to be focused at a small point at the pool surface. The device relies on
the acoustic pressure to propel droplets from a small pool of liquid. The
pressure is greatest in the beam's focal region, particularly, at the pool
surface where the wave reflection occurs. The pressure acts to lift a small
column of liquid which appears initially as a small mound. When enough energy is
applied to overcome the liquid surface tension, the mound becomes a momentary
liquid fountain where each short tone burst emits a single droplet. As one
increases the energy level, the droplets begin to form tails, which then break
off into satellite droplets. Further increases in the energy causes the process
to transition to a continuous fountain.

ADVANTAGES:

The advantages of the acoustic pressure droplet generator:

1.   It produces uniform droplet size distribution,

2.   It produces a wide range of droplet size,

3.   It can control the ejection velocity of the droplets,

4.   It can atomize liquid as well as suspension systems,

5.   It can atomize polypeptides and proteins without any molecular chains
     denaturation,

6.   It does not clog, self cleaning system

                                       12
<PAGE>

                                                                    EXHIBIT A TO
                                                            EMPLOYMENT AGREEMENT

                         SHEFFIELD PHARMACEUTICALS, INC.
                               425 WOODSMILL ROAD
                         ST. LOUIS, MISSOURI 63017-3441

                                                      --------------, 1998

To:           [Insert Name & Address
              of Employee]

            At a meeting of the Compensation Committee of the Board of Directors
of Sheffield Pharmaceuticals, Inc. (the "Company") held on July 15, 1998, the
Company authorized the grant to you of an option (the "Option") to purchase
_____________________ (___,000) shares (the "Shares") of Common Stock, par value
$.01 per share, of the Company. The Option is being granted in connection with
your employment by the Company.

            Except as provided below, the option may be exercised at anytime and
from time after ________________, 199__ and on or prior to _______________,
200__ (on which date the Option will, to the extent not previously exercised,
expire).(1) The purchase price per Share payable by you is $______.(2)

Unless at the time of the exercise of the Option a registration statement under
the Securities Act of 1933, as amended (the "Act") , is in effect as to the
Shares, any Shares purchased by you upon the exercise of the Option shall be
acquired for investment and not for sale or distribution, and if the Company so
requests, upon any exercise of the Option, in whole or in part, you will execute
and deliver to the Company a certificate to such effect. The Company shall not
be obligated to issue any Shares pursuant to the Option if, in the opinion of
counsel to the Company, the Shares to be so issued are required to be registered
or otherwise qualified under the Act or under any other applicable statute,
regulation or ordinance affecting the sale of securities, unless and until such
Shares have been so registered or otherwise qualified.

            You understand and acknowledge that, under existing law, unless at
the time of the exercise of the Option a registration statement under the Act is
in effect as to such Shares (i) any Shares purchased by you upon exercise of
this option may be required to be held indefinitely unless such Shares are
subsequently registered under the Act or an exemption from such registration is
available; (ii) any sales of such Shares made in reliance upon Rule 144
promulgated under the Act may be made only in accordance with the terms and
conditions of that Rule (which, under certain circumstances, restrict the number
of shares which may he sold and the manner in which shares may

----------
          (1) The first date for exercise shall be the date six months after the
          issuance date of the Option and the last date for exercise shall be
          the fifth anniversary of such issuance date.

          (2) Purchase price shall he the closing price of the Company's common
          stock on the American Stock Exchange as of the date of commencement of
          employment.

                                       13
<PAGE>

be sold); (iii) in the case of securities to which Rule 144 is not applicable,
compliance with Regulation A promulgated under the Act or some other disclosure
exemption will be required; (iv) certificates for Shares to be issued to you
hereunder shall bear a legend to the effect that the Shares have not been
registered under the Act and that the Shares may not be sold, hypothecated or
otherwise transferred in the absence of an effective registration statement
under the Act relating thereto or an opinion of counsel satisfactory to the
Company that such registration is not required; and (v) the Company will place
an appropriate "stop transfer" order with its transfer agent with respect to
such Shares. In addition, you understand and-acknowledge that the Company has no
obligation to you to furnish information necessary to enable you to make sales
under Rule 144.

            In the event that the Company shall at any time prior to the
expiration of the Option and prior to the exercise thereof: (i) declare or pay
to the holders of the Common Stock a dividend payable in any kind of shares of
stock of the Company; or (ii) change or divide or otherwise reclassify its
Common Stock into the same or a different number of shares with or without par
value, or into shares of any class or classes; or (iii) consolidate or merge
with, or transfer its property as an entirety or substantially all of its assets
to any other corporation; or (iv) make any distribution of its assets to holders
of its Common Stock as a liquidation, or partial liquidation dividend or by way
of return of capital; then, upon the subsequent exercise of the Option, the
purchase price of the Shares issuable upon the exercise hereof shall be
appropriately adjusted by the Board of Directors of the Company so that you
shall receive for the exercise price, in addition to or in substitution for the
Shares to which you would be entitled upon such exercise, such additional shares
of stock of the Company, or such reclassified shares of stock of the Company, or
such securities or property of the Company resulting from such consolidation or
merger or transfer, of such assets of the Company, which you would have been
entitled to receive had you exercised the Option prior to the happening of any
of the foregoing events.

            In the event that your employment by the Company is terminated for
cause, then the Option shall be immediately canceled upon such termination of
employment and you shall have no further rights with respect to the Option. In
the event that your employment by the Company is terminated for reasons other
than for cause, then you may, during the ninety (90) day period following the
date you cease to be employed by the Company, exercise the Option to the extent
that you were entitled to exercise it at the date of such termination. To the
extent that you were not entitled to exercise the Option at the date of such
termination, or if you do not exercise the Option (to the extent you are
entitled to exercise) within the time specified in this paragraph, the Option
shall terminate.

            The Option (or installment thereof) is to be exercised by delivering
to the Company a written notice of exercise in the form attached hereto as Annex
A, specifying the number of Shares to be purchased, together with payment of the
purchase price of the Shares to be purchased. The purchase price is to be paid
in cash.

            The Option does not confer upon any right whatsoever as a
stockholder of the Company. Your right to exercise the Option shall not
terminate as a result of the termination of your employment by the Company.

            The Option shall be binding upon any successors or assigns of the
Company.

            If the foregoing correctly sets forth our understanding, please
indicate your acceptance by signing this letter in the space provided below.

                                     Very truly yours,

                                     SHEFFIELD PHARMACEUTICALS, INC.

                                     BY:
                                           ------------------------------

                                           Name:
                                           Title:
AGREED TO AND ACCEPTED:

-------------------------------
[Name of Employee]

                                       14
<PAGE>

                                                                       Exhibit A

                             STOCK SUBSCRIPTION FORM

To:     Sheffield Pharmaceuticals, Inc.

Gentlemen:

            I hereby exercise my option to purchase from Sheffield
Pharmaceuticals, Inc. (the "Company"), pursuant to the Stock Option Letter
Agreement between us dated as of _____________, 1998, ______________ shares of
the Company's Common Stock, $.01 par value, and herewith tender payment therefor
at the rate of $_____ per share.

            I represent and warrant that I am acquiring the said shares for my
own account for investment purposes only; that I have no present intention of
selling or otherwise disposing of such shares or any part thereof; that I will
not transfer said shares in violation of the securities laws of the United
States; that I am familiar with the business operations, management and
financial condition and affairs of the Company; that I have not relied upon any
representation of the Company with respect thereto; and that I have the personal
financial means to comply with all of said representations. I further confirm
that I have been advised that said shares will not be registered under the
Securities Act of 1933, as amended, and that I have consulted with and been
advised by counsel as to the restrictions on resale to which said shares will
thereby be subject.

            The form in which I wish my name and address to appear on the
Company stock records is as follows:

                                   Name:
                                        ---------------------------------------

                                   Address:
                                   --------------------------------------------
                                   --------------------------------------------
                                   --------------------------------------------

                                               Very truly yours,

                                               --------------------------------
                                               [Name of Employee]

                                       15<PAGE>

                                                                 EXHIBIT 10.6.6A

            THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT ("First Amendment") is
made this first day of October, 2001 (the "Effective Date"), by and between
Sheffield Pharmaceuticals, Inc. (the "Corporation") and Thomas A. Armer (the
"Executive").

            WHEREAS, the Compensation Committee of the Board of Directors has
determined that a possibility of a Change in Control of the Corporation exists
and appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of certain management to their assigned duties.

            NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, intending to be legally bound, the Corporation and Executive
hereby agree, effective as of the Effective Date, as follows:

15.  Paragraph 3 of the Employment Agreement by and between the Corporation and
     Executive dated August 3, 1998 (the "Employment Agreement") is hereby
     amended by deleting the third sentence in its entirety and adding to the
     second sentence the following:

            "; provided that, no such notice by the Corporation shall be
            effective and the term of this Agreement shall be extended for an
            additional year if a Potential Change in Control shall have occurred
            or occurs at any time prior to the date of such notice or within the
            twelve month period beginning on the date of such notice. Further,
            if a Change in Control shall have occurred at any time during the
            term of this Agreement, then notwithstanding any provision hereof to
            the contrary, the term shall continue in effect for: (i) the
            remainder of the month in which the Change in Control occurred, and
            (ii) a term of twenty-four months beyond the month in which such
            Change in Control occurred; provided that, if any obligations of the
            Corporation hereunder shall not have been fully and finally
            discharged at the end of such twenty-four month period, the term
            shall continue until such obligations shall have been finally
            discharged in full. The period commencing on the earlier of a
            Potential Change in Control (if applicable) or Change in Control and
            ending with the conclusion of such twenty-four month period shall be
            referred to hereinafter as the "Protection Period."

16.  Paragraph 12(c) of the Employment Agreement is hereby deleted in its
     entirety.

17.  Paragraph 14 of the Employment Agreement is hereby amended by deleting
     Paragraph 14 in its entirety and replacing it with the following:

                        "14. Termination for Cause. The Corporation may at any
time upon written notice to Executive terminate Executive's employment for
Cause. For purposes of this Agreement, the following shall constitute Cause: (a)
the Executive's gross misconduct which is materially and demonstrably injurious
to the Corporation; (b) the Executive's willful and continued failure to perform
substantially his duties with the Corporation (other than a failure resulting
from the Executive's incapacity due to bodily injury or physical or mental
illness) after a demand for substantial performance is delivered to the
Executive by the Board which specifically identifies the manner in which the
Board believes that the Executive has not substantially performed his duties and
provides for a reasonable period of time within which the Executive may take
corrective measures; or (c) the Executive's conviction (including a plea of nolo
contendere) of willfully engaging in illegal conduct constituting a felony or a
gross misdemeanor involving an intentional act of fraud, misrepresentation,
theft, embezzlement or dishonesty under federal or state law (or comparable
illegal conduct under the laws of any foreign jurisdiction) which is materially
and demonstrably injurious to the Corporation or which impairs the Executive's
ability to perform substantially his duties with the Corporation. An act or
failure to act will be considered "gross" or "willful" for this purpose only if
done, or omitted to be done, by the Executive in bad faith and without
reasonable belief that it was in, or not opposed to, the best interests of the
Corporation. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or governing body of the Corporation (or
a committee thereof) or based upon the advice of counsel for the Corporation
will be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Corporation.
Executive's attention to matters not directly related to the business of the
Corporation will not provide a basis for termination for Cause so long as the
Board did not expressly disapprove in writing of his engagement in such
activities either before or within a reasonable period of time after the Board
knew or could reasonably have known that the Executive engaged in those
activities. Notwithstanding the

                                       1
<PAGE>

foregoing, the Executive may not be terminated for Cause unless and until there
has been delivered to Executive a copy of a resolution duly adopted by the
affirmative vote of not less than two-thirds of the entire membership of the
Board (excluding such Executive) at a meeting of the Board called and held for
such purpose (after reasonable notice to such Executive and an opportunity for
such Executive, together with his counsel, to be heard before the Board),
finding that in the good faith opinion of the Board such Executive engaged in
the conduct set forth in paragraphs (a), (b) or (c) above and specifying the
particulars thereof in detail."

18.  Paragraph 21 of the Employment Agreement is hereby amended by adding to the
     end of the first sentence the following:

            "and the Corporation hereby irrevocably consents to the jurisdiction
            of the federal and state courts sitting in the State of Missouri for
            purposes of enforcing this Agreement."

19.  Paragraph 26 of the Employment Agreement is hereby amended by deleting
     Paragraph 26 in its entirety and replacing it with the following:

                        "26. Disputes. (a) If the Executive so elects, any
dispute, controversy or claim arising under or in connection with this Agreement
will be settled exclusively by binding arbitration in St. Louis, Missouri in
accordance with the Employee Benefit Plan Claims Arbitration Rules of the
American Arbitration Association, incorporated by referenced herein. Judgment
may be entered on the arbitrator's award in any court having jurisdiction;
provided that, the Executive may seek specific performance of his right to
receive benefits until the Termination Date during the pendency of any dispute
or controversy arising under or in connection with this Agreement.

                        (b) If the Executive does not elect arbitration to
resolve a dispute, claim or controversy, he may pursue all other available legal
remedies.

                        (c) Any review by an arbitrator or a court of competent
jurisdiction of a decision made by the Board at any time after a Change in
Control shall be de novo, and any such Board determination shall not be entitled
to deference.

                        (d) The Corporation will not assert in any dispute or
controversy with the Executive arising under or in connection with this
Agreement the Executive's failure to exhaust administrative remedies.

                        (e) In the event of any dispute, claim or controversy
arising out of or in connection with this Agreement, if the Executive prevails
on any of the material issues involved in any such dispute, claim or
controversy, the Corporation shall pay to the Executive immediately upon demand
all reasonable expenses (including without limitation attorneys' fees) incurred
by the Executive in connection therewith.

                        (f) If the Corporation refuses or otherwise fails to
make a payment when due under this Agreement and it is ultimately determined
that the Executive is entitled to such payment, such payment shall be increased
to reflect an interest factor, compounded annually, equal to the prime rate in
effect as of the date the payment was first due plus five points. For this
purpose, the prime rate shall be based on the rate identified by Chase Manhattan
Bank as its prime rate in New York City."

20.  The Employment Agreement is further amended by adding the following as new
     Paragraphs 27 through 32:

                        "27. Definitions. For purposes of this Agreement, the
capitalized terms set forth herein and not otherwise defined shall have the
meanings set forth in Appendix A attached hereto which shall have the same force
and effect as if included as a Paragraph in this Amendment and shall apply when
interpreting the terms of this Agreement.

                        28. Termination Employment in Connection with a Change
in Control.

                        (a) Eligibility. If the Executive's employment is
terminated during the Protection Period either: (i) by the Corporation without
Cause, or (ii) by the Executive for Good Reason, the Corporation will provide

                                       2
<PAGE>

the Executive with the payments and benefits set forth in Paragraph 29 below
(collectively, the "Enhanced Severance Benefits"), accelerated vesting and
exercisability of stock based compensation under Paragraph 30 and a Gross-Up
Payment for "Excise Tax" (as defined in Paragraph 31) under Paragraph 31. If the
Executive terminates employment with the Corporation under any other
circumstances, he shall not be entitled to Enhanced Severance Benefits under
Paragraph 29, but may be entitled to (c) benefits under Paragraph 12 hereunder,
and (d) accelerated vesting and exercisability of stock based compensation under
Paragraph 30 and a Gross-Up Payment for Excise Tax under Paragraph 31 by
remaining employed with the Corporation as of a Change in Control. In no event
shall Executive be entitled to Enhanced Severance Benefits under Paragraph 29
and to benefits under Paragraph 12.

                        (b) Process for Termination of Employment. During the
Protection Period, any termination of the Executive's employment by the
Executive for Good Reason or by the Corporation for Cause shall be communicated
by written Notice of Termination from the party terminating employment hereunder
to the other party hereto in accordance with Paragraph 18. A "Notice of
Termination" shall mean, for purposes of this Agreement, a written notice given
in good faith and with a reasonable belief that Good Reason or Cause, as the
case may be, has occurred, which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated. Any Notice of
Termination must specify a Termination Date and any Notice of Termination for
Cause shall include a copy of the relevant resolution of the Board action taken
in accordance with the terms of this Agreement to terminate the Executive's
employment for Cause.

                        (c) Compensation and Benefits before Termination Date.
During the period beginning on the date the Executive or the Corporation, as the
case may be, receives Notice of Termination and ending on the Termination Date,
the Corporation will continue to pay the Executive his Base Pay and cause his
continued participation in all Benefit Plans in accordance with the terms of
such Benefit Plans.

                        (d) Rights Under Other Plans, Policies, Practices and
Agreements. Other than to the extent expressly provided herein, this Agreement
does not supersede any other plans, policies, and/or practices of the
Corporation. To the extent that any provision of any Benefit Plan limits,
qualifies or is inconsistent with any of the benefits provided under this
Agreement, then, for purposes of this Agreement, while such other Benefit Plans
remains in force, the provisions of this Agreement will control and such
provision of such other Benefit Plan will be deemed to have been superseded and
to be of no force or effect, as if such other agreement had been formally
amended to the extent necessary to accomplish such purpose. Nothing in this
Agreement prevents or limits the Executive's continuing or future participation
in any Benefit Plan provided by the Corporation and nothing in this Agreement
limits or otherwise affects the rights the Executive may have under any Benefit
Plans with the Corporation. Amounts that are vested benefits or which the
Executive is otherwise entitled to receive under any Benefit Plan with the
Corporation at or subsequent to the Termination Date will be payable in
accordance with such Benefit Plan.

         29. Enhanced Severance Benefits.

             (a) Cash Payment. The Executive will be entitled to a cash payment
equal to one and one-half (1.5) times Base Pay (disregarding any change in Base
Pay that constitutes Good Reason). The benefit provided under this Paragraph
29(a) will be distributed in a single lump sum within ten business days after
the Termination Date or, if later, within ten business days following the
effective date of the Change in Control.

             (b) Continuation of Certain Welfare Benefits.

                 (i) During the period described in Paragraph 29(b)(ii) below,
the Corporation will maintain, or continue to reimburse or pay on behalf of the
Executive, as the case may be, medical, dental and life insurance plans which by
their terms cover the Executive and his family members and dependents under the
same terms and at the same cost to the Executive and his family members and
dependents as similarly situated executives who continue to be employed by the
Corporation (without regard to any reduction in such benefits that constitutes
Good Reason). The continuation period under applicable federal and state
continuation laws will begin to run from the date on which coverage under this
Paragraph ends.

                 (ii) For purposes of Paragraph 29(b)(i) above, the continuation
period with respect to any particular plan is the period beginning on the
Termination Date and ending on the earlier of: (x) the last day

                                       3
<PAGE>
of the twelfth month that begins after the Termination Date, (y) the date after
Termination Date on which the Executive first becomes eligible to participate in
the plan of another employer providing comparable benefits to the Executive and
his eligible family members and dependents which plan does not contain any
exclusion or limitation with respect to any pre-existing condition of the
Executive or any eligible family member or dependent who would otherwise be
covered under the Corporation's plan but for this clause (y), or (z) the date of
the Executive's death.

                 (iii) To the extent the Executive incurs a liability for Taxes
in connection with a benefit provided pursuant to Paragraph 29(b) which he would
not have incurred had he been an active employee of the Corporation
participating in one of the Corporation's Benefit Plans, the Corporation shall
make a Gross-Up Payment for any such Taxes to the Executive. For purposes of
applying the foregoing, the Executive's tax rate will be deemed to be the
highest statutory marginal state and federal tax rate (on a combined basis) then
in effect. The payment pursuant to this subparagraph will be made within ten
days after the Executive's remittal of a written request therefor, accompanied
by a statement indicating the basis for and amount of the liability.

             (c) Extended Exercise Period for Stock Options. Any stock options
issued by the Corporation and held by the Executive shall remain exercisable
until thirty-six months following the Termination Date, but in no event beyond
the stock option's maximum exercise period (without regard to any provisions
that shortens the exercise period in connection with termination of employment
or otherwise).

         30. Accelerated Vesting and Exercisability. If a Change in Control
occurs while the Executive is employed by the Corporation or after the Executive
has terminated employment with the Corporation under circumstances entitling him
to Enhanced Severance Benefits, (a) all stock options previously granted to the
Executive by the Corporation shall become fully vested and exercisable as of the
date of the Change in Control, whether or not otherwise exercisable and vested
as of that date, and (b) shares of restricted Corporation stock previously
awarded to the Executive shall become fully vested.

         31. Excise Tax Equalization. The Corporation will cause its independent
auditors promptly to review, at the Corporation's sole expense, the
applicability of Paragraph 4999 of the Code to any payment or distribution of
any type by the Corporation or its Affiliates to or for the benefit of the
Executive, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement, any Benefit Plan or otherwise (the "Total
Payments"). The Corporation shall engage the auditor so that its review is
completed no later than the Change in Control. If the auditor determines that
the Total Payments result in an excise tax imposed by Paragraph 4999 of the Code
or any comparable state or local law, or any interest or penalties with respect
to such excise tax (such excise tax, together with any such interest and
penalties, are collectively referred to as the "Excise Tax") and if the
Executive is entitled to Enhanced Severance Benefits or accelerated vesting or
exercisability of equity compensation under Paragraph 30, or both, the
Corporation shall make a Gross-Up Payment for any Excise Taxes to the Executive
within ten business days after the Termination Date, but in no event later than
the due date for the payments of any excise tax. For purposes of the foregoing
determination, the Executive's tax rate will be deemed to be the highest
statutory marginal state and federal tax rate (on a combined basis) then in
effect. If any tax authority determines that a greater Excise Tax should be
imposed upon the Total Payments than is determined by the Corporation's
independent auditors pursuant to this Paragraph 31, the Executive is entitled to
receive from the Corporation the full Gross-Up Payment calculated on the basis
of the amount of Excise Tax determined to be payable by such tax authority
within ten business days after he notifies the Corporation of such
determination.

         32. Miscellaneous.

             (a) Successors and Assigns.

                 (i) The Corporation will require any Successor to expressly
assume and agree to perform the obligations of this Agreement in the same manner
and to the same extent that the Corporation would be required to perform if no
such succession had taken place except as specifically required to the contrary
hereunder. Failure of the Corporation to obtain such assumption and agreement at
least three business days prior to the time a Person becomes a Successor (or
where the Corporation does not have at least three business days' advance notice
that a Person may become a Successor, within one business day after having
notice that such Person may become or has become a Successor) will constitute
Good Reason for termination of the Executive's employment. The date on which any
such succession becomes effective will be deemed the Termination Date and Notice
of Termination will be deemed to have been timely given by the Executive. A
Successor has no rights, authority or power with respect to this Agreement prior
to a Change in Control.

                                       4
<PAGE>

                 (ii) This Agreement is for the benefit of, and is enforceable
by, the Executive, his personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees; provided
that, the Executive may not otherwise assign any of his rights or delegate any
of his obligations under this Agreement. If the Executive dies after becoming
entitled to, but before receiving, any amounts payable under this Agreement, all
such amounts, unless otherwise specifically provided to the contrary in this
Agreement, will be paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee or other designee or, if there be no such designee,
to the Executive's estate.

             (b) No Mitigation or Set-Off. The Executive will not be required to
mitigate the amount of any benefits the Corporation becomes obligated to provide
in connection with this Agreement by seeking other employment or otherwise. The
Corporation has no right to set-off benefits owed under this Agreement against
amounts owed or claimed to be owed by the Executive to the Corporation under
this Agreement or otherwise.

             (c) Taxes. All benefits to be provided to the Executive in
connection with the this Agreement will be subject to required withholding of
federal, state and local income, excise and employment-related taxes.

             (d) Survival. The respective obligations of, and benefits afforded
to, the Corporation and the Executive which, by their express terms or clear
meaning, survive termination of the Executive's employment with the Corporation
or termination of this Agreement, as the case may be, will remain in full force
and effect according to their terms notwithstanding the termination of the
Executive's employment with the Corporation or termination of this Agreement, as
the case may be.

             (e) Benefits as Eligible Compensation under Other Benefit Plans.
Unless otherwise expressly provided therein, benefits paid or payable under this
Agreement will not be deemed to be salary or compensation for purposes of
determining the benefits to which the Executive may be entitled under any other
Benefit Plan sponsored, maintained or contributed to by the Corporation."

21.  Except as amended as set forth in this First Amendment, the Employment
     Agreement shall remain in full force and effect in accordance with its
     terms.

            IN WITNESS WHEREOF, this First Amendment has been executed by the
Corporation, by its duly authorized representative, and by Executive, as of the
Effective Date.

EXECUTIVE                                       CORPORATION

/s/ Thomas A. Armer                             /s/ Loren G. Peterson
------------------------------                  -----------------------------
                                                By: Loren G. Peterson
                                                Title: President and CEO

                                       5
<PAGE>

                                   APPENDIX A

                                   DEFINITIONS

Whenever the following capitalized terms are used in the Agreement, they shall
have the meaning specified below.

Affiliate

            "Affiliate" shall mean: (a) any corporation at least a majority of
whose outstanding securities ordinarily having the right to vote at elections of
directors is owned directly or indirectly by the Corporation; or (b) any other
form of business entity in which the Corporation, by virtue of a direct or
indirect ownership interest, has the right to elect a majority of the members of
such entity's governing body.

Base Pay

            "Base Pay" shall mean the Executive's base salary at the highest
annual rate in effect immediately prior to the Change in Control or at the time
Notice of Termination is given, whichever is greater, disregarding any decrease
which constitutes Good Reason for the Executive's termination of employment.
Base Pay includes only regular cash salary and wages and is determined before
any reduction for deferrals pursuant to any nonqualified deferred compensation
plan or arrangement, qualified cash or deferred arrangement or cafeteria plan.

Beneficial Owner

            "Beneficial Owner" shall have the meaning ascribed to such term in
Rule 13d-3 of the General Rules and Regulations under the Exchange Act.

Benefit Plan

            "Benefit Plan" is (a) employee benefit plan as defined in Paragraph
3(3) of ERISA, (b) a cafeteria plan described in Paragraph 125 of the Code, (c)
a plan, policy or practice providing for paid vacation, other paid time off or
short- or long-term profit sharing, bonus or incentive payments, or (d) stock
option, stock purchase, restricted stock, phantom stock, stock appreciation
right or other equity-based compensation plan that is sponsored, maintained or
contributed to by the Corporation or its Affiliates for the benefit of employees
(and/or their families and dependents) generally or the Executive (and/or the
Executive's family and dependents) in particular.

Board

            "Board" is the board of directors of the Corporation duly qualified
and acting at the time in question. On and after the date of a Change in
Control, any duty of the Board in connection with this Agreement is
non-delegable and any attempt by the Board to delegate any such duty is
ineffective.

Change in Control

            A "Change in Control" shall mean the first of the following events
to occur:

            (a) Any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Corporation representing at least thirty
percent or, in the case of Elan Corporation and its Affiliates in the aggregate
(collectively, the "Elan Group"), at least fifty percent, of the combined voting
power of the Corporation's then outstanding securities;

            (b) During any twenty-four month consecutive period beginning on or
after October 1, 2001, individuals who at the beginning of such period
constituted a majority of the Board of Directors cease for any reason during any
day during any such period to constitute a majority thereof; provided, however,
that any director who is not in office at the beginning of such twenty-four
month period, but whose election by the Board or whose nomination for election
by the Company's shareholders was to fill a vacancy caused by death or
retirement and was

                                       6
<PAGE>
approved by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of such period or whose election or
nomination for election was previously so approved shall be deemed to have been
in office at the beginning of such period for purposes of this definition;

            (c) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other Corporation or agreement of
exchange involving the Corporation ("Merger"), other than (1) a Merger which
would result in the voting securities of the Corporation outstanding as of
October 1, 2001 continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than fifty
percent of the combined voting power of the voting securities of the Corporation
or such surviving entity outstanding immediately after the Merger, or (2) a
Merger effected to implement a recapitalization of the Corporation (or similar
transaction) in which no Person acquires thirty percent or more, or in the case
of Elan Group in the aggregate, fifty percent or more, of the combined voting
power of the Corporation's then outstanding securities; or

            (d) the stockholders of the Corporation approve a plan of complete
liquidation of the Corporation or an agreement for the sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) or
disposition by the Corporation of all or substantially all of the Corporation's
assets.

Code

            "Code" shall mean the Internal Revenue Code of 1986, as amended. Any
reference to a specific provision of the Code includes a reference to such
provision as it may be amended from time to time and to any successor provision.

Effective Date

            "Effective Date" shall mean the Effective Date of the First
Amendment.

ERISA

            "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended. Any reference to a specific provision of ERISA includes a
reference to such provision as it may be amended from time to time and to any
successor provision.

Exchange Act

            The "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended. Any reference to a specific provision of the Exchange Act or to any
rule or regulation thereunder includes a reference to such provision as it may
be amended from time to time and to any successor provision.

Good Reason

            "Good Reason" shall mean the occurrence of one or more of the
following events (regardless of whether any other reason, other than Cause, for
such termination exists or has occurred, including without limitation other
employment):

            (a) failure to elect or reelect or otherwise maintain the Executive
in the offices or positions that the Executive held immediately prior to the
Change in Control;

            (b) a change in the nature or scope of the authorities, powers,
functions, duties or responsibilities attached to the position with the
Corporation that the Executive held immediately prior to the Change in Control,
as reasonably determined by the Executive;

            (c) a reduction by the Corporation in the Executive's Base Pay or an
adverse change in the form or timing of the payment thereof, as in effect
immediately prior to the Potential Change in Control or as thereafter increased;

                                       7
<PAGE>

            (d) the failure by the Corporation to cover the Executive under
Benefit Plans that, in the aggregate, provide substantially similar benefits to
the Executive and/or his family and dependents at a substantially similar total
cost to the Executive (e.g., premiums, deductibles, co-pays, out of pocket
maximums, required contributions, Taxes and the like) relative to the highest
benefits and lowest total costs under the Benefit Plans in which the Executive
(and/or his family or dependents) is participating at any time during the period
between the Potential Change in Control and the Change in Control;

            (e) the Corporation's requiring the Executive to be based more than
fifty miles from where his office is located immediately prior to the Change in
Control, except for required travel on the Corporation's business, and then only
to the extent substantially consistent with the business travel obligations
which the Executive undertook on behalf of the Corporation during the ninety day
period ending on the date of the Potential Change in Control (without regard to
travel related to or in anticipation of the Change in Control);

            (f) the failure of the Corporation to obtain from any Successor the
assent to this Agreement as required under Paragraph 32(a)(i);

            (g) any purported termination by the Corporation of the Executive's
employment which is not properly effected pursuant to a Notice of Termination
and pursuant to any other requirements of this Agreement and, for purposes of
this Agreement, no such purported termination will be effective; or

            (h) any refusal by the Corporation to continue to allow the
Executive to attend to matters or engage in activities not directly related to
the business of the Corporation which, at any time prior to the Potential Change
in Control, the Executive was not expressly prohibited by the Corporation from
attending to or engaging in.

The Executive's continued employment does not constitute consent to, or waiver
of any rights arising in connection with, any circumstance constituting Good
Reason. Notwithstanding the foregoing, the occurrence of an event that would
otherwise constitute Good Reason hereunder shall cease to be an event
constituting Good Reason if the Executive does not provide a Notice of
Termination to the Corporation within one hundred eighty days of the date that
the Executive first becomes aware of the occurrence of such event. Termination
by the Executive of his employment for Good Reason as defined hereunder will
constitute Good Reason for all purposes of this Agreement, even if the Executive
may also thereby be deemed to have "retired" under any applicable retirement
programs of the Corporation.

Gross-Up Payment

            "Gross-Up Payment" shall mean an amount payable to the Executive
such that, after the payment of all Taxes attributable to any item of
compensation subject to gross-up under this Agreement by the Corporation, there
remains a balance sufficient to pay the Taxes being reimbursed.

Person

            A "Person" shall mean any individual, corporation, partnership,
group, association or other "person," as such term is used in Paragraph 14(d) of
the Exchange Act, other than the Corporation, any Affiliate or any benefit plan
sponsored by the Corporation or an Affiliate.

                                       8
<PAGE>

Potential Change in Control

            A "Potential Change in Control" shall be the first of the following
events to occur:

            (a) the Corporation enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control;

            (b) any Person (including the Corporation) publicly announces an
intention to take or to consider taking actions which, if consummated, would
constitute a Change in Control; or

            (c) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Corporation representing fifteen percent or
more of the combined voting power of the Corporation's then outstanding
securities, increases its beneficial ownership of such securities by one
percentage point or more over the percentage so owned by such Person on the
Effective Date, other than an increase in ownership percentage due to the
payment of dividends by the issuance of additional securities of the
Corporation; or

            (d) the Board adopts a resolution to the effect that, for purposes
of this Agreement, a Potential Change in Control has occurred.

The Board shall not be precluded from adopting a resolution to the effect that,
for purposes of this Agreement, it is the good faith opinion of the Board that a
Potential Change in Control has been abandoned and that a Potential Change in
Control no longer exists.

An event shall not be a Potential Change in Control for purposes of this
Agreement if a Change in Control does not occur within twelve months of such
event.

Successor

            A "Successor" shall mean any Person that succeeds to, or has the
practical ability to control (either immediately or solely with the passage of
time), the Corporation's business directly, by merger, consolidation or other
form of business combination, or indirectly, by purchase of the Corporation's
outstanding securities ordinarily having the right to vote at the election of
directors, all or substantially all of its assets or otherwise.

Taxes

            "Taxes" shall mean the incremental federal, state and local income,
excise and other taxes (including Excise Taxes), penalties and interest payable
by the Executive with respect to any applicable item of income.

Termination Date

            "Termination Date" shall mean: (1) in the case of an employment
termination by the Corporation for Cause or by the Executive for Good Reason,
the date specified as the Executive's last day of employment in the Notice of
Termination, which shall not be less than ten business days after the date such
Notice of Termination is deemed given in accordance with Paragraph 18, or (2) in
any other case, the last day worked by the Executive as reflected on the
Corporation's payroll records. Notwithstanding the foregoing, if the Corporation
terminates the Executive's employment for Cause and the Executive has not
previously expressly agreed in writing to the termination, then within the
thirty day period after the Executive's receipt of the Notice of Termination,
the Executive may notify the Corporation that a dispute exists concerning the
termination, in which event the Termination Date will be the date set either by
mutual written agreement of the parties or by the arbitrators or a court under
the dispute resolution provisions in Paragraph 26. During the pendency of any
such dispute, the Executive will continue to make himself available to provide
services to the Corporation and the Corporation will continue to pay the
Executive his full compensation and benefits in effect immediately prior to the
date on which the Notice of Termination is given (without regard to any changes
to such compensation or benefits which constitute Good Reason) and until the
dispute is resolved in accordance with Paragraph 26. The Executive will be
entitled to retain the full amount of any such compensation and benefits without
regard to the resolution of the dispute unless the arbitrators or judge
decide(s) that the Executive's claim of a dispute was frivolous or advanced by
the Executive in bad faith.

                                       9

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