DURA PHARMACEUTICALS INC/CA, S-1/A, 1997-10-21

DURA PHARMACEUTICALS INC/CA
S-1/A, 1997-10-21
PHARMACEUTICAL PREPARATIONS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 21, 1997

REGISTRATION NO. 333-37673/37673-01

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------

AMENDMENT NO. 1
TO FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
--------------------------

SPIROS DEVELOPMENT CORPORATION II, INC.

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 2834
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>

7475 LUSK BOULEVARD, SAN DIEGO, CALIFORNIA 92121 (619) 457-2553
(Address and telephone number, including area code, of registrant's principal
executive offices)
--------------------------

AMENDMENT NO. 1
TO FORM S-3

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
--------------------------

DURA PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 2834 95-3645543
(State or other jurisdiction (Primary Standard Industrial (I.R.S.Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>

7475 LUSK BOULEVARD, SAN DIEGO, CALIFORNIA 92121 (619) 457-2553

(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

CAM L. GARNER DAVID S. KABAKOFF
Chairman, President and Chief Chairman, President and Chief
Executive Officer Executive Officer
DURA PHARMACEUTICALS, INC. SPIROS DEVELOPMENT CORPORATION II,
INC.
7475 Lusk Boulevard c/o Dura Pharmaceuticals, Inc.
San Diego, California 92121 7475 Lusk Boulevard
(619) 457-2553 San Diego, California 92121
(619) 457-2553
(Name, address, including zip code, (Name, address, including zip code,
and telephone and telephone
number, including area code, of agent number, including area code, of agent
for service) for service)

--------------------------

COPIES TO:

FAYE H. RUSSELL, ESQ. MARK KESSEL, ESQ.
BROBECK, PHLEGER & HARRISON LLP SHEARMAN & STERLING
550 West "C" Street, Suite 1300 599 Lexington Avenue
San Diego, California 92101 New York, New York 10022
(619) 234-1966 (212) 848-4000

--------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
--------------------------

* If the securities being registered on this form are being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: /X/

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
--------------------------

THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.

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- --------------------------------------------------------------------------------

* SOLELY WITH RESPECT TO THE FORM S-3.
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SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED OCTOBER 21, 1997

PROSPECTUS
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY
NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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SPIROS DEVELOPMENT CORPORATION II, INC.
DURA PHARMACEUTICALS, INC.

UNITS

EACH UNIT CONSISTING OF
ONE SHARE OF CALLABLE COMMON STOCK, PAR VALUE $.001 PER SHARE,
OF SPIROS DEVELOPMENT CORPORATION II, INC. AND
ONE WARRANT TO PURCHASE ONE-FOURTH OF ONE SHARE OF COMMON STOCK,
PAR VALUE $.001 PER SHARE,
OF DURA PHARMACEUTICALS, INC.
-----------------

The Callable Common Stock, par value $.001 per share (the "Spiros Corp. II
Common Stock"), of Spiros Development Corporation II, Inc. ("Spiros Corp. II")
and the Warrants (the "Warrants") to purchase one-fourth of one share of Common
Stock, par value $.001 per share (the "Dura Common Stock"), of Dura
Pharmaceuticals, Inc. ("Dura") which comprise the units (the "Units") will trade
only as units (and not separately) through December 31, 1999 or such earlier
date as the Purchase Option (as defined below) is exercised or expires
unexercised. It is currently estimated that the public offering price will be
between $ and $ per Unit. Application has been made to have the Units
listed for quotation on the Nasdaq National Market under the symbol "SDCO." The
Warrants are exercisable at any time from January 1, 2000 through December 31,
2002. The exercise price of the Warrants is $ per share of Dura Common
Stock. See "Description of the Warrants." On October 20, 1997 the last reported
sales price of a share of Dura Common Stock on the Nasdaq National Market was
$49.

Immediately prior to the consummation of this offering of the Units (the
"Offering"), Dura will contribute $75 million in cash to Spiros Corp. II. See
"Prospectus Summary--The Contribution."

Prior to the Offering, there has been no public market for the Units. Spiros
Corp. II will receive all of the net proceeds of the Offering. Spiros Corp. II
will, pursuant to the terms of a development agreement, pay to Dura
substantially all of the net proceeds of the Offering in research, clinical
development, product development and commercialization costs. See "Use of
Proceeds."

Beginning on the closing date of the Offering and ending on the earlier of
(i) December 31, 2002 or (ii) the 90th day after Spiros Corp. II provides Dura
with quarterly financial statements of Spiros Corp. II showing cash or cash
equivalents of less than $5 million (which period may be extended by Dura under
certain circumstances but in no event beyond December 31, 2002), Dura will have
an option to purchase all (but not less than all) of the shares of Spiros Corp.
II Common Stock at a substantial premium over the offering price. The option
price may be paid in cash, shares of Dura Common Stock or any combination of the
foregoing, at Dura's sole discretion. See "The Agreements and the Purchase
Options--Stock Purchase Option."

SEE "RISK FACTORS" BEGINNING ON PAGE 16 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN CONSIDERATIONS RELATED TO AN INVESTMENT IN THE UNITS.
-----------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) SPIROS CORP. II(2)
<S> <C> <C> <C>
Per Unit........................................ $ $ $
Total(3)........................................ $ $ $
</TABLE>

(1) Spiros Corp. II and Dura have agreed to indemnify the Underwriters (as
defined below) against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting expenses, estimated at $750,000 payable by Spiros Corp. II.

(3) Spiros Corp. II and Dura have granted the Underwriters an option exercisable
within 30 days after the date hereof to purchase up to an additional
Units on the same terms as set forth above solely to cover
over-allotments, if any. If the option is exercised in full, the total Price
to Public, Underwriting Discounts and Commissions, and Proceeds to Spiros
Corp. II will be $ , $ and $ , respectively. See
"Underwriting."
---------------------

The Units are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by the Underwriters, and subject to the
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the Units will be made in New York, New York on or about ,
1997.
---------------------
MERRILL LYNCH & CO. DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
-------------------

The date of this Prospectus is , 1997.
<PAGE>
SPIROS-TM- PULMONARY DRY POWDER DRUG DELIVERY SYSTEM

[PHOTO OF INDIVIDUAL USING SPIROS-TM-]

Spiros-TM- is a proprietary dry powder delivery system under development
that is designed to aerosolize pharmaceuticals in dry powder formulations for
propellant-free delivery to the lungs.

Spiros-TM- features:

-- Inspiratory Flow Rate Independence

-- Minimum Need for Patient Coordination

-- Absence of Chlorofluorocarbon Propellants

-- Patient Convenience

Product candidates based on Spiros-TM- are in various stages of research or
development and have not been cleared by the United States Food and Drug
Administration for commercial sale. There can be no assurance that products will
be successfully developed or approved by regulatory authorities for commercial
sale.

[PHOTO OF SPIROS-TM- MODELS]

Spiros-TM- cassette system, the first to be developed and
currently in use in clinical trials with albuterol and
beclomethasone; and Spiros-TM- blisterdisk system, being developed
for use with drugs sensitive to moisture or light.

CERTAIN PERSONS PARTICIPATING IN THIS UNIT OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF ANY OF
THE UNITS, THE SPIROS CORP. II COMMON STOCK, THE DURA COMMON STOCK OR THE
WARRANTS. SPECIFICALLY, THE REPRESENTATIVES OF THE UNDERWRITERS MAY OVER-ALLOT
IN CONNECTION WITH THE UNIT OFFERING, MAY BID FOR AND PURCHASE UNITS IN THE OPEN
MARKET AND MAY IMPOSE PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."

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AVAILABLE INFORMATION

Dura is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). Such reports and other information
can be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as well
as at the Commission's regional offices at 7 World Trade Center, 13th Floor, New
York, New York 10048; and at Citicorp Center, 500 West Madison Street, Room
1400, Chicago, Illinois 60661-2511. Copies of such material can also be obtained
at prescribed rates at the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. In addition, the Commission
maintains a World Wide Web site on the Internet at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. Dura Common
Stock is traded on the Nasdaq National Market and other information concerning
Dura can be inspected at the offices of Nasdaq Operations, 1745 K Street, N.W.,
Washington, D.C. 20006.

Dura and Spiros Corp. II have filed with the Commission a registration
statement on Forms S-1/S-3 (together with all amendments and exhibits thereto,
the "Registration Statement") under the Securities Act of 1933, as amended, with
respect to the securities offered by this Prospectus. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to Dura, Spiros Corp. II and
the securities offered hereby, reference is made to the Registration Statement,
which may be obtained from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549, upon payment of the fees prescribed
by the Commission.

Upon completion of the Offering, Spiros Corp. II is expected to be subject
to the information and reporting requirements of the Exchange Act and in
accordance therewith to file reports and other information with the Commission.
Holders of Spiros Corp. II Common Stock will receive annual reports containing
financial information including the report of independent accountants as to the
financial statements of Spiros Corp. II.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by Dura with the Commission are hereby
incorporated by reference in this Prospectus: (1) the Annual Report of Dura on
Form 10-K for the fiscal year ended December 31, 1996; (2) the Quarterly Report
of Dura on Form 10-Q for the quarter ended March 31, 1997; (3) the Quarterly
Report of Dura on Form 10-Q for the quarter ended June 30, 1997; (4) the
Quarterly Report of Dura on Form 10-Q for the quarter ended September 30, 1997;
(5) the Proxy Statement of Dura dated April 16, 1997 in connection with the
Annual Meeting of Stockholders held on May 28, 1997; (6) the Current Report of
Dura on Form 8-K filed on May 22, 1997; (7) the Current Report of Dura on Form
8-K filed on October 10, 1997, as amended; and (8) the description of Dura's
Common Stock contained in its Registration Statement on Form 8-A filed on July
22, 1997.

All reports and other documents subsequently filed by Dura pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the Offering shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such reports and documents. Any statement incorporated herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.

Dura will provide without charge to each person to whom this Prospectus is
delivered, upon written or oral request of such person, a copy of any or all of
the foregoing documents incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into any such document). Requests for such documents should be submitted in
writing to Mitchell R. Woodbury, Senior Vice President and General Counsel, at
Dura Pharmaceuticals, Inc., 7475 Lusk Boulevard, San Diego, California 92121 or
by telephone at (619) 457-2553.

Spiros Corp. II is a Delaware company incorporated on September 23, 1997 and
has conducted no business to date. Spiros Corp. II's principal executive office
is located at 7475 Lusk Boulevard, San Diego, California 92121, and its
telephone number is (619) 457-2553.

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PROSPECTUS SUMMARY

THE INFORMATION SET FORTH BELOW SHOULD BE READ IN CONJUNCTION WITH, AND IS
QUALIFIED IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION, INCLUDING "RISK
FACTORS" AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED BY REFERENCE HEREIN. EXCEPT AS
OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE
UNDERWRITERS' OVER-ALLOTMENT OPTION. UNLESS THE CONTEXT OTHERWISE REQUIRES, THE
TERM "DURA" REFERS TO "DURA PHARMACEUTICALS, INC." AND ITS SUBSIDIARIES. THIS
PROSPECTUS MAY CONTAIN, IN ADDITION TO HISTORICAL INFORMATION, FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISK AND UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS
THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED UNDER
"RISK FACTORS," AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS OR IN
THE DOCUMENTS INCORPORATED BY REFERENCE.

DURA

Dura Pharmaceuticals, Inc. ("Dura") is a specialty respiratory
pharmaceutical and pulmonary drug delivery company. Dura is engaged in
developing and marketing prescription pharmaceutical products for the treatment
of asthma, hay fever, chronic obstructive pulmonary disease ("COPD"), the common
cold and related respiratory ailments, and is developing a pulmonary drug
delivery system. Dura has strategically focused on the U.S. respiratory market
because of its size and growth opportunities. The estimated size of the target
market for antihistamines, asthma/rhinitis therapies, cough/cold preparations
and anti-infectives in 1996 was approximately $9.5 billion. The size and
fragmented nature of the market and the identifiable base of physician
prescribers allow Dura to achieve significant market penetration with a
specialized sales force. Dura currently markets 31 prescription products. Dura
also has a separate mail service pharmacy, Health Script Pharmacy Services, Inc.
("Health Script"), which dispenses respiratory pharmaceuticals.

Dura employs a dual marketing strategy utilizing its focused field sales
force of over 300 people and dedicated managed care sales and marketing and
national account groups that cover managed care organizations and retail
pharmacy chains. Dura's field sales force targets a physician base that includes
approximately 80,000 U.S. allergists, ear, nose, and throat specialists
("ENTs"), pulmonologists and a selected subset of pediatricians and generalist
physicians, who Dura believes collectively write a significant portion of
respiratory pharmaceutical prescriptions. Dura believes that its field sales
force calls on approximately one-half of the target physician base. Dura's
managed care sales and marketing group concentrates on sales to large regional
and national managed care organizations. Dura expects to continue expanding both
the field sales force and the managed care sales and marketing group as
warranted by market opportunities.

This marketing strategy has allowed Dura to leverage its distribution
capabilities by acquiring the rights to market additional prescription
pharmaceutical products through acquisition, in-license or co-promotion
arrangements. Since 1992, Dura has acquired 19 products targeted at the U.S.
respiratory market. In September 1996, Dura acquired from Eli Lilly and Company
("Lilly") exclusive U.S. marketing rights to the antibiotics Keftab-Registered
Trademark- and Ceclor-Registered Trademark- CD. Dura began marketing Keftab in
September 1996, and launched Ceclor CD in October 1996. In May 1997, Dura
acquired from Syntex (USA) Inc. and other members of the Roche Group
(collectively, "Syntex") the exclusive U.S. rights to the intranasal steroid
products Nasarel-Registered Trademark- and Nasalide-Registered Trademark-.

Another key component of Dura's strategy is to develop the Spiros-TM-
pulmonary drug delivery system ("Spiros"). Spiros is being designed to
aerosolize pharmaceuticals in dry powder formulations for delivery to the lungs
while providing certain advantages over other currently-used methods of
pulmonary drug delivery. Dura has a three-level development program for Spiros
which entails (i) developing, on behalf of Spiros Development Corporation II,
Inc. ("Spiros Corp. II"), certain drug compounds for use in Spiros, including in
the near-term albuterol, beclomethasone and ipratropium, three of the
pharmaceutical agents most frequently prescribed to treat respiratory
conditions, (ii) licensing Spiros primarily to pharmaceutical

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companies, including Mitsubishi Chemical Corporation ("Mitsubishi"), Fujisawa
Pharmaceutical Co., Ltd. ("Fujisawa") and Trega Biosciences, Inc. ("Trega"),
generally for use with certain of their proprietary respiratory products, and
(iii) developing Spiros, generally in collaboration with third parties, for the
systemic delivery of compounds, including certain proteins and peptides, through
the lungs for respiratory and non-respiratory indications as an alternative to
current invasive delivery techniques.

Spiros Development Corporation ("Spiros Corp.") is a separate company formed
in December 1995 to fund the development of Spiros for use with certain asthma
drugs. Spiros Corp. has used substantially all of the $28 million in financing
it raised and a $13 million contribution it received from Dura to finance the
development of Spiros and certain compounds for use in Spiros. On or prior to
the closing of the Offering, Dura will purchase all of the common stock of
Spiros Corp. for an aggregate purchase price estimated to be $45.7 million,
payable in cash, shares of Dura Common Stock, or any combination thereof, at
Dura's sole discretion (the "Spiros Corp. Purchase"). The Spiros Corp. Purchase
will result in a one-time charge in the period in which the Spiros Corp.
Purchase is closed, relating to the acquisition of in-process research, that
will approximate the purchase price.

Prior to the formation of Spiros Corp., Dura Delivery Systems, Inc. ("DDSI")
was organized as a separate entity responsible for Spiros development. DDSI
spent approximately $23 million for the development of Spiros before being
acquired by Dura in December 1995.

Dura was incorporated under the laws of California in 1981 and
reincorporated in Delaware in 1997. Dura's principal executive offices are
located at 7475 Lusk Boulevard, San Diego, California 92121. Its telephone
number is (619) 457-2553.

RECENT DEVELOPMENTS

On October 21, 1997, Dura announced that it had signed a definitive merger
agreement (the "Merger Agreement") with Scandipharm, Inc. ("Scandipharm").
Scandipharm is an Alabama-based distributor of pharmaceutical products for the
treatment of cystic fibrosis ("CF"), a fatal genetic disease affecting
approximately 30,000 children and young adults.

Scandipharm markets primarily to hospital-based cystic fibrosis specialists
through its sales force which has significantly increased in 1997 and currently
numbers approximately 50 persons. Scandipharm's principal product is the
Ultrase-Registered Trademark- prescription enzyme preparation for CF patients.
Under the terms of the Merger Agreement, Dura will issue between $93 and $139
million of Dura Common Stock, depending on the average price of Dura Common
Stock 20 days prior to the closing, in exchange for all capital stock and
outstanding options of Scandipharm. The transaction, which is expected to close
in the first half of 1998, has been approved by the board of directors of each
of Dura and Scandipharm and is subject to, among other things, the approval of
the shareholders of Scandipharm, the receipt of regulatory approvals and the
effectiveness of a registration statement covering the issuance of Dura stock in
the merger of Scandipharm with a Dura subsidiary (the "Merger"). See "Risk
Factors--Business Risks Relating to Dura--Risks Related to the Proposed Merger
with Scandipharm."

At September 30, 1997, Scandipharm had total assets of $35.7 million, of
which $23.6 million consisted of cash and cash equivalents, and total
liabilities of $7.9 million. Scandipharm had net sales, gross profit and net
loss of $19.4 million, $13.6 million and $2.6 million, respectively, for the
year ended December 31, 1996 and $16.2 million, $10.4 million and $2.5 million,
respectively, for the nine months ended September 30, 1997. Net loss for the
1996 and 1997 periods included nonrecurring charges of $4.4 million and $4.0
million, respectively.

SPIROS CORP. II

Spiros Corp. II was formed in September 1997 to continue to fund the
development of Spiros and to conduct formulation work, clinical trials and
commercialization for four leading asthma drugs (albuterol, beclomethasone,
ipratropium and budesonide) and certain combinations and alternative
formulations thereof for use in Spiros. Spiros Corp. II may also expend funds on
enhancements to the existing Spiros

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technology, initial development of a next generation inhaler system and the
acquisition of capital equipment (the "Other Expenditures") to be used in the
manufacture of the Spiros Products (as defined below). Finally, Spiros Corp. II
plans to use a portion of its funding to conduct technical evaluation projects
designed to identify additional respiratory drug candidates for further
development in Spiros. Spiros has been designed to aerosolize pharmaceuticals in
dry powder formulations for delivery to the lungs while providing certain
advantages over other currently-used methods of pulmonary drug delivery,
including inspiratory flow rate independence, minimum need for patient
coordination, reduced side effects, improved patient convenience and lack of
chlorofluorocarbon propellants.

Asthma is a complex physiological disorder characterized by airway
hyperactivity to a variety of stimuli such as dust, pollen, stress or physical
exercise, resulting in airway obstruction that is partially or temporarily
reversible. The number of people with asthma has grown steadily in recent years
and is now believed to be over 200 million worldwide. COPD is a complex
condition comprising a combination of chronic bronchitis, emphysema and airway
obstruction. The worldwide combined market for therapeutic drugs to treat asthma
and COPD was approximately $7.5 billion in 1996. The primary categories of
therapeutic drugs used in the treatment of asthma and COPD include
bronchodilators and anti-inflammatories. Bronchodilators dilate the airways and
include beta agonists (such as albuterol and bitolterol), xanthines (such as
theophylline) and anticholinergics (such as ipratropium). Anti-inflammatories
reduce inflammation and include steroids (such as beclomethasone, budesonide,
flunisolide and triamcinolone).

Inhaled therapeutic drugs have been shown to be effective in treating or
preventing the symptoms of asthma, COPD, and other lung diseases. When treating
respiratory diseases, inhalation delivery puts the drug directly into the lung
for topical treatment. If administered in capsule, tablet or liquid form, rather
than through inhalation, the patient must take sufficient drug to achieve a
systemic therapeutic blood level to benefit the lungs. In many instances, this
may cause serious side effects by impacting other organs. Because inhaled
therapy delivers the drug directly into the lung, it provides comparable
efficacy with less risk of systemic side effects at greatly reduced dosages.
Inhalation delivery also yields a fast onset of action, hastening the time for
patient relief.

Spiros Corp. II has no employees other than its three executive officers who
are full-time employees, officers and/or directors of Dura. Spiros Corp. II does
not intend to perform any research, marketing, manufacturing or other activities
on its own behalf, as it will pay Dura to perform all such activities pursuant
to the terms of the Development Agreement (as defined below) and the
Manufacturing and Marketing Agreement (as defined below). Substantially all of
the net proceeds of the Offering and the Contribution (as defined below),
together with interest earned thereon (the "Available Funds"), will be used for
payments to Dura for clinical and other services under the Development Agreement
in connection with the development of the following compounds using Spiros (the
"Spiros Products") and the Other Expenditures:

ALBUTEROL. Albuterol, a beta agonist, provides rapid symptomatic relief of
reversible bronchospasm. When administered by inhalation, it produces
significant bronchodilation promptly and its effects are demonstrable for a
number of hours. Albuterol is the most widely accepted asthma medication in the
world. The leading branded metered dose inhaler ("MDI") albuterol products are
Proventil-Registered Trademark-, sold by Schering-Plough Corporation
("Schering-Plough"), and Ventolin-Registered Trademark-, sold by Glaxo Wellcome,
Inc. ("Glaxo"). In 1996, U.S. sales of albuterol were approximately $700 million
as measured by average wholesale prices.

In March 1997, patient dosing was completed in long-term and short-term
pivotal clinical trials that, along with earlier studies, are intended to serve
as the basis for filing a New Drug Application ("NDA") in November 1997, seeking
United States Food and Drug Administration ("FDA") approval to market albuterol
in the Spiros cassette system. An open label study of albuterol in the Spiros
cassette system is currently in progress. Interim results of this study will be
provided to the FDA in the NDA and results of the full study must be submitted
to and reviewed by the FDA prior to product approval.

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BECLOMETHASONE. Beclomethasone is a steroid used to treat the inflammatory
component of asthma and certain symptoms of COPD. Systemic side effects
resulting from the inhalation of beclomethasone are less than those that occur
with steroids taken in capsule, tablet or liquid form. Beclomethasone was first
launched in MDI form as Vanceril-Registered Trademark- by Schering-Plough and
later as Beclovent-Registered Trademark- by Glaxo. In 1996, U.S. sales of
beclomethasone were approximately $205 million as measured by average wholesale
prices.

In the first quarter of 1997, Dura, on behalf of Spiros Corp., completed
dose ranging studies of a one dosage strength of beclomethasone in the Spiros
cassette system under an Investigational New Drug ("IND") application, and
preparations for Phase III pivotal clinical trials to demonstrate safety and
efficacy have been initiated.

Spiros Corp. II plans to continue formulation work on additional dosage
strengths of beclomethasone to evaluate whether to develop a higher strength
formulation as a companion to the beclomethasone product currently under
development. Spiros Corp. II believes that the availability of higher strength
formulations of beclomethasone can improve convenience and patient compliance as
well as allow physicians to prescribe higher doses to more effectively control
asthma. Spiros Corp. II believes that it will be required to conduct additional
dosing and pivotal clinical trials in connection with each additional
formulation of beclomethasone.

IPRATROPIUM. Ipratropium is an anticholinergic bronchodilator. Ipratropium
is most commonly prescribed for the long term management of COPD (including
chronic bronchitis and emphysema) and for treatment of asthmatic patients who
are poorly controlled by, or who experience troublesome side effects from,
beta-agonists such as albuterol. Ipratropium acts at a site that is different
from the site where beta-agonists act and thus affords an alternative approach
to the treatment of airway obstruction. Ipratropium in MDI form is marketed as
Atrovent-Registered Trademark- by Boehringer Ingelheim International GmbH
("Boehringer Ingelheim"). In 1996, U.S. sales of ipratropium were approximately
$200 million as measured by average wholesale prices.

Dura, on behalf of Spiros Corp., has conducted initial formulation studies
using ipratropium to demonstrate that delivery via Spiros is feasible. In 1998,
Spiros Corp. II plans to begin product development for a formulation of
ipratropium to be delivered using Spiros.

ALBUTEROL-IPRATROPIUM COMBINATION. Albuterol and ipratropium are frequently
prescribed in combination for patients with COPD or asthma. Boehringer Ingelheim
has marketed an albuterol-ipratropium combination product, Combivent-Registered
Trademark-, outside of the U.S. for a number of years. Combivent was approved
for marketing in the U.S. in early 1997, and has recently been launched in MDI
form by Boehringer Ingelheim in the U.S.

Based on the substantial work performed with albuterol and the feasibility
study conducted with ipratropium, Spiros Corp. II believes that developing an
albuterol-ipratropium formulation for delivery using Spiros will be feasible,
and it intends to commence the development of this formulation in 1998.

BUDESONIDE. Budesonide is a new generation steroid used to treat the
inflammatory component of asthma. Budesonide has been marketed in several dosage
forms outside of the U.S., but to date, has only been available in the U.S. in
nasal spray form. However, in June 1997, the FDA approved for marketing in the
U.S. a dry powder formulation of budesonide for delivery through Astra
Pharmaceutical's Pulmicort-Registered Trademark-Turbuhaler-Registered
Trademark-. In 1996, worldwide sales of budesonide were estimated to be greater
than $600 million as measured by average wholesale prices.

In 1998, Spiros Corp. II expects to begin formulation of budesonide for
delivery through Spiros.

DESIGNATED COMPOUNDS. The Board of Directors of Spiros Corp. II has the
right, with the consent of Dura, to select additional compounds for the
treatment of respiratory diseases, including asthma, allergy, cystic fibrosis or
respiratory infection (the "Designated Compounds") for delivery using Spiros.
See "The Agreements and the Purchase Options--Technology License Agreement."

7
<PAGE>
In the event that Spiros Corp. II obtains the rights to any Designated
Compounds, Spiros Corp. II will conduct technical evaluations of the applicable
compounds as candidates for delivery through Spiros. Technical evaluations will
generally include patent evaluation, establishment of analytical methods,
micronization of drug substance, preliminary formulation development,
preliminary aerosol characterization, preliminary stability evaluation and
animal bioavailability, efficacy and toxicology evaluation. Technical
evaluations may also include initial safety and efficacy studies in humans.

In the event that additional funds become available to Spiros Corp. II,
whether through the exercise of the Albuterol Option (as defined below) or the
Product Option (as defined below), such funds will become part of the Available
Funds, and a portion of such funds may be used for additional development of a
next generation inhaler system and certain other enhancements to the existing
Spiros technology and to fund the acquisition of capital equipment to be used to
manufacture the Spiros Products.

RISK FACTORS

An investment in the Units involves certain risks associated with the
Offering, the business of Dura and Spiros Corp. II and the industry in which
they compete. See "Risk Factors."

THE OFFERING

<TABLE>
<S> <C>
Units Offered.......................................................................

Number of shares of Spiros Corp. II Common Stock Offered
and to be Outstanding after the Offering....................................

Warrants to Purchase Dura Common Stock Offered....................................

Proposed Nasdaq National Market Symbol for Unit..................................... SDCO
</TABLE>

TRADING INFORMATION

Application has been made to have the Units listed for quotation on the
Nasdaq National Market. The Spiros Corp. II Common Stock and the Warrants
comprising the Units will trade only as units through December 31, 1999 or such
earlier date as the Purchase Option (as defined below) is exercised or expires
unexercised (the "Separation Date"). See "Description of the Warrants." It is
expected that the Spiros Corp. II Common Stock and the Warrants will be eligible
for quotation after the Separation Date on the Nasdaq National Market. There can
be no assurance that there will be an active trading market for the Units or
that, after the Separation Date, there will be active trading markets for the
Spiros Corp. II Common Stock or the Warrants. The Dura Common Stock is quoted on
the Nasdaq National Market.

THE WARRANTS

Each Unit includes a Warrant to purchase one-fourth of one share of Dura
Common Stock. The Warrants will be exercisable from January 1, 2000 through
December 31, 2002 (the "Warrant Expiration Date") at an exercise price of
$ per share (the "Warrant Exercise Price"). The Warrants will trade
separately from the Spiros Corp. II Common Stock beginning on the Separation
Date. In the event that Dura exercises the Purchase Option, holders of Spiros
Corp. II Common Stock will retain their Warrants, unless sold or otherwise
transferred by those holders. See "Description of the Warrants."

THE CONTRIBUTION

Prior to the consummation of the Offering, Dura will contribute $75 million
in cash to Spiros Corp. II (the "Contribution") in order to increase the funds
available for Spiros Corp. II to undertake research, clinical development,
product development, including regulatory approval, and commercialization of the
Spiros Products under the Development Agreement. Dura will incur a one-time
charge to earnings in the amount of the Contribution in the period in which the
Contribution is made.

8
<PAGE>
STOCK PURCHASE OPTION

Dura, as the holder of all of the issued and outstanding special shares, par
value $1.00 per share, of Spiros Corp. II (the "Special Shares"), will have the
right to purchase all, but not less than all, of the Spiros Corp. II Common
Stock outstanding at the time such right is exercised (the "Purchase Option").
The Purchase Option will be exercisable by notice (the "Exercise Notice") given
at any time beginning on the closing date of the Offering and ending on the
earlier of (i) December 31, 2002 or (ii) the 90th day after the date Spiros
Corp. II provides Dura (as such holder) with quarterly financial statements of
Spiros Corp. II showing cash or cash equivalents of less than $5 million (the
"Financial Notice"), although, following the receipt of the Financial Notice,
Dura may elect to extend such period by providing additional funding for the
continued development of the Spiros Products (but in no event beyond December
31, 2002). If the Purchase Option is exercised, the purchase price calculated on
a per share basis (the "Purchase Option Exercise Price") will be as follows:

<TABLE>
<CAPTION>
IF THE SPIROS CORP. II COMMON STOCK IS ACQUIRED PURCHASE OPTION
PURSUANT TO THE PURCHASE OPTION: EXERCISE PRICE
- ----------------------------------------------------------------------------- ---------------
<S> <C>
Before January 1, 2000....................................................... $

On or after January 1, 2000 and on or before March 31, 2000..................
On or after April 1, 2000 and on or before June 30, 2000.....................
On or after July 1, 2000 and on or before September 30, 2000.................
On or after October 1, 2000 and on or before December 31, 2000...............

On or after January 1, 2001 and on or before March 31, 2001..................
On or after April 1, 2001 and on or before June 30, 2001.....................
On or after July 1, 2001 and on or before September 30, 2001.................
On or after October 1, 2001 and on or before December 31, 2001...............

On or after January 1, 2002 and on or before March 31, 2002..................
On or after April 1, 2002 and on or before June 30, 2002.....................
On or after July 1, 2002 and on or before September 30, 2002.................
On or after October 1, 2002 and on or before December 31, 2002...............
</TABLE>

Dura owns all of the issued and outstanding Special Shares, which grants
Dura the Purchase Option and confers certain voting and other rights, including
the right to elect two of the five directors of Spiros Corp. II. Under Spiros
Corp. II's Amended and Restated Certificate of Incorporation, Spiros Corp. II
will be prohibited, until the expiration of the Purchase Option, from taking or
permitting certain actions inconsistent with Dura's rights under the Purchase
Option. For example, until the expiration of the Purchase Option, Spiros Corp.
II will not be able to, among other things, without the consent of Dura, pay any
dividends, issue additional shares of capital stock, have outstanding borrowings
in excess of an aggregate of $1 million, or merge, liquidate or sell all or
substantially all of its assets or alter the Purchase Option. See "Spiros Corp.
II Capital Stock."

TECHNOLOGY LICENSE AGREEMENT

Dura, Spiros Corp. and Spiros Corp. II will enter into an agreement (the
"Technology Agreement"), under which Dura and Spiros Corp. will grant Spiros
Corp. II an exclusive, worldwide, perpetual, royalty-bearing license to use
technology owned or controlled by Dura or Spiros Corp. as of the date of the
closing of the Offering relating to Spiros and any technology acquired following
the closing of the Offering relating to Spiros, which such parties have the
right to sublicense, (the "Core Technology") in research, development and
commercialization (except with respect to beclomethasone in Japan, Hong Kong,

9
<PAGE>
Singapore, the Republic of China (Taiwan), the Republic of Korea and the
People's Republic of China (collectively, "Asia")) of the Spiros Products,
including rights to patents, patent applications and other intellectual property
rights necessary or useful to the development of the Spiros Products.

In consideration for these license rights granted to Spiros Corp. II by Dura
and Spiros Corp., Spiros Corp. II will pay Dura and Spiros Corp. a technology
access fee equal to 5% of the Net Sales (as defined below) of each Spiros
Product. Spiros Corp. II's obligation will terminate, on a country-by-country
basis, (a) within 10 years from the first sale of such Spiros Product in those
countries where no patents covering such product are issued and (b) in those
countries where patents covering the Spiros Products are issued, upon the
expiration of the last-to-expire patent covering such Spiros Product in such
country.

In addition, Spiros Corp. II will grant Dura (a) a worldwide, exclusive,
royalty-free license to use the Core Technology and any technology developed or
acquired on behalf of Spiros Corp. II by Dura (the "Program Technology") to
develop the Spiros Products pursuant to the terms of the Development Agreement;
(b) a worldwide, exclusive, royalty-bearing license to use the Program
Technology to sell Spiros Products worldwide pursuant to the terms of the
Manufacturing and Marketing Agreement; (c) upon Dura's exercise of the Albuterol
Option (as defined below), a worldwide, exclusive, royalty-free, irrevocable,
perpetual license to the Program Technology to develop, manufacture and
commercialize the Albuterol Product (as defined below); (d) upon Dura's exercise
of the Product Option (as defined below), a worldwide, exclusive, royalty-free,
irrevocable, perpetual license to the Program Technology to develop, manufacture
and commercialize the Spiros Product for which the Product Option is exercised;
and (e) a worldwide, exclusive, royalty-free, irrevocable, perpetual license to
the Program Technology, including technology relating to enhancements to
existing Spiros technology or any next generation inhaler system, to develop,
manufacture and commercialize products other than the Spiros Products, including
products that compete with the Spiros Products.

Under the Technology Agreement, Dura must use commercially reasonable
efforts to secure the rights of third parties in technology that is necessary or
useful to the development of the Spiros Products. Spiros Corp. II will have no
obligation to accept any grant of such rights or to assume any obligation
without its prior written consent. If Spiros Corp. II desires to obtain any such
rights, Dura and Spiros Corp. II agree to negotiate in good faith regarding the
allocation of any royalty, license fee or other payments payable to the third
party and the assumption of any obligations applicable to such license.

Prior to the expiration of the Purchase Option, Spiros Corp. II cannot
without Dura's prior written consent (a) license, sublicense, encumber or
otherwise transfer any rights in the Program Technology; (b) make, use or sell
any of the Program Technology; or (c) authorize, cause or assist in any way any
other person to do any of the foregoing. Following the expiration or termination
of the Purchase Option, the foregoing limitations will cease to be applicable
and Spiros Corp. II will have the right to license, sublicense, encumber or
otherwise transfer the Program Technology for use with any Spiros Products that
have not been acquired by Dura through the exercise of either the Albuterol
Option or the Product Option.

The Technology Agreement will remain in full force and effect indefinitely,
unless terminated by (a) mutual agreement of the parties or (b) Dura's exercise
of the Purchase Option.

10
<PAGE>
parties to research, develop and commercialize the Spiros Products. If Dura
terminates the Technology Agreement, (a) Spiros Corp. II's license to use the
Core Technology under the Technology Agreement will terminate, (b) all of Spiros
Corp. II's rights to the Program Technology will revert to Dura, and (c) all
rights to develop, use and sell the Spiros Products will revert to Dura. Dura
and Spiros Corp. II will use reasonable efforts for a period of 120 days after
the Technology Agreement is terminated by Dura to reach agreement on royalties
and other compensation to be paid by Dura to Spiros Corp. II solely with respect
to the Spiros Products and the Program Technology and, in the absence of such
agreement, the matter will be submitted to binding arbitration. There can be no
assurance that, upon termination of the Technology Agreement by Spiros Corp. II,
that it will be able to make alternative arrangements for the research,
development and commercialization of some or all of the Spiros Products. See
"The Agreements and the Purchase Options--Technology License Agreement."

ALBUTEROL AND PRODUCT OPTION AGREEMENT

Dura and Spiros Corp. II will enter into an agreement (the "Albuterol and
Product Option Agreement") pursuant to which Dura will obtain options to acquire
(a) the Albuterol Program Assets (as defined below) (the "Albuterol Option") and
(b) the Spiros Product Program Assets (as defined below) (the "Product Option").

The Albuterol Program Assets include (a) the product developed by Dura
pursuant to the Development Agreement with albuterol in the Spiros cassette
system (the "Albuterol Product"), (b) albuterol as formulated for use in the
Albuterol Product, (c) a perpetual, sublicensable, non-exclusive, royalty-free
license to the technology owned by Dura or developed or acquired by Dura during
the term of the Development Agreement applicable to the Albuterol Product for
use solely with the Albuterol Product, and (d) all applications and documents
filed with the FDA or a foreign regulatory authority to obtain regulatory
approval to commence commercial sale or use of the Albuterol Product. The
Albuterol Option is exercisable commencing on the date of the closing of the
Offering and ending on the earlier of (i) 360 days after receipt of FDA approval
to market the Albuterol Product or (ii) the date Dura ceases to manufacture or
market the Albuterol Product in accordance with the terms of the Manufacturing
and Marketing Agreement.

Upon exercise of the Albuterol Option, Dura will make a single payment to
Spiros Corp. II in cash equal to (a) the aggregate Purchase Option Exercise
Price, assuming acquisition of all shares of Spiros Corp. II Common Stock issued
pursuant to the Offering four years following closing of the Offering,
multiplied by (b) a fraction, the numerator of which will equal the development
and commercialization costs and expenses incurred by Spiros Corp. II in
connection with the development and commercialization of the Albuterol Product
and the denominator of which will equal the Available Funds (excluding the
proceeds, if any, from the exercise of the Albuterol Option or the Product
Option) set forth in the proposed budget contained herein. See "Use of
Proceeds."

The Spiros Product Program Assets include (a) a single Spiros Product (other
than the Albuterol Product) for which Dura elects to exercise the Product Option
(the "Option Product"), (b) the compound to be delivered by the Option Product,
as formulated for use specifically in the Option Product, (c) a perpetual,
sublicensable, non-exclusive, royalty-free license to the technology owned by
Dura or developed or acquired by Dura during the term of the Development
Agreement applicable to the Option Product for use solely with the Option
Product, and (d) all applications and documents filed with the FDA or a foreign
regulatory authority to obtain regulatory approval to commence commercial sale
or use of the Option Product. The Product Option is exercisable with respect to
each Spiros Product commencing on the date of the closing of the Offering and
ending 90 days after receipt of FDA approval to market such Spiros Product;
provided, however, that the Product Option may only be exercised with respect to
a single Spiros Product.

11
<PAGE>

Upon exercise of the Product Option, Dura will make a single payment to
Spiros Corp. II in cash equal to 110% of (a) the aggregate Purchase Option
Exercise Price, assuming acquisition of all shares of Spiros Corp. II Common
Stock issued pursuant to the Offering four years following closing of the
Offering, multiplied by (b) a fraction, the numerator of which will equal the
development and commercialization costs and expenses incurred by Spiros Corp. II
in connection with the development of the Option Product and the denominator of
which will equal the Available Funds (excluding the proceeds, if any, from the
exercise of the Albuterol Option or the Product Option) set forth in the
proposed budget contained herein. See "Use of Proceeds."

Any payments received by Spiros Corp. II with respect to the exercise of the
Albuterol Option and the Product Option will become part of the Available Funds.

DEVELOPMENT AGREEMENT

Dura and Spiros Corp. II will enter into an agreement (the "Development
Agreement") under which Dura will agree to use commercially reasonable efforts
to develop the Program Technology for the purpose of identifying and developing
the Spiros Products and to make the Other Expenditures (the "Development"). Dura
will furnish all labor, supervision, services, supplies, and materials necessary
to perform the Development.

Dura also agrees to use commercially reasonable efforts to obtain the rights
to, and to sublicense to, Spiros Corp. II, any patent or technology license held
by a third party that Dura reasonably determines to be necessary or useful to
enable Dura to conduct the Development. Dura will act as Spiros Corp. II's
exclusive agent for the filing and prosecuting of all regulatory applications
and permits required to obtain FDA approval in Dura's name and any other
necessary regulatory approvals for the Spiros Products. In the event that the
Purchase Option expires unexercised, Dura will use its reasonable efforts to
cause all applications and documents filed with the FDA or a foreign regulatory
authority to obtain regulatory approvals for the Spiros Products, with respect
to which Dura has not acquired exclusive rights, to be assigned to Spiros Corp.
II.

Dura will conduct the Development in accordance with an annual workplan and
budget. At the closing, Dura will provide Spiros Corp. II with a workplan and
budget covering the period from the closing date through December 31, 1998.
Thereafter, Dura and Spiros Corp. II will prepare annual workplans and budgets.
The annual workplans and budgets are subject to approval and acceptance by
Spiros Corp. II's Board of Directors. Dura must report any significant
deviations from an annual workplan and budget in a timely manner. Further,
reimbursement for expenditures from Spiros Corp. II may not exceed in any
calendar year 120% of the amount allocated in the applicable annual workplan and
budget, unless otherwise approved by Spiros Corp. II.

Payments to Dura under the Development Agreement for Dura's work in
performing the Development will be made for the full amount of all Development
Costs (as defined in the Development Agreement) incurred by Dura in performing
these activities, up to the maximum amount of the funds available to Spiros
Corp. II, which includes substantially all of the Available Funds. Development
Costs will include costs, estimated to be approximately $4 million, for the
Development conducted by Dura from October 10, 1997 through the date of the
closing of the Offering.

If Spiros Corp. II or Dura determine that the development of a particular
Spiros Product should be discontinued because continued development is not
feasible or is uneconomic, or that the development should be expanded to include
one or more Designated Compounds, then Spiros Corp. II and Dura will

12
<PAGE>
use reasonable efforts to agree on the nature of the Development and the
identity of any other compound on which unexpended Available Funds will be
spent.

Under the Development Agreement, the manufacture and sale of the Spiros
Products for the sole purpose of conducting clinical trials necessary to obtain
FDA approval or any other required regulatory approval will be charged to Spiros
Corp. II as Development Costs. Dura will remit to Spiros Corp. II any revenue
received by it from the sale of such Spiros Products prior to receipt of FDA
approval to market.

MANUFACTURING AND MARKETING AGREEMENT

Dura and Spiros Corp. II will enter into an agreement (the "Manufacturing
and Marketing Agreement") under which Spiros Corp. II will grant to Dura an
exclusive, worldwide license to manufacture and market the Spiros Products. Dura
will pay Spiros Corp. II on a quarterly basis a royalty of 7% of the Net Sales
of each Spiros Product beginning upon receipt of FDA approval to market such
product; provided, however, that prior to the expiration of the Albuterol
Option, no royalty payment will be made with respect to Net Sales of the
Albuterol Product.

Under the Manufacturing and Marketing Agreement, Dura will agree to use
diligent efforts to commence sales of each Spiros Product promptly upon
receiving FDA approval for such product. Dura will be responsible for
maintaining competent, qualified sales personnel, and will agree not to make any
representations inconsistent with the approved labeling of each Spiros Product.

"Net Sales" for purposes of the Manufacturing and Marketing Agreement and
the Technology Agreement will be defined as the gross amount invoiced for sales
of the Spiros Products by Dura or its sublicensees, if any, to third parties
less (i) discounts actually allowed, (ii) credits for claims, allowances,
retroactive price reductions or returned Spiros Products, (iii) prepaid freight
charges incurred in transporting Spiros Products to customers, (iv) sales taxes
and other governmental charges actually paid in connection with the sales (but
excluding what is commonly known as income taxes) and (v) any royalty
obligations under the 1993 Royalty Agreement (as defined below). See "Business
of Spiros Corp. II-- Patents." Net Sales will not include sales between or among
Dura, its affiliates and its sublicensees unless such sales are for end use
rather than for purposes of resale.

The Manufacturing and Marketing Agreement will terminate (a) upon the
exercise or termination of the Purchase Option or (b) by mutual agreement of the
parties at any time. In the event Dura exercises the Albuterol Option or the
Product Option, the Manufacturing and Marketing Agreement will terminate with
respect to the Albuterol Product or the Option Product, as the case may be, but
will otherwise continue in full force and effect.

SERVICES AGREEMENT

Spiros Corp. II will enter into an agreement with Dura (the "Services
Agreement") under which Dura will provide certain management and administrative
services to Spiros Corp. II at the rate of $100,000 per calendar quarter for
services to be performed internally by Dura and for services performed by third
parties for Dura on Spiros Corp. II's behalf. In addition, Spiros Corp. II will
reimburse Dura for all costs and expenses incurred by Dura in connection with
the Offering (currently estimated to be approximately $750,000). The Services
Agreement terminates on the earlier of (i) the exercise of the Purchase Option
or (ii) 12 months after expiration of the Purchase Option.

FEDERAL INCOME TAX CONSEQUENCES

The material federal income tax consequences of the purchase of Units in the
Offering and the subsequent sale of Spiros Corp. II Common Stock and Warrants by
the purchasers of Units in the Offering are discussed under "Federal Income Tax
Consequences."

13
<PAGE>
USE OF PROCEEDS

DURA SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:(1)
Sales........................................ $ 9,561 $ 15,816 $ 22,199 $ 39,308 $ 79,563 $ 45,900 $ 105,437
Contract revenues............................ -- 2,297 10,481 12,194 24,556 17,407 22,430
--------- --------- --------- --------- --------- --------- ----------
Total revenues............................. 9,561 18,113 32,680 51,502 104,119 63,307 127,867
Operating income (loss)(2)................... (7,016) (8,240) 1,456 (37,252) 21,647 12,173 36,849
Net income (loss)(2)......................... (6,769) (8,173) 1,936 (35,778) 24,328 14,471 29,395
Net income (loss) per share(2)............... (0.47) (0.55) 0.10 (1.53) 0.60 0.37 0.62
Weighted average number of common and common
equivalent shares.......................... 14,506 14,988 19,860 23,440 40,479 38,890 47,392
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments................................. $ 240,345 $ 454,710
Working capital................................................................... 219,864 457,276
Total assets...................................................................... 504,670 821,105
Long-term obligations (excluding current portion)................................. 6,670 294,535
Shareholders' equity.............................................................. 443,577 482,297
</TABLE>

- ------------------------

(1) Dura Summary Consolidated Financial Information includes Health Script
subsequent to its acquisition on March 22, 1995, the Rondec-Registered
Trademark- product line subsequent to its acquisition on June 30, 1995, the
Entex-Registered Trademark- product line subsequent to its acquisition on
July 3, 1996, the Ceclor CD and Keftab products subsequent to their
acquisition on September 5, 1996, and the Nasarel and Nasalide products
subsequent to their acquisition on May 7, 1997.

(2) In 1993 and 1995, Dura incurred charges for purchase options and acquired
in-process technology totaling $2.3 million and $43.8 million, respectively.
If these charges were excluded, Dura would have reported a net loss of $5.9
million, or $0.39 per share, for 1993 and net income of $8.0 million, or
$0.28 per share, in 1995.

14
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following summary unaudited pro forma consolidated financial data
illustrates the effects of the Spiros Corp. Purchase under the purchase method
of accounting as if the Spiros Corp. Purchase had occurred as of September 30,
1997 for the balance sheet data and as of January 1, 1996 for the statement of
operations data. The summary unaudited pro forma consolidated statement of
operations data also includes pro forma adjustments to reflect the impact from
the acquisitions of the Entex products (July 1996), Keftab and Ceclor CD
(September 1996), and Nasarel and Nasalide (May 1997), as if they had occurred
on January 1, 1996. This financial data has been derived from information
included in the unaudited pro forma condensed consolidated financial statements
incorporated herein by reference from Dura's Current Report on Form 8-K, dated
October 10, 1997, as amended.

The summary unaudited pro forma combined financial data is not necessarily
indicative of the results of operations which may have occurred if the Spiros
Corp. Purchase had been consummated on the dates indicated and should not be
construed as representative of any future results.

The Spiros Corp. Purchase adjustments to contract and total revenues relate
to the elimination of intercompany revenue from Spiros Corp. These adjustments
are substantially offset by a reduction in operating expenses relating to
intercompany development expenses. The adjustment to net income relates
primarily to a reduction in the pro forma consolidated provision for income
taxes resulting from the recognition of the income tax benefit on Spiros Corp.'s
pre-tax loss, which was not recorded on a stand-alone basis. The Product
Acquisition Adjustments are based on sales data for the products referred to
above prior to their acquisition by Dura. The pro forma adjustments do not
reflect any revenues or expenses for Ceclor CD as this product was launched
after it was acquired by Dura.

SUMMARY UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS DATA

<TABLE>
<CAPTION>
SPIROS CORP. PRODUCT
PURCHASE ACQUISITIONS PRO FORMA
DURA SPIROS CORP. ADJUSTMENTS ADJUSTMENTS CONSOLIDATED
--------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Sales.......................................... $ 79,563 $ -- $ -- $ 51,047 $ 130,610
Contract revenue............................... 24,556 200 (19,138) -- 5,618
--------- ------------ ------------ ----------- ------------
Total revenues............................... 104,119 200 (19,138) 51,047 136,228
Operating income (loss)........................ 21,647 (20,640) 1,702 28,400 31,109
Net income (loss).............................. 24,328 (18,854) 8,562 13,987 28,023
Net income per share........................... 0.60 0.68
Weighted average number of common and common
equivalent shares............................ 40,479 41,495
NINE MONTHS ENDED SEPTEMBER 30, 1997
Sales.......................................... $ 105,437 $ -- $ -- $ 4,860 $ 110,297
Contract revenue............................... 22,430 -- (18,331) -- 4,099
--------- ------------ ------------ ----------- ------------
Total revenues............................... 127,867 -- (18,331) 4,860 114,396
Operating income (loss)........................ 36,849 (19,732) 1,401 2,702 21,220
Net income (loss).............................. 29,395 (19,044) 8,458 1,044 19,853
Net income per share........................... 0.62 0.41
Weighted average number of common and common
equivalent shares............................ 47,392 48,408
</TABLE>

SUMMARY UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET DATA

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
---------------------------------------------------------------------
PRO FORMA
PRO FORMA CONSOLIDATED
DURA SPIROS CORP. ADJUSTMENTS CONSOLIDATED AS ADJUSTED(1)
--------- ------------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents and short-term
investments................................ $ 454,710 $ 4,851 $ -- $ 459,561 $ 384,561
Working capital............................. 457,276 2,518 -- 459,794 384,794
Total assets................................ 821,105 4,851 (2,325) 823,631 748,631
Long-term obligations (excluding current
portion)................................... 294,535 -- -- 294,535 294,535
Shareholders' equity........................ 482,297 2,518 -- 484,815 409,815
</TABLE>

- ------------------------------

(1) Pro Forma Consolidated As Adjusted amounts give effect to the Contribution.
No adjustment has been made to reflect the Offering as it will result in an
increase to additional paid-in capital in an amount equal to the value of
the Warrants as determined at the time of their issuance, offset by an
increase to the warrant subscriptions receivable contra equity account.

15
<PAGE>
RISK FACTORS

AN INVESTMENT IN THE UNITS OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. IN
ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS OR INCORPORATED
HEREIN BY REFERENCE, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE
FOLLOWING RISK FACTORS BEFORE PURCHASING THE UNITS OFFERED HEREBY.

CONFLICTS OF INTEREST

COMMON MANAGEMENT. The Technology Agreement, the Development Agreement, the
Manufacturing and Marketing Agreement and the Albuterol and Product Option
Agreement (collectively, the "Major Agreements") were approved by Dura, as
controlling stockholder of Spiros Corp. II, which, in such capacity, may have
influenced the Board of Directors of Spiros Corp. II to enter into such
agreements. Two of the five authorized members of the Board of Directors of
Spiros Corp. II are persons who are directors and/or officers of Dura or its
affiliates.

LACK OF ARM'S-LENGTH NEGOTIATION. The Development Agreement and the
Manufacturing and Marketing Agreement were not negotiated on an arm's-length
basis and Dura and Spiros Corp. II did not retain separate counsel in connection
therewith. In particular, the Board of Directors of Spiros Corp. II may have
been influenced by Dura, as the controlling stockholder of Spiros Corp. II, in
entering into the Development Agreement and the Manufacturing and Marketing
Agreement. Dura is the contractor under the Development Agreement and will
perform or participate in all development and other activities thereunder.
Additionally, Dura will be primarily responsible for the marketing and
manufacture of Spiros Products under the Manufacturing and Marketing Agreement.
Spiros Corp. II will be responsible for and will pay the development costs that
are incurred by Dura under the Development Agreement and the marketing and
manufacturing costs incurred by Dura under the Manufacturing and Marketing
Agreement. Dura will determine unilaterally certain activities to be undertaken
under the Development Agreement and in all events Dura will have substantial
influence over all activities and procedures (including the timing and
priorities thereof) to be undertaken under the Development Agreement and the
Manufacturing and Marketing Agreement. Dura has no obligation to complete any
development or other activity after all funds of Spiros Corp. II have been
expended. Dura's own projects and other third party projects may compete for
time and resources with projects undertaken pursuant to the Development
Agreement and the Manufacturing and Marketing Agreement and the resources that
Dura expends under such agreements may therefore be limited.

THE ALBUTEROL OPTION AND THE PRODUCT OPTION. If Dura exercises the
Albuterol Option for the Albuterol Product or the Product Option for any other
Spiros Product, it will have sole discretion to control the commercialization of
such product, including discretion to allocate its marketing resources among
that product and other Dura products.

THE PURCHASE OPTION EXERCISE PRICE. The Purchase Option Exercise Price was
determined by Spiros Corp. II and Dura giving consideration to the Spiros
Products, the agreements between Spiros Corp. II and Dura, such other factors as
Spiros Corp. II and Dura deemed appropriate, and other advice given by the
Underwriters. Therefore, such price was not determined on an arm's-length basis.

BUSINESS RISKS RELATING TO SPIROS CORP. II

NO ASSURANCE OF SUCCESSFUL DEVELOPMENT OF THE SPIROS PRODUCTS. Spiros Corp.
II has agreed with Dura that Dura will conduct work on the Spiros Products in
accordance with the Development Agreement for the purpose of research, clinical
development, product development, including regulatory approval, and
commercialization of the Spiros Products. Dura's historical performance has no
relationship to Spiros Corp. II's potential product development and is not
indicative of the future performance of Spiros Corp. II. While certain research
and development on the Spiros Products being transferred to Spiros Corp. II by
Dura has been conducted, additional clinical studies and product development are
still to be undertaken. There can be no assurance that Spiros Corp. II or Dura
will be able to complete the development, gain regulatory approval and
successfully commercialize any of the Spiros Products or that

16
<PAGE>

the Spiros Products can be introduced in a timely manner. The successful
development of any of the Spiros Products will require demonstration through
human clinical studies that such Spiros Products are both safe and efficacious.
See "Business of Spiros Corp. II."

NO ASSURANCE OF EXERCISE OF DURA'S OPTIONS. Dura is not obligated to
exercise the Purchase Option, the Albuterol Option or the Product Option, and it
will exercise such options only if, in the opinion of Dura's Board of Directors,
it is in Dura's best interest to do so. Even if the Spiros Products are
developed and approved, if Dura does not exercise the Purchase Option, the
Albuterol Option or the Product Option, Spiros Corp. II will be required to find
alternative ways to commercially market or exploit the Spiros Products and there
can be no assurance that Spiros Corp. II will be able to do so. If, in the event
Dura fails to exercise the Purchase Option, the Albuterol Option and the Product
Option and Spiros Corp. II determines to market the Spiros Products itself,
Spiros Corp. II will require substantial additional funds. There can be no
assurance that such funds will be available on attractive terms, if at all.
Similarly, if Spiros Corp. II determines to license the Spiros Products to third
parties, such arrangements, if available, may be on terms less favorable to
Spiros Corp. II than the terms of Spiros Corp. II's arrangements with Dura. See
"The Agreements and the Purchase Options--Stock Purchase Option" and "The
Agreements and the Purchase Options--Albuterol and Product Option Agreement."

NO ASSURANCE OF SUFFICIENT FUNDS. Although Spiros Corp. II believes that
the Available Funds will be sufficient to enable it to advance three Spiros
Products through the FDA approval stage, there can be no assurance that this
will be the case. Until the expiration of the Purchase Option, Spiros Corp. II
is significantly restricted from raising additional funds without Dura's consent
and there can be no assurance that Spiros Corp. II will have sufficient funds to
successfully develop any Spiros Products. While Dura may, at its sole option,
provide funds for further development of the Spiros Products, it is not
obligated to do so. If the Purchase Option is not exercised, Spiros Corp. II
would have to raise substantial funding while hiring, or otherwise obtaining
access to research, and management personnel.

NO ASSURANCE THAT THE PURCHASE OPTION WILL BE REPRESENTATIVE OF THE VALUE OF
SPIROS CORP. II. The Purchase Option Exercise Price is set forth in the Spiros
Corp. II Amended and Restated Certificate of Incorporation as of the date of the
closing of the Offering and therefore may not be representative of the value of
the Spiros Corp. II Common Stock at the time of the exercise of the Purchase
Option.

DEPENDENCE ON DURA. Substantially all of the Available Funds will be paid
by Spiros Corp. II to Dura under the Development Agreement. In addition, Dura
will be primarily responsible for the marketing and manufacturing of the Spiros
Products, if any are commercialized prior to the expiration of the Purchase
Option. Spiros Corp. II is not expected to have its own research, development,
clinical, licensing, administration, manufacturing or marketing employees or
facilities and thus will be entirely dependent on Dura in these areas. Subject
to their respective obligations under the Development Agreement, consistent with
commercially reasonable practices, Dura will have sole discretion to determine
the allocation of its research, development, clinical, licensing,
administration, manufacturing and marketing employees and facilities. Although
Dura believes that its personnel and facilities currently are or, in the future,
will be adequate for the performance of its duties under the Development
Agreement and the Manufacturing and Marketing Agreement, Dura's proprietary and
collaborative development, licensing, manufacturing and marketing projects may
compete for time and resources with projects undertaken by Spiros Corp. II
pursuant to the Development Agreement and the Manufacturing and Marketing
Agreement, thereby delaying development, manufacture and marketing of the Spiros
Products. Any material adverse change in the business or financial condition of
Dura would have a material adverse effect upon Spiros Corp. II. See "The
Agreements and the Purchase Options--Development Agreement."

POTENTIAL COMPETITION FROM DURA. Dura is engaged in ongoing licensing and
development of new products. While Dura has licensed the rights to develop,
manufacture and commercialize the Spiros Products in connection with the Core
Technology to Spiros Corp. II, Dura is not prohibited from developing other
products using Spiros, including those that may compete with the Spiros
Products, or

17
<PAGE>
from in-licensing or acquiring products that may compete with the Spiros
Products. Dura's activities may, in some circumstances, lead to the development,
in-licensing or acquisition of products that compete with the Spiros Products
being developed by Spiros Corp II. It is possible that Dura's rights with
respect to such competitive products could reduce Dura's incentive to exercise
the Albuterol Option, the Product Option or the Purchase Option. See "Business
of Dura."

NO MANUFACTURING OR MARKETING CAPABILITY. Spiros Corp. II has no
manufacturing or marketing capability. Spiros Corp. II is obligated to only
utilize Dura's manufacturing facilities for manufacturing in the U.S. during the
term of the Manufacturing and Marketing Agreement. Dura has the right under the
Manufacturing and Marketing Agreement to use contract manufacturers and
currently plans to rely on third parties to manufacture certain components of
Spiros. There can be no assurance that Dura's facilities or those of its
contract manufacturers will be satisfactory for the needs of Spiros Corp. II. In
addition, Dura or its contract manufacturers, as the case may be, may require
additional FDA approval prior to commencing manufacturing of Spiros Products.
There can be no assurance that the Spiros Products can be manufactured, whether
by Dura or a contract manufacturer, on a commercial scale for commercially
reasonable cost or on a timely basis. In addition, Spiros Corp. II has no
experience in sales, marketing or distribution. Under the Manufacturing and
Marketing Agreement, Dura has been granted exclusive worldwide marketing rights
to the Spiros Products. There can be no assurance that Dura's sales and
marketing force will be able to establish commercially successful sales and
distribution capabilities for the Spiros Products. See "The Agreements and the
Purchase Options--Manufacturing and Marketing Agreement."

ABSENCE OF OPERATING HISTORY; NO ASSURANCE OF PROFITABILITY; LACK OF
DIVIDENDS. Spiros Corp. II was recently formed and has no operating history
upon which investors may base an evaluation of its likely financial performance.
Spiros Corp. II anticipates that substantially all of the Available Funds may be
expended prior to the earliest receipt of any significant revenues by Spiros
Corp. II, resulting in significant losses. Further, even if the Spiros Products
are developed in accordance with the Development Agreement and marketed pursuant
to the Manufacturing and Marketing Agreement, there can be no assurance that
they can be marketed profitably. Even if such Spiros Products are commercialized
profitably, the initial losses incurred by Spiros Corp. II may never be
recovered. Spiros Corp. II is prevented from paying dividends on the Spiros
Corp. II Common Stock without the approval of Dura, and accordingly, does not
expect to pay any dividends. See "Spiros Corp. II Capital Stock" and "The
Agreements and the Purchase Options--Stock Purchase Option."

ABILITY OF SPECIAL STOCKHOLDER TO LIMIT CERTAIN SPIROS CORP. II
ACTIVITIES. Pursuant to the Amended and Restated Certificate of Incorporation
of Spiros Corp. II, until the expiration of the Purchase Option, no resolution
or act of Spiros Corp. II to authorize or permit any of the following will be
effective without the prior written approval of the holders of a majority of the
outstanding Special Shares: (i) the allotment or issue of shares or other
securities of Spiros Corp. II or the creation of any right to such allotment or
issue; (ii) the reduction of Spiros Corp. II's authorized share capital; (iii)
outstanding borrowings by Spiros Corp. II in excess of $1 million; (iv) the sale
or other disposition of, or the creation of any lien or liens on, the whole or a
part of Spiros Corp. II's business or assets; (vi) the consolidation of Spiros
Corp. II; and (vii) any alteration of the Purchase Option. Accordingly, Dura as
the holder of a majority of the outstanding Special Shares, could preclude the
holders of a majority of the outstanding Spiros Corp. II Common Stock and the
Board of Directors of Spiros Corp. II from taking any of the foregoing actions
during such period. See "Spiros Corp. II Capital Stock."

POTENTIAL LOSS OF TECHNOLOGY BY SPIROS CORP. II. Under the Development
Agreement, Spiros Corp. II is obligated to make payments to Dura equal in the
aggregate to substantially all of the Available Funds. If Spiros Corp. II does
not use such Available Funds as provided in the Development Agreement or
otherwise breaches any of its material obligations under the Major Agreements,
Dura may have the right to terminate the Technology Agreement, the Development
Agreement and the Manufacturing and

18
<PAGE>
Marketing Agreement, and thereby reacquire rights to all technology licensed to
Spiros Corp. II thereunder, including improvements made to such technology using
funds provided by Spiros Corp. II. In the event of such a termination by Dura,
it is unlikely that Dura would exercise the Albuterol Option, the Product Option
or the Purchase Option. See "The Agreements and the Purchase Options."

ACCELERATION OF PURCHASE OPTION. If Spiros Corp. II terminates all Major
Agreements due to a material breach of any of the Major Agreements by Dura, the
Purchase Option automatically accelerates. The Purchase Option also terminates
in the event of certain voluntary or involuntary bankruptcy events affecting
Dura or an uncured material breach by Dura under any of its material loan
agreements. There can be no assurance that, at that time, the development of the
Spiros Products will have progressed to a point where Dura will have sufficient
information to determine whether to exercise the Purchase Option. As a result,
Dura may determine not to exercise the Purchase Option. There can be no
assurance that, upon termination of the Development Agreement by Spiros Corp. II
as described above, alternative arrangements for the development of some or all
of the Spiros Products could be made or that such development of the Spiros
Products by Spiros Corp. II would be successful. See "The Agreements and the
Purchase Options."

BUSINESS RISKS RELATED TO SPIROS CORP. II AND DURA

NO ASSURANCE OF MARKET FOR UNITS, WARRANTS OR SPIROS CORP. II COMMON
STOCK. The Warrants and the Spiros Corp. II Common Stock that constitute the
Units will be transferable only as Units until the Separation Date. No assurance
can be given that an active trading market for the Units will develop. After the
Separation Date, the Warrants and the Spiros Corp. II Common Stock will be
separately transferable. There can be no assurance that factors related to Dura
or otherwise will not depress the value of the Warrants, or that factors related
to Spiros Corp. II or otherwise will not depress the value of the Spiros Corp.
II Common Stock, in either case reducing the liquidity of an investment in the
Units. After the Separation Date, there can be no assurance that there will be
an active trading market for the Warrants or the Spiros Corp. II Common Stock.
Prior to the Separation Date, application will be made to list the Spiros Corp.
II Common Stock and the Warrants for trading on the Nasdaq National Market.

UNCERTAINTY REGARDING PATENTS AND PROPRIETARY TECHNOLOGY; UNPREDICTABILITY
OF PATENT PROTECTION--SPIROS CORP. II. Spiros Corp. II's success will depend,
in part, on its ability to obtain patents, protect trade secrets and other
proprietary information and operate without infringing upon the proprietary
rights of others both in the U.S. and abroad. There can be no assurance that
patent applications for a Spiros Product will be approved, that Spiros Corp. II
will develop any Spiros Product to the point that it is patentable, that any
issued patents for a Spiros Product will provide Spiros Corp. II with adequate
protection or will not be challenged by others, or that the patents of others
will not impair the ability of Spiros Corp. II to do business. Furthermore,
there can be no assurance that others will not independently develop similar
products, duplicate any unpatented Spiros Products or design around any patented
Spiros Products in development or marketed by Spiros Corp. II.

Spiros Corp. II will rely on secrecy to protect technology where patent
protection is not believed to be appropriate or obtainable. There can be no
assurance that any confidentiality agreement entered into by Dura with third
parties will not be breached, that Spiros Corp. II will have adequate remedies
for any breach, that others will not independently develop substantially
equivalent proprietary information or that third parties will not otherwise gain
access to proprietary information concerning the Spiros Products or Program
Technology.

Spiros Corp. II may be required to obtain licenses to patents or other
proprietary rights of others. No assurance can be given that any licenses
required under any such patents or proprietary rights would be made available on
terms acceptable to Spiros Corp. II, if at all. If Spiros Corp. II does not
obtain such licenses, it could encounter delays in Spiros Product market
introductions or could find that the development, manufacture or sale of the
Spiros Products requiring such licenses could be foreclosed. Moreover, Spiros
Corp. II could incur substantial costs and diversion of management time in
defending itself in any

19
<PAGE>
suits brought against it claiming infringement of the patent rights of others or
in asserting Spiros Corp. II's patent rights.

Spiros Corp. II is aware of foreign patents granted to third parties in the
United Kingdom that claim proprietary rights in areas that may overlap with
certain Spiros technology. In the event that Spiros Corp. II determines to
market any Spiros Product in the United Kingdom and further determines that such
activity would infringe upon such third party patents, Spiros Corp. II may need
to either design around these patents, obtain licenses to such patents, or avoid
marketing products in the United Kingdom and other areas in Europe in which
these patents provide protection. There can be no assurance that patents or
patent applications do not exist or will not exist in the future that may
materially affect Spiros Corp. II's ability to make, use or sell any current or
future products. See "Business of Spiros Corp. II--Patents."

UNCERTAINTY REGARDING PATENTS AND PROPRIETARY; UNPREDICTABILITY OF PATENT
PROTECTION--DURA. Dura's success will depend in part on its ability to obtain
patents on current or future products or formulations, defend its patents,
maintain trade secrets and operate without infringing upon the proprietary
rights of others both in the U.S. and abroad. However, only six of the
pharmaceuticals currently marketed by Dura are covered by patents. Dura also has
licenses or license rights to certain other U.S. and foreign patent and patent
applications. There can be no assurance that patents, U.S. or foreign, will be
obtained, or that, if issued or licensed to Dura, they will be enforceable or
will provide substantial protection from competition or be of commercial benefit
to Dura or that Dura will possess the financial resources necessary to enforce
or defend any of its patent rights. Federal court decisions establishing legal
standards for determining the validity and scope of patents in the field are in
transition. There can be no assurance that the historical legal standards
surrounding questions or validity and scope will continue to be applied or that
current defenses as to issued patents in the field will offer protection in the
future. The commercial success of Dura will also depend upon avoiding the
infringement of patents issued to competitors and upon maintaining the
technology licenses upon which certain of Dura's current products are, or any
future products under development might be, based. Litigation, which could
result in substantial cost to Dura, may be necessary to enforce Dura's patent
and license rights or to determine the scope and validity of proprietary rights
of third parties. If any of Dura's products are found to infringe upon patents
or other rights owned by third parties, Dura could be required to obtain a
license to continue to manufacture or market such products. There can be no
assurance that licenses to such patent rights would be made available to Dura on
commercially reasonable terms, if at all. If Dura does not obtain such licenses,
it could encounter delays in marketing affected products while it attempts to
design around such patents or it could find that the development, manufacture or
sale of products requiring such licenses is not possible. Dura currently has
certain licenses from third parties and in the future may require additional
licenses from other parties to develop, manufacture and market commercially
viable products effectively. There can be no assurance that such licenses will
be obtainable on commercially reasonable terms, if at all, or that the patents
underlying such licenses will be valid and enforceable. See "Business of
Dura--Patents and Proprietary Rights."

GOVERNMENT REGULATION; NO ASSURANCE OF FDA APPROVAL. Development, testing,
manufacturing and marketing of pharmaceutical products including drug delivery
systems are subject to extensive regulation by numerous governmental authorities
in the U.S. and other countries. The process of obtaining FDA approval of
pharmaceutical products and drug delivery systems is costly and time consuming.
Any new pharmaceutical product must undergo rigorous preclinical and clinical
testing and an extensive regulatory approval process mandated by the FDA. Such
regulatory review includes the determination of manufacturing capability and
product performance. Marketing of drug delivery systems also requires FDA
approval, which can be costly and time consuming to obtain. A separate
regulatory approval will need to be obtained for each Spiros drug delivery
system.

Dura expects to submit an abbreviated NDA called a 505(b)(2) application for
the use of albuterol and other drugs with the Spiros system. No assurances can
be given that all of Dura's drugs identified for development with Spiros will be
suitable for, or approved under, abbreviated application procedures.

20
<PAGE>
Certain abbreviated application procedures have been the subject of petitions
filed by brand name manufacturers which seek changes in the FDA's approval
process for such abbreviated applications. These requested changes include,
among other things, disallowance of the use by an applicant of an abbreviated
application with data considered proprietary by the original manufacturer that
was submitted to the FDA as part of an original NDA. Dura is unable to predict
at this time whether the FDA will make any changes to its abbreviated
application procedures as a result of such petitions or the effect that such
changes or challenges may have on Dura.

There can be no assurance that the pharmaceutical products currently in
development by Spiros Corp. II or Dura, or those products acquired or
in-licensed by either company, will be approved by the FDA. In addition, there
can be no assurance that all necessary approvals will be granted for future
products or that FDA review or actions will not involve delays caused by the
FDA's request for additional information or testing that could adversely affect
the time to market and sale of the products. For both currently marketed
products of Dura and future products of Dura and Spiros Corp. II, failure to
comply with applicable regulatory requirements can, among other things, result
in the suspension of regulatory approval, as well as possible civil and criminal
sanctions.

Dura, on behalf of Spiros Corp. II, plans to submit an NDA for the Albuterol
Product in November 1997. The FDA may determine to reject Dura's NDA at any time
within 60 days of submission based on a determination that the NDA is incomplete
or that additional information is required prior to consideration of the NDA.
Prior to the FDA's approval of the Albuterol Product, Dura will be required to
complete an ongoing open label study with respect to the Albuterol Product.
Since completion of the pivotal trials, Dura has made, and is proposing to make,
a number of additional modifications to the Spiros system, some of which address
problems encountered with the mechanical features of the Spiros delivery system
during the pivotal trials. These changes are intended to improve the
reliability, performance, manufacturability, and customer acceptance of the
mechanical features of the Spiros delivery system. Dura expects that it will be
required to complete testing and validation pursuant to cGMP requirements of the
Spiros system as modified for commercial distribution, which could be costly and
time-consuming. There can be no assurance that the FDA will not require Dura to
undertake further laboratory testing, field testing and/or clinical studies in
order to insure the safety and effectiveness of the Albuterol Product intended
to be commercialized by Dura and to insure that it can be reliably manfactured.
If a proposed change is deemed to be a major modification by the FDA, Dura could
be required to repeat one or more of the clinical studies. Moreover, because of
the time necessary to validate the changes to the Spiros system, there can be no
assurance that Dura will be prepared for any FDA preapproval inspection of
Dura's manufacturing facilities in a timely manner. If Dura is required to
undertake additional laboratory testing and/or clinical studies or to postpone
the preapproval inspection, or if Dura fails to complete the open label study in
a timely manner, Dura could receive a non-approval letter and, in any event,
there could be a substantial delay in completion of the approval process. FDA
approval to market the Albuterol Product could take several months to several
years, or approval may ultimately be denied.

The FDA is required to conduct biennial inspections of drug manufacturing
establishments. Since the planned NDA submission for the Albuterol Product will
be Dura's first for a Spiros Product, the FDA will inspect Dura's manufacturing
facility as part of the review process. Dura may also be subject to State of
California inspection. There can be no assurance that Dura will be able to
satisfy such inspections in a timely manner, if at all.

In addition, changes in regulations could have a material adverse effect on
Dura. The FDA is continuing an evaluation of the effectiveness of all drug
products containing ingredients marketed prior to 1962 (the year of enactment of
the "Drug Amendments of 1962" to the Federal Food, Drug and Cosmetic Act) as
part of its Drug Efficacy Study Implementation ("DESI") program and will
determine which drugs are considered "new drugs" requiring approval through a
NDA for marketing. A Policy Guide (CPG 440.100) issued by the FDA indicates that
the FDA will implement procedures to determine whether the new drug provisions
are applicable to existing products. This Policy Guide requires that products
covered by paragraph B not be similar or related to any drug included in the
DESI program, or have a different

21
<PAGE>

formulation or conditions for use than products marketed before November 13,
1984. If a final determination is made that a particular drug required an
approved NDA, such approval will be required for marketing to continue. If such
a determination is made, the FDA might impose various requirements; for example,
it might require that the current product be the subject of an approved NDA,
that the product be reformulated and an NDA approval be obtained, that the
product must be sold on an over-the-counter basis rather than as a prescription
drug or that the products must be removed from the market. Dura believes that
nine of its prescription pharmaceutical products may be covered by paragraph B
of the Policy Guide and is aware that one of its products may be considered to
be similar or related to a DESI drug. Also, Dura is not aware of evidence to
substantiate that three of its products have the same formulation or conditions
for use as products marketed before November 13, 1984. There can be no assurance
as to which regulatory course the FDA will follow, if any, with respect to many
of Dura's pharmaceutical products or whether either Dura or Spiros Corp. II will
be able to obtain any approvals that the FDA may deem necessary. If any negative
actions are taken by the FDA, such actions could have a material adverse effect
on business of Dura or Spiros Corp. II. Dura's Health Script is subject to
regulation by state regulatory authorities, principally state boards of
pharmacy. In addition, Dura's Health Script is subject to regulation by other
state and federal agencies with respect to reimbursement for prescription drug
benefits provided to individuals covered primarily by publicly-funded programs.
See "Business of Dura--Government Regulation."

ATTRACTION AND RETENTION OF KEY PERSONNEL. Spiros Corp. II will be highly
dependent on the principal members of Dura's scientific and management staff,
the loss of whose services might impede the achievement of development
objectives. Dura is also highly dependent on the principal members of its
scientific and management staff. Recruiting and retaining management and
operational personnel and qualified scientific personnel to perform research and
development work, whether for Spiros Corp. II's or Dura's internal projects,
will also be critical to Spiros Corp. II's and Dura's success. Although Dura
believes it will be successful in attracting and retaining skilled and
experienced management, operational and scientific personnel, there can be no
assurance that Dura will be able to attract and retain such personnel on
acceptable terms given the competition among numerous pharmaceutical companies,
universities and research institutions for such personnel. See "Business of
Dura--Human Resources."

COMPETITION. Many companies, including large pharmaceutical firms with
financial and marketing resources and development capabilities substantially
greater than those of Dura and Spiros Corp. II, are engaged in developing,
marketing and selling products that compete with those offered or planned to be
offered by Dura and Spiros Corp. II. The selling prices of such products
typically decline as competition increases. Further, other products now in use
or under development by others may be more effective than Dura's or Spiros Corp.
II's current or future products. The industry is characterized by rapid
technological change, and competitors may develop their products more rapidly
than Dura or Spiros Corp. II. Competitors may also be able to complete the
regulatory process sooner, and therefore, may begin to market their products in
advance of Dura's or Spiros Corp. II's products. Dura and Spiros Corp. II
believe that competition among both prescription pharmaceuticals and pulmonary
drug delivery systems aimed at the respiratory infection, allergy, cough and
cold, and asthma and COPD markets will be based on, among other things, product
efficacy, safety, reliability, availability and price.

There are at least 25 other companies in the U.S. that are currently engaged
in developing, marketing and selling respiratory pharmaceuticals. Additionally,
there are at least 10 companies currently involved in the development, marketing
or sales of dry powder pulmonary drug delivery systems. There are two types of
dry powder inhalers ("DPIs") currently in commercial use worldwide. In the U.S.,
only individual dose DPIs currently are marketed, including the Rotohaler-TM-
(developed and marketed by Glaxo) and the Spinhaler-Registered Trademark-
(developed and marketed by Fisons Limited). The Turbuhaler-Registered Trademark-
(developed and marketed by Astra Pharmaceuticals), a multiple dose DPI, is the
leading DPI in worldwide sales. In June 1997, the FDA approved the first
Turbuhaler product, the Pulmicort Turbuhaler, for marketing in the U.S. See
"Business of Dura--Competition" and "Business of Spiros Corp. II--Competition."

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THIRD-PARTY REIMBURSEMENT; PRICING PRESSURES. Dura's and Spiros Corp. II's
commercial success will depend in part on the availability of adequate
reimbursement from third-party health care payers, such as government and
private health insurers and managed care organizations. Third-party payers are
increasingly challenging the pricing of medical products and services. There can
be no assurance that reimbursement will be available to enable Dura or Spiros
Corp. II to achieve market acceptance of products or to maintain price levels
sufficient to realize an appropriate return on the investment in product
acquisition, in-licensing and development. The market for Dura's and Spiros
Corp. II's products may be limited by actions of third-party payers. For
example, many managed health care organizations are now controlling the
pharmaceuticals that are on their formulary lists. The resulting competition
among pharmaceutical companies to place their products on these formulary lists
has created a trend of downward pricing pressure in the industry. In addition,
many managed care organizations are pursuing various ways to reduce
pharmaceutical costs and are considering formulary contracts primarily with
those pharmaceutical companies that can offer a full line of products for a
given therapy sector or disease state. There can be no assurance that Dura or
Spiros Corp. II products will be included on the formulary list of managed care
organizations or that downward pricing pressure in the industry generally will
not negatively impact the operations of Dura or Spiros Corp. II.

LIMITED MANUFACTURING EXPERIENCE AND RELIANCE ON THIRD PARTIES. Dura's
principal manufacturing facility is intended to be used to formulate, mill,
blend and manufacture drugs to be used with Spiros, pending regulatory approval.
Equipment purchases and validation are currently scheduled through 1998. Dura's
manufacturing facility must be registered with and licensed by various
regulatory authorities and must comply with current Good Manufacturing Practice
("cGMP") requirements prescribed by the FDA and the State of California. Dura is
currently expanding its facilities to provide additional manufacturing
capabilities. Dura will need to significantly scale up its current manufacturing
operations and comply with cGMPs and other regulations prescribed by various
regulatory agencies in the U.S. and other countries to achieve the prescribed
quality and required levels of production of such products to obtain marketing
approval. Spiros Corp. II is completely reliant on Dura for all of its
manufacturing needs. Any failure or significant delay in the validation of or
obtaining a satisfactory regulatory inspection of the new facility or failure to
successfully scale up could have a material adverse effect on the ability of
Dura and Spiros Corp. II to manufacture products in connection with Spiros. Dura
intends to utilize third parties to produce components of and assemble the
Spiros aerosol generator. Such third parties have only produced limited
quantities of components and assembled generators and will be required to
significantly scale up their activities. There can be no assurance that such
third parties will be successful in completing these activities in a timely
manner or can meet cGMP requirements. Any failure or delay in the scale up of
aerosol generator manufacturing would have a material adverse effect on the
ability of Dura and Spiros Corp. II to manufacture Spiros Products. See
"Business of Dura--Manufacturing."

PRODUCT LIABILITY AND INSURANCE. Dura's and Spiros Corp. II's respective
businesses will expose them to potential product liability risks which are
inherent in the testing, manufacturing and marketing of respiratory drugs and
drug delivery systems. Dura currently has limited product liability insurance;
however, there can be no assurance that Dura will be able to maintain such
insurance, that such insurance can be maintained on acceptable terms or that
insurance will provide adequate coverage against potential liabilities. Spiros
Corp. II does not maintain any product liability insurance and there can be no
assurance Spiros Corp. II will be able to obtain adequate product liability
insurance on reasonable terms, or at all, or that such insurance, if obtained,
can be maintained on acceptable terms or that insurance will provide adequate
coverage against potential liabilities.

BUSINESS RISKS RELATING TO DURA

REDUCTION IN GROSS MARGINS. There is no proprietary protection for most of
the products sold by Dura and substitutes for such products are sold by other
pharmaceutical companies. Dura expects average selling prices for many of its
products to decline over time due to competitive and reimbursement

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pressures. While Dura will seek to mitigate the effect of this decline in
average selling prices, there can be no assurance that Dura will be successful
in these efforts. See "Business of Dura--Competition."

DEPENDENCE ON ACQUISITION OF RIGHTS TO PHARMACEUTICAL PRODUCTS. Dura's
strategy for growth is dependent, in part, upon acquiring, in-licensing and
co-promoting pharmaceuticals targeted primarily at allergists, ENTs,
pulmonologists and a selected subset of pediatricians and generalist physicians.
Other companies, including those with substantially greater resources, are
competing with Dura for the rights to such products. There can be no assurance
that Dura will be able to acquire, in-license or co-promote additional
pharmaceuticals on acceptable terms, if at all. The failure to acquire,
in-license, co-promote, develop or market commercially successful
pharmaceuticals would have a material adverse effect on Dura. Furthermore, there
can be no assurance that Dura, once it has obtained rights to a pharmaceutical
product and committed to payment terms, will be able to generate sales
sufficient to create a profit or otherwise avoid a loss. See "Business of
Dura--Strategy" and "Business of Dura--Strategic Alliances."

RISKS ASSOCIATED WITH RECENT ACQUISITIONS OF PRODUCTS. In September 1996,
Dura acquired from Lilly the exclusive U.S. rights to market and distribute
Keftab and Ceclor CD and entered into a manufacturing agreement with Lilly which
terminates in certain circumstances. In May 1997, Dura acquired from Syntex the
exclusive U.S. rights to the intranasal steroid products Nasarel and Nasalide.
Any interruption in the supply of these products due to regulatory or other
causes could result in the inability of Dura to meet demand and could have a
material adverse impact on Dura.

Dura has limited experience in marketing antibiotic products, such as Keftab
and Ceclor CD, and steroid products, such as Nasarel and Nasalide. Ceclor CD was
not previously marketed to physicians prior to its October 1996 launch by Dura,
and no assurance can be given that Dura will be able to continue to successfully
compete with currently available products. Failure to successfully market and
sell Keftab, Ceclor CD, Nasarel or Nasalide would have a material adverse effect
on the Dura's business, financial condition and results of operations. See
"Business of Dura--Dura's Current Products" and "Business of Dura--Sales and
Marketing."

Dura is currently considering transferring a substantial portion of its
recently acquired product rights to foreign subsidiaries. Risks inherent in
having assets in foreign subsidiaries include those relating to political and
economic instability and the burden of complying with a wide variety of complex
foreign laws and treaties.

RISKS RELATED TO THE PROPOSED MERGER WITH SCANDIPHARM

NO ASSURANCE THAT PROPOSED MERGER CAN BE COMPLETED. The obligations of
Dura and Scandipharm to consummate the Merger are each subject to the
satisfaction of a number of conditions, including the approval of Scandipharm's
stockholders, receipt of certain regulatory approvals, and the accuracy of
certain representations and warranties of each of Scandipharm and Dura at the
closing. In addition, the Merger Agreement may be terminated at any time by
Scandipharm and Dura under certain circumstances prior to the effective date of
the Merger, whether before or after the approval of the stockholders of
Scandipharm. Accordingly, there can be no assurance that the Merger will be
completed.

NO ASSURANCE THAT BUSINESSES CAN BE SUCCESSFULLY COMBINED. Following
the Merger, to achieve optimal synergies, the combined companies will need to
successfully integrate and streamline overlapping functions and control
expenditures resulting from their respective operations. There can be no
assurance that such synergies will be realized.

Some Scandipharm employees, including officers of Scandipharm, may
choose to leave the employ of Scandipharm if they find new assignments
unattractive or unacceptable. These departures may create operating difficulties
and could adversely affect morale and operations at Scandipharm for some period
of time following the Merger. Although specific areas of reduction have not been
defined, it is likely that reductions in force will occur at Scandipharm in
areas for which the combined companies have overlapping functions. In addition,
the two companies have different systems and procedures in many areas

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which must be reconciled. While individually the systems and procedures to be
reconciled are not material to the combined companies, in the aggregate the
effort required and the impact of success or failure may be material. There can
be no assurance that the process can be effectively managed to achieve desired
results.

GOVERNMENT REGULATION; NO ASSURANCE OF FDA APPROVAL. The FDA has
recently announced that all pancreatic enzyme drug products used to treat
exocrine pancreatic insufficiency, such as Ultrase, are considered new drugs
within the meaning of the Federal Food, Drug, and Cosmetic Act. As a result, all
such products will eventually require the submission and approval of NDAs to
remain on the market. While the FDA has indicated that these products are
considered important drugs, the agency has also made it clear that there will
only be a limited period of time during which products that have not been
granted approved NDAs will be permitted to remain on the market. The length of
this period has not been established, but may depend on how quickly other
products are approved and on any safety concerns.

Although Dura expects to submit an NDA in connection with the Ultrase
product following consummation of the Merger, no assurance can be given that an
NDA for such product or any other products developed or marketed by Scandipharm
will be approved by the FDA, as such process is an extensive regulatory approval
process which entails rigorous preclinical and clinical testing. There can be no
assurance that the studies that are being undertaken to meet preclinical and
clinical testing requirements for the Ultrase product will achieve results
supporting approval of this product or that these studies will be accepted by
FDA as adequate in design and otherwise providing sufficient evidence for
approval of the product. The process of completing adequate studies for approval
is costly and time-consuming. In addition, such regulatory review includes the
determination of manufacturing capability and product performance, and will
include FDA inspection of Scandipharm's contract manufacturer's facility, which
is currently located in Italy. No assurance can be given with respect to the
overall adequacy of the manufacturing process for Ultrase or any other
Scandipharm products or whether the process meets cGMP requirements necessary
for NDA approval or for any other governmental approvals required by the U.S. or
any other country. The failure to obtain any such required approvals could have
a material adverse impact on Dura.

Finally, even if regulatory approval of a product is granted, such
approval may entail limitations on the indicated uses for which the product may
be marketed. Further, even if such regulatory approval is obtained for a product
to be marketed, its manufacturer and the manufacturing facilities are subject to
continual review and periodic inspections, and later discovery of previously
unknown problems with a product, manufacturer or facility may result in
restrictions on such product or manufacturer, including withdrawal of the
product from the market.

UNCERTAINTY RELATED TO CURRENT PATENT PROCEEDINGS. A substantial
portion of Scandipharm's sales are based upon its commercialization of its
Ultrase products pursuant to an exclusive sublicensing arrangement in the United
States. However, such use is currently associated with a patent infringement
claim brought against Scandipharm by McNeilLab, Inc. ("McNeilLab") in December
1992 in the U.S. District Court for the Eastern District of Pennsylvania.
McNeilLab alleges that Scandipharm's use of the Ultrase products infringes
certain patents held by BASF, the rights to which have been exclusively licensed
to McNeilLab. Eurand Microencapsulation S.A., the ultimate licensor of
Scandipharm's rights, has an obligation to indemnify Scandipharm against its
costs and potential liability as a result of the litigation. However, no
assurance can be given with respect to such indemnification or the outcome of
the litigation. If McNeilLab is successful in enforcing its patent claims
against Scandipharm such that Scandipharm is unable to commercialize Ultrase
and/or if Scandipharm is for some reason unable to obtain full indemnification
against any costs or damages resulting from such litigation, Dura's and/or
Scandipharm's business, financial condition and results of operations could be
materially and adversely affected.

PRODUCT LIABILITY AND INSURANCE. Scandipharm's business exposes it to
potential product liability risks which are inherent in the testing,
manufacturing, marketing and sale of therapeutic products. Product

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liability actions have been brought against Scandipharm and other manufacturers
and marketers of pancreatic enzymes. Scandipharm no longer manufactures or
markets the product formulation of Ultrase that is the subject of these actions.
Management of Dura believes that all such claims to date are covered by
Scandipharm's product liability insurance. However, no assurance can be given
that Scandipharm will be able to maintain its current limited product liability
insurance, that such insurance can be maintained on acceptable terms, that
future claims will be covered by insurance, or that insurance will provide
adequate coverage against potential liabilities.

DEPENDENCE OF SCANDIPHARM REVENUES ON ULTRASE. Scandipharm is dependent
upon Ultrase for a significant portion of its revenues. As a result, the success
of the Merger and its impact on Dura's operations is dependent upon the
continued ability to produce, develop and market Ultrase. However, product
development of pharmaceuticals is highly uncertain and unanticipated
developments, clinical or regulatory delays, inability to have an NDA approved
by the FDA, unexpected adverse side effects, inadequate therapeutic efficacy,
competitive and technological developments or other obstacles to commercializing
Ultrase could have a material adverse effect on Dura following the Merger.

CUSTOMER CONCENTRATION; CONSOLIDATION OF DISTRIBUTION NETWORK. The
distribution network for pharmaceutical products has in recent years been
subject to increasing consolidation. As a result, a few large wholesale
distributors control a significant share of the market and the number of
independent drug stores and small chains has decreased. Further consolidation
among, or any financial difficulties of, distributors or retailers could result
in the combination or elimination of warehouses thereby stimulating product
returns to Dura. Further consolidation or financial difficulties could also
cause customers to reduce their inventory levels, or otherwise reduce purchases
of Dura's products which could result in a material adverse effect on Dura's
business, financial condition or results of operations.

Dura's principal customers are wholesale drug distributors and major drug
store chains. For the first nine months of 1997, three wholesale customers
individually accounted for 11%, 11% and 10% of sales. For 1996, three wholesale
customers individually accounted for 17%, 14% and 13% of sales. Two wholesale
customers individually accounted for 16% and 11% of 1995 sales, and three
wholesale customers individually accounted for 21%, 14% and 12% of 1994 sales.
The loss of any of these customers could have a material adverse effect upon
Dura's business, financial condition or results of operations.

SEASONALITY AND FLUCTUATING QUARTERLY RESULTS. Historically, as a result of
the winter cold and flu season, industry-wide demand for respiratory products
has been stronger in the first and fourth quarters than in the second and third
quarters of the year. In addition, variations in the timing and severity of the
winter cold and flu season have influenced Dura's results of operations in the
past. While the growth and productivity of Dura's sales force and the
introduction by Dura of new products have historically mitigated the impact of
seasonality on Dura's results of operations, recent product acquisitions by
Dura, especially Keftab and Ceclor CD, which are used to treat respiratory
infections, are likely to increase the impact of seasonality on Dura's results
of operations. No assurances can be given that Dura's results of operations will
not be materially adversely affected by the seasonality of product sales.

DEPENDENCE ON THIRD PARTIES. Dura's strategy for development and
commercialization of certain of its products is dependent upon entering into
various arrangements with corporate partners, licensors and others and upon the
subsequent success of these partners, licensors and others in performing their
obligations. There can be no assurance that Dura will be able to negotiate
acceptable arrangements in the future or that such arrangements or its existing
arrangements will be successful. In addition, partners, licensors and others may
pursue alternative technologies or develop alternative compounds or drug
delivery systems either on their own or in collaboration with others, including
Dura's competitors. Dura has limited experience manufacturing products for
commercial purposes and currently does not have the capability to manufacture
its pharmaceutical products and therefore is dependent on contract manufacturers
for the production of such products for development and commercial purposes. The
manufacture of

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Dura's products is subject to cGMP regulations prescribed by the FDA. Dura
relies on a single manufacturer for each of its products. In the event that Dura
is unable to obtain or retain third-party manufacturing, it may not be able to
commercialize its products as planned. There can be no assurance that Dura will
be able to continue to obtain adequate supplies of such products in a timely
fashion at acceptable quality and prices. Also, there can be no assurance that
Dura will be able to enter into agreements for the manufacture of future
products with manufacturers whose facilities and procedures comply with cGMP and
other regulatory requirements. Dura's current dependence upon others for the
manufacture of its products may adversely affect future profit margins, if any,
on the sale of those products and Dura's ability to develop and deliver products
on a timely and competitive basis. See "Business of Dura-- Manufacturing."

MANAGING GROWTH OF BUSINESS. Dura has experienced significant growth as
total revenues increased 58% in fiscal 1995, 102% in fiscal 1996, and 102% for
the first nine months of 1997, as compared to prior periods, primarily as a
result of the acquisition or in-licensing of additional respiratory
pharmaceutical products. During fiscal 1997, Dura executed an agreement relating
to the acquisition of the rights to the Nasarel and Nasalide products. During
fiscal 1996, Dura executed agreements relating to the acquisition of the rights
to the Entex, Ceclor CD and Keftab products. During fiscal 1995, Dura executed
three agreements relating to the acquisition, in-licensing and co-promotion of
products and acquired Health Script. Due to Dura's emphasis on acquiring and
in-licensing respiratory pharmaceutical products, Dura anticipates that the
integration of the recently acquired businesses and products, as well as any
future acquisitions, will require significant management attention and expansion
of its sales force. Dura's ability to achieve and maintain profitability is
based on management's ability to manage its changing business effectively. See
"--Attraction and Retention of Key Personnel" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations of Dura."

UNCERTAINTY OF PROFITABILITY; NEED FOR ADDITIONAL FUNDS. Dura has
experienced significant operating losses in the past, and, at September 30,
1997, Dura's accumulated deficit was $49.6 million. Although Dura achieved
profitability on an annual basis in 1996 and in the first nine months of 1997,
there can be no assurance that revenue growth or profitability will continue on
an annual or quarterly basis in the future. In addition, the Spiros Corp.
Purchase and the Contribution will result in significant, non-recurring charges
to earnings in the period such transactions are completed. The acquisition and
in-licensing of products, the expansion of Dura's sales force in response to
acquisition and in-licensing of products, the maintenance of Dura's existing
sales force, the upgrade and expansion of its facilities, continued pricing
pressure, the exercise of the Purchase Option, the Albuterol Option or the
Product Option, if Dura decides to do so, will require the commitment of
substantial capital resources and may also result in significant losses.
Depending upon, among other things, the acquisition and in-licensing
opportunities available, Dura may need to raise additional funds for these
purposes. Dura may seek such additional funding through public and private
financing, including equity or debt financing. Adequate funds for these
purposes, whether through financial markets or from other sources, may not be
available when needed or on terms acceptable to Dura. Insufficient funds may
require Dura to delay, scale back or suspend some or all of its product
acquisition and in-licensing programs, the upgrade and expansion of its
facilities, or the potential exercise of the Purchase Option, the Albuterol
Option and/or the Product Option. Dura anticipates that its existing capital
resources, together with cash expected to be generated from operations and
available bank borrowings, should be sufficient to finance its current
operations and working capital requirements through at least 12 months following
the date of this Prospectus. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations of Dura."

ABILITY TO SERVICE INDEBTEDNESS. In the third quarter of 1997, Dura issued
$287.5 million principal amount of 3 1/2% Convertible Subordinated Notes due
2002 (the "Notes"). There can be no assurance that Dura will have the necessary
funds available to pay the interest on the principal of the Notes or that the
Notes will be able to be refinanced. Any inability to service the obligations in
respect to the Notes could

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have a material adverse effect on Dura, the market value of the Units, the
Warrants and the Dura Common Stock.

EFFECT OF EXERCISE OF THE PURCHASE OPTION, THE ALBUTEROL OPTION AND THE
PRODUCT OPTION; DILUTION. If Dura exercises the Purchase Option, it will be
required to make a substantial cash payment or to issue shares of Dura Common
Stock, or both. A payment in cash would reduce Dura's capital resources. A
payment in shares of Dura Common Stock would result in a decrease in the
percentage ownership of Dura's stockholders at that time. The exercise of the
Purchase Option will likely require Dura to record a significant charge to
earnings and may adversely impact future operating results. If Dura does not
exercise the Purchase Option prior to its expiration, Dura's rights in and to
Spiros Corp. II with respect to certain compounds will terminate.

As part of Dura's contractual relationship with Spiros Corp. II, Dura
received the Albuterol Option to purchase certain rights to the Albuterol
Product and the Product Option to purchase certain rights to one additional
Spiros Product. If Dura exercises the Albuterol Option or the Product Option, it
will be required to make a significant cash payment which could have an adverse
effect on its capital resources. Dura may not have sufficient capital resources
to exercise the Albuterol Option or the Product Option, which may result in
Dura's loss of valuable rights.

PRODUCT LIABILITY AND RECALL. Dura faces an inherent business risk of
exposure to product liability claims in the event that the use of its
technologies or products is alleged to have resulted in adverse effects. Such
risks will exist even with respect to those products that receive regulatory
approval for commercial sale. While Dura has taken, and will continue to take,
what it believes are appropriate precautions, there can be no assurance that it
will avoid significant product liability exposure. Dura currently has product
liability insurance; however, there can be no assurance that the level or
breadth of any insurance coverage will be sufficient to fully cover potential
claims. There can be no assurance that adequate insurance coverage will be
available in the future at acceptable costs, if at all, or that a product
liability claim or recall would not materially and adversely affect the business
or financial condition of Dura.

CHANGE IN CONTROL. Certain provisions of Dura's charter documents and terms
relating to the acceleration of the exercisability of certain warrants and
options relating to the purchase of such securities by Dura in the event of a
change in control may have the effect of delaying, deferring or preventing a
change in control of Dura, thereby possibly depriving stockholders of receiving
a premium for their shares of the Dura Common Stock. In addition, upon a Change
in Control (as defined), Dura will be required to offer to purchase for cash all
of the outstanding Notes at a purchase price of 100% of the principal amount
thereof, plus accrued but unpaid interest through the Change in Control Purchase
Date (as defined). The Change in Control purchase features of the Notes may in
certain circumstances have an anti-takeover effect. If a Change in Control were
to occur, there can be no assurance that Dura would have sufficient funds to pay
the Change in Control Purchase Price (as defined) for all Notes tendered by the
holders thereof and to repay other indebtedness that may become due as a result
of any Change in Control.

EFFECT OF ISSUANCE OF EQUITY SECURITIES. The potential issuance of Dura's
equity securities in connection with the Offering, the Spiros Corp. Purchase and
the proposed Merger with Scandipharm will result in a substantial dilution in
the percentage ownership of Dura's stockholders in Dura at the time of issuance
and could negatively affect the market price of Dura Common Stock.

VOLATILITY OF DURA STOCK PRICE. The market prices for securities of
emerging companies, including Dura, have historically been highly volatile.
Future announcements concerning Dura or its competitors may have a significant
impact on the market price of the Dura Common Stock. Such announcements might
include financial results, the results of testing, technological innovations,
new commercial products, changes to government regulations, government decisions
on commercialization of products, developments concerning proprietary rights,
litigation or public concern as to safety of Dura's products.

ABSENCE OF DIVIDENDS. Dura has never paid any cash dividends on the Dura
Common Stock. In accordance with a bank loan agreement, Dura is prohibited from
paying cash dividends without prior bank

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approval. Dura currently anticipates that it will retain all available funds for
use in its business and does not expect to pay any cash dividends in the
foreseeable future.

FORWARD LOOKING STATEMENTS MAY NOT PROVE ACCURATE

This Prospectus contains forward-looking statements. Discussions containing
such forward-looking statements may be found in the material set forth under
"Prospectus Summary," "Use of Proceeds," "Business of Spiros Corp. II,"
"Business of Dura," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations of Dura," as well as within the Prospectus
generally and within documents incorporated by reference into this Prospectus.
In addition, when used in this Prospectus, the words "believes," "anticipates,"
"expects" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to a number of risks and uncertainties.
Actual results in the future could differ materially from those described in the
forward-looking statements as a result of the risk factors set forth herein and
the matters set forth in the Prospectus generally. Neither Spiros Corp. II nor
Dura undertake any obligation to publicly release the result of any revisions to
these forward-looking statements that may be made to reflect any future events
or circumstances.

TAX RISKS

There are tax risks associated with the purchase of the Units, principally
relating to (i) the valuation of the Warrants (which will be used to determine
the tax basis of the Warrants and the Spiros Corp. II Common Stock after the
Separation Date), and (ii) the possibility that the United States Internal
Revenue Service ("IRS") could assert that the substance of the various
transactions is different from the form of such transactions. Certain federal
income tax consequences may be applicable to the purchase of the Units, Warrants
and Spiros Corp. II Common Stock and the exercise or expiration of the Purchase
Option. Such tax consequences are important and include the recognition by
Spiros Corp. II stockholders of taxable income upon the exercise or expiration
unexercised of the Purchase Option. The recognition by Spiros Corp. II
stockholders of income on expiration of the Purchase Option will be required
notwithstanding the fact that no cash or other property will be received at such
time. See "Federal Income Tax Consequences."

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USE OF PROCEEDS

The net proceeds from the Offering are expected to be approximately
$ million ($ million if the Underwriters' over-allotment option is exercised
in full), all of which will be received by Spiros Corp. II. Spiros Corp. II
expects to use substantially all of the net proceeds of the Offering, the
Contribution and interest to be earned thereon, less $1 million to be used as
working capital, to engage Dura to undertake research, clinical development,
product development, including regulatory approval, and commercialization of the
Spiros Products under the Development Agreement, including to make the Other
Expenditures. Spiros Corp. II expects that during the term of the Development
Agreement, unless Dura exercises the Albuterol Option or the Product Option, it
will have very limited sources of revenue other than the net proceeds of the
Offering, the Contribution and the interest earned thereon. Any funds received
by Spiros Corp. II as a result of Dura's exercise of the Albuterol Option or the
Product Option will become part of the Available Funds and are intended to be
paid to Dura pursuant to the Development Agreement. See "The Agreements and the
Purchase Options--Development Agreement." Pending expenditure of such funds, the
net proceeds of the Offering will be invested in short-term interest-bearing or
other debt securities. Dura's obligation to perform development work under the
Development Agreement will terminate at such time as Spiros Corp. II has cash or
cash equivalents of less than $5 million, which is projected by Spiros Corp. II
to occur on or about February 28, 2001. Upon receipt of notice from Spiros Corp.
II, Dura may elect to provide additional funding for the development of the
Spiros Products (but in no event beyond December 31, 2002). See "The Agreements
and Purchase Options--Stock Purchase Option" and "--Development Agreement."

The following table sets forth a proposed budget that provides estimates of
Spiros Corp. II's cash flow through April 2001, assuming the net proceeds of the
Offering and the Contribution together with interest thereon total $155.2
million. The proposed budget assumes no exercise of the Underwriters' over-
allotment option and does not take into account any cash received upon the
exercise of the Albuterol Option or the Product Option. Because of the
long-range nature of the development plans, there can be no assurance that funds
will be expended as set forth below and Spiros Corp. II and Dura reserve the
right to reallocate funds as they deem appropriate. Neither Spiros Corp. II's
nor Dura's independent auditors, nor any independent accountants or financial
advisors, have compiled, examined or performed any procedures with respect to
the budget contained herein, nor have they expressed any opinion or any form of
assurance on such information and assume no responsibility for, and disclaim any
association with, the information. See "Risk Factors" for a discussion of
various factors that could materially affect the operations of Spiros Corp. II.

PROPOSED BUDGET

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
<S> <C> <C> <C> <C>
(3 MONTHS)
1997(2) 1998 1999 2000
----------- --------- --------- ---------

<CAPTION>
(IN MILLIONS)
<S> <C> <C> <C> <C>
Beginning cash balance..................................................... $ -- $ 140.5 $ 87.3 $ 37.4
Dura Contribution.......................................................... 75.0 -- -- --
Net proceeds of the Offering............................................... 70.5 -- -- --
Interest income(1)......................................................... -- 5.6 3.0 1.1
----------- --------- --------- ---------
Total.................................................................. $ 145.5 $ 146.1 $ 90.3 $ 38.5
----------- --------- --------- ---------
----------- --------- --------- ---------
Payments
Albuterol................................................................ 3.4 27.3 -- --
Beclomethasone........................................................... 1.6 16.3 12.0 3.3
Budesonide............................................................... -- 1.9 15.2 11.1
Ipratropium.............................................................. -- 8.0 13.6 6.0
Albuterol-Ipratropium.................................................... -- 3.5 7.7 7.1
Other Expenditures......................................................... -- 1.4 4.0 --
General and administrative expenses........................................ -- 0.4 0.4 0.4
----------- --------- --------- ---------
Total.................................................................. $ 5.0 $ 58.8 $ 52.9 $ 27.9
----------- --------- --------- ---------
----------- --------- --------- ---------
Ending cash balance........................................................ $ 140.5 $ 87.3 $ 37.4 $ 10.6
----------- --------- --------- ---------
----------- --------- --------- ---------

<S> <C> <C>
(4 MONTHS)
2001 TOTAL
------------- ---------

<S> <C> <C>
Beginning cash balance..................................................... $ 10.6 $ --
Dura Contribution.......................................................... -- 75.0
Net proceeds of the Offering............................................... -- 70.5
Interest income(1)......................................................... -- 9.7
----- ---------
Total.................................................................. $ 10.6 $ 155.2
----- ---------
----- ---------
Payments
Albuterol................................................................ -- 30.7
Beclomethasone........................................................... -- 33.2
Budesonide............................................................... 5.7 33.9
Ipratropium.............................................................. -- 27.6
Albuterol-Ipratropium.................................................... 3.5 21.8
Other Expenditures......................................................... -- 5.4
General and administrative expenses........................................ 0.4 1.6
----- ---------
Total.................................................................. $ 9.6 $ 154.2
----- ---------
----- ---------
Ending cash balance........................................................ $ 1.0 $ 1.0
----- ---------
----- ---------
</TABLE>

- ------------------------------

(1) Assumes an interest rate of 5%.

(2) Expenditures in the year ended December 31, 1997 include approximately $4
million to repay Dura for estimated costs and expenses to be incurred by
Dura on behalf of Spiros Corp. II between October 10, 1997 and the closing
of the Offering.

30
<PAGE>
PRICE RANGE OF DURA COMMON STOCK AND DIVIDEND POLICIES

Dura Common Stock is traded in the over-the-counter market and prices are
quoted on the Nasdaq National Market under the symbol "DURA." The following
table sets forth the intraday high and low prices for the Dura Common Stock for
the periods indicated, as reported on the Nasdaq National Market, as adjusted
for the 2-for-1 stock split in the form of a 100% stock dividend, effective July
1, 1996.

<TABLE>
<CAPTION>
HIGH LOW
--------- -------
<S> <C> <C>
1995:
1st Quarter................................................................ $ 7 1/2 $ 5 3/4
2nd Quarter................................................................ 9 7/8 6 1/2
3rd Quarter................................................................ 17 1/2 9 1/8
4th Quarter................................................................ 17 3/4 13 1/4

1996:
1st Quarter................................................................ $27 1/4 $16 3/8
2nd Quarter................................................................ 34 11/16 22
3rd Quarter................................................................ 40 1/2 19 3/4
4th Quarter................................................................ 47 7/8 29 1/2

1997:
1st Quarter................................................................ $47 1/8 $31 3/4
2nd Quarter................................................................ 44 22 3/4
3rd Quarter................................................................ 45 1/2 32 3/8
4th Quarter (through October 20)........................................... 53 43 1/2
</TABLE>

On October 20, 1997, the last reported sale price of the Dura Common Stock
on the Nasdaq National Market was $49 per share. As of September 30, 1997, there
were approximately 360 holders of record of Dura Common Stock.

In addition, at September 30, 1997, warrants to purchase a total of
3,856,014 shares of Dura Common Stock were outstanding. The number of holders of
record was 22.

Dura has never paid any cash dividends on the Dura Common Stock. In
accordance with a bank loan agreement, Dura is prohibited from paying cash
dividends without prior bank approval. Dura currently anticipates that it will
retain all available funds for use in its business and does not expect to pay
any cash dividends in the foreseeable future.

It is not expected that Spiros Corp. II will pay any dividends to
stockholders for the foreseeable future. The Amended and Restated Certificate of
Incorporation of Spiros Corp. II provides that until the Purchase Option is
exercised or terminates unexercised, Spiros Corp. II is not permitted to pay
dividends to holders of Spiros Corp. II Common Stock without the approval of
holders of a majority of the Special Shares.

31
<PAGE>
DURA CAPITALIZATION

The following table sets forth the capitalization of the Dura at September
30, 1997 on an actual basis and on a "pro forma as adjusted" basis, assuming
consummation of the Spiros Corp. Purchase for an aggregate purchase price of
$45.7 million, paid by Dura through the issuance of 1,015,711 shares of Dura
Common Stock, and the Contribution.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------------
PRO FORMA
ACTUAL AS ADJUSTED(2)
---------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash, cash equivalents and short-term investments..................................... $ 454,710 $ 384,561
---------- --------------
---------- --------------
Current portion of long-term obligations.............................................. $ 2,948 $ 2,948
---------- --------------
---------- --------------
Long-term obligations (excluding current portion of long-term obligations)............ $ 7,035 $ 7,035
Convertible subordinated notes........................................................ 287,500 287,500
---------- --------------
294,535 294,535
---------- --------------
Shareholders' equity:
Preferred stock; 5,000,000 shares authorized; no shares issued or outstanding....... -- --
Common stock; 100,000,000 shares authorized; 43,890,806 shares outstanding actual;
44,906,517 outstanding pro forma as adjusted(1)................................... 44 45
Additional paid-in capital.......................................................... 533,003 578,709
Accumulated deficit................................................................. (49,597) (169,134)
Unrealized gain on investments...................................................... 195 195
Warrant subscriptions receivable.................................................... (1,348) --
---------- --------------
Total shareholders' equity........................................................ 482,297 409,815
---------- --------------
Total capitalization.............................................................. $ 776,832 $ 704,350
---------- --------------
---------- --------------
</TABLE>

- ------------------------

(1) Excludes (a) 3,371,141 shares of Dura Common Stock issuable upon the
exercise of options outstanding at September 30, 1997 under the Dura's stock
option plan, (b) 1,436,033 shares of Dura Common Stock available for future
grants under such plan and (c) 3,856,014 shares of Dura Common Stock
issuable upon exercise of warrants outstanding at September 30, 1997. Also
excludes 5,677,891 shares of Dura Common Stock issuable upon conversion of
the Notes. See "Description of Dura Capital Stock."

(2) Pro Forma As Adjusted amounts reflect the Spiros Corp. Purchase and the
Contribution as if those transactions occurred on September 30, 1997. No
adjustment has been made to give effect to the Offering. The Offering will
result in an increase to additional paid-in capital in an amount equal to
the value of the Warrants as determined at the time of their issuance, and
an offsetting increase to the warrant subscriptions receivable contra equity
account.

32
<PAGE>
SPIROS CORP. II CAPITALIZATION

The following table sets forth the capitalization of Spiros Corp. II as of
September 30, 1997 and as adjusted to reflect the issuance of the Units and the
Contribution.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
----------------------
<S> <C> <C>
AS
ACTUAL ADJUSTED(2)
--------- -----------
(DOLLARS IN THOUSANDS)
Callable common stock, par value $.001 per share; no shares authorized, issued and
outstanding actual; 6,500,000 shares authorized, issued and outstanding as adjusted...... $ -- $
Special common stock, par value $1.00 per share; 1,000 shares authorized; 1,000 shares
issued and outstanding actual and as adjusted(1)......................................... 1 1
Additional paid-in capital................................................................. --
--------- -----------
Total capitalization..................................................................... $ 1 $
--------- -----------
--------- -----------
</TABLE>

- ------------------------

(1) Held by Dura.

(2) Does not include the effect of amounts payable by Spiros Corp. II to Dura
under the Development Agreement for research and development costs relating
to the Spiros Products and the Core Technology incurred by Dura from October
10, 1997 through the date of the closing of the Offering (currently
estimated to be $4 million).

33
<PAGE>
BUSINESS OF SPIROS CORP. II

BACKGROUND

Spiros Corp. is a separate company formed in December 1995 to fund the
development of Spiros with certain asthma drugs. Spiros Corp. has used
substantially all of the $28 million in financing that it raised and a $13
million contribution from Dura to finance the development of Spiros and certain
compounds for use in Spiros. On or prior to the closing of the Offering, Dura
will purchase all of the common stock of Spiros Corp. for an aggregate purchase
price estimated to be $45.7 million, payable in cash, shares of Dura Common
Stock or any combination thereof, at Dura's sole discretion. Prior to the
formation of Spiros Corp., DDSI was organized as a separate entity responsible
for Spiros development. DDSI spent approximately $23 million for the development
of Spiros before being acquired by Dura in December 1995.

Spiros Corp. II was formed in September 1997 to continue to fund the
development of Spiros and to conduct formulation work, clinical trials, and
commercialization for four leading asthma drugs (albuterol, beclomethasone,
ipratropium and budesonide) and certain combinations and alternative
formulations thereof for use in Spiros. Spiros Corp. II may also expend funds on
enhancements to the existing Spiros technology, initial development of a next
generation inhaler system and the acquisition of capital equipment to be used in
the manufacture of the Spiros Products. Finally, Spiros Corp. II plans to use a
portion of its funding to conduct technical evaluation projects designed to
identify additional respiratory drug candidates for further development in
Spiros.

ASTHMA AND COPD MARKET

PULMONARY DRUG DELIVERY SYSTEMS

Inhaled therapeutic drugs have been shown to be effective in treating or
preventing the symptoms of asthma, COPD and other respiratory diseases. When
treating respiratory diseases, inhalation delivery puts the drug directly into
the lung for topical treatment. If administered in capsule, tablet or liquid
form, rather than through inhalation, the patient must take sufficient drug to
achieve a systemic therapeutic blood level to benefit the lungs. In many
instances, this may cause serious side effects by impacting other organs.
Because inhaled therapy delivers the drug directly into the lung, it provides
comparable efficacy with less risk of systemic side effects at greatly reduced
dosages. Inhalation delivery also yields a fast onset of action, hastening the
time for patient relief.

TRADITIONAL INHALATION DELIVERY DEVICES

Traditional delivery systems used for administering inhaled drugs include
the following:

JET NEBULIZERS

Jet nebulizers aerosolize a liquid solution of medicine, either
ultrasonically or with compressed air, creating a fine mist that patients inhale
slowly over several minutes. Jet nebulizers are larger than other

34
<PAGE>
inhalation delivery systems and because of their size, are primarily used to
deliver aerosol to hospitalized patients, patients with acute asthma
exacerbation in a clinic or emergency room environment, and patients unable to
coordinate the use of other inhalation delivery technology.

METERED DOSE INHALERS

MDIs are the most popular inhalation delivery system due to their relative
convenience and portability. MDIs consist of a suspension or solution of drug
filled into a canister which is sealed with a metering valve and pressurized
using a propellant, most commonly a chlorofluorocarbon ("CFC"). Because MDIs
contain an internal energy source, the CFCs, the operation is relatively flow
rate independent, and the dose exiting the MDI is relatively consistent.
However, it is estimated that only 10 to 20 percent of the dose from an MDI
actually deposits in the lung. The variation in lung deposition is in large part
reflected by the inability of most patients to coordinate actuation of the
system with inhalation.

DRY POWDER INHALERS

DPIs represent a significant advancement in the development of inhalation
delivery systems. Dry powder inhalers are relatively convenient and portable,
and are CFC-free. DPIs are breath actuated, so they eliminate the need for
hand-lung coordination associated with MDIs. Although DPIs overcome the need for
coordination of actuation and inspiration, currently marketed DPIs require high
inspiratory flow rates and the ultimate dose delivered to the patient is
dependent on inspiratory flow rate. This high inspiratory flow rate is difficult
to achieve for pediatrics, geriatrics and patients in acute respiratory
distress.

SPIROS

Spiros is a proprietary pulmonary drug delivery system that is designed to
aerosolize pharmaceuticals in dry powder formulations for delivery to the lungs
while providing certain advantages over traditional pulmonary delivery systems.
Spiros Corp. II believes new inhalation systems will gradually replace MDIs as
the leading pulmonary delivery systems, due primarily to the phasing out of CFCs
and coordination problems associated with many MDIs. Many companies are studying
alternative propellants, such as hydrofluorocarbons ("HFAs"), for use in MDIs,
and the first albuterol MDI using an HFA propellant has obtained FDA approval
and is being marketed by Schering-Plough. However, Spiros Corp. II believes that
any product utilizing alternative propellants will still suffer from many of the
limitations of currently marketed MDIs, including the need for patients to
coordinate breathing with actuation of the drug delivery system. There are
currently two general classes of DPIs in commercial use worldwide, individual
and multiple dose systems, and both are breath powered and inspiratory flow rate
dependent. In the U.S., only individual dose DPIs are currently marketed.
Turbuhaler, a multiple dose DPI, is the leading DPI in worldwide sales and was
approved by the FDA for marketing in the U.S. in June 1997.

POTENTIAL ADVANTAGES OF SPIROS. Spiros Corp. II believes Spiros may have
certain advantages over other currently used methods of pulmonary drug delivery
including:

INSPIRATORY FLOW RATE INDEPENDENCE. Spiros is designed to deliver a
relatively consistent drug dose to the lungs over a wide range of
inspiratory flow rates, which can vary depending on a patient's health,
effort or physical abilities. Tests of Spiros on human subjects have shown a
relatively consistent and significant level of drug deposition throughout
the clinically relevant inspiratory range. Existing DPIs can vary
significantly in their level of drug deposition depending on the patient's
inspiratory flow rate and can deliver significantly less drug at the lower
flow rates typically associated with asthma attacks.

MINIMUM NEED FOR PATIENT COORDINATION. Spiros is breath-actuated and
does not require the user to coordinate inhalation and actuation of the drug
delivery system. MDIs generally require the user to

35
<PAGE>
coordinate their breathing with actuation of the MDI. Studies indicate that
a significant percentage of patients, particularly young children and the
elderly, do not use MDIs correctly. Spiros is designed to solve these
coordination problems by delivering the drug to patient's lungs as they
inhale.

REDUCED SIDE EFFECTS. Spiros is designed to efficiently deliver drugs
to the lungs, thereby reducing drug deposition to the mouth and throat which
could reduce the possibility of unwanted side effects of certain
pharmaceutical agents, such as coughing and local irritation. With MDIs, a
significant portion of the dose is delivered to the mouth and throat and is
swallowed.

PATIENT CONVENIENCE. Spiros is designed to be convenient for patients,
with features such as breath actuation (Spiros is triggered by inhalation),
portability (light weight and small size), quick delivery time, simple
operation, dose delivery feedback and multi-dose capability. Spiros also
allows the patient to see the actual number of doses remaining in a cassette
or blister pack and an LED light provides a warning of the need to replace
Spiros prior to the end of its useful life.

FREE OF CHLOROFLUOROCARBON PROPELLANTS. CFC propellants have ozone
destructive characteristics and are subject to worldwide regulations aimed
at eliminating their usage within the decade. Spiros does not use CFCs while
most MDIs, currently the most popular form of aerosol drug delivery, use
CFCs. Virtually all of the world's industrial nations, under the auspices of
the United Nations Environmental Program, have pledged to cease use of CFCs
by the year 2000. Continued use of CFCs in medical products has been
permitted under annual exemptions. As a result of the planned phase out of
CFCs, Spiros Corp. II believes that DPIs will become a leading method for
pulmonary drug delivery.

CORE SPIROS TECHNOLOGY

The core technology contained in Spiros which gives rise to the flow rate
independent delivery is an aerosol generator that uses electromechanical energy
to disperse dry powder to form an aerosol for inhalation. The main components of
the aerosol generator include the impeller, the motor, the breath actuated
switch, and the dosing chamber. When the switch is activated, the electric
circuit is completed and the impeller rotates. The action of the impeller on the
dry powder formulation supplies the energy to disperse the drug and provide a
zero-velocity cloud of aerosolized drug for inhalation. The cloud of aerosolized
drug is suspended in the dosing chamber and is delivered to the lungs only as
the patient inhales.

Two separate Spiros systems are currently under development, both utilizing
the same core technology with distinct powder storage systems ("PSS"). Because
of the physical and chemical requirements of the specific drugs deliverable by
Spiros, as well as the varying needs of the patients and marketplace, Spiros
Corp. II believes that its cassette and blisterdisk systems will provide
flexibility for delivery of many different types of drugs.

CASSETTE SYSTEM

The cassette system was the first Spiros system developed and has been
utilized in all clinical testing of Spiros conducted to date. The PSS in this
system is a 30-dose plastic cassette packed in a foil pouch. In order to take a
dose using the cassette system, the patient first opens the lid of the Spiros
generator to load the cassette. When the lid is closed the cassette rotates to
deliver a dose of drug into the dosing chamber. The dosing chamber contains the
impeller. When the patient inhales through the mouthpiece, the impeller is
automatically activated. The action of the impeller on the powder in the chamber
generates the aerosol which the patient inhales. The patient then closes the
lid. When the 30-dose cassette is empty, the patient opens the lid and presses
an ejection button on the bottom of the system to remove an empty cassette and
load a new cassette.

36
<PAGE>
The Spiros cassette system has been produced in clinical trial quantities
and is being used in ongoing clinical trials of albuterol and beclomethasone.
Dura is currently working with outside vendors on Spiros Corp. II's behalf to
produce the necessary tooling for commercial scale production.

BLISTERDISK SYSTEM

Once a cassette is removed from the foil package it is no longer protected
from fluctuations in the relative humidity. Although some drugs and powder
formulations are sufficiently stable using the cassette system, many other dry
powders are sensitive to relative humidity. In those cases, exposure to moisture
causes agglomeration of the powder which can no longer be readily aerosolized to
the required aerodynamic diameter. The blisterdisk system is being developed for
drugs that require a barrier against moisture. This system utilizes
powder-filled sealed foil blisters which prevent moisture build-up into the
powder. The blisterdisk system has been designed to contain 16 doses per
blisterdisk and is believed to be sufficiently flexible to accommodate a wide
variety of drugs. In order to take a dose using the blisterdisk system, the
patient will open the mouthpiece cover, push a button to open the blister and
inhale through the mouthpiece to actuate the impeller and aerosolize the dose.
As the patient closes the mouthpiece cover, the next blister is advanced to the
dosing position.

The Spiros blisterdisk system design has evolved to the prototype stage and
units that are suitable for laboratory testing have been produced. Further
refinements in the design of this system aimed at producing units suitable for
clinical trials are in progress.

SPIROS PRODUCTS IN DEVELOPMENT

Spiros Corp. II has selected five compounds to develop for delivery through
Spiros: a beta-agonist (albuterol), two steroids (beclomethasone and
budesonide), an anticholinergic (ipratropium) and a combination of a
beta-agonist and an anticholinergic (albuterol-ipratropium).

ALBUTEROL

Albuterol, a beta-agonist, provides rapid symptomatic relief of reversible
bronchospasm. When administered by inhalation, it produces significant
bronchodilation promptly and its effects are demonstrable for a number of hours.
Albuterol is the most widely accepted asthma medication in the world. The
leading branded MDI products are Proventil, sold by Schering-Plough, and
Ventolin, sold by Glaxo. In 1996, U.S. sales of albuterol were approximately
$700 million as measured by average wholesale prices.

In 1994, an IND application was filed with the FDA to begin clinical testing
of an albuterol dry powder formulation with the Spiros cassette system. In April
1996, dosing of subjects in a clinical trial focusing on dose selection using a
formulation of powdered albuterol with Spiros was completed. In March 1997,
patient dosing was completed in long-term and short-term pivotal clinical
trials, that, along with earlier studies, are intended to serve as the basis for
filing an NDA in November 1997 seeking FDA approval to market albuterol in the
Spiros cassette system.

An open label study of albuterol in the Spiros cassette system is currently
in progress. Interim results of this study will be provided to the FDA in the
NDA and results of the full study must be submitted to and reviewed by the FDA
prior to product approval.

BECLOMETHASONE

Beclomethasone is a steroid used to treat the inflammatory component of
asthma and certain symptoms of COPD. Systemic side effects resulting from the
inhalation of beclomethasone are less than those that occur with steroids taken
in capsule, tablet or liquid form. Beclomethasone was first launched in MDI form
as Vanceril by Schering-Plough and later as Beclovent by Glaxo. In 1996, U.S.
sales of beclomethasone were approximately $205 million as measured by average
wholesale prices.

37
<PAGE>
In the first quarter of 1997, Dura completed, on behalf of Spiros Corp.,
dose ranging studies of a one dosage strength of beclomethasone in the Spiros
cassette system under an IND, and preparations for Phase III pivotal clinical
trials to demonstrate safety and efficacy have been initiated.

IPRATROPIUM

Ipratropium is an anticholinergic bronchodilator. Ipratropium is most
commonly prescribed for the long term management of COPD (including chronic
bronchitis and emphysema) and for the treatment of asthmatic patients who are
poorly controlled by, or who experience troublesome side effects from, beta-
agonists such as albuterol. Ipratropium acts at a site that is different from
the site where beta-agonists act and thus affords an alternative approach to the
treatment of airway obstruction. Ipratropium in MDI form is marketed as Atrovent
by Boehringer Ingelheim. In 1996, U.S. sales of ipratropium were approximately
$200 million as measured by average wholesale prices.

Dura, on behalf of Spiros Corp., has conducted initial formulation studies
using ipratropium in order to demonstrate that delivery via Spiros is feasible.
Spiros Corp. II currently anticipates that ipratropium will be the first
compound formulated for delivery through the Spiros blisterdisk system. In 1998,
Spiros Corp. II plans to begin product development for a formulation of
ipratropium to be delivered using Spiros.

ALBUTEROL-IPRATROPIUM COMBINATION

Albuterol and ipratropium are frequently prescribed in combination for
patients with COPD or asthma. Boehringer Ingelheim has marketed an
albuterol-ipratropium combination product, Combivent, outside of the U.S. for a
number of years. Combivent was approved for marketing in the U.S. in early 1997
and has recently been launched in MDI form by Boehringer Ingelheim.

Based on the substantial work performed with albuterol and the feasibility
study conducted with ipratropium, Spiros Corp. II believes that developing an
albuterol-ipratropium formulation for delivery using Spiros will be feasible and
intends to commence the development of this formulation in 1998.

BUDESONIDE

Budesonide is a new generation steroid used to treat the inflammatory
component of asthma. Budesonide has been marketed in several dosage forms
outside of the U.S., but to date, has only been available in the U.S. in nasal
spray form. However, in June 1997, the FDA approved for marketing in the U.S. a
dry powder formulation of budesonide for delivery through Astra Pharmaceutical's
Pulmicort Turbuhaler. In 1996, worldwide sales of budesonide were estimated to
be greater than $600 million as measured by average wholesale prices.

In 1998, Spiros Corp. II expects to begin formulation of budesonide for
delivery through Spiros.

OTHER PRODUCT DEVELOPMENT EFFORTS

The Board of Directors of Spiros Corp. II has the right, with the consent of
Dura, to select additional Designated Compounds for the treatment of respiratory
diseases, including asthma, allergy, cystic fibrosis or respiratory infection
for delivery using Spiros. See "The Agreement and the Purchase Options--
Technology License Agreement."

38
<PAGE>
In the event that Spiros Corp. II obtains the rights to any Designated
Compounds, Spiros Corp. II will conduct technical evaluations of the applicable
compounds as candidates for delivery through Spiros. Technical evaluations will
generally include patent evaluation, establishment of analytical methods,
micronization of drug substance, preliminary formulation development,
preliminary aerosol characterization, preliminary stability evaluation and
animal bioavailability, efficacy and toxicology evaluation. Technical
evaluations may also include initial safety and efficacy studies in humans.

In the event that additional funds become available to Spiros Corp. II,
whether through the exercise of the Albuterol Option or the Product Option, such
funds will become part of the Available Funds, and a portion of such funds may
be used for additional development of a next generation inhaler system and
certain other enhancements to the existing Spiros technology and to fund the
acquisition of capital equipment to be used to manufacture the Spiros Products.

SALES AND MARKETING

Spiros Corp. II will rely entirely on Dura under the Manufacturing and
Marketing Agreement for its sales and marketing efforts. Under the Manufacturing
and Marketing Agreement, Dura will submit an annual marketing plan to be
approved by Spiros Corp. II. See "Business of Dura--Sales and Marketing."

SPIROS CORP. II BUDGET

The following is a preliminary budget of anticipated expenditures by Spiros
Corp. II for research, clinical development, product development and
commercialization. Due to the late stage in the development of certain of the
Spiros Products, most of the funds are expected to be expended for clinical
trials, product development and initial commercialization. If the Underwriters'
over-allotment option is exercised, amounts to be spent under the Development
Agreement will be increased. Substantial additional funding will still be
required for the development of certain Spiros Products and for the
commercialization of the Spiros Products. Due to the long-range nature of the
development plans, Spiros Corp. II, in consultation with Dura, reserves the
right to reallocate funds as it deems appropriate. See "Use of Proceeds."

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
(3 MONTHS) (4 MONTHS)
1997 1998 1999 2000 2001 TOTAL
------------- --------- --------- --------- ----------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Products
Albuterol....................................... $ 3.4 $ 27.3 $ -- $ -- $ -- $ 30.7
Beclomethasone.................................. 1.6 16.3 12.0 3.3 -- 33.2
Budesonide...................................... -- 1.9 15.2 11.1 5.7 33.9
Ipratropium..................................... -- 8.0 13.6 6.0 -- 27.6
Albuterol-Ipratropium........................... -- 3.5 7.7 7.1 3.5 21.8
Other Expenditures................................ -- 1.4 4.0 -- -- 5.4
General and administrative expenses............... -- 0.4 0.4 0.4 0.4 1.6
--- --------- --------- --------- ----- ---------
Total............................................. $ 5.0 $ 58.8 $ 52.9 $ 27.9 $ 9.6 $ 154.2
--- --------- --------- --------- ----- ---------
--- --------- --------- --------- ----- ---------
</TABLE>

COMPETITION

There are at least 10 companies currently involved in the development,
marketing or sales of dry powder pulmonary drug delivery systems. There are two
types of DPIs currently in commercial use worldwide. In the U.S., only
individual dose DPIs currently are marketed, including the Rotohaler (developed
and marketed by Glaxo) and the Spinhaler (developed and marketed by Fisons
Limited). The Turbuhaler (developed and marketed by Astra Pharmaceuticals), a
multiple dose DPI, is the leading DPI

39
<PAGE>
in worldwide sales. In June 1997, the FDA approved the first Turbuhaler product,
the Pulmicort Turbuhaler, for marketing a dry powder formulation of budesonide
in the U.S.

Many of these companies, including large pharmaceutical firms with financial
and marketing resources and development capabilities substantially greater than
those of Spiros Corp. II and Dura, are engaged in developing, marketing and
selling products that compete with the proposed products of Spiros Corp. II. In
addition, Dura may develop or acquire products which may compete with Spiros
Products. Further, other products now in use or under development by others may
be more effective than Spiros Corp. II's current or future products. The
industry is characterized by rapid technological change, and competitors may
develop their products more rapidly than Dura and Spiros Corp. II. Competitors
may also be able to complete the regulatory process sooner, and therefore, may
begin to market their products in advance of Dura's and Spiros Corp. II's
products. Dura and Spiros Corp. II believe that competition among both
prescription pharmaceuticals and pulmonary delivery systems will be based on,
among other things, product efficacy, safety, reliability, availability and
price.

GOVERNMENT REGULATION

For a discussion of governmental regulations applicable to Spiros Corp. II,
see "Business of Dura-- Government Regulation."

MANUFACTURING

A substantial amount of the work under the Development Agreement and the
Manufacturing and Marketing Agreement will be conducted at Dura's facilities.
See "Business of Dura--Manufacturing" and "Business of Dura--Facilities." Dura
believes that its available facilities are sufficient to satisfy its obligations
for performance under the Development Agreement and the Manufacturing and
Marketing Agreement. However, the same facilities may be used by Dura for work
performed on its own account and in the performance of third party contracts.

PATENTS

Dura presently holds five U.S. patents and four U.S. patent applications
relating to the Spiros technology to be further developed by Spiros Corp. II.
The issued patents include a patent with claims covering the use in Spiros of an
impeller to create an aerosol cloud of a drug intended for inhalation, which
expires in 2011. Dura has also filed certain continuations in part and foreign
patent applications relating to Spiros. All of the above patents and patent
applications, relating to the Spiros technology, together with their respective
continuations in part and foreign patent applications, have been licensed to
Spiros Corp. II pursuant to the Technology Agreement. See "Risk
Factors--Business Risks Related to Spiros Corp. II and Dura--Uncertainty
Regarding Patents and Proprietary Technology; Unpredictability of Patent
Protection," and "The Agreements and the Purchase Options--Technology
Agreement."

Spiros Corp. II and Dura consider the protection of discoveries in
connection with their development activities important to their respective
businesses. Spiros Corp. II and Dura intend to seek patent protection in the
U.S. and selected foreign countries where deemed appropriate. There can be no
assurance that issued patents or subsequent patents, if issued, will adequately
protect Spiros Corp. II or Dura or that such patents will provide protection
against infringement claims by competitors. Dura has also filed certain foreign
patent applications relating to Spiros technology. There can be no assurance
that additional patents, U.S. or foreign, will be obtained covering the Spiros
Products or Dura products or that, if issued or licensed, the patents covering
such products will provide substantial protection or be of commercial benefit.
Federal court decisions establishing legal standards for determining the
validity and scope of patents in the field are in transition. There can be no
assurance that the historical legal standards surrounding questions of validity
and scope will continue to be applied or that current defenses as to issued
patents in the field will offer protection in the future.

40
<PAGE>
Both Spiros Corp. II and Dura also rely upon trade secrets, unpatented
proprietary know-how and continuing technological innovation to develop their
respective competitive positions. Dura enters into confidentiality agreements
with certain of its employees pursuant to which such employees agree to assign
to Dura any inventions relating to Dura's business made by them while in Dura's
employ. There can be no assurance, however, that others may not acquire or
independently develop similar technology or, if patents are not issued with
respect to products arising from research, that Spiros Corp. II or Dura will be
able to maintain information pertinent to such research as proprietary
technology or trade secrets.

In connection with one of the patents described above, in 1993, Dura entered
into an agreement (the "1993 Royalty Agreement") with the principal inventor
thereof which, among other things, provides compensation to the inventor over
the life of the patent which is linked to annual sales of products related to
such patent. Such compensation amounts to approximately $1 million of the first
$50 million of annual sales of such products, and $1 million of the next $100
million of annual sales, with a maximum aggregate compensation of $6 million.

EXECUTIVE OFFICERS AND DIRECTORS

The following table provides information concerning the current officers and
directors of Spiros Corp. II. The current officers and directors of Spiros Corp.
II are also officers, directors and/or employees of Dura. Subsequent to the
consummation of the Offering, it is anticipated that the current directors will,
pursuant to delegated authority from the existing stockholder, appoint
independent directors such that independent directors will constitute a majority
of the board. As the holder of the Special Shares, Dura has the right to elect
two directors (the "Special Directors"). The Special Directors represent the
interest of the holder of Special Shares. All other directors (the "Common
Directors") represent the interests of the other stockholders and in the future
will be elected by the holders of Spiros Corp. II Common Stock. Spiros Corp. II
has no employees other than its three executive officers who are full-time
employees, officers and/or directors of Dura.

<TABLE>
<CAPTION>
NAME POSITION WITH SPIROS CORP. II AGE ON SEPTEMBER 30, 1997
- ------------------------------------------ ------------------------------------------- -----------------------------
<S> <C> <C>
David S. Kabakoff......................... Chairman, President and 49
Chief Executive Officer

Cam L. Garner............................. Director 49

Erle T. Mast.............................. Vice President, Chief Financial Officer 35

Mitchell R. Woodbury...................... Secretary 55
</TABLE>

David S. Kabakoff has served as the Chairman and President and Chief
Executive Officer of Spiros Corp. II since its formation in September 1997. Dr.
Kabakoff also has served as a director and Executive Vice President of Dura and
as President and Chief Executive Officer and a director of Spiros Corp. since
1996. From 1989 to 1996, Dr. Kabakoff was employed by Corvas International,
Inc., a biopharmaceutical company, and served in a number of capacities during
that time period, including Chief Executive Officer, President, Chief Operating
Officer and Chairman of the Board. From 1983 to 1989, Dr. Kabakoff was employed
by Hybritech, most recently as Senior Vice President of Research and
Development-Diagnostics. Dr. Kabakoff received a Ph.D. in Organic Chemistry from
Yale University and a B.A. in Chemistry from Case Western Reserve University.

Cam L. Garner has served as a director of Spiros Corp. II since its
formation in September 1997. Mr. Garner also has served as the President and
Chief Executive Officer of Dura since 1990 and was named Chairman of Dura's
Board of Directors in 1995. Prior to joining Dura, Mr. Garner served as
President of Syntro Corporation, a biotechnology company, from 1987 to 1989. Mr.
Garner currently serves as a director of the following companies: Safeskin
Corporation, CardioDynamics International

41
<PAGE>
Corporation and Trega. Mr. Garner received an MBA from Baldwin-Wallace College
and a B.S. in Biology from Virginia Wesleyan College.

Erle T. Mast has served as Vice President and Chief Financial Officer of
Spiros Corp. II since September 1997. Mr. Mast also has served as Vice
President, Finance of Dura since February 1997. From 1984 through 1997, Mr. Mast
served in various positions at Deloitte & Touche LLP, an accounting and
consulting firm, most recently as a partner where Mr. Mast specialized in
providing accounting, auditing and business consulting services to companies in
various industries, including the healthcare and life science industries. Mr.
Mast received a B.A. in Business Administration from California State University
at Bakersfield.

Mitchell R. Woodbury has served as Secretary of Spiros Corp. II since
September 1997. Mr. Woodbury also served as Vice President, General Counsel and
Secretary of Dura from June 1994 until January 1997, and since January 1997 has
served as Senior Vice President, General Counsel and Secretary of Dura. Prior to
joining Dura, Mr. Woodbury served as Vice President, General Counsel and
Secretary at Advance Tissue Sciences, Inc., a biomedical company. From October
1981 until June 1992, Mr. Woodbury served as Senior Vice President, General
Counsel of Intermark, Inc., a publicly held operating/holding company. He was
elected Vice President and Corporate Counsel of Intermark in 1980 and had served
as Corporate Secretary since 1981. Mr. Woodbury received his J.D. from the
University of San Diego School of Law and a B.A. in Business Administration from
San Diego State University.

Shortly after the completion of the Offering, Spiros Corp. II intends to
appoint three additional directors to its Board of Directors so that a majority
of the members will be persons unaffiliated with Dura.

1997 STOCK OPTION PLAN

Spiros Corp. II's 1997 Stock Plan (the "Plan") was adopted by the board of
directors of Spiros Corp. II on October 17, 1997 and approved by the stockholder
of Spiros Corp. II on October 17, 1997. The Plan will become effective on the
date the Spiros Corp. II Common Stock is registered under Section 12 of the
Exchange Act in connection with this Offering.

A reserve of 450,000 shares of Spiros Corp. II Common Stock has been
authorized for issuance pursuant to stock option grants made from time to time
under the Plan. In no event, however, may any one participant in the Plan
receive stock option grants for more than 100,000 shares of Spiros Corp. II
Common Stock per calendar year.

Under the Plan, eligible individuals in Spiros Corp. II's employ or service
(including officers, non-employee board members and consultants) may, at the
discretion of the Plan Administrator, be granted options to purchase shares of
Spiros Corp. II Common Stock at an exercise price not less than 100% of their
fair market value on the grant date. The Plan will be administered by the
Compensation Committee of the board of directors, and the Compensation Committee
in its capacity as Plan Administrator will have complete discretion to determine
which eligible individuals are to receive option grants under the Plan, the time
or times when such option grants are to be made, the number of shares subject to
each such grant, the status of any granted option as either an incentive stock
option or a non-statutory stock option under the Federal tax laws, the vesting
schedule to be in effect for the option grant and the maximum term for which any
granted option is to remain outstanding. However, administration of the Plan
with respect to individuals who are not subject to the short-swing liability
provisions of Section 16 of the Exchange Act may be delegated to a secondary
committee of one or more board members appointed by the board of directors.

It is anticipated that the options to be granted under the Plan will
generally become exercisable upon the optionee's completion of five years of
employ or service (including as an officer, non-employee board member or
consultant) with Spiros Corp. II. However, if Dura exercises the Purchase
Option, then all options outstanding under the Plan at that time will
immediately vest and become exercisable for all the

42
<PAGE>

option shares. No option grant will have a term in excess of 10 years and
options will be subject to earlier termination following the optionee's
cessation of service with Spiros Corp. II.

The exercise price for the shares of Spiros Corp. II Common Stock subject to
option grants made under the Plan may be paid in cash or in shares of Spiros
Corp. II Common Stock valued at fair market value on the exercise date. The
option may also be exercised through a same-day sale program without any cash
outlay by the optionee. The Plan Administrator may also permit one or more
holders of non-statutory stock options to satisfy the withholding tax liability
incurred in connection with the exercise of those options by having Spiros Corp.
II withhold a portion of the purchased shares with a market value equal to such
liability.

The Plan Administrator will have the authority to effect the cancellation of
outstanding options under the Plan in return for the grant of new options for
the same or different number of option shares with an exercise price per share
based upon the fair market value of the Spiros Corp. II Common Stock on the new
grant date.

In the event that Spiros Corp. II is acquired by merger or asset sale, each
outstanding option under the Plan will automatically accelerate in full and
become immediately exercisable for all the shares of Spiros Corp. II Common
Stock at the time subject to that option, unless the option is to be assumed by
the successor corporation. The Plan Administrator will have complete discretion
to grant one or more options under the Plan which will become immediately
exercisable for all the option shares in the event those options are assumed in
the acquisition and the optionee's service with Spiros Corp. II or the acquiring
entity terminates within a designated period following such acquisition. The
Plan Administrator will also have the authority to grant options which will
immediately vest upon an acquisition of Spiros Corp. II, whether or not those
options are assumed by the successor corporation. Finally, the Plan
Administrator will have the discretionary authority to structure one or more
option grants so that those options will immediately vest in connection with a
change in control of Spiros Corp. II (whether by successful tender offer for
more than 50% of the outstanding voting stock or a change in the majority of the
board of directors by reason of one or more contested elections for board
membership), with such vesting to occur either at the time of such change in
control or upon the subsequent termination of the individual's service within a
designated period following such change in control.

The board of directors may amend or modify the Plan at any time, subject to
any required stockholder approval. The Plan will terminate on the earliest of
(i) October 31, 2007, (ii) the date on which all shares available for issuance
under the Plan have been issued as fully-vested shares or (iii) the termination
of all outstanding options in connection with certain changes in control or
ownership of Spiros Corp. II.

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<PAGE>
BUSINESS OF DURA

OVERVIEW

Dura is a specialty respiratory pharmaceutical and pulmonary drug delivery
company. Dura is engaged in developing and marketing prescription pharmaceutical
products for the treatment of asthma, hay fever, COPD, the common cold and
related respiratory ailments, and is developing a pulmonary drug delivery
system. Dura has strategically focused on the U.S. respiratory market because of
its size and growth opportunities. The estimated size of the target market for
antihistamines, asthma/rhinitis therapies, cough/ cold preparations and
anti-infectives in 1996 was approximately $9.5 billion. The size and fragmented
nature of the market and the identifiable base of physician prescribers allow
Dura to achieve significant market penetration with a specialized sales force.
Dura currently markets 31 prescription products. Dura also has a separate mail
service pharmacy, Health Script, which dispenses respiratory pharmaceuticals.

Dura employs a dual marketing strategy utilizing its focused field sales
force of over 300 people and a dedicated managed care sales and marketing and
national account groups that covers managed care organizations and retail
pharmacy chains. Dura's field sales force targets a physician base that includes
approximately 80,000 U.S. allergists, ENTs, pulmonologists and a selected subset
of pediatricians and generalist physicians, who Dura believes collectively write
a significant portion of respiratory pharmaceutical prescriptions. Dura believes
that its field sales force calls on approximately one-half of the target
physician base. Dura's managed care sales and marketing group concentrates on
sales to large regional and national managed care organizations. Dura expects to
continue expanding both the field sales force and the managed care sales and
marketing group as warranted by market opportunities.

This marketing strategy has allowed Dura to leverage its distribution
capabilities by acquiring the rights to market additional prescription
pharmaceutical products through acquisition, in-license or co-promotion
arrangements. Since 1992, Dura has acquired 19 products targeted at the U.S.
respiratory market. In September 1996, Dura acquired from Lilly exclusive U.S.
marketing rights to the antibiotics Keftab and Ceclor CD. Dura began marketing
Keftab in September 1996 and launched Ceclor CD in October 1996. In May 1997,
Dura acquired from Syntex the exclusive U.S. rights to the intranasal steroid
products Nasarel and Nasalide.

Another key component of Dura's strategy is to develop Spiros. Spiros is
being designed to aerosolize pharmaceuticals in dry powder formulations for
delivery to the lungs while providing certain advantages over other
currently-used methods of pulmonary drug delivery. Dura has a three-level
development program for Spiros which entails (i) developing, on behalf of Spiros
Corp. II, certain drug compounds for use in Spiros, including in the near-term
albuterol, beclomethasone and ipratropium, three of the pharmaceutical agents
most frequently prescribed to treat respiratory conditions, (ii) licensing
Spiros primarily to pharmaceutical companies, including Mitsubishi, Fujisawa and
Trega, generally for use with certain of their proprietary respiratory products,
and (iii) developing Spiros, generally in collaboration with third parties, for
the systemic delivery of compounds, including certain proteins and peptides,
through the lungs for respiratory and non-respiratory indications as an
alternative to current invasive delivery techniques.

RECENT DEVELOPMENTS

On October 21, 1997, Dura announced that it had signed a definitive Merger
Agreement with Scandipharm. Scandipharm is an Alabama-based distributor of
pharmaceutical products for the treatment of CF, a fatal genetic disease
affecting approximately 30,000 children and young adults.

44
<PAGE>

the average price of Dura Common Stock 20 days prior to the closing, in exchange
for all capital stock and outstanding options of Scandipharm. The transaction,
which is expected to close in the first half of 1998, has been approved by the
board of directors of each of Dura and Scandipharm and is subject to, among
other things, the approval of the shareholders of Scandipharm, the receipt of
regulatory approvals and the effectiveness of a registration statement covering
the issuance of Dura stock in the Merger. See "Risk Factors--Business Risks
Relating to Dura--Risks Related to the Proposed Merger with Scandipharm."

U.S. RESPIRATORY MARKET

Dura divides the U.S. respiratory market into three primary segments: (i)
respiratory infection, (ii) allergy, cough and cold and (iii) asthma and COPD.

RESPIRATORY INFECTION. Respiratory infections are generally caused by a
variety of bacteria and can affect either the upper respiratory tract (nasal
cavity, sinuses and throat) or the lower respiratory tract (lungs). The
resulting diagnoses include sinusitis, tonsillitis and bronchitis. These
infections are treated with antibiotics, which kill the bacteria causing the
symptoms. There are a variety of classes of antibiotics that treat specific
ranges, or spectrums, of bacteria. Classes used to treat respiratory infection
include cephalosporins, broad spectrum macrolides and quinolones. The market for
these classes is very large, totaling $4.6 billion in 1996 for the oral solid
forms alone. The cephalosporin class accounts for approximately $1.3 billion of
this total.

ALLERGY, COUGH AND COLD. While the causes of allergies (which can be
seasonal or perennial) and cough and colds differ, nasal congestion and sneezing
are common symptoms of these diseases. The U.S. combined market for therapeutic
drugs to treat allergies, coughs and colds was over $2.1 billion in 1996.
Antihistamines and antihistamine/decongestant combinations are the most widely
used forms of therapy for allergies and represent the largest portion of the
allergy, cough and cold market in the U.S. An additional form of therapy for
allergies includes intranasal steroids, such as Nasarel and Nasalide, which are
increasingly being prescribed for allergic rhinitis. Cough and cold preparations
represent the next largest portion of the allergy, cough and cold market and
include decongestant and decongestant/ expectorant combinations, cough
suppressants and antihistamine combinations and expectorants.

ASTHMA AND COPD. Asthma is a complex physiological disorder characterized
by airway hyperactivity to a variety of stimuli such as dust, pollen, stress or
physical exercise, resulting in airway obstruction that is partially or
temporarily reversible. The U.S. asthma population has grown steadily in recent
years. COPD is a complex condition comprising a combination of chronic
bronchitis, emphysema and airway obstruction. The disease affects males more
often than females and is exacerbated by smoking and other insults to the lung.
Incidence is as high as 20% of the adult male population, though only a minority
are clinically disabled. The U.S. combined market for therapeutic drugs to treat
asthma and COPD was approximately $2.8 billion in 1996.

STRATEGY

Dura's objective is to be a leading supplier of respiratory pharmaceuticals
and pulmonary drug delivery systems. Dura attempts to achieve this objective
through the implementation of the following strategies:

45
<PAGE>
--FOCUSING MARKETING EFFORTS ON RESPIRATORY PHYSICIAN SPECIALISTS. Dura
employs a dual marketing strategy utilizing its focused field sales force
and a dedicated managed care sales and marketing group. Dura's field sales
force targets a physician base that includes approximately 80,000 U.S.
allergists, ENTs, pulmonologists and a selected subset of pediatricians and
generalist physicians, who Dura believes collectively write a significant
portion of respiratory pharmaceutical prescriptions. Dura believes that its
field sales force calls on approximately one-half of the target physician
base. Dura's managed care sales and marketing group concentrates on sales to
large regional and national managed care organizations. Dura expects to
continue expanding both the field sales force and the managed care sales and
marketing group as warranted by market opportunities.

--ACQUIRING, IN-LICENSING OR CO-PROMOTING RESPIRATORY PRESCRIPTION
PHARMACEUTICALS. Dura seeks to acquire, in-license or co-promote
respiratory prescription pharmaceuticals or companies developing and/or
marketing such pharmaceuticals. Dura is particularly focused on respiratory
drugs that are under-promoted by large pharmaceutical companies. Dura
believes that the pharmaceutical industry is undergoing a restructuring that
may create greater opportunities for Dura. For example, many large
pharmaceutical companies are consolidating and merging and/or redirecting
their sales forces, which may lead to the underpromotion of certain products
deemed too small for large sales forces and create significant acquisition,
in-licensing and co-promotion opportunities. Additionally, consolidation
within the sector may make small product lines less desirable to large
pharmaceutical companies. Dura is actively pursuing the acquisition of
rights to products and/or companies, which may require the use of
substantial capital resources.

--DEVELOPING SPIROS. Dura has a three-level development program for Spiros
which entails (i) developing, on behalf of Spiros Corp. II, certain drug
applications for use in Spiros, including in the near term albuterol,
beclomethasone and ipratropium, three of the most frequently prescribed
pharmaceutical agents to treat respiratory conditions, (ii) licensing Spiros
primarily to pharmaceutical companies, including Mitsubishi, Fujisawa and
Trega, generally for use with certain of their proprietary respiratory
products, and (iii) developing Spiros, generally in collaboration with third
parties, for the systemic delivery of compounds, including certain proteins
and peptides, through the lungs for respiratory and non-respiratory
indications as an alternative to current invasive delivery techniques.

DURA'S CURRENT PRODUCTS

Dura currently markets 31 prescription products, including 25 that are
off-patent, in the following therapeutic categories: respiratory infection (five
products); allergy, cough and cold (24 products); and asthma and COPD (two
products). The following is a list of Dura's principal prescription
pharmaceuticals:

<TABLE>
<CAPTION>
RIGHTS
OBTAINED FROM OR
PRODUCTS DEVELOPED BY
- -------------------------------------------------------------------- ------------------------
<S> <C>
Respiratory Infection
Ceclor CD Tablets (anhydrous cefaclor)............................ Lilly
Keftab (cephalexin hydrochloride)................................. Lilly
Allergy, Cough and Cold
Nasarel (flunisolide) Nasal Solution.............................. Syntex
Nasalide (flunisolide) Nasal Solution............................. Syntex
ENTEX Products.................................................... P&G
DURA-VENT-Registered Trademark- Products.......................... Dura
RONDEC Products................................................... Abbott, Dura
Asthma and COPD
TORNALATE-Registered Trademark- Products.......................... Sanofi-Winthrop, Inc.
</TABLE>

46
<PAGE>
In September 1996, Dura acquired the exclusive U.S. rights to the
cephalosporin antibiotics Keftab and Ceclor CD from Lilly. The U.S. antibiotic
market was $4.6 billion in 1996, of which $1.3 billion was accounted for by
cephalosporin antibiotics. Dura believes that this acquisition complements its
existing strategy because approximately 60% of antibiotics are prescribed for
respiratory infections. Keftab is an antibiotic indicated for respiratory tract,
skin and soft tissue infections. Ceclor CD is a twice-a-day dosage form of
cefaclor typically taken for seven days. Ceclor, Lilly's currently marketed
cefaclor, is normally taken three times a day for 10 days. Dura believes these
product acquisitions further its strategy of acquiring prescription
pharmaceuticals which are marketed by its sales force to its targeted
physicians.

In May 1997, Dura acquired from Syntex the exclusive U.S. rights to the
intranasal steroid products Nasarel and Nasalide. The U.S. market for intranasal
steroids for the treatment of perennial and allergic rhinitis was approximately
$700 million in 1996, and has averaged 24% growth over the last two years. Dura
believes that this acquisition complements its strategy because the products fit
within Dura's respiratory focus while adding a new respiratory category, nasal
steroids, to its product portfolio. In addition, Dura believes that it will be
able to further leverage its field sales force by offering these new products
acquired from Lilly and Syntex to high-prescribing physicians during sales
calls. A portion of the revenues from these products is being utilized to fund
the expansion of Dura's existing field sales force.

Keftab and Ceclor CD and the two Tornalate products are the subject of
approved NDAs. Dura also markets Capastat-Registered Trademark- Sulfate and
Seromycin-Registered Trademark- which are also the subject of approved NDAs.
Crolom-TM- is the subject of an approved Abbreviated New Drug Application
("ANDA"). The remaining products are branded pharmaceuticals which are not the
subject of NDAs or ANDAs.

STRATEGIC ALLIANCES

MITSUBISHI CHEMICAL CORPORATION. In October 1994, Dura, DDSI and Mitsubishi
entered into a license and supply agreement, under which Mitsubishi was granted
the exclusive right to use and sell Spiros together with a dry powder
formulation of an asthma compound in Japan, Hong Kong, Singapore, the Republic
of China (Taiwan), the Republic of Korea and the People's Republic of China
(collectively the "Territory"). DDSI's rights under the agreement were assigned
to Spiros Corp. Dura and Spiros Corp. have agreed to develop a dry powder
formulation of such compound for Mitsubishi and will manufacture and supply to
Mitsubishi its requirements for both Spiros and such compound. Mitsubishi will
be responsible for conducting all clinical and other work needed to obtain
regulatory approvals of Spiros and such compound in the Territory. In connection
with the license and supply agreement, Mitsubishi is obligated to make milestone
and other payments to Dura and/or Spiros Corp. in certain circumstances.

FUJISAWA PHARMACEUTICAL CO., LTD. In April 1995, Dura entered into a
collaborative development agreement with Fujisawa covering the use of Spiros to
deliver one of Fujisawa's new chemical entity asthma compounds. The agreement
was an extension of previous feasibility work completed by Dura. Pursuant to the
agreement, Dura will provide dry powder formulation assistance, manufacturing
process development and clinical trial supplies to Fujisawa through the
completion of clinical trials in Japan or June 30, 1998, whichever occurs first.
Dura received an up-front payment and is to receive additional milestone
payments and reimbursement of costs from Fujisawa. Fujisawa can terminate the
agreement upon 30 days' notice to Dura. If Fujisawa's clinical trials are
successful, the parties have agreed to negotiate additional agreements, which
could include license and supply agreements.

TREGA BIOSCIENCES, INC. In February 1996, Dura entered into a research and
development agreement with Trega to develop inhalation formulations of new
compounds discovered and developed by Trega. In addition, Dura will provide to
Trega, for a four-year period, contract services for Trega's drug development
programs using Dura's development capabilities and proprietary formulation and
delivery technology. Dura will receive a percentage of proceeds received by
Trega with respect to jointly developed compounds, and will receive contract
revenues from Trega for services provided. Concurrently, Dura made a $5 million
equity investment in Trega, which was subsequently converted into 775,193 shares
of Trega common stock.

47
<PAGE>
In addition, Dura has executed agreements with a number of international
pharmaceutical companies to conduct feasibility studies on formulations of
certain compounds for use with Spiros, including small molecules and proteins
and peptides, for treatment of respiratory and non-respiratory diseases.

SALES AND MARKETING

FIELD SALES FORCE. Dura's specialized sales and marketing organization
targets a physician base that includes approximately 80,000 U.S. allergists,
ENTs, pulmonologists, and a selected subset of pediatricians and generalist
physicians who treat a large number of allergy and asthma patients. Dura
believes this relatively small group of physicians writes a significant portion
of respiratory pharmaceutical prescriptions. This concentration allows for
effective market penetration by a specialized sales and marketing organization.

As of September 30, 1997, Dura had 277 pharmaceutical sales representatives
nationwide, supervised by 20 district managers, six area recruiter-trainers and
two regional directors. Dura believes its focused sales force currently calls on
approximately one-half of its target physician base. Dura intends to continue
expansion of its field sales force as warranted by market opportunities,
including the potential commercialization of the Spiros Products.

Dura believes that the personal relationships of Dura's sales
representatives with their physician customers are essential to Dura's business.
Dura's sales representatives differentiate themselves from the competition by
focusing primarily on respiratory infections, allergy, cough and cold, and
asthma and COPD, and by promoting pharmaceuticals used by respiratory
specialists in treating patients. With a relatively small target audience,
promotional spending by Dura on advertising and direct mail is generally
inexpensive and efficient. Dura regularly participates in local, regional and
national medical meetings of the key specialty groups. Dura believes that it has
established a national awareness of the Dura name within the U.S. respiratory
market.

MANAGED CARE SALES AND MARKETING AND NATIONAL ACCOUNTS GROUPS. To implement
Dura's marketing strategy, Dura established dedicated managed care sales and
marketing and national accounts groups, which concentrates on sales to large
regional and national managed care organizations. These organizations include
health maintenance organizations ("HMOs"), preferred provider organizations
("PPOs"), large drug merchandising chains, nursing home providers and mail order
pharmacies. A primary goal of the managed care sales and marketing group is to
place Dura's products on approved formulary lists of HMOs and PPOs.

HEALTH SCRIPT

In March 1995, Dura acquired Health Script, located in Denver, Colorado.
Health Script is a mail service pharmacy which dispenses respiratory
pharmaceuticals. Mail order services are particularly well-suited for
respiratory patients who are long-term, chronic users of certain pharmaceuticals
and to whom the convenience and cost efficiency of mail order is appealing.
Health Script was formed in 1990 to supply value-priced respiratory
pharmaceutical products to patients through the mail. Health Script currently
dispenses to its approximately 30,000 patients nationwide over 100 respiratory
products manufactured by third parties. Health Script is focused on working with
home healthcare providers and patients to coordinate respiratory medication
services and patients' management programs. Health Script markets its services
through specialty field sales representatives and telemarketing. The existing
patient base is maintained by telephone contact with patients to monitor
compliance with their doctors' prescriptions.

COMPETITION

Dura directly competes with at least 25 other companies in the U.S. which
are currently engaged in developing, marketing and selling respiratory
pharmaceuticals. Additionally, there are at least 10 companies currently
involved in the development, marketing or sales of dry powder pulmonary drug
delivery

48
<PAGE>
systems. There are two types of DPIs currently in commercial use worldwide. In
the U.S., only individual dose DPIs currently are marketed, including the
Rotohaler (developed and marketed by Glaxo) and the Spinhaler (developed and
marketed by Fisons Limited). The Turbuhaler (developed and marketed by Astra
Pharmaceuticals), a multiple dose DPI, is the leading DPI in worldwide sales. In
June 1997, the FDA approved the first Turbuhaler product, the Pulmicort
Turbuhaler, for marketing a dry powder formulation of budesonide in the U.S.

Many of these companies, including large pharmaceutical firms with financial
and marketing resources and development capabilities substantially greater than
those of Dura, are engaged in developing, marketing and selling products that
compete with those offered by Dura. The selling prices of such products
typically decline as competition increases. Further, other products now in use
or under development by others may be more effective than Dura's current or
future products. The industry is characterized by rapid technological change,
and competitors may develop their products more rapidly than Dura. Competitors
may also be able to complete the regulatory process sooner and, therefore, may
begin to market their products in advance of Dura's products. Dura believes that
competition among both prescription pharmaceuticals and pulmonary drug delivery
systems aimed at the respiratory infection, allergy, cough and cold and asthma
and COPD markets will be based on, among other things, product efficacy, safety,
reliability, availability and price.

CLINICAL, DEVELOPMENT AND REGULATORY

Dura's clinical, development and regulatory expenses relate primarily to
product development and regulatory compliance activities. Clinical, development
and regulatory expenses were $9,354,000, $8,408,000, and $18,540,000 for the
years ended December 31, 1994, 1995 and 1996, respectively, and $12,122,000 and
$18,160,000 for the nine-month periods ended September 30, 1996 and 1997,
respectively. The clinical, development and regulatory expenses associated with
Spiros development, for which Dura recorded contract revenues from DDSI and
Spiros Corp., were $8,260,000, $6,428,000, and $15,932,000 for the years ended
December 31, 1994, 1995, and 1996, respectively, and $10,634,000 and $14,872,000
for the nine-month periods ended September 30, 1996 and 1997, respectively.

PATENTS AND PROPRIETARY RIGHTS

Tornalate Inhalation Solution and Tornalate MDI are covered by patents filed
by Sanofi-Winthrop, Inc. which expire in the near-term. The Keftab, Ceclor CD,
Nasarel and Nasalide products or processes to make such products are covered by
patents which expire between 2003 and 2007. Dura's other pharmaceutical products
are not protected by patents. Additionally, see "Business of Spiros Corp.
II--Patents and Proprietary Rights."

GOVERNMENT REGULATION

The manufacturing and marketing of Dura's products are subject to regulation
by Federal and state government authorities, including the FDA, the
Environmental Protection Agency and the Occupational Safety and Health
Administration, in the U.S. and other countries. In the U.S., pharmaceuticals
and drug delivery systems, including Spiros, are also subject to rigorous FDA
regulation and may be subject to regulation by other jurisdictions, including
the State of California. The Federal Food, Drug, and Cosmetic Act and the Public
Health Service Act govern the testing, manufacture, safety, efficacy, labeling,
storage, record keeping, approval, advertising and promotion of Dura's products.
Product development and approval within this regulatory framework takes a number
of years and involves the expenditure of substantial resources.

To obtain FDA approval for each of the Spiros Products, Dura is required to
conduct each of the following steps and possibly others: (i) preclinical testing
(laboratory and possibly animal tests), (ii) the submission to the FDA of an IND
application, which must become effective before human clinical trials

49
<PAGE>
may commence, (iii) adequate and well-controlled human clinical trials to
establish safety and efficacy, (iv) the submission of an NDA to the FDA for
marketing approval, and (v) FDA approval of the NDA prior to any commercial sale
or shipment. The NDA must include, in addition to a compilation of preclinical
and clinical data, complete information about product performance and
manufacturing facilities and processes. Prior to completion of the NDA review
process, the FDA may conduct an inspection of the facility, manufacturing
procedures, operating systems and personnel qualifications. In addition to
obtaining FDA approval for each product, each domestic drug and/or device
manufacturing facility must be registered with and approved by the FDA. Domestic
manufacturing facilities are subject to biennial inspections by the FDA and
inspections by other jurisdictions and must comply with cGMPs for both drugs and
devices. To supply products for use in the U.S., foreign manufacturing
establishments must comply with cGMP and other requirements and are subject to
periodic inspection by the FDA or by regulatory authorities in such countries
under reciprocal agreements with the FDA.

Preclinical testing includes laboratory evaluation of product chemistry and
animal studies, if appropriate, to assess the safety and efficacy of the product
and its formulation. The results of the preclinical tests are submitted to the
FDA as part of an IND application, and unless the FDA objects, the IND
application will become effective 30 days following its receipt by the FDA, thus
allowing the product to be tested in humans.

Clinical trials involve the administration of the pharmaceutical product to
healthy volunteers or to patients identified as having the condition for which
the pharmaceutical agent is being tested. The pharmaceutical product is
administered under the supervision of a qualified principal investigator.
Clinical trials are conducted in accordance with Good Clinical Practice and
protocols previously submitted to the FDA (as part of the IND application) that
detail the objectives of the study, the parameters used to monitor safety and
the efficacy criteria evaluated. Each clinical study is conducted under the
auspices of an independent Institutional Review Board ("IRB") at the institution
at which the study is conducted. The IRB considers, among other things, the
design of the study, ethical factors, the safety of the human subjects and the
possible liability risk for the institution.

Clinical trials for new products are typically conducted in three sequential
phases that may overlap. In Phase I, the initial introduction of the
pharmaceutical into healthy human volunteers, the emphasis is on testing for
safety (adverse effects), dosage tolerance, metabolism, distribution, excretion
and clinical pharmacology. Phase II involves studies in a limited patient
population to determine the initial efficacy of the pharmaceutical for specific
targeted indications, to determine dosage tolerance and optimal dosage and to
identify possible adverse side effect and safety risks. Once a compound is found
to be effective and to have an acceptable safety profile in Phase II
evaluations, Phase III trials are undertaken to more fully evaluate clinical
outcomes. The FDA reviews both the clinical plans and the results of the trials
and may require the study to be discontinued at any time if there are
significant safety issues.

The results of the preclinical and clinical trials for pharmaceutical drug
products such as those currently marketed by Dura or being developed by Dura are
submitted to the FDA in the form of an NDA for marketing approval. FDA approval
can take several months to several years, or approval may be denied. The
approval process can be affected by a number of factors, including the severity
of the side effects, the availability of alternative treatments and the risks
and benefits demonstrated in clinical trials. Additional animal studies or
clinical trials may be requested during the FDA review process and may delay
marketing approval. After FDA approval for the initial indication, further
clinical trials are necessary to gain approval for the use of the product for
any additional indications. The FDA may also require post-marketing testing and
surveillance to monitor for adverse effects, which can involve significant
additional expense.

Although the FDA has considerable discretion to decide what requirements
must be met prior to approval, Dura believes, based upon the FDA's historical
practice with respect to drug inhalers, that the FDA is likely to regulate each
combination of Spiros with a compound as a discrete pharmaceutical or

50
<PAGE>
drug product requiring separate approval as a new drug. Dura believes that the
approval process for each drug/delivery combination now under development may be
shorter than the full NDA process described above because the safety and
efficacy of the compounds have already been established in currently marketed
formulations and delivery mechanisms.

The Drug Price Competition and Patent Restoration Term Act of 1984, known as
the Waxman-Hatch Act, established abbreviated application procedures for
obtaining FDA approval for many brand name drugs that are off-patent and whose
marketing exclusivity has expired. Approval to manufacture these drugs is
obtained by filing abbreviated drug applications. As a substitute for conducting
full-scale preclinical and clinical studies required of the brand name drug, the
FDA requires data establishing that the drug formulation which is the subject of
an abbreviation application is either bioequivalent or has the same therapeutic
effect as the previously approved drug, among other requirements.

The type of abbreviated application that Dura intends to file is a section
505(b)(2) application, which is a reference to the statutory provision of the
Waxman-Hatch Act that applies to the type of abbreviated application being
submitted. Section 505(b)(2) applicants are required to certify to the FDA that
any patent which has been listed with the FDA as covering the brand name drug
product is invalid and will not be infringed by the sale of the applicant's
product. The patent holder may challenge a notice of noninfringement or
invalidity by filing a suit for patent infringement, which would prevent FDA
approval until the suit is resolved or until at least 30 months had elapsed.
Should any entity commence a lawsuit with respect to any alleged patent
infringement by Dura, uncertainties inherent in patent litigation make the
outcome of such litigation difficult to predict.

By their very nature, section 505(b)(2) applications rely at least to some
extent on the preclinical and clinical studies of the approved, innovator or
brand name drug to demonstrate that Dura's product is safe and effective for its
intended use. In the past, innovator drug manufacturers have challenged, by way
of petitions to the FDA, the use of a section 505(b)(2) application of data from
an innovator's approved NDA that is considered propriety by the original
manufacturer and was submitted to the FDA as part of an original new drug
application. Thus far, none of these petitions or other challenges to the
section 505(b)(2) application procedure have been successful. No assurances
exist that the 505(b)(2) application procedure that Dura plans to utilize will
not result in similar challenges to Dura's products and such challenges, if they
occur, may have a significant adverse effect on Dura's ability to obtain
approvals under such abbreviated procedures.

For both currently marketed and future products, failure to comply with
applicable regulatory requirements after obtaining regulatory approval can,
among other things, result in the suspension of regulatory approval, as well as
possible civil and criminal sanctions. In addition, changes in regulations could
have a material adverse effect on Dura.

Since completion of the pivotal trials, Dura has made, and is proposing to
make, a number of additional modifications to the Spiros system, some of which
address problems encountered with the mechanical features of the Spiros delivery
system during the pivotal trials. These changes are intended to improve the
reliability, performance, manufacturability, and customer acceptance of the
mechanical features of the Spiros delivery system. Dura expects that it will be
required to complete testing and validation pursuant to cGMP requirements of the
Spiros system as modified for commercial distribution, which could be costly and
time-consuming. There can be no assurance that the FDA will not require Dura to
undertake further laboratory testing, field testing and/or clinical studies in
order to insure the safety and effectiveness of the Albuterol Product intended
to be commercialized by Dura and to insure that it can be reliably manufactured.
If a proposed change is deemed to be a major modification by the FDA, Dura could
be required to repeat one or more of the clinical studies. Moreover, because of
the time necessary to validate the changes to the Spiros system, there can be no
assurance that Dura will be prepared for any FDA preapproval inspection of
Dura's manufacturing facilities in a timely manner. If Dura is required to
undertake additional laboratory testing and/or clinical studies or to postpone
the preapproval inspection,

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<PAGE>
or if Dura fails to complete the open label study in a timely manner, Dura could
receive a non-approvable letter and, in any event, there could be a substantial
delay in completion of the approval process.

The Federal Food, Drug, and Cosmetic Act requires that any "new drug" must
be approved pursuant to an NDA. The term "new drug" is defined as any drug which
is not generally recognized among qualified experts as safe and effective for
its labeled intended uses. Certain exemptions from this definition exist for
products marketed without change since prior to 1938 (the date of enactment of
the Federal Food, Drug, and Cosmetic Act) or, with respect to the need to show
effectiveness, for drug products marketed prior to October 10, 1962 (the date of
enactment of the "Drug Amendments of 1962"). Dura presently markets 21 drug
products for which the FDA has not yet made a determination as to their status
as new drugs under the Federal Food, Drug, and Cosmetic Act. The FDA is
continuing an evaluation of the effectiveness of all products containing
ingredients marketed prior to 1962 that are not the subject of an approved NDA
as part of its DESI program and will determine which are new drugs requiring
approval through an NDA for marketing. The existence of currently-marketed
prescription pharmaceuticals that contain one or more active ingredients first
introduced in the marketplace before 1962 and that are marketed based on their
manufacturers' belief that such products are not subject to the new drug
provisions of the Act is recognized in paragraph B of the Food and Drug
Administration's Compliance Policy Guide, 440.100. This Policy Guide indicates
that the FDA will implement procedures to determine whether the new drug
provisions are or are not applicable to these products. The Policy Guide
requires that products covered by paragraph B not be similar or related to any
drug included in the DESI program, or have a different formulation or conditions
for use than products marketed before November 13, 1984. If a product is not
covered by paragraph B, the FDA could make a determination as to whether or not
the new drug provisions are applicable to it without first implementing the
procedures called for by the Policy Guide. Dura believes that nine of its
prescription pharmaceutical products may be covered by paragraph B of the Policy
Guide and it is aware that one of its products may be considered to be similar
or related to a DESI drug. Also, it is not aware of evidence to substantiate
that three of its products have the same formulation or conditions for use as
products marketed before November 13, 1984. These products could be subject at
any time to an FDA determination that an NDA is required. If a final
determination is made that a particular drug requires an approved NDA, such
approval will be required for marketing to continue. If such a determination is
made, the FDA might impose various requirements: for example, it might require
that the current product be the subject of an approved NDA, that the product be
reformulated and NDA approval obtained, that the product must be sold on an
over-the-counter basis rather than as a prescription drug, or that the product
must be removed from the market. There can be no assurance as to which of these
courses the FDA will require or whether Dura will be able to obtain any
approvals which the FDA may deem necessary. If any of these actions are taken by
the FDA, such actions could have a material adverse effect on Dura's business.

In April 1996, the export provisions of the Federal Food, Drug, and Cosmetic
Act were relaxed to permit the export of unapproved drugs to a foreign country,
provided the product complies with the laws of that country and has valid
marketing authorization in at least one of a list of designated "Tier 1"
countries. Once a product is exported to a qualified foreign country, Dura will
be subject to the applicable foreign regulatory requirements governing human
clinical trials and marketing approval in that country. The requirements
relating to the conduct of clinical trials, product licensing, pricing and
reimbursement vary widely from country to country and there can be no assurance
that Dura or any of its collaborators will be able to meet and fulfill the
statutory requirements in a particular country.

Health Script is subject to regulation by state regulatory authorities,
principally state boards of pharmacy. In addition, Health Script is subject to
regulation by other state and Federal agencies with respect to reimbursement for
prescription drug benefits provided to individuals covered primarily by publicly
funded programs.

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MANUFACTURING

Dura's principal manufacturing facility is located near its headquarters in
San Diego, California. The facility initially is intended to be used to
formulate, mill, blend and manufacture drugs to be used with Spiros, pending
regulatory approval. Equipment purchases and validation are currently scheduled
through 1998. Dura's manufacturing facility must be registered with and licensed
by various regulatory authorities and must comply with cGMP requirements
prescribed by the FDA and the State of California. Dura is currently expanding
its facilities to provide additional manufacturing capabilities. Dura will need
to significantly scale up its current manufacturing operations from clinical
supply scale to commercial scale and comply with cGMPs and other regulations
prescribed by various regulatory agencies in the U.S. and other countries to
achieve the prescribed quality and required levels of production of such
products and to obtain marketing approval. Spiros Corp. II is completely reliant
on Dura for all of its manufacturing needs. Any failure or significant delay in
the validation of or obtaining a satisfactory regulatory inspection of the new
facility or failure to successfully scale up could have a material adverse
effect on the ability of Dura and Spiros Corp. II to manufacture products in
connection with Spiros.

Dura has limited experience manufacturing products for commercial purposes
and currently does not have the capability to manufacture its pharmaceutical
products and therefore is dependent on contract manufacturers for the production
of such products for development and commercial purposes. Dura's current
dependence upon others for the manufacture of its products may adversely affect
the future profit margin, if any, on the sale of those products and Dura's
ability to develop and deliver products on a timely and competitive basis.

FACILITIES

Dura owns and occupies a new 77,000 square foot headquarters facility in San
Diego, California, on a parcel of land that it purchased in 1996. In addition,
Dura owns two buildings that are situated on another parcel of land near its
headquarters. One building, consisting of approximately 31,000 square feet, is
currently vacant. The second building, consisting of approximately 49,000 square
feet, contains Dura's manufacturing facility that will be used to formulate,
mill, blend and fill drugs to be used with Spiros, laboratory and research
facilities and warehouse space. Dura also occupies an additional 34,000 square
feet of office and laboratory space pursuant to a short-term lease. Dura expects
to commence construction of a 125,000 square foot facility beginning in late
1997 adjacent to the new 77,000 square foot facility, to be used initially for
research and development purposes.

Dura also leases approximately 16,660 square feet of space in Denver,
Colorado which houses the operations of Health Script's mail service pharmacy.
The lease term expires in January 2001 with one five-year renewal option.

HUMAN RESOURCES

Dura employed 611 employees (of which 600 are full-time) as of September 30,
1997, consisting of 347 people in sales and marketing (of which 315 constitute
the field sales force and the managed care group), 60 in administration and
finance, 79 in clinical, regulatory and research and development, 34 in
operations and 91 at Health Script. None of Dura's employees are represented by
a labor union and Dura believes it maintains positive relations with both field
and corporate personnel.

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DURA SELECTED CONSOLIDATED FINANCIAL DATA

The statement of operations data set forth below for each of the three years
in the period ended December 31, 1996, and the balance sheet data at December
31, 1996, are derived from, and are qualified by reference to, Dura audited
financial statements incorporated by reference in this Prospectus and should be
read in conjunction with those financial statements and notes thereto. The
statement of operations data for the fiscal years ended December 31, 1992 and
1993 are derived from audited financial statements of Dura not included or
incorporated by reference herein. The management of Dura believes that the
unaudited information at September 30, 1997, and for the nine-month periods
ended September 30, 1996 and 1997, contains all adjustments, consisting of only
normal recurring accruals, necessary for a fair presentation of the financial
position at such date and the results of operations for such periods. Operating
results for the nine-month period ended September 30, 1997, are not necessarily
indicative of results to be expected for the fiscal year ending December 31,
1997 or any other interim period. The information set forth below should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations of Dura," included elsewhere in this Prospectus and
Dura's financial statements and related notes incorporated by reference in this
Prospectus.

<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
YEAR ENDED DECEMBER 31,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:(1)
Revenues:
Sales...................................... $ 9,561 $ 15,816 $ 22,199 $ 39,308 79,563 $ 45,900 $ 105,437
Contract................................... -- 2,297 10,481 12,194 24,556 17,407 22,430
--------- --------- --------- --------- --------- --------- ---------
Total revenues............................... 9,561 18,113 32,680 51,502 104,119 63,307 127,867
--------- --------- --------- --------- --------- --------- ---------
Operating costs and expenses:
Cost of sales.............................. 2,700 3,782 3,894 10,618 21,301 12,553 23,373
Clinical, development and regulatory....... 1,354 2,819 9,354 8,408 18,540 12,121 18,160
Selling, general and administrative........ 12,523 17,437 17,976 25,955 42,631 26,460 49,485
Other charges(2)........................... -- 2,315 -- 43,773 -- -- --
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss)...................... (7,016) (8,240) 1,456 (37,252) 21,647 12,173 36,849
Other income-net............................. 247 67 514 1,880 6,220 4,060 8,903
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes............ (6,769) (8,173) 1,970 (35,372) 27,867 16,233 45,752
Provision for income taxes................... -- -- 34 406 3,539 1,762 16,357
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)(2)......................... $ (6,769) $ (8,173) $ 1,936 $ (35,778) $ 24,328 $ 14,471 $ 29,395
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) per share(2)............... $ (0.47) $ (0.55) $ 0.10 $ (1.53) $ 0.60 $ 0.37 $ 0.62
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Weighted average number of common and common
equivalent shares.......................... 14,506 14,988 19,860 23,440 40,479 38,890 47,392
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------- -------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments................................... $ 240,345 $ 454,710
Working capital..................................................................... 219,864 457,276
Total assets........................................................................ 504,670 821,105
Long-term obligations (excluding current portion)................................... 6,670 294,535
Shareholders' equity(3)............................................................. 443,577 482,297
</TABLE>

- ------------------------

(1) Dura's selected financial data include Health Script subsequent to its
acquisition on March 22, 1995, the Rondec product line subsequent to its
acquisition on June 30, 1995, the Entex product line subsequent to its
acquisition on July 3, 1996, the Ceclor CD and Keftab products subsequent
to their acquisition on September 5, 1996, and the Nasarel and Nasalide
products subsequent to their acquisition on May 7, 1997.

(2) The 1993 charge of $2.3 million represents the charge for the option to
acquire all of the outstanding stock of DDSI. The 1995 charge of $43.8
million represents the $30.8 million charge for acquired in-process
technology associated with the DDSI acquisition and the $13.0 million charge
for the contribution to Spiros Corp. If these charges were excluded, Dura
would have reported a net loss of $5.9 million, or $0.39 per share, for 1993
and net income of $8.0 million, or $0.28 per share, for 1995.

(3) No cash dividends were declared or paid during the periods presented.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF DURA

The following comments should be read in conjunction with Dura's
Consolidated Financial Statements and Notes incorporated herein by reference.
See "Risk Factors" for trends and uncertainties known to Dura that could cause
reported financial information not to be necessarily indicative of future
results, including discussion of the effects of seasonality on Dura.

RECENT DEVELOPMENTS

During the second half of 1996 and the first half of 1997, Dura made
significant acquisitions of product rights and licenses. In July 1996, Dura
acquired the worldwide rights to the Entex products, consisting of four
prescription upper respiratory drugs. In September 1996, Dura acquired the U.S.
marketing rights to the patented antibiotics Ceclor CD and Keftab. In May 1997,
Dura acquired the U.S. rights to the intranasal steroid products Nasarel and
Nasalide. The acquisition of these products has had a material impact on Dura's
financial position and results of operations.

In the third quarter of 1997, Dura issued $287.5 million principal amount of
its 3 1/2% Notes due July 15, 2002 with interest payable semiannually January 15
and July 15. The Notes are convertible, at the option of the holder, into shares
of Dura's Common Stock at any time prior to maturity or redemption at a
conversion price of $50.635 per share, subject to adjustment under certain
conditions. The Notes are unsecured and subordinated to all existing and future
senior indebtedness of Dura. The Notes can be redeemed by Dura from time to
time, in whole or in part, at specified redemption prices after July 15, 2000.

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996

Total revenues for the nine months ended September 30, 1997 were $127.9
million, an increase of $64.6 million as compared to the same period in 1996.
Net income for the nine months ended September 30, 1997 was $29.4 million, an
increase of $14.9 million, or $0.25 per share, over the same period in 1996. The
principal factors causing these increases are discussed below.

Pharmaceutical sales for the nine months ended September 30, 1997 were
$105.4 million, an increase of 130% over the same period in 1996. This increase
is due primarily to the acquisition of the Entex products, Ceclor CD, Keftab,
Nasarel and Nasalide and the expansion of Dura's sales force.

Gross profit for the nine months ended September 30, 1997 was $82.1 million,
an increase of $48.7 million as compared to the same period in 1996. Gross
profit as a percentage of sales for the nine month period ended September 30,
1997 was 78%, as compared to 73% for the same period in 1996. This increase is
due primarily to higher average gross margins earned on sales of the Entex
products, Ceclor CD, Keftab, Nasarel and Nasalide as compared to the average
gross margins earned on Dura's other products.

Contract revenues for the nine months ended September 30, 1997 were $22.4
million, an increase of $5.0 million, or 29%, as compared to the same period in
1996. Dura, under agreements with several companies, conducts feasibility
testing and development work on various compounds for use with Spiros. Contract
revenues from Spiros-related development and feasibility agreements for the nine
months ended September 30, 1997 were $21.2 million, including $18.3 million from
Spiros Corp., as compared to $14.4 million, including $12.8 million from Spiros
Corp., for the same period in 1996. Dura also earns contract revenues under
various agreements for the co-promotion of pharmaceutical products. Contract
revenues from such agreements were $1.2 million for the nine months ended
September 30, 1997 compared to $3.0 million for the same period in 1996.

55
<PAGE>

Clinical, development and regulatory expenses for the nine months ended
September 30, 1997 were $18.2 million, an increase of $6.0 million over the same
period in 1996. The increase reflects additional expenses incurred by Dura under
feasibility and development agreements covering the use of various compounds
with Spiros.

Selling, general and administrative expenses for the nine months ended
September 30, 1997 were $49.5 million, an increase of $23.0 million as compared
to the same period in 1996, but decreased as a percentage of total revenues to
39% as compared to 42% for the same period in 1996. The dollar increase is
primarily due to increased costs incurred to support Dura's sales and contract
revenue growth, including costs associated with expanding Dura's sales force,
higher marketing costs relating to the newly-acquired products, and amortization
of newly-acquired product rights. The decrease as a percentage of revenues
reflects the growth of pharmaceutical sales due to new product acquisitions and
the growth of contract revenues.

Interest income for the nine months ended September 30, 1997 was $11.4
million, an increase of $6.8 million as compared to the same period in 1996. The
increase is due primarily to higher balances of cash and short-term investments
resulting from public stock offerings completed in May and November 1996 and the
Notes offering completed in July 1997, as well as cash generated from
operations.

Interest expense for the nine months ended September 30, 1997 was $2.5
million compared to $602,000 for the same period in 1996. The increase in
interest expense is primarily due to interest accrued on the Notes issued by
Dura in the third quarter of 1997.

Dura's effective tax rate was 36% for the nine month period ended September
30, 1997 compared to 11% for the same period in 1996. This increase is primarily
due to the utilization of net operating loss carryforwards in 1996. Net
operating loss carryforwards available in 1997 relate primarily to tax
deductions for previously exercised stock options and, as such, the related
benefit from their utilization has been credited directly to shareholders'
equity.

Dura records interim provisions for income taxes based on the estimated
effective combined tax rate to be applicable for the fiscal year. This estimate
is reevaluated by management each quarter based on forecasts of income before
income taxes for the year as well as anticipated modifications to statutory
federal and state tax rates. During the three months ended September 30, 1997,
Dura reduced its estimate of the combined effective tax rate expected to be
applicable for fiscal 1997 from 39% to 36%.

FISCAL YEAR 1996 ("1996") COMPARED TO FISCAL YEAR 1995 ("1995")

Total revenues in 1996 increased $52.6 million, up 102%, as compared to
1995. Net income for 1996 was $24.3 million as compared with a net loss of $35.8
million for 1995, a change of $60.1 million or $2.13 per share. The 1995 net
loss of $35.8 million was due to charges totalling $43.8 million relating to
Dura's Spiros development program, consisting of a $30.8 million noncash charge
for in-process technology acquired in connection with Dura's acquisition of DDSI
and a $13.0 million purchase option charge resulting from the cash contribution
to Spiros Corp..

Pharmaceutical sales in 1996 increased by $40.3 million, or 102%, as
compared to 1995 due primarily to sales of products acquired in 1996 as well as
higher sales at Health Script, acquired in March 1995.

Gross profit for 1996 increased by $29.6 million, or 103%, as compared to
1995 due to the increase in pharmaceutical sales. Gross profit as a percentage
of sales remained steady at 73%.

Contract revenues in 1996 increased by $12.4 million, or 101%, as compared
to 1995. Dura, under agreements with several companies, conducts feasibility
testing and development work on various compounds for use with Spiros. In
addition, Dura receives royalties primarily from the co-promotion of
pharmaceutical products. Contract revenues from Spiros-related development and
feasibility agreements generated $21.2 million in 1996, including $19.1 million
from Spiros Corp., compared to $9.5 million,

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including $8.0 million from DDSI, in 1995. Contract revenues from royalties were
$3.4 million in 1996 as compared to $2.6 million for 1995.

Clinical, development and regulatory expenses for 1996 increased by $10.1
million to $18.5 million as compared to 1995. The increase reflects expenses
incurred by Dura under feasibility and development agreements covering the use
of various compounds with Spiros.

Selling, general and administrative expenses in 1996 increased $16.7 million
to $42.6 million as compared to 1995, and decreased as a percent of total
revenues to 41% in 1996 from 50% in 1995. The dollar increase results primarily
from marketing costs related to newly acquired products as well as higher costs
at Health Script to support its increased sales. The decrease as a percentage of
revenues reflects increased productivity of the sales force, the growth of
pharmaceutical sales due to product acquisitions, and the growth of contract
revenues.

Other income-net (primarily interest income) for 1996 increased $4.3 million
to $6.2 million as compared to 1995. The increase is due to an increase in
interest income of $4.1 million from cash generated from the August 1995 and May
and November 1996 public stock offerings as well as cash generated from
operations.

Dura recorded an income tax provision of $3.5 million for 1996 as compared
to $406,000 for 1995. The increased provision is due to the increase in income
before income taxes in 1996. The 1996 provision reflects the expected combined
federal and state tax rate of approximately 40% largely offset by the benefit
from the utilization of net operating loss carryforwards.

FISCAL YEAR 1995 ("1995") COMPARED TO FISCAL YEAR 1994 ("1994")

Total revenues in 1995 increased $18.8 million, or 58%, over 1994. However,
Dura incurred a net loss in 1995 of $35.8 million, or $1.53 per share, due to
charges totaling $43.8 million related to Dura's Spiros development program. The
charges consisted of a $30.8 million non-cash charge for in-process technology
acquired in connection with Dura's acquisition of DDSI and a $13.0 million
purchase option charge resulting from the cash contribution to Spiros Corp.. If
the charges were excluded, Dura would have reported net income in 1995 of $8.0
million or $0.28 per share.

Pharmaceutical sales in 1995 increased by $17.1 million, or 77%, over 1994
due primarily to the $15.3 million in sales generated by Health Script, 1995
product acquisitions and internally-developed products that were launched in the
second half of 1994. The remaining increase was generated by the pre-existing
product line for which sales growth was impacted by the relatively weak
cough/cold season experienced across the country in the first quarter of 1995.

Gross profit for 1995 increased by $10.4 million, or 57%, as compared to
1994. Gross profit as a percentage of sales decreased to 73% in 1995 from 82% in
1994 due primarily to the lower margins generated on sales by Health Script in
addition to the impact of contract pricing to managed care organizations.

Contract revenues in 1995 increased by $1.7 million as compared to 1994. In
1995 and 1994, Dura recorded contract revenues of $1.6 million and $400,000,
respectively, relating to an agreement with Drug Royalty Corporation USA Inc.
("DRC") under which Dura received funding through December 1995 to expand its
sales force. In addition, Dura conducts development work under contracts with
several companies and receives royalties. The development contracts relate to
the testing and development of various compounds for use with Spiros and
generated revenues in 1995 and 1994 of $9.5 million and $9.9 million,
respectively, including $8.0 million and $9.2 million from DDSI. Dura recorded
royalties under the co-promotion arrangement with Bausch & Lomb Pharmaceuticals,
Inc. ("Bausch & Lomb") of $813,000 in 1995.

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Clinical, development and regulatory expenses in 1995 decreased by $946,000,
or 10%, from 1994. Under an agreement with DDSI, Dura managed the development of
DDSI products and incurred development expenses on behalf of DDSI in 1995 and
1994 of $6.4 million and $8.3 million, respectively, for which it received
contract revenues. The decrease in DDSI development expenses resulted primarily
from the shift from use of outside contractors to Dura employed personnel and
resources. This decrease was partially offset by increased expenses associated
with work being performed under development contracts, for which Dura recorded
contract revenues of $1.0 million in 1995, and by costs associated with the
internal development of respiratory pharmaceutical products.

Selling, general and administrative expenses in 1995 increased by $8.0
million over 1994 and decreased as a percentage of revenues from 55% in 1994 to
50% in 1995. The dollar increase results primarily from the operating costs of
Health Script, acquired in March 1995, and increased sales and contracting
levels. The decrease as a percentage of revenues reflects an increase in the
productivity of the sales force, the growth of pharmaceutical sales due to
product acquisitions and the growth of contract revenues.

Other income-net (primarily interest income) in 1995 increased by $1.4
million as compared to 1994. The increase resulted primarily from interest
income on cash balances generated by the November 1994 and August 1995 stock
offerings which was partially offset by interest expense resulting from
obligations incurred in connection with 1995 acquisitions.

Dura recorded income tax provisions of $406,000 and $34,000 in 1995 and
1994, respectively. The provisions reflect the expected combined federal and
state tax rate of 40% offset by the benefit from utilization of net operating
loss carryforwards, which are generally limited to 90% of taxable income.

LIQUIDITY AND CAPITAL RESOURCES

Cash, cash equivalents and short-term investments increased by $214.4
million to $454.7 million at September 30, 1997 from $240.3 million at December
31, 1996. The increase resulted primarily from the net proceeds of the offering
of the Notes as well as from cash generated from operations, partially offset by
the acquisition of the intranasal steroid products Nasarel and Nasalide for $70
million in May 1997 and capital expenditures of $18.8 million. Working capital
increased by $237.4 million to $457.3 million at September 30, 1997 from $219.9
million at December 31, 1996.

At September 30, 1997, Dura had an aggregate of $297.7 million in long-term
obligations, of which $2.9 million is to be paid during the next 12 months. As
of September 30, 1997, additional future contingent obligations totaling $97.9
million relating to product acquisitions are due through 2004.

In April 1997, Dura entered into a loan agreement which provides for the
borrowing of up to $50 million on an unsecured basis through May 1, 1999. As of
September 30, 1997, no borrowings were outstanding under this loan.

Dura provides development and management services to Spiros Corp. pursuant
to various agreements for the development of Spiros for use with certain
respiratory drugs. Dura records contract revenues from Spiros Corp. equal to
amounts due for such services, less a pro rata amount allocated to warrant
subscriptions receivable. On October 10, 1997, Dura announced its intention to
exercise, prior to the completion of this Offering and subject to providing
formal notice of exercise, its option to acquire all of the callable common
stock of Spiros Corp. for an aggregate purchase price estimated to be $45.7
million, payable in cash, shares of Dura Common Stock, or any combination
thereof.

Dura anticipates that its existing capital resources, together with cash
expected to be generated from operations and available bank borrowings, should
be sufficient to finance the transactions discussed above and its operations
through at least the next 12 months. Significant additional resources, however,
may be required in connection with product or company acquisitions or
in-licensing opportunities. At present, Dura is actively pursuing the
acquisition of rights to several products and/or companies which may require

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the use of substantial capital resources; however, there are no present
agreements or commitments with respect to such acquisitions.

Assuming the completion of the Offering and the Spiros Corp. Purchase, Dura
expects to incur charges to earnings for the amount of the Contribution and for
purchased in-process technology, in an amount approximating the Spiros Corp.
Purchase price, that will be recorded in the periods in which these transactions
are consummated. Dura will also record warrant subscriptions receivable and a
corresponding increase to additional paid-in capital reflecting the estimated
fair value of the Warrants issued pursuant to the Offering. Thereafter, cash
received from Spiros Corp. II pursuant to the Development Agreement will be
pro-rated between contract revenue and the warrant subscriptions receivable.

SPIROS CORP. II

Spiros Corp. II was formed in September 1997 and has not yet commenced
operations. Assuming completion of the Offering, Spiros Corp. II expects to
receive approximately $75 million from the Contribution and approximately
$ million in net proceeds from the Offering ($ million if the
Underwriters' over-allotment option is exercised in full). Spiros Corp. II
anticipates that it will use the Contribution and substantially all of such net
proceeds to undertake research, clinical development, product development and
commercialization of the Spiros Products. See "Use of Proceeds."

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DESCRIPTION OF THE WARRANTS

Each Unit includes a Warrant to purchase one-fourth of one share of Dura
Common Stock. The Warrants will be issued pursuant to a Warrant Agreement (the
"Warrant Agreement") to be entered into between Dura and ChaseMellon Shareholder
Services, as warrant agent (the "Warrant Agent") on the closing date of the
Offering. Except as described below, the Warrants will be exercisable from the
Separation Date until December 31, 2002 (the "Warrant Expiration Date"), at an
exercise price equal to $ per share of Dura Common Stock (the "Exercise
Price"), subject to certain adjustments, as described below. Warrants not
exercised on or prior to the Warrant Expiration Date will become void and all
rights in respect thereof will cease as of such time. The Warrants will trade
only with shares of Spiros Corp. II Common Stock as Units until the Separation
Date. On and after the Separation Date the Warrants will trade separately from
the Spiros Corp. II Common Stock.

In the event of (i) certain reorganizations of Dura or reclassifications of
Dura Common Stock, (ii) certain mergers, consolidations or other business
combinations of Dura with any person, other than a merger or consolidation with
a subsidiary of Dura in which Dura is the surviving entity, (iii) a sale, lease,
transfer or conveyance by Dura of all or substantially all of its property or
assets or (iv) the announcement or commencement of a tender or exchange offer
for securities of Dura pursuant to which the acquiror would beneficially own
securities of Dura representing 50% or more of the aggregate voting power of
Dura (each an "Acceleration Event"), the Separation Date will be accelerated to
the date of such event and the Warrants will become immediately exercisable.

The Warrant Agreement provides that the Exercise Price and the number of
shares of Dura Common Stock issuable upon exercise of each Warrant will be
adjusted in the event of any stock split, stock combination, rights offering,
stock dividend or certain other special dividends with respect to Dura Common
Stock. The Warrant Agreement further provides that in case of any capital
reorganization of Dura, any reclassification of Dura Common Stock, any
consolidation or merger or any other business combination of Dura with or into
another corporation or any sale, lease or transfer to any person of all or
substantially all of the assets of Dura, the holder of each outstanding Warrant
will have the right, upon subsequent exercise of the Warrant, to receive the
kind and amount of shares of stock, other securities or property receivable upon
the capital reorganization, reclassification, consolidation, merger, sale, lease
or transfer that would have been received by such holder upon the exercise of
the Warrant had such Warrant been exercised immediately prior to that event, and
the Exercise Price will be appropriately adjusted.

Fractional shares of Dura Common Stock will not be issued upon exercise of
the Warrants. In lieu thereof, a cash adjustment based on the last sale price of
the Dura Common Stock as reported on the Nasdaq National Market (or as reported
on a national securities exchange, if applicable) on the date of the exercise
will be made. The Warrants do not confer upon the holder thereof any voting,
preemptive or other rights as a stockholder of Dura.

Warrants may be exercised following the Separation Date and through the
Warrant Expiration Date by the surrender to the Warrant Agent of a duly executed
certificate evidencing the Warrants accompanied by payment in full by a
certified or official bank check, payable to the order of Dura, for the Exercise
Price multiplied by the number of shares of Dura Common Stock to be acquired
pursuant to such exercise.

Certificates evidencing the Warrants will be a legend substantially as
follows:

"Until December 31, 1999 or such earlier date as the Purchase Option is
exercised or expires unexercised (the "Separation Date"), the Warrants
represented by this Certificate may be traded, exchanged or otherwise
transferred only together with the Common Stock of Spiros Corp. II issued
herewith. The holder hereof may, but need not, submit this Certificate for
the removal of this legend after the Separation Date."

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DURA CAPITAL STOCK

The authorized capital stock of Dura consists of 100,000,000 shares of
Common Stock and 5,000,000 shares of Preferred Stock, par value $.001 per share
("Preferred Stock").

COMMON STOCK

At September 30, 1997, there were 43,890,806 shares of Dura Common Stock
outstanding and held of record by approximately 360 stockholders. The holders of
Dura Common Stock are entitled to one vote for each share held of record on all
matters submitted to a vote of the stockholders. Subject to the prior or equal
rights of holders of all classes of stock at the time outstanding having prior
or equal rights as to dividends, the holders of Dura Common Stock are entitled
to receive, when and as declared by the Board of Directors of Dura, out of any
assets of Dura legally available therefor, such dividends as may be declared
from time to time by the Board of Directors of Dura. See "Price Range of Dura
Common Stock and Dividend Policies." In the event of liquidation, dissolution or
winding up of Dura, holders of Dura Common Stock are entitled to share ratably
in all assets remaining after payment of liabilities and the liquidation
preference of any outstanding Preferred Stock of Dura. Holders of Dura Common
Stock have no preemptive rights and no right to convert their Dura Common Stock
into any other securities. All outstanding shares of Dura Common Stock are fully
paid and nonassessable.

PREFERRED STOCK

The Board of Directors of Dura has the authority to issue Preferred Stock in
one or more series and to fix the rights, priorities, preferences,
qualifications, limitations and restrictions, including the dividend rates,
conversion rights, voting rights, terms of redemption, terms of sinking funds,
liquidation preferences and the number of shares constituting any series of the
designation of such series, without any further vote or action by the
stockholders, which could decrease the amount of earnings and assets available
for distribution to holders of Dura Common Stock or adversely affect the rights
and powers, including voting rights, of the holders of Dura Common Stock. The
issuance of Preferred Stock by Dura may have the effect of delaying, deferring
or preventing a change in control of Dura without further action by the
stockholders, may discourage bids for Dura Common Stock at a premium over the
market price of Dura Common Stock and may adversely affect the market price of
and the voting and other rights of the holders of Dura Common Stock. At present,
Dura has no plans to issue any Preferred Stock.

WARRANTS TO PURCHASE COMMON STOCK

At September 30, 1997, there were outstanding warrants (other than the
Series W Warrants and the Series S Warrants, described below) to purchase an
aggregate of 3,000 shares of Dura Common Stock at $.25 per share; 1,014 shares
at $2.44 per share; 600,000 shares at $4.38 per share; and 200,000 shares at
$6.48 per share. Such warrants expire on April 2, 1999, September 27, 1998,
April 17, 2001, and September 21, 1999, respectively. Each such warrant contains
provisions for the adjustment of the exercise price and the aggregate number of
shares issuable upon exercise of the warrant under certain circumstances,
including stock dividends, stock splits, reorganization, reclassifications or
consolidations. The holders of certain of the warrants are entitled to certain
registration rights with respect to Dura Common Stock issued or issuable upon
exercise thereof. Dura has registered the resale of 204,014 shares of Dura
Common Stock issuable upon exercise of the warrants on a "shelf registration
statement" on Form S-3 filed with the Commission. See "--Registration Rights."

Also outstanding at September 30, 1997 were Series W Warrants to purchase an
aggregate of 812,000 shares of Dura Common Stock at $2.38 per share and Series S
Warrants to purchase an aggregate of 2,240,000 shares of Dura Common Stock at an
exercise price of $19.47 per share, subject to adjustment as defined in the
warrants (collectively, the Series W Warrants and the Series S Warrants are
referred to herein as the "Dura Warrants"). The Series W Warrants are currently
exercisable through September 27, 2000. The Series S Warrants will be
exercisable after December 29, 1997 or sooner under certain circumstances (the
"Series S Exercise Date"), through December 29, 2000. The Dura Warrants contain
provisions for the adjustment of the exercise price and the aggregate number of
shares of Dura Common

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Stock issuable upon exercise of the Warrants under certain circumstances,
including stock splits, stock combinations, rights offerings, stock dividends or
certain special dividends with respect to the Dura Common Stock. In addition,
the exercise price and the number of shares issuable upon exercise of the Series
W Warrants and the Series S Warrants will be appropriately adjusted, with
respect to the Series W Warrants, in the event of the issuance of Dura Common
Stock at a per share price less than the exercise price of the Series W
Warrants, and, with respect to the Series S Warrants, in the event of the
issuance of Dura Common Stock below "fair market value" (as defined in the
Series S Warrants). Dura has registered the resale of shares of Dura Common
Stock issuable upon exercise of the Series W Warrants on a "shelf registration
statement" on Form S-3 filed with the Commission. Dura is obligated to register
the shares of Dura Common Stock issuable upon exercise of the Series S Warrants,
and in certain circumstances, the Series W Warrants, upon demand or with the
registration of its other securities. See "--Registration Rights."

NOTES CONVERTIBLE INTO COMMON STOCK

In the third quarter of 1997, Dura issued $287.5 million of principal amount
of its 3 1/2% Notes due 2002. The Notes are convertible, at the option of the
holder, into shares of Dura's Common Stock at any time prior to maturity or
redemption at a conversion price of $50.635 per share, subject to adjustment
under certain conditions. Interest is payable semi-annually, commencing on
January 15, 1998. The Notes can be redeemed by Dura from time to time, in whole
or in part, at specified redemption prices after July 15, 2000.

REGISTRATION RIGHTS

Pursuant to an Investors' Rights Agreement dated as of September 27, 1993
(the "1993 Registration Rights Agreement"), Dura has registered on a shelf
registration statement on Form S-3 the resale of the 812,000 shares of Dura
Common Stock (the "Series W Shares") issuable upon exercise of all of the
currently outstanding Series W Warrants. Dura is further obligated to file a
registration statement with respect to the resale of the Series W Warrants and
the Series W Shares within 30 days after a registration statement on Form S-3
becomes available for use by Dura with respect to the registration of the resale
of the Series W Warrants. Moreover, if, prior to the earlier of (i) September
27, 1996 (or, in the case of any holder who cannot resell his Series W Warrants
under Rule 144(k), September 27, 1998) or (ii) the effective date of a
registration statement on Form S-3 with respect to the resale of the Series W
Warrants, Dura registers any of its securities, the holders of the Series W
Warrants will have the right to include their Series W Warrants in such
registration.

Pursuant to the Registration Rights Agreement dated as of April 17, 1994,
the holder of 914,024 outstanding shares of Dura Common Stock (and 600,000
shares of Dura Common Stock issuable upon exercise of an outstanding warrant) is
entitled to notice of registration of any of the Dura's securities under the
Securities Act and is entitled to include its registrable securities in such
registration. In addition, such holder is entitled to request registration of at
least 51% of its registrable securities on Form S-3 (or other successor form)
under the Securities Act. All registration expenses in connection with Dura
registrations will be borne by Dura, and all registration expenses in connection
with the holder's requested registration on Form S-3 will be borne by the
holder, up to a maximum of $100,000. All selling expenses will be borne by the
holder. Dura is required to indemnify the holder and the underwriters for such
holder, if any, under certain circumstances. Registration rights may be
transferred only to a transferee of registrable securities who, after such
transfer, holds 200,000 shares of Dura registrable securities. The registration
rights granted under this agreement terminate on April 17, 1999 (or, with
respect to registration on Form S-3, if earlier, the date on which the holder is
able to sell all registrable securities under Rule 144(k)).

Pursuant to an Investors' Rights Agreement dated as of December 29, 1995
(the "1995 Registration Rights Agreement"), Dura is obligated to use its best
efforts to file a registration statement on Form S-3 with respect to the resale
of the shares of Dura Common Stock issuable upon exercise of the Series S
Warrants (the "Series S Shares") on or before December 29, 1997. In addition, if
at any time after

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December 29, 1997, Dura registers its securities, the holders of the Series S
Warrants will have the right to include the resale of the Series S Shares in
such registration.

Pursuant to the 1993 Registration Rights Agreement and the 1995 Registration
Rights Agreement, Dura is required to bear all the registration expenses. Dura
is required to indemnify the holders and the underwriters for such holders, if
any, under certain circumstances. Dura's respective obligations to register the
Series W Warrants and the Series S Shares will each terminate in certain
circumstances.

POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS

CERTIFICATE OF INCORPORATION AND BYLAWS

Dura's Certificate of Incorporation authorizes its Board of Directors
("Board") to establish one or more series of undesignated Preferred Stock, the
terms of which can be determined by the Board at the time of issuance. See
"--Preferred Stock." The Certificate of Incorporation also provides that all
stockholder actions must be effected at a duly called meeting of stockholders
and not by a consent in writing. Dura's Bylaws provide that Dura's Board will be
classified into two classes of directors serving staggered two-year terms, with
one class of directors to be elected at each annual meeting of stockholders. In
addition, Dura's Bylaws do not permit stockholders to call a special meeting of
stockholders; only Dura's Chief Executive Officer or the Chairman of the Board,
or the President or Secretary at the written request of a majority of the Board,
are permitted to call a special meeting of stockholders. The Bylaws also require
that stockholders give advance notice to Dura's secretary of any nominations for
director or other business to be brought by stockholders at any stockholders'
meeting and require a majority vote of members of Dura's Board or stockholders
to amend Bylaw provisions. These provisions of the Dura Certificate of
Incorporation and Bylaws could discourage potential acquisition proposals and
could delay or prevent a change in control. Such provisions may also have the
effect of preventing changes in Dura's management.

DELAWARE TAKEOVER STATUTE

Dura is subject to Section 203 of the Delaware General Corporation Law
("Section 203") which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder (defined as any person or entity that is the beneficial owner of at
least 15% of a corporation's voting stock) for a period of three years following
the time that such stockholder became an interested stockholder, unless: (i)
prior to such time, the board of directors of the corporation approved either
the business combination or the transaction that resulted in the stockholder's
becoming an interested stockholder; (ii) upon consummation of the transaction
that resulted in the stockholder's becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding, for purposes of
determining the number of shares outstanding, those shares owned (x) by persons
who are directors and also officers and (y) by employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time, the business combination is approved by
the board and authorized at an annual or special meeting of stockholders, and
not by written consent, by the affirmative vote of at least two-thirds of the
outstanding voting stock that is not owned by the interested stockholder.

Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, lease, exchange, mortgage, transfer, pledge or other disposition involving
the interested stockholder and 10% or more of the assets of the corporation;
(iii) subject to certain exceptions, any transaction which results in the
issuance or transfer by the corporation of any stock of the corporation to the
interested stockholder; (iv) any transaction involving the corporation that has
the effect of increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested stockholder; or
(v) the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or through
the corporation.

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SPIROS CORP. II CAPITAL STOCK

The authorized capital stock of Spiros Corp. II will consist of 6,500,000
shares of Common Stock, par value $0.001 per share, and 1,000 Special Shares,
par value $1.00 per share. It is not expected that Spiros Corp. II will pay any
dividends for the foreseeable future.

COMMON STOCK

GENERAL. Upon completion of the Offering all of the outstanding shares of
Spiros Corp. II Common Stock will be duly authorized, fully paid and validly
issued. See "The Agreement and the Purchase Options--Stock Purchase Option."
Holder of Spiros Corp. II Common Stock are entitled to receive such dividends as
may be recommended by the Board of Directors and approved by the holders of a
majority of the Special Shares. It is expected that Spiros Corp. II will not pay
dividends on the Spiros Corp. II Common Stock. In a solvent winding-up or
liquidation of Spiros Corp. II, the assets available for distribution among the
holders of shares of Spiros Corp. II Common Stock shall be distributed pro rata.
Shares of Spiros Corp. II Common Stock have no conversion or redemption rights.
Prior to the Offering, no shares of Spiros Corp. II Common Stock were
outstanding.

VOTING RIGHTS. The Amended and Restated Certificate of Incorporation of
Spiros Corp. II provides that the holders of Spiros Corp. II Common Stock are
entitled to one vote per share, either in person or by proxy, at stockholder
meetings. Two or more stockholders present in person or by proxy holding not
less than one third of the issued and outstanding Spiros Corp. II Common Stock
constitute a quorum at such meetings. A majority of votes cast is required for
most items of business placed before a general meeting of stockholders. The
consent of the holder of Special Shares is required for certain actions. See
"Risk Factors--Business Risks Related to Spiros Corp. II--Limitation on Certain
Spiros Corp. II Activities" and "--Special Shares." Stockholders do not have
cumulative voting rights for the election of directors, which means that the
holders of a majority of the shares elect all of the directors, except for those
directors elected by the Special Shares.

SPECIAL SHARES. There are currently issued 1,000 Special Shares, all of
which are held by Dura. Following the issuance of the Spiros Corp. II Common
Stock, the Special Shares do not confer on the holders thereof the right to vote
at any meeting of Spiros Corp. II stockholders except as referred to in the next
paragraph and except that holders of a majority of Special Shares are entitled
to elect two directors. Nor do these shares have the right to any profits of
Spiros Corp. II. In the event of the winding up of Spiros Corp. II, the Spiros
Corp. II Common Stock shall have a priority over the Special Shares with respect
to return of capital, and the Special Shares shall not otherwise be entitled to
participate in any way in the profits or assets of Spiros Corp. II. Spiros Corp.
II does not presently intend to issue any additional Special Shares.

Until the expiration of the Purchase Option, no resolution or act of Spiros
Corp. II to authorize or permit any of the following will be effective without
the prior written approval of the holders of a majority of the outstanding
Special Shares: (i) the allotment or issue of shares or other securities of
Spiros Corp. II or the creation of any right to such an allotment or issue; (ii)
the reduction of Spiros Corp. II's authorized share capital; (iii) outstanding
borrowings by Spiros Corp. II over an aggregate of $1 million; (iv) the sale or
other disposition of or the creation of any lien or liens on the whole or a
material part of Spiros Corp. II's business or assets; (v) the declaration or
payment of dividends or the making of any other distributions to stockholders;
(vi) any merger, liquidation or sale of all or substantially all of its assets
of Spiros Corp. II; and (vii) any alteration of the Purchase Option. See "The
Agreements and the Purchase Options--Stock Purchase Option."

Thus Dura, as the holder of a majority of the outstanding Special Shares,
could preclude the holders of a majority of the majority of the shares of Spiros
Corp. II Common Stock and the Board of Directors of Spiros Corp. II from taking
any of the foregoing actions during such period. In addition, any resolution to
wind up the affairs of or liquidate Spiros Corp. II will confer upon the holders
of the Special Shares a right to vote and such Special Shares will carry a
number of votes equal to the total number of votes carried by the Spiros Corp.
II Common Stock at the time outstanding.

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THE AGREEMENTS AND THE PURCHASE OPTIONS

The following is a summary of certain provisions of the Stock Purchase
Option, the Technology Agreement, the Albuterol and Product Option Agreement,
the Development Agreement, the Manufacturing and Marketing Agreement and the
Services Agreement. The summary is qualified in its entirety by reference to the
full text of such agreements, copies of which may be obtained upon request to
Dura.

STOCK PURCHASE OPTION

Dura, as the holder of all of the issued and outstanding Special Shares will
have the right, as set forth in Spiros Corp. II's Amended and Restated
Certificate of Incorporation, to purchase all, but not less than all, of the
Spiros Corp. II Common Stock outstanding at the time such right is exercised.
The Purchase Option will be exercisable upon the Exercise Notice given at any
time beginning on the closing date of the Offering and ending on the earlier of
(i) December 31, 2002 or (ii) the 90th day after the date Spiros Corp. II
provides Dura (as such holder) with the Financial Notice, although following the
receipt of the Financial Notice Dura may, at its election, extend such period by
providing additional funding for the continued development of Spiros Products
(but in no event beyond December 31, 2002). If the Purchase Option is exercised,
the Purchase Option Exercise Price, calculated on a per share basis, will be as
follows:

The Purchase Option Exercise Price may be paid in cash or shares of Dura
Common Stock, or any combination of the foregoing, at Dura's sole discretion.
Any such shares of Dura Common Stock will be valued based upon the average of
the closing price for Dura Common Stock on the Nasdaq National Market for ten
trading days immediately preceding the date of the Exercise Notice. In the event
the Purchase Option were transferred, the payment by the subsequent holder of
the majority of the Special Shares could be made in cash or, if such holder or
its parent is a company whose common equity securities are listed on a national
securities exchange or admitted to unlisted trading privileges or listed on the
Nasdaq National Market, in the sole discretion of such holder, in shares of such
listed common equity security.

Dura owns all of the issued and outstanding Special Shares, which grants
Dura the Purchase Option and confers certain voting and other rights, including
the right to elect two of the five directors of Spiros Corp. II. Under its
Amended and Restated Certificate of Incorporation, Spiros Corp. II will be
prohibited, until the expiration of the Purchase Option, from taking or
permitting certain actions inconsistent with Dura's rights under the Purchase
Option. For example, until the expiration of the Purchase Option, Spiros Corp.
II will not be able to, among other things, without the consent of Dura, pay any
dividends, issue additional shares of capital stock, have outstanding borrowings
in excess of an aggregate of $1 million, or merge, liquidate or sell all or
substantially all of its assets or alter the Purchase Option. At present, Dura
has no intention of transferring such Special Shares. See "Spiros Corp. II
Capital Stock."

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TECHNOLOGY LICENSE AGREEMENT

Dura, Spiros Corp. and Spiros Corp. II will enter into the Technology
Agreement, under which Dura and Spiros Corp. will grant Spiros Corp. II an
exclusive, worldwide, perpetual, royalty-bearing license to use the Core
Technology in research, development and commercialization (except with respect
to beclomethasone in Asia) of the Spiros Products, including rights to patents,
patent applications and other intellectual property rights.

In consideration for these license rights granted to Spiros Corp. II by Dura
and Spiros Corp., Spiros Corp. II will pay Dura and Spiros Corp. a technology
access fee equal to 5% of the Net Sales of each Spiros Product. Spiros Corp.
II's obligation will terminate, on a country-by-country basis, (a) within 10
years from the first sale of such Spiros Product in those countries where no
patents covering such product are issued and (b) in those countries where
patents covering the Spiros Products are issued, upon the expiration of the
last-to-expire patent covering such Spiros Product in such country.

In addition, Spiros Corp. II will grant Dura (a) a worldwide, exclusive,
royalty-free license to use the Core Technology and the Program Technology to
develop the Spiros Products pursuant to the terms of the Development Agreement;
(b) a worldwide, exclusive, royalty-bearing license to use the Program
Technology to sell Spiros Products worldwide pursuant to the terms of the
Manufacturing and Marketing Agreement; (c) upon Dura's exercise of the Albuterol
Option, a worldwide, exclusive, royalty-free, irrevocable, perpetual license to
the Program Technology to develop, manufacture and commercialize the Albuterol
Product; (d) upon Dura's exercise of the Product Option, a worldwide, exclusive,
royalty-free, irrevocable, perpetual license to the Program Technology to
develop, manufacture and commercialize sell the Spiros Product for which the
Product Option is exercised; and (e) a worldwide, exclusive, royalty-free,
irrevocable, perpetual license to the Program Technology, including technology
relating to enhancements to the existing Spiros technology or any next
generation inhaler system, to develop, manufacture and commercialize products
other than the Spiros Products, including products that compete with the Spiros
Products.

Until the expiration of the Purchase Option, Dura will direct and cause, at
Spiros Corp. II's expense, appropriate patent applications to be prepared,
prosecuted and maintained with respect to patents licensed to Spiros Corp. II
and with respect to any technology developed or acquired on behalf of Spiros
Corp. II by Dura. Upon the termination unexercised of the Purchase Option, all
patents and patent applications developed or acquired on behalf of Spiros Corp.
II will be assigned to Spiros Corp. II.

Pursuant to the terms of the Technology Agreement, if Spiros Corp. II or
Dura receives notice of alleged infringement of any patent, it shall notify the
other party of such infringement and all amounts recovered in any action to
enforce patent rights shall be retained by the parties in proportion to the
respective portion of expenses borne by the parties in enforcing such action.

Spiros Corp. II has agreed to indemnify Dura against certain third party
claims, including patent infringement claims, relating to the Spiros Corp. II's
use of the Program Technology or breach of the Technology Agreement, Development
Agreement or Manufacturing and Marketing Agreement. Dura has agreed to indemnify
Spiros Corp. II against certain third party claims, including patent
infringement claims, relating to Dura's use of the Program Technology,
performance of the Development or breach of the Technology Agreement,
Development Agreement or Manufacturing and Marketing Agreement.

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(b) make, use or sell any of the Program Technology; or (c) authorize, cause or
assist in any way any other person to do any of the foregoing. Following the
expiration or termination of the Purchase Option, the foregoing limitations will
cease to be applicable and Spiros Corp. II will have the right to license,
sublicense, encumber or otherwise transfer the Program Technology for use with
any Spiros Products that have not been acquired by Dura through the exercise of
either the Albuterol Option or the Product Option. Dura may assign its rights
and delegate its obligations under the Technology Agreement only to an affiliate
of Dura, certain successors of Dura or certain persons that acquired
substantially all of the assets of Dura.

The Technology Agreement will remain in full force and effect indefinitely,
unless terminated by (a) mutual agreement of the parties or (b) Dura's exercise
of the Purchase Option.

Either Dura or Spiros Corp. II may terminate the Technology Agreement prior
to its expiration if the other party (a) breaches any material obligation under
the Technology Agreement or the Development Agreement, which breach continues
for a period of 60 days after written notice thereof, (b) enters into any
voluntary proceeding in bankruptcy, reorganization or an arrangement for the
benefit of its creditors, or its Board of Directors or stockholders authorize
such action or (c) fails to dismiss any such proceeding within 60 days after the
same is involuntarily commenced. If Spiros Corp. II terminates the Technology
Agreement, Spiros Corp. II's license to use the Program Technology will continue
(except with respect to any Spiros Products that have been previously acquired
by Dura through exercise of the Albuterol Option or the Product Option), and
Spiros Corp. II will be free to enter into arrangements with third parties to
research, develop and commercialize the Spiros Products. If Dura terminates the
Technology Agreement, (a) Spiros Corp. II's license to use the Core Technology
under the Technology Agreement will terminate, (b) all of Spiros Corp. II's
rights to the Program Technology will revert to Dura, and (c) all rights to
develop, use and sell the Spiros Products will revert to Dura. Dura and Spiros
Corp. II will use reasonable efforts for a period of 120 days after the
Technology Agreement is terminated by Dura to reach agreement on royalties and
other compensation to be paid by Dura to Spiros Corp. II solely with respect to
the Spiros Products and the Program Technology and, in the absence of such
agreement, the matter will be submitted to binding arbitration. There can be no
assurance that, upon termination of the Technology Agreement by Spiros Corp. II,
that it will be able to make alternative arrangements for the research,
development and commercialization of some or all of the Spiros Products.

ALBUTEROL AND PRODUCT OPTION AGREEMENT

Dura and Spiros Corp. II will enter into the Albuterol and Product Option
Agreement pursuant to which Dura will obtain (a) the Albuterol Program Assets
and (b) the Spiros Product Program Assets.

The Albuterol Program Assets include (a) the Albuterol Product, (b)
albuterol as formulated for use in the Albuterol Product, (c) a perpetual,
sublicensable, non-exclusive, royalty-free license to the technology owned by
Dura or developed or acquired by Dura during the term of the Development
Agreement applicable to the Albuterol Product for use solely with the Albuterol
Product, and (d) all applications and documents filed with the FDA or a foreign
regulatory authority to obtain regulatory approval to commence commercial sale
or use of the Albuterol Product. The Albuterol Option is exercisable commencing
on the date of the closing of the Offering and ending on the earlier of (i) 360
days after receipt of FDA approval to market the Albuterol Product or (ii) the
date Dura ceases to manufacture or market the Albuterol Product in accordance
with the terms of the Manufacturing and Marketing Agreement.

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proceeds, if any, from the exercise of the Albuterol Option or the Product
Option) set forth in the proposed budget contained herein. See "Use of
Proceeds."

The Spiros Product Program Assets include (a) the Option Product, (b) the
compound to be delivered by the Option Product, as formulated for use
specifically in the Option Product, (c) a perpetual, sublicensable,
non-exclusive, royalty-free license to the technology owned by Dura or developed
or acquired by Dura during the term of the Development Agreement applicable to
the Option Product for use solely with the Option Product, and (d) all
applications and documents filed with the FDA or a foreign regulatory authority
to obtain regulatory approval to commence commercial sale or use of the Option
Product. The Product Option is exercisable with respect to each Spiros Product
commencing on the date of the closing of the Offering and ending 90 days after
receipt of FDA approval to market such Spiros Product; provided, however, that
the Product Option may only be exercised with respect to a single Spiros
Product.

Any payments received by Spiros Corp. II with respect to the exercise of the
Albuterol Option and the Product Option will become part of the Available Funds.

The Albuterol and Product Option Agreement will automatically terminate in
the event that Spiros Corp. II terminates the Technology Agreement, the
Development Agreement or the Manufacturing and Marketing Agreement, consistent
with the terms of those agreements. Additionally, the Albuterol and Product
Option Agreement will terminate on the date the Purchase Option terminates,
whether by exercise or otherwise.

DEVELOPMENT AGREEMENT

Dura and Spiros Corp. II will enter into the Development Agreement under
which Dura will agree to use commercially reasonable efforts to develop the
Program Technology for the purpose of the Development and to make the Other
Expenditures. Dura will furnish all labor, supervision, services, supplies, and
materials necessary to perform the Development.

Dura also agrees to use commercially reasonable efforts to obtain the rights
to, and to sublicense to Spiros Corp. II, any patent or technology license held
by a third party that Dura reasonably determines to be necessary or useful to
enable Dura to conduct the Development. Dura will act as Spiros Corp. II's
exclusive agent for the filing and prosecuting of all regulatory applications
and permits required to obtain FDA approval in Dura's name and any other
necessary regulatory approvals for the Spiros Products. In the event that the
Purchase Option expires unexercised, Dura will use its reasonable efforts to
cause all applications and documents filed with the FDA or a foreign regulatory
authority to obtain regulatory approvals for the Spiros Products, with respect
to which Dura has not acquired exclusive rights, to be assigned to Spiros Corp.
II.

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calendar year 120% of the amount allocated in the applicable annual workplan and
budget, unless otherwise approved by Spiros Corp. II.

During the term of the Development Agreement, each of Dura and Spiros Corp.
II will provide the other with quarterly reports with respect to all payments
due and all credits taken for such quarter, including, in the case of Dura, a
statement of the Development Costs incurred during such quarter and a summary of
work performed for Spiros Corp. II. Additionally, each of Spiros Corp. II and
Dura is required to maintain and make available for inspection by an independent
public accountant selected by the requesting party, once in each calendar year
and upon reasonable notice and during regular business hours, such records of
the other party as may be necessary to verify the accuracy of reports and
payments made in respect of the Development Agreement.

Payments to Dura under the Development Agreement for Dura's work in
performing the Development will be made for the full amount of all of Dura's
research and development expenses, general and administrative expenses, capital
equipment costs and all other costs and expenses (the "Development Costs")
incurred by Dura in performing the activities described above, up the maximum
amount of the funds available to Spiros Corp. II, which include substantially
all of the Available Funds. Development Costs will include development expenses
(including salaries, benefits, supplies, and facilities and overhead
allocations) that are billed at a rate of fully burdened cost plus 25%;
provided, however, that services provided by third parties will be billed at a
rate of cost plus 15%. This pricing structure is considered by Dura to be
consistent with contractual relationships it has had with other third parties.
Development Costs also include costs, estimated to be approximately $4 million,
for the Development conducted by Dura from October 10, 1997 through the date of
the closing of the Offering.

If Spiros Corp. II or Dura determines that the development of a particular
Spiros Product should be discontinued because continued development is not
feasible or is uneconomic, or that the development should be expanded to include
one or more Designated Compounds, then Spiros Corp. II and Dura will use
reasonable efforts to agree on the nature of the Development and the identity of
any other compound on which unexpended Available Funds will be spent.

Under the Development Agreement, the manufacture and sale of Spiros Products
for the sole purpose of conducting clinical trials necessary to obtain FDA
approval or any other required regulatory approval will be charged to Spiros
Corp. II as Development Costs. Dura will remit to Spiros Corp. II any revenue
received by it from the sale of such Spiros Products prior to receipt of FDA
approval to market.

Either Dura or Spiros Corp. II may terminate the Development Agreement prior
to its expiration if the other party (a) breaches any material obligation under
the Technology Agreement or the Development Agreement, which breach continues
for a period of 60 days after written notice thereof, (b) enters into any
voluntary proceeding in bankruptcy, reorganization or an arrangement for the
benefit of its creditors, or its Board of Directors or stockholders authorize
such action or (c) fails to dismiss any such proceeding within 60 days after the
same is involuntarily commenced.

Dura's obligation to perform development work under the Development
Agreement will terminate at such time as Spiros Corp. II has cash or cash
equivalents of less than $5 million, which is projected by Spiros Corp. II to
occur on or about February 28, 2001. Upon receipt of notice from Spiros Corp.
II, Dura may elect to provide additional funding for the development of the
Spiros Products.

Dura may assign its rights and delegate its obligations under the
Development Agreement only to an affiliate of Dura, certain successors of Dura
or certain persons that acquired substantially all of the assets of Dura. Spiros
Corp. II may not assign its rights or delegate its obligations under the
Development Agreement.

MANUFACTURING AND MARKETING AGREEMENT

Dura and Spiros Corp. II will enter into the Manufacturing and Marketing
Agreement under which Spiros Corp. II will grant to Dura an exclusive, worldwide
license to manufacture and market the Spiros

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Products. Dura will pay Spiros Corp. II on a quarterly basis a royalty of 7% of
the Net Sales of each Spiros Product beginning upon receipt of FDA approval to
market such product; provided, however, that prior to the expiration of the
Albuterol Option, no royalty payment will be made with respect to Net Sales of
the Albuterol Product.

"Net Sales" for purposes of the Manufacturing and Marketing Agreement and
the Technology Agreement will be defined as the gross amount invoiced for sales
of the Spiros Products by Dura or its sublicensees, if any, to third parties
less (i) discounts actually allowed, (ii) credits for claims, allowances,
retroactive price reductions or returned Spiros Products, (iii) prepaid freight
charges incurred in transporting Spiros Products to customers, (iv) sales taxes
and other governmental charges actually paid in connection with the sales (but
excluding what is commonly known as income taxes) and (v) any royalty
obligations under the 1993 Royalty Agreement. See "Business of Spiros Corp.
II--Patents." Net Sales will not include sales between or among Dura, its
affiliates and its sublicensees unless such sales are for end use rather than
for purposes of resale.

SERVICES AGREEMENT

Spiros Corp. II will enter into the Services Agreement with Dura under which
Dura will provide certain management and administrative services to Spiros Corp.
II at the rate of $100,000 per calendar quarter for services to be performed
internally by Dura and for services performed by third parties for Dura on
Spiros Corp. II's behalf. In addition, Spiros Corp. II will reimburse Dura for
all costs and expenses incurred by Dura in connection with the Offering
(currently estimated to be approximately $750,000). The Services Agreement
terminates on the earlier of (i) the exercise of the Purchase Option or (ii) 12
months after expiration of the Purchase Option.

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FEDERAL INCOME TAX CONSEQUENCES

In the opinion of Brobeck, Phleger & Harrison LLP, counsel for Dura and
Spiros Corp. II ("Counsel"), the following summary accurately sets forth under
currently applicable law all the material U.S. federal income tax consequences
of the purchase, ownership and disposition of the Units, the Spiros Corp. II
Common Stock, the Warrants and the Dura Common Stock (the "Securities") to U.S.
Holders. The following discussion is based on the Internal Revenue Code of 1986,
as amended (the "Code"), judicial decisions, administrative pronouncements, and
existing and proposed regulations issued by the U.S. Department of the Treasury
as now in effect. Each prospective investor should understand that future
legislative, administrative and judicial changes could modify the tax
consequences described below, possibly with retroactive effect.

As used herein, the term U.S. Holder means a beneficial holder of Securities
that (i) owns the Securities as capital assets and (ii) is a U.S. citizen or
resident, a U.S. corporation, an estate the income of which is subject to U.S.
federal income taxation regardless of its source, or a trust that meets the
following two tests: (A) a U.S. court is able to exercise primary supervision
over the administration of the trust, and (B) one or more U.S. fiduciaries have
the authority to control all substantial decisions of the trust.

This summary is necessarily general and may not apply to U.S. Holders who
are subject to special treatment under U.S. tax law (including, but not limited
to, insurance companies, tax-exempt organizations, U.S. expatriates, financial
institutions, broker-dealers, and persons whose functional currency is not the
U.S. dollar). The discussion is also not applicable to foreign entities or
individuals who are not U.S. Holders. In addition, this summary is based on the
assumption that the investment in the Units and the transactions related thereto
will be characterized for federal income tax purposes in a manner consistent
with the form of such transactions under the governing documents. While counsel
believes that such characterizations should be given to the transactions, there
can be no assurance that the IRS will not assert that a different
characterization should obtain.

EACH U.S. HOLDER IS URGED TO CONSULT HIS, HER OR ITS OWN TAX ADVISOR WITH
RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO HIM, HER OR IT OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF THE SECURITIES, INCLUDING THE TAX CONSEQUENCES
UNDER STATE, LOCAL, AND FOREIGN TAX LAWS, ESTATE TAX LAWS AND PROPOSED CHANGES
IN APPLICABLE LAWS.

TAXATION OF UNITS

In accordance with the governing documents, immediately upon the purchase of
the Units, Dura will acquire an option to acquire the Spiros Corp. II Common
Stock pursuant to the Purchase Option as well as the right to purchase assets
from Spiros Corp. II under the Albuterol Option and the Product Option. At the
same time, Dura will contribute the Contribution together with the proceeds from
the sale of the Warrants to Spiros Corp. II (the "Dura Contribution"). Under
these circumstances, it is likely that, for U.S. federal income tax purposes,
the Dura Contribution will be treated as having been made in consideration for
the grant of the Purchase Option, the Albuterol Option and the Product Option.
In such event, each U.S. Holder of Units should be treated as receiving a
substantial portion of the Dura Contribution in return for the grant to Dura of
the Purchase Option (the "Stock Option Consideration") even though the Stock
Option Consideration is in fact being transferred directly to Spiros Corp. II.
In such case, each U.S. Holder of Units would be treated as having paid the
amount of the Stock Option Consideration to Spiros Corp. II as part of their
cost of acquiring the Spiros Corp. II Common Stock. Neither the deemed receipt
of the Stock Option Consideration nor the deemed transfer of the Stock Option
Considerations to Spiros Corp. II will subject U.S. Holders to current taxation.
See discussion below with regard to the treatment of the Stock Option
Consideration on the sale of the Units or the Spiros Corp. II Common Stock or on
lapse of the Purchase Option.

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Upon the sale of a Unit, a U.S. Holder will recognize capital gain or loss
measured by the difference between the amount realized and the U.S. Holder's tax
basis in the Unit. For this purpose, the U.S. Holder's aggregate tax basis in a
Unit will include the amount paid for the Unit plus any Stock Option
Consideration the U.S. Holder is deemed to have received in respect of the grant
of the Purchase Option. The amount realized on the sale of the Units will be the
price at which the Units were sold plus the Stock Option Consideration deemed to
have been received. The inclusion of the Stock Option Consideration in the basis
of the Units will offset the inclusion of such amount in the amount realized
upon sale. Therefore, a U.S. Holder who sells Units will not recognize either
gain or loss solely as a result of the deemed receipt of the Stock Option
Consideration or the inclusion of the Stock Option Consideration in the amount
realized upon sale. The holding period for each Unit will begin on the
acquisition date of such Unit. In the case of an individual U.S. Holder, any
such capital gain will be taxable at various preferential rates, if the holding
period for the Units is more than one year, depending on the actual holding
period of the Units at the time of sale. Any capital loss will be long-term if
the holding period for the Unit is more than one year. To the extent that gain
realized upon the sale of a Unit is attributable to its constituent shares of
Spiros Corp. II Common Stock, however, such gain may be treated as ordinary
income if Spiros Corp. II were determined to be a "collapsible corporation" as
described below.

A U.S. Holder of the Units will not recognize gain or loss at the time that
the shares of Spiros Corp. II Common Stock and the Warrant become separately
tradeable. The basis of the Units will be allocated between the Spiros Corp. II
Common Stock and the Warrants after separation in proportion to the relative
fair market value of the Spiros Corp. II Common Stock and the Warrants on the
date the U.S. Holder acquired the Units. The respective holding period of each
constituent part of a Unit on and after the Separation Date will include the
holding period for the Unit prior to the Separation Date.

TAXATION OF WARRANTS

A U.S. Holder of a Warrant will not recognize taxable income or loss upon
exercise of the Warrant. If the Warrant expires unexercised, the U.S. Holder
will recognize a capital loss equal to the U.S. Holder's tax basis in the
Warrant (which will include the portion of the U.S. Holder's basis in the Unit
allocable thereto). Such loss will generally be a capital loss and will be
long-term if the U.S. Holder's holding period for the Warrant is more than one
year. Gain or loss upon a sale of a Warrant will be capital gain or loss. In the
case of an individual U.S. Holder, any such capital gain will be taxable at
various preferential rates, if the holding period for the Warrants is more than
one year, depending on the actual holding period of the Warrants at the time of
sale. Any such loss will be long-term if the holding period for the Warrant was
more than one year on the date of sale. The holding period of the Warrant
acquired as part of the Units should commence on the date the U.S. Holder
acquires the Units.

Adjustments to the exercise price of the Warrants pursuant to the
anti-dilution provisions of the Warrant Agreement, or the failure to make
adjustments to the exercise price upon the occurrence of certain events, may
result in constructive dividends to the U.S. Holders of the Warrants or the
shares of Dura Common Stock under Section 305 of the Code regardless of whether
there is a distribution of cash or property to the U.S. Holder.

TAXATION OF SPIROS CORP. II COMMON STOCK

Upon the sale of shares of Spiros Corp. II Common Stock acquired as part of
a Unit, including a sale pursuant to the Purchase Option, the U.S. Holder will,
except as otherwise discussed in this paragraph, recognize capital gain or loss
equal to the difference between his tax basis in the shares of Spiros Corp. II
Common Stock and the amount realized from such sale. For this purpose, the
amount realized will equal the sum of the cash plus the fair market value of
other property received in such sale (including Dura Common Stock). In addition,
if the sale occurs pursuant to the Purchase Option or prior to the lapse of the
Purchase Option, the amount realized will also include any Stock Option
Consideration the U.S. Holder was deemed to have received. However, the
inclusion of the Stock Option Consideration in the basis of the

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Spiros Corp. II Common Stock will offset the inclusion of such amount in the
amount realized upon sale. Therefore, any such U.S. Holder will not recognize
either gain or loss solely as a result of the deemed receipt of the Stock Option
Consideration. In the case of an individual U.S. Holder, any such capital gain
will be taxable at various preferential rates, if the holding period for the
Spiros Corp. II Common Stock is more than one year, depending on the actual
holding period of the Warrants at the time of sale. Any capital loss will be
long-term if the holding period for the Spiros Corp. II Common Stock was more
than one year on the date of sale. The holding period of Spiros Corp. II Common
Stock acquired as part of a Unit should commence on the date the U.S. Holder
acquired the Unit. However, a gain realized upon a sale of shares of Spiros
Corp. II Common Stock by a U.S. Holder owning (or considered as owning pursuant
to certain "attribution rules") more than 5% of the Spiros Corp. II Common Stock
may be treated as ordinary income if Spiros Corp. II is determined to be a
"collapsible corporation" within the meaning of Section 341 of the Code based on
the facts in existence on the date of such sale. In addition, the IRS may
assert, under certain circumstances where, in the aggregate, U.S. Holders
transferring shares of Spiros Corp. II Common Stock pursuant to the Purchase
Option own, directly or indirectly, a controlling interest in Dura, that U.S.
Holders of the shares of Spiros Corp. II Common Stock should recognize ordinary
income upon the exercise of the Purchase Option on the theory that payment of
the exercise price should be treated as a dividend distribution by Dura under
Sections 301 and 304 of the Code.

Neither the exercise nor the lapse of the Albuterol Option and the Product
Option should have any direct tax consequences on the U.S. Holders. However,
Spiros Corp. II will recognize gain on the exercise of the Albuterol Option and
the Product Option in an amount equal to the amount received on exercise over
the basis of the purchased assets. For this purpose, the amount received should
include the portion of the Dura Contribution which is attributable to the
Albuterol Option and the Product Option. If the Albuterol Option and the Product
Option expire unexercised, the portion of the Dura Contribution attributable to
the Albuterol Option and the Product Option would be included in income by
Spiros Corp. II at the time of such expiration.

The U.S. Holder of Units who is deemed to have received Stock Option
Consideration on the purchase of Units will recognize a short-term capital gain
if the Purchase Option expires unexercised in an amount equal to the Stock
Option Consideration. Notwithstanding that no cash or other consideration will
be received by the U.S. Holder at such time. However, the basis of the U.S.
Holders' Spiros Corp. II Common Stock will still include the amount of the Stock
Option Consideration. That additional basis will reduce the gain or increase the
loss recognized on the eventual sale of the Spiros Corp. II Common Stock. If
stock is sold in the same year that the Purchase Option expires, the gain
recognized on the expiration of the Purchase Option should be fully offset by
the increased loss (or reduced gain) recognized on the sale of the stock as a
result of the inclusion of the Stock Option Consideration in the basis of the
Spiros Corp. II Common Stock. As a result, the net taxable gain (or loss) for
the year will equal the U.S. Holders' economic gain or loss from the investment.
If the Spiros Corp. II Common Stock is not sold in the same year that the
Purchase Option lapses, U.S. Holders will incur an additional income tax
liability for the year of lapse which will not be offset until a later year when
such stock is sold. Finally, significant limitations apply to the deductibility
of capital losses. If the additional basis attributable to the Stock Option
Consideration results in the recognition of a capital loss (as opposed to a
reduction in gain), these limitations could significantly affect the ability of
the U.S. Holders to utilize such loss.

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UNDERWRITING

Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") among Dura, Spiros Corp. II and each of the
Underwriters named below (the "Underwriters"), Dura and Spiros Corp. II have
agreed to sell to each of the Underwriters, and each of the Underwriters
severally has agreed to purchase, the number of Units set forth opposite its
name below:

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF UNITS
---------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.......................................................
Donaldson, Lufkin & Jenrette Securities Corporation..........................

-------
-------
-------
</TABLE>

Merrill Lynch, Pierce, Fenner & Smith Incorporated and Donaldson, Lufkin &
Jenrette Securities Corporation are acting as representatives (the
"Representatives") of the Underwriters.

In the Underwriting Agreement, the several Underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase all of the Units
offered hereby if any Units are purchased. Under certain circumstances, the
commitments of non-defaulting Underwriters may be increased. Dura and Spiros
Corp. II have been advised by the Underwriters that the Underwriters propose
initially to offer the Units to the public in the U.S. and to certain European
institutions at the public offering price set forth on the cover page of this
Prospectus and to certain selected dealers at such price less a discount not in
excess of $ per Unit. After the initial public offering, the offering
price and concession may be changed.

The Underwriters do not intend to sell as part of the initial Offering Units
offered hereby to any accounts over which they exercise discretionary authority.

Dura and Spiros Corp. II have granted to the Underwriters an option
exercisable for 30 days after the date hereof to purchase up to additional
Units to cover over-allotments, if any, at the initial public offering price,
less the underwriting discount. To the extent that the Underwriters exercise
this option, each of the Underwriters will have a firm commitment, subject to
certain conditions, to purchase approximately the same percentage of such Units
that the number of Units to be purchased by it shown in the foregoing table
bears to the total number of Units initially offered to the Underwriters hereby.

Prior to the Offering, there has been no public market for the Units, the
Spiros Corp. II Common Stock or the Warrants. The initial public offering price
for the Units and the Warrant Exercise Price have been determined by
negotiations among Dura, Spiros Corp. II and the Underwriters. Among the factors
considered in such negotiations were the number of Units to be issued, the stock
price of the Dura Common Stock, an assessment of Dura's recent results of
operations, the future prospects of Dura and Spiros Corp. II and their industry
in general, the price-earnings ratios and market prices of securities of
companies engaged in activities similar to those of Dura and Spiros Corp. II,
the agreements between Dura and Spiros Corp. II, the present state of Dura's
business operations, an assessment of Dura and Spiros Corp. II management,
interest rates, the volatility for the market price of Dura Common Stock and
prevailing conditions in the securities market. There can be no assurance that
an active trading market will develop for the Units or that the Units will trade
in the public market subsequent to the Offering at or above the initial public
offering price.

74
<PAGE>
The amounts of the Purchase Option Exercise Prices were determined by Dura
and Spiros Corp. II giving consideration to the Spiros Products, the agreements
between Dura and Spiros Corp. II, such other factors as Dura and Spiros Corp. II
deemed appropriate and advice given by the Representatives.

Dura and its officers and directors and Spiros Corp. II's officers and
directors have agreed not to offer, sell, contract to sell, grant any option to
purchase or otherwise dispose of Dura Common Stock (or, in the case of Dura,
rights to acquire Dura Common Stock) without the prior written consent of the
Representatives, for a period of 90 days after the date of this Prospectus.

In the Underwriting Agreement, Dura and Spiros Corp. II have agreed to
indemnify the Underwriters against certain civil liabilities, including
liabilities under the Act, and contribute to payments the Underwriters may be
required to make in respect thereof.

Each Underwriter has represented and agreed that (i) it has not offered or
sold and, during the period of six months from the date of this Prospectus, will
not offer or sell any Units to persons in the U.K. except to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the U.K. within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Units in, from or otherwise involving the
U.K.; and (iii) it has only issued or passed on and will only issue or pass on
in the U.K. any documents received by it in connection with the Offering to a
person who is of a kind described in Article II(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1995 or is a person to whom
the document may otherwise lawfully be issued or passed on.

Until the distribution of the Units is completed, rules of the Securities
and Exchange Commission may limit the ability of the Underwriters and certain
selling group members to bid for and purchase the Units. As an exception to
these rules, the Representatives are permitted to engage in certain transactions
that stabilize the price of the Units. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Units.

If the Underwriters create a short position in the Units in connection with
the Offering, i.e., if they sell more shares of Units than set forth on the
cover page of this Prospectus, the Representatives may reduce that short
position by purchasing Units in the open market. The Representatives may also
elect to reduce any short position by exercising all or part of the
over-allotment option described above.

The Representatives may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase Units
in the open market to reduce the Underwriters' short position or to stabilize
the price of the Units, they may reclaim the amount of the selling concession
from the Underwriters and selling group members who sold those shares as part of
the Offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.

None of Dura, Spiros Corp. II nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the Units. In
addition, none of Dura, Spiros Corp. II nor any of the Underwriters makes any
representation that the Underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.

75
<PAGE>
TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Dura Common Stock and the Units is
ChaseMellon Shareholder Services.

LEGAL MATTERS

Certain legal matters relating to the Offering will be passed upon by
Brobeck, Phleger & Harrison LLP, San Diego, California, counsel for Dura and
Spiros Corp. II. Certain legal matters in connection with the Offering will be
passed upon for the Underwriters by Shearman & Sterling, New York, New York,
counsel for the Underwriters.

EXPERTS

The consolidated financial statements of Dura incorporated in this
Prospectus by reference from Dura's Annual Report on Form 10-K for the year
ended December 31, 1996 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.

The financial statements of Spiros Development Corporation as of December
31, 1995 and 1996 and for the periods then ended incorporated in this Prospectus
by reference from Dura's Current Report on Form 8-K filed on October 10, 1997,
as amended, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference, and have been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.

The balance sheet of Spiros Corp. II at September 30, 1997, appearing in
this Prospectus has been audited by Deloitte & Touche LLP, independent auditors,
as stated in their report included herein, and has been so included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.

The statements concerning U.S. federal regulatory process for investigating
and obtaining FDA clearance of drugs and medical devices in this Prospectus
under the caption "Risk Factors--Business Risks Related to Spiros Corp. II and
Dura--Government Regulation; No Assurance of FDA Approval," "Risk
Factors--Business Risks Related to Dura--Risks Related to the Proposed Merger
with Scandipharm-- Government Regulation; No Assurance of FDA Approval,"
"Business of Spiros Corp. II--Government Regulation," "Business of
Dura--Government Regulation" and other references herein relating to such
processes have been reviewed and approved by Kleinfeld, Kaplan and Becker,
regulatory counsel for Dura and Spiros Corp. II, as an expert in such matters,
and are included herein in reliance upon that review and approval. In conducting
this review, Kleinfeld, Kaplan and Becker assumed the accuracy and adequacy of
the factual statements and conclusions in this Prospectus, including those
concerning Dura's manufacturing capabilities and procedures, compliance with
regulatory requirements, the status of marketed drugs and drugs under
development and the potential significance of such drugs in targeting the
disease states identified.

76
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Independent Auditors' Report.......................................................... F-2

Balance Sheet of Spiros Development Corporation II, Inc. as of September 30, 1997..... F-3

Notes to Balance Sheet of Spiros Development Corporation II, Inc...................... F-4
</TABLE>

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholder of
Spiros Development Corporation II, Inc.:

We have audited the accompanying balance sheet of Spiros Development
Corporation II, Inc. (a development stage enterprise) (the "Company") as of
September 30, 1997. This balance sheet is the responsibility of the Company's
management. Our responsibility is to express an opinion on this balance sheet
based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.

In our opinion, such balance sheet presents fairly, in all material
respects, the financial position of the Company as of September 30, 1997 in
conformity with generally accepted accounting principles.

The Company is in the development stage as of September 30, 1997. As
discussed in Note 1 to the balance sheet, the Company has not yet commenced
operations, and its only activity to date has been the initial capitalization
provided by Dura Pharmaceuticals, Inc., which owns all of the Company's common
stock.

DELOITTE & TOUCHE LLP

San Diego, California
October 9, 1997

F-2
<PAGE>
SPIROS DEVELOPMENT CORPORATION II, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

BALANCE SHEET

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------

<S> <C>
ASSETS

Cash.......................................................................................... $ 1,000
------
Total Asssets................................................................................. $ 1,000
------
------

SHAREHOLDER'S EQUITY

Common stock, par value $.001, 1,000 shares authorized; issued and outstanding................ $ 1
Additional paid-in capital.................................................................... 999
------
Total Shareholder's Equity.................................................................... $ 1,000
------
------
</TABLE>

See accompanying notes to balance sheet.

F-3
<PAGE>
SPIROS DEVELOPMENT CORPORATION II, INC.
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO BALANCE SHEET

SEPTEMBER 30, 1997

1. ORGANIZATION AND INCORPORATION

Spiros Development Corporation II, Inc. (the "Company") was incorporated on
September 23, 1997 in the state of Delaware for the purpose of continuing the
development of Spiros, a pulmonary drug delivery system, and to conduct
formulation work, clinical trials and commercialization for certain leading
asthma drugs with the Spiros system.

The Company has not yet commenced operations. Its only activity to date has
been the initial capitalization provided by Dura Pharmaceuticals, Inc., ("Dura")
which owns all of the Company's common stock. Accordingly, no statement of
operations or statement of cash flows is presented. The Company's fiscal year
end is December 31.

2. COMMON STOCK

All issued and outstanding shares of the Company's common stock as of
September 30, 1997 are held by Dura. The Company is in the process of filing a
Registration Statement on Form S-1 with the Securities and Exchange Commission
in contemplation of an initial public offering of units consisting of shares of
the Company's callable common stock and warrants to purchase shares of Dura's
common stock. The Company expects to exchange the shares of common stock held by
Dura with newly issued Special Shares of stock which will provide Dura with
certain voting rights as well as the right to acquire all of the shares of the
callable common stock to be offered by the Prospectus included in the
Registration Statement.

3. AGREEMENTS WITH DURA

The Company intends to enter into various agreements relating to Spiros with
Dura, including a technology license agreement, a development and management
agreement, and a manufacturing and marketing agreement. Substantially all of the
net proceeds from the initial public offering contemplated by the Prospectus,
together with a contribution from Dura and interest earned thereon, are expected
to be paid to Dura for development and administrative services provided by Dura
pursuant to these agreements.

F-4
<PAGE>
DURA'S CURRENT PRODUCT LINE
[PHOTO OF PRODUCTS]

The U.S. respiratory market is the focus of Dura's strategy. Dura divides
this market into three primary segments:

1) respiratory infection

2) allergy, cough and cold

3) asthma and chronic obstructive pulmonary disease.

These classes of respiratory ailments are treated by the 31 products in
Dura's portfolio. Twenty-four of these products are owned and promoted by Dura,
six are marketed under licensing agreements with Eli Lilly and Company and
Sanofi-Winthrop, Inc., and one is co-promoted with Bausch & Lomb
Pharmaceuticals, Inc.

Dura's marketing strategy is to promote its products to allergists,
pulmonologists and ENT specialists, as well as to high prescribing generalist
physicians and pediatricians who treat a large number of allergy and asthma
patients.

RECENT ACQUISITIONS
[PHOTO OF CECLOR-Registered Trademark- CD AND KEFTAB-Registered Trademark-]

Dura acquired the U.S. rights to two respiratory antibiotics,
Keftab-Registered Trademark- (cephalexin hydrochloride, USP) and
Ceclor-Registered Trademark- CD (cefaclor extended release tablets), from Eli
Lilly and Company in September 1996.

[PHOTO OF NASAREL/NASALIDE]

In May 1997, Dura acquired the exclusive U.S. rights to the intranasal
steroid products Nasarel-Registered Trademark- and Nasalide-Registered
Trademark- (flunisolide) Nasal Solutions 0.025%.

TRADEMARKS

DURA-VENT-Registered Trademark-, ENTEX-Registered Trademark-,
RONDEC-Registered Trademark-, RONDEC-TR-Registered Trademark-,
NASAREL-Registered Trademark- and NASALIDE-Registered Trademark- are registered
trademarks of Dura. Dura claims common law trademark rights to Spiros-TM- and
DURA-VENT/ DA-TM-. TORNALATE-Registered Trademark- is a registered trademark of
Sanofi-Winthrop, Inc. CROLOM-TM- is a trademark of Bausch & Lomb
Pharmaceuticals, Inc. Capastat-Registered Trademark-, Seromycin-Registered
Trademark-, Ceclor-Registered Trademark-CD and Keftab-Registered Trademark- are
registered trademarks of Eli Lilly and Dura. Spinhaler-Registered Trademark- is
a registered trademark of Fisons Limited. Turbuhaler-Registered Trademark-and
Pulmicort-Registered Trademark- are registered trademarks of Astra
Pharmaceuticals. Rotohaler-TM- is a trademark of Glaxo Wellcome, Inc.
Ventolin-Registered Trademark- and Beclovent-Registered Trademark-are registered
trademarks of Glaxo Wellcome, Inc. Proventil-Registered Trademark- and
Vanceril-Registered Trademark- are registered trademarks of Schering-Plough
Corporation. Atrovent-Registered Trademark- and Combivent-Registered Trademark-
are registered trademarks of Boehringer Ingelheim International GmbH.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY DURA OR
SPIROS CORP. II. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES
OTHER THAN THE UNITS TO WHICH ITS RELATES OR AN OFFER TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 3
Incorporation of Certain Documents by Reference........................... 3
Prospectus Summary........................................................ 4
Risk Factors.............................................................. 16
Use of Proceeds........................................................... 30
Price Range of Dura Common Stock and Dividend Policies.................... 31
Dura Capitalization....................................................... 32
Spiros Corp. II Capitalization............................................ 33
Business of Spiros Corp. II............................................... 34
Business of Dura.......................................................... 44
Dura Selected Consolidated Financial Data................................. 54
Management's Discussion and Analysis of Financial Condition and Results of
Operations of Dura...................................................... 55
Description of the Warrants............................................... 60
Dura Capital Stock........................................................ 61
Spiros Corp. II Capital Stock............................................. 64
The Agreements and the Purchase Options................................... 65
Federal Income Tax Consequences........................................... 71
Underwriting.............................................................. 74
Transfer Agent and Registrar.............................................. 76
Legal Matters............................................................. 76
Experts................................................................... 76
Index to Financial Statements............................................. F-1
</TABLE>

------------------------

UNTIL , 1998 (THE 25TH DAY AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE UNITS, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

UNITS

SPIROS DEVELOPMENT
CORPORATION II, INC.

DURA PHARMACEUTICALS, INC.

UNITS CONSISTING OF ONE SHARE OF
CALLABLE COMMON STOCK OF
SPIROS DEVELOPMENT
CORPORATION II, INC. AND ONE
WARRANT TO PURCHASE
ONE-FOURTH OF ONE SHARE OF
COMMON STOCK OF
DURA PHARMACEUTICALS, INC.

------------------------

PROSPECTUS

------------------------

MERRILL LYNCH & CO.

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

, 1997

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.* OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Spiros Corp. II in connection
with the registration, issuance and distribution of the securities being
registered hereby. All the amounts shown are estimates, except for the SEC
registration fee, the Nasdaq National Market listing fee and the NASD filing
fee.

<TABLE>
<S> <C>
SEC registration fee............................................. $ 93,251
Nasdaq National Market listing fee............................... 50,000
NASD filing fee.................................................. 30,500
Blue Sky qualification fees and expenses......................... 10,000
Printing and engraving expenses.................................. 100,000
Legal fees and expenses.......................................... 250,000
Transfer Agent and Registrar fees................................ 10,000
Accounting fees and expenses..................................... 60,000
Miscellaneous expenses........................................... 146,249
-----------
Total........................................................ $ 750,000
-----------
-----------
</TABLE>

- ------------------------

* Pursuant to the Services Agreement, Dura and Spiros Corp. II have agreed
that Spiros Corp. II will pay all expenses associated with the Offering.

ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

Except as hereinafter set forth, there is no charter provision, by-law,
contract, arrangement or statute under which any director or officer of either
of the Registrants is insured or indemnified in any manner against all liability
that he may incur in his capacity as such.

With respect to Dura:

(a) Section 145 of the Delaware General Corporation Law permits
indemnification of officers and directors of Dura under certain conditions
and subject to certain limitations. Section 145 of the Delaware General
Corporation Law also provides that a corporation has the power to purchase
and maintain insurance on behalf of its officers and directors against any
liability asserted against such person and incurred by him or her in such
capacity, or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify him or her against such
liability under the provisions of Section 145 of the Delaware General
Corporation Law.

(b) Dura's Bylaws (Article VII, Section (1)) provide that Dura shall
indemnify its directors and executive officers to the fullest extent not
prohibited by the Delaware General Corporation Law. The rights to indemnity
thereunder continue as to a person who has ceased to be a director, officer,
employee or agent and inure to the benefit of the heirs, executors and
administrators of the person. In addition, expenses incurred by a director
or executive officer in defending any civil, criminal, administrative or
investigative action, suit or proceeding by reason of the fact that he or
she is or was a director or officer of Dura (or was serving at Dura's
request as a director or officer of another corporation) shall be paid by
Dura in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such director or officer
to repay such amount if it shall ultimately be determined that he or she is
not entitled to be indemnified by Dura as authorized by the relevant section
of the Delaware General Corporation Law.

II-1
<PAGE>
(c) As permitted by Section 102(b)(7) of the Delaware General
Corporation Law, Article V, Section (A) of Dura's Certificate of
Incorporation provides that a director of Dura shall not be personally
liable for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
Dura or its stockholders, (ii) for acts or omissions not in good faith or
acts or omissions that involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the Delaware General Corporation Law or
(iv) for any transaction from which the director derived any improper
personal benefit.

(d) Dura entered into indemnification agreements with each of its
directors and executive officers, effective upon the reincorporation of Dura
in Delaware in July 1997.

(e) There is directors and officers liability insurance now in effect
which insures directors and officers of Dura.

With respect to Spiros Corp. II:

(a) Section 145 of the Delaware General Corporation Law permits
indemnification of officers and directors of Spiros Corp. II under certain
conditions and subject to certain limitations. Section 145 of the Delaware
General Corporation Law also provides that a corporation has the power to
purchase and maintain insurance on behalf of its officers and directors
against any liability asserted against such person and incurred by him or
her in such capacity, or arising out of his or her status as such, whether
or not the corporation would have the power to indemnify him or her against
such liability under the provisions of Section 145 of the Delaware General
Corporation Law.

(b) Spiros Corp. II's Bylaws (Article VII, Section (1)) provide that
Spiros Corp. II shall indemnify its directors and executive officers to the
fullest extent not prohibited by the Delaware General Corporation Law. The
rights to indemnity thereunder continue as to a person who has ceased to be
a director, officer, employee or agent and inure to the benefit of the
heirs, executors and administrators of the person. In addition, expenses
incurred by a director or executive officer in defending any civil,
criminal, administrative or investigative action, suit or proceeding by
reason of the fact that he or she is or was a director or officer of Spiros
Corp. II (or was serving at Spiros Corp. II's request as a director or
officer of another corporation) shall be paid by Spiros Corp. II in advance
of the final disposition of such action, suit or proceeding upon receipt of
an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he or she is not entitled
to be indemnified by Spiros Corp. II as authorized by the relevant section
of the Delaware General Corporation Law.

(c) As permitted by Section 102(b)(7) of the Delaware General
Corporation Law, Article V, Section (A) of Spiros Corp. II's Certificate of
Incorporation provides that a director of Spiros Corp. II shall not be
personally liable for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to Spiros Corp. II or its stockholders, (ii) for acts or omissions
not in good faith or acts or omissions that involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the Delaware
General Corporation Law or (iv) for any transaction from which the director
derived any improper personal benefit.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since its incorporation on September 23, 1997, Spiros Corp. II has sold and
issued the following unregistered securities:

(1) On September 30, 1997, Spiros Corp. II sold 1000 Special Shares with
an aggregate value of $1000 to Dura.

The sales and issuance of securities in the above transaction was deemed to
be exempt under the Securities Act by virtue of Section 4(2) thereof and/or
Regulation D promulgated thereunder. The

II-2
<PAGE>
purchasers in each case represented their intention to acquire the securities
for investment only and not with a view to the distribution thereof. Appropriate
legends were affixed to the stock certificates issued in such transactions.
Similar representations of investment intent were obtained and similar legends
imposed in connection with any subsequent transfers of any such securities.
Spiros Corp. II believes that all recipients had adequate access, through
employment or other relationships, to information about Spiros Corp. II to make
an informed investment decision.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S>
1.1+ Form of Underwriting Agreement.
3.1++ Certificate of Incorporation of Spiros Corp. II.
3.2++ By-laws of Spiros Corp. II.
3.3 Amended and Restated Certificate of Incorporation of Spiros Corp. II (to be effective immediately
prior to closing).
3.4+ Amended and Restated By-laws of Spiros Corp. II (to be effective immediately prior to closing).
4.1 Purchase Option (included in Exhibit 3.3).
4.2 Form of Warrant Agreement, including form of Warrant.
4.3 Form of Warrant (included in Exhibit 4.2).
4.4+ Specimen Unit Certificate.
4.5+ Specimen Stock Certificate for Dura Common Stock.
4.6+ Specimen Stock Certificate for Spiros Corp. II Common Stock.
4.7+ Specimen Stock Certificate for Spiros Corp. II Special Shares.
5.1+ Opinion of Brobeck, Phleger & Harrison LLP as to legality of the securities being registered,
including consent.
8.1+ Opinion of Brobeck, Phleger & Harrison LLP as to certain tax matters, including consent.
10.1 Form of Technology License Agreement.
10.2 Form of Development Agreement.
10.3 Form of Albuterol and Product Option Agreement.
10.4 Form of Manufacturing and Marketing Agreement.
10.5 Form of Services Agreement.
10.6 Spiros Corp. II 1997 Stock Option Plan.
10.7 Form of Spiros Corp. II Notice of Grant of Stock Option
10.8 Form of Spiros Corp. II Stock Option Agreement
10.9 Form of Addendum to Stock Option Agreement
23.1+ Consent of Brobeck, Phleger & Harrison LLP (included in Exhibits 5.1 and 8.1).
23.2 Consent of Deloitte & Touche LLP, Independent Auditors.
23.3 Consent of Kleinfeld, Kaplan and Becker, regulatory counsel.
24.1++ Powers of Attorney.
27.1++ Financial Data Schedule of Spiros Corp. II.
</TABLE>

- ------------------------

+ To be filed by amendment.

++ Previously filed.

II-3
<PAGE>
(b) Financial Statement Schedules included separately in the Registration
Statement.

None

All other schedules are omitted because they are not required, are not
applicable or the information is included in the Financial Statements or Notes
thereto.

ITEM 17. UNDERTAKINGS.

The undersigned Registrants hereby undertake:

(1) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the termination
of the offering.

(4) That, insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrants pursuant to the provisions described
in Item 15, or otherwise, each of the Registrants has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by a registrant of expenses incurred or
paid by a director, officer or controlling person of a Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, such registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.

(5) That, for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by either of the Registrants pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.

(6) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

Dura hereby undertakes that, for purposes of determining any liability under
the Securities Act of 1933, each filing of Dura's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.

II-4
<PAGE>
SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, SPIROS
DEVELOPMENT CORPORATION II, INC. HAS DULY CAUSED THIS REGISTRATION STATEMENT TO
BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ON THE 21ST DAY OF
OCTOBER, 1997.

SPIROS DEVELOPMENT CORPORATION II, INC.

By: /s/ DAVID S. KABAKOFF
-----------------------------------------
DAVID S. KABAKOFF
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED OF BEHALF OF SPIROS DEVELOPMENT
CORPORATION II, INC. BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES
INDICATED.

SIGNATURE TITLE DATE
- ------------------------------ --------------------------- ----------------

Chairman, President and
/s/ DAVID S. KABAKOFF Chief Executive Officer
- ------------------------------ (Principal Executive October 21, 1997
DAVID S. KABAKOFF Officer)

Vice President and Chief
* Financial Officer
- ------------------------------ (Principal Financial and October 21, 1997
ERLE T. MAST Accounting Officer)

*
- ------------------------------ Director October 21, 1997
CAM L. GARNER

*/s/ DAVID S. KABAKOFF
- ------------------------------
BY: DAVID S. KABAKOFF,
ATTORNEY-IN-FACT

II-5
<PAGE>
SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, DURA
PHARMACEUTICALS, INC. CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT
IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF
CALIFORNIA, ON THE 21ST DAY OF OCTOBER, 1997.

<TABLE>
<S> <C> <C>
DURA PHARMACEUTICALS, INC.

BY: /S/ CAM L. GARNER
-----------------------------------------
CAM L. GARNER
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
</TABLE>

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED ON BEHALF OF DURA PHARMACEUTICALS, INC.
BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- ----------------

<C> <S> <C>
Chairman, President and
/s/ CAM L. GARNER Chief Executive Officer
- ------------------------------ (Principal Executive October 21, 1997
CAM L. GARNER Officer)

Senior Vice President,
Finance and
/s/ JAMES W. NEWMAN Administration, and Chief
- ------------------------------ Financial Officer October 21, 1997
JAMES W. NEWMAN (Principal Financial and
Accounting Officer)

/s/ DAVID S. KABAKOFF
- ------------------------------ Executive Vice President October 21, 1997
DAVID S. KABAKOFF and Director

* Senior Vice President,
- ------------------------------ Sales and Marketing, and October 21, 1997
WALTER F. SPATH Director

*
- ------------------------------ Director October 21, 1997
JAMES C. BLAIR

*
- ------------------------------ Director October 21, 1997
HERBERT J. CONRAD

*
- ------------------------------ Director October 21, 1997
JOSEPH C. COOK, JR.
</TABLE>

II-6
<PAGE>

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- ----------------

<C> <S> <C>
*
- ------------------------------ Director October 21, 1997
DAVID F. HALE

*
- ------------------------------ Director October 21, 1997
GORDON V. RAMSEIER

*
- ------------------------------ Director October 21, 1997
CHARLES G. SMITH

*/s/ CAM S. GARNER
- ------------------------------
BY: CAM L. GARNER,
ATTORNEY-IN-FACT
</TABLE>

II-7

<PAGE>
EXHIBIT 3.3

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SPIROS DEVELOPMENT CORPORATION II, INC.

Spiros Development Corporation II, Inc., a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), hereby
certifies as follows:

1. The name of the Corporation is Spiros Development Corporation II,
Inc. The Corporation's original Certificate of Incorporation was filed with
the Secretary of State of the State of Delaware on September 23, 1997 under
the name of SDC II, Inc., and was amended pursuant to a Certificate of
Amendment of Certificate of Incorporation filed with the Secretary of State
of the State of Delaware on October 8, 1997.

2. Pursuant to Sections 242 and 245 of the General Corporation Law of
the State of Delaware, this Amended and Restated Certificate of Incorporation
was adopted by the Corporation's Board of Directors and its sole stockholder,
the holder of one hundred percent (100%) of the Corporation's capital stock,
in accordance with Section 228 thereof. The Amended and Restated Certificate
of Incorporation restates, integrates and amends the provisions of the
Certificate of Incorporation of this Corporation.

3. The text of the Corporation's Certificate of Incorporation as
heretofore amended is hereby restated and further amended to read in its
entirety as follows:

ARTICLE I

NAME

The name of the Corporation is Spiros Development Corporation II, Inc.

ARTICLE II

REGISTERED OFFICE AND REGISTERED AGENT

The address of the Corporation's registered office in the State of
Delaware is 30 Old Rudnick Lane, City of Dover, County of Kent 19901. The
name of its registered agent at such address is CorpAmerica, Inc.

ARTICLE III

CORPORATE PURPOSE

The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may now or hereafter be organized under the General
Corporation Law of Delaware.

-1-

<PAGE>

ARTICLE IV

CAPITAL STOCK

Section 4.1. AUTHORIZED STOCK. The Corporation is authorized to issue
two classes of stock, one of which shall be known as Callable Common Stock
and the other of which shall be known as Special Common Stock. The total
number of shares of all classes of stock the Corporation shall have authority
to issue is 6,501,000. The total number of shares of Callable Common Stock
which the Corporation is authorized to issue is 6,500,000. The par value of
each share of Callable Common Stock shall be $.001. The total number of
shares of Special Common Stock which the Corporation is authorized to issue
is 1,000. The par value of each share of Special Common Stock shall be
$1.00. The authorized and outstanding shares of the Corporation's capital
stock as of the date of this Amended and Restated Certificate of
Incorporation are hereby renamed Special Common Stock.

SECTION 4.2. DIVIDENDS. Subject to Section 4.4(c) hereof, the holders
of Callable Common Stock are entitled to receive dividends when, as and if
declared by the Board of Directors of the Corporation (the "Board") out of
funds legally available therefore. No dividends are payable on or with
respect to the Special Common Stock and, other than as set forth in Section
4.3, the holder of Special Common Stock is not entitled to participate in any
way in the profits or assets of the Corporation.

SECTION 4.3. LIQUIDATION. In the event of the liquidation, dissolution
or winding-up of the Corporation, the holders of Callable Common Stock have
priority over the holder of Special Common Stock with respect to a return of
capital.

SECTION 4.4. VOTING RIGHTS OF STOCKHOLDERS.

(a) Each holder of Callable Common Stock shall have one vote, either
in person or by proxy, for each share standing in his, her or its name on all
matters submitted to a vote of the stockholders of the Corporation. The
holder of Special Common Stock shall be entitled to vote only as required by
law or as set forth in this Section 4.4. In such instances, the holder of
Special Common Stock shall have one vote for each share standing in his, her
or its name.

(b) In any election of directors of the Corporation, the holder of
Special Common Stock, voting as a separate class, shall be entitled to elect
two directors (each a "Special Common Stock Director"). This right of the
holder of Special Common Stock shall continue until the earliest of (i) the
exercise of the Purchase Option (as defined in Article V), (ii) the Purchase
Option Expiration Date (as defined in Article V) or (iii) the date of
termination of the Purchase Option pursuant to Section 5.10 hereof, at which
time such right shall terminate.

-2-

<PAGE>

(c) The Corporation shall not, without the affirmative vote of the
holder of the then issued and outstanding shares of Special Common Stock,
voting separately as a class, authorize or permit: (i) the allotment or issue
of shares of capital stock of the Corporation or the creation of any right to
such an allotment or issue; (ii) the reduction of the Corporation's
authorized capital stock; (ii) the alteration of or any change to the rights,
powers, preferences and restrictions of the Special Common Stock; (iii)
outstanding borrowings of an aggregate of more than $1 million at any one
time; (iv) the sale or other disposition of or the creation of any lien or
liens on the whole or a material part of the Corporation's business or
assets; (v) the declaration or payment of dividends or the making of any
other distributions to the Corporation's stockholders; (vi) the merger,
consolidation or reorganization of the Corporation with or into any other
corporation; (vii) the sale, liquidation or other disposition of all or
substantially all of the assets of the Corporation; (viii) the alteration or
amendment of Articles IV or VII of this Amended and Restated Certificate of
Incorporation; and (ix) the adoption, amendment or repeal of the Bylaws of
the Corporation. The affirmative vote of a majority of the issued and
outstanding shares of Special Common Stock required by this Section 4.4(c)
shall continue until the earliest of (i) the exercise of the Purchase Option;
(ii) the Purchase Option Expiration Date or (iii) the date of termination of
the Purchase Option pursuant to Section 5.10 hereof, at which time such
requirement shall terminate.

(d) No holder of Special Common Stock may transfer or sell less than
all of the shares of Special Common Stock held by such holder. In the event
of any sale, assignment, delegation or transfer of the Special Common Stock,
the holder thereof shall provide written notice to the record holders of
shares of Callable Common Stock and to the Corporation of any such
assignment, delegation, transfer or sale not later than thirty (30) days
after such assignment, delegation, transfer or sale setting forth the
identity and address of the assignee and summarizing the terms of the
assignment, delegation, transfer or sale.

SECTION 4.5. REDEMPTION OF SPECIAL COMMON STOCK.

(a) The Corporation may, from time to time on and after the earliest
of (i) the exercise of the Purchase Option, (ii) the Purchase Option
Expiration Date or (iii) the date of termination of the Purchase Option
pursuant to Section 5.10 hereof, redeem all of the outstanding shares of
Special Common Stock by paying in cash $1.00 per share on each redeemed share
(the "Redemption Price"). At least 15 days before the date of redemption, a
written redemption notice (the "Redemption Notice") shall be given to the
holder of Special Common Stock by first-class mail, postage prepaid, at the
holder's address as shown on the Corporation's records, stating that: (i) all
the shares of Special Common Stock are to be redeemed; (ii) the date fixed
for

-3-

<PAGE>

redemption (the "Redemption Date"); (iii) the Redemption Price; and (iv) the
place of payment of the Redemption Price.

(b) On or before the Redemption Date, the holder of shares of
Special Common Stock to be redeemed shall surrender the certificates
representing these shares to the Corporation at the place designated for
payment in the redemption notice and shall then be entitled to receive
payment of the Redemption Price.

(c) If the Redemption Notice is given in the manner provided in this
Article IV, and if on the Redemption Date the Redemption Price is available
for payment, whether or not the certificates covering these shares are
surrendered, all rights with respect to the redeemable Special Common Stock
shall terminate, except the right of the holder thereof to receive the
Redemption Price without interest on the surrender of the certificates.

ARTICLE V

STOCK PURCHASE OPTION

Section 5.1. TERMS OF OPTION.

(a) The holder of the Special Common Stock has the right to purchase
all, but not less than all, of the issued and outstanding shares of Callable
Common Stock of the Corporation at the time such right is exercised on the
terms and conditions set forth herein (the "Purchase Option").

(b) Subject to Section 5.13 hereof, the Purchase Option may be
exercised at any time beginning on the closing date of the underwritten
offering (the "Offering") of units (the "Units"), each Unit consisting of one
share of the Corporation's Callable Common Stock and a warrant to purchase
one-fourth of one share of the common stock of Dura Pharmaceuticals, Inc.
("Dura"), and ending on the earliest of (i) December 31, 2002, (ii) the 90th
day after the date the Corporation delivers quarterly financial statements of
the Corporation to the holder of the Special Common Stock showing cash or
cash equivalents of less than $5 million (the "Financial Notice"), and date
of termination by the Corporation of the Technology License Agreement among
the Corporation, Dura, Spiros Development Corporation and Dura Delivery
Systems, Inc. pursuant to Section 8.4 thereof, the Development Agreement
between the Corporation and Dura pursuant to Section 10.4 thereof or the
Manufacturing and Marketing Agreement between the Corporation and Dura
pursuant to Section 9.4 thereof, each such agreement being dated on or about
________, 1997 (such date of expiration being the "Purchase Option Expiration
Date"); PROVIDED, that the delivery of Financial Notice will be deemed not to
have occurred with respect to any one or more quarterly financial statements
delivered if within 15 days of receipt, the Corporation receives a written
commitment from the holder of the Special Common Stock, in form and substance
reasonably satisfactory to a majority of the Board members elected by the
holders of the Callable Common Stock, to

-4-

<PAGE>

make a cash contribution in an amount considered sufficient by the Board, and
consistent with the budget and workplans then in effect, to allow the
Corporation to continue research and development under the Development
Agreement between the Corporation and Dura executed on the date of the
closing of the Offering, as may be amended from time to time (the
"Development Agreement"), for at least three months subsequent to such
quarterly financial statements, and in such case the holder of the Special
Common Stock funds such cash contribution within fifteen (15) days after such
written commitment is received by the Corporation.

(c) If the Purchase Option Expiration Date is not a Business Day (as
defined below), then the Purchase Option Expiration Date shall be 11:59 p.m.,
San Diego time, on the next succeeding Business Day. "Business Day" shall
mean any day, other than a Saturday, Sunday or any other day on which banking
institutions in San Diego, California are authorized or required by law,
regulation or executive order to be closed.

SECTION 5.2. PURCHASE OPTION EXERCISE PRICE. Upon exercise of the
Purchase Option, the holder of the Special Common Stock shall make a payment
for each outstanding share of Callable Common Stock (the "Purchase Option
Exercise Price") in accordance with the following schedule:

-5-

<PAGE>

IF THE PURCHASE OPTION IS EXERCISED PURCHASE
OPTION
EXERCISE PRICE

Before January 1, 2000..................................................$
On or after January 1, 2000 and before March 31, 2000....................$
On or after April 1, 2000 and before June 30, 2000.......................$
On or after July 1, 2000 and before September 30, 2000...................$
On or after October 1, 2000 and before December 31, 2000 ................$
On or after January 1, 2001 before March 31, 2001........................$
On or after April 1, 2001 and before June 30, 2001.......................$
On or after July 1, 2001 and before December 31, 2001....................$
On or after October 1, 2001 and before December 31, 2001.................$
On or after January 1, 2002 and before March 31, 2002....................$
On or after April 1, 2002 and before June 30, 2002.......................$
On or after July 1, 2002 and before September 30, 2002...................$
On or after October 1, 2002 and before December 31, 2002.................$

SECTION 5.3. FORM OF PAYMENT.

(a) If the holder of the Special Common Stock exercises the
Purchase Option, subject to Section 5.6 hereof, the Purchase Option Exercise
Price may be paid in cash, in shares of Dura common stock, or the Common
Equity Securities (as defined below) of the holder of the Special Common
Stock, if other than Dura (provided that such Common Equity Securities must
be listed on a national securities exchange or listed on the Nasdaq National
Market), or in any combination thereof at the sole discretion of the holder
of the Special Common Stock. The number of shares of Common Equity
Securities, if any, to be delivered in payment of all or a portion of the
Purchase Option Exercise Price shall be determined by dividing the portion of
the Purchase Option Exercise Price to be paid in shares of Common Equity
Securities by the average of the closing prices of such Common Equity
Securities on the principal national securities exchange on which such Common
Equity Securities are then traded or, if not traded on any national
securities exchange, the average of the closing prices of such Common Equity
Securities on the Nasdaq National Market (in each case the "Closing Price")
for the ten (10) trading days immediately preceding the date the holder of
the Special Common Stock gives written notice of its exercise of the Purchase
Option as provided in this Article. No fractional shares of Common Equity
Securities shall be issued in payment of all or a portion of the Purchase
Option Exercise Price. Instead of any fractional shares of Common Equity
Securities that would otherwise be issuable in payment of all or a portion of
the Option Exercise Price, the holder of the Special Common Stock shall pay a
cash adjustment in respect of such fractional

-6-

<PAGE>

interest in an amount equal to that fractional interest multiplied by the
average of the Closing Price on each of the ten (10) trading days immediately
preceding the exercise of the Purchase Option.

(b) "Common Equity Securities" shall mean, with respect to any
corporation (the "Acquiror"), common stock having the right under ordinary
circumstances to elect a majority of directors of the Acquiror, and that is
registered under the Securities Act and (i) listed on the principal national
securities exchange on which such common stock of the Acquiror is then listed
or (ii) if not listed on national securities exchange, listed on the Nasdaq
National Market if such stock is traded thereon or, if such stock is neither
listed as provided in either (i) or (ii), qualified for inclusion on the
Nasdaq over-the-counter system.

SECTION 5.4. MANNER OF EXERCISE.

(a) The holder of the Special Common Stock shall exercise the
Purchase Option by delivery of a Purchase Exercise Notice (as defined in
clause (c) of this Section 5.4) to the Corporation and to each holder of
record of Callable Common Stock on the Record Date (as defined below). The
Purchase Exercise Notice sent pursuant to this Section 5.4 shall be sent via
first class mail.

(b) "Record Date" shall mean the record date fixed by the Purchase
Exercise Notice which shall be a date no earlier than 10 days after, and no
later than 20 days after, the date of such notice.

(c) The "Purchase Exercise Notice" shall be a written notice signed
by the holder of the Special Common Stock given in accordance with the
provisions of this Article V and stating that such party intends to exercise
the Purchase Option and setting forth: (i) the Purchase Option Exercise Price
as determined in accordance with Section 5.2 hereof; (ii) the portion, if
any, of the Purchase Option Exercise Price to be paid in cash, (iii) the
portion, if any, of the Purchase Option Exercise Price to be paid in shares
of Common Equity Securities; (v) the Record Date; (vi) the Purchase Option
Closing Date (as defined in clause (d) of this Section 5.4); and (vii) the
place at which the holders of the shares of Callable Common Stock may obtain
payment of the Purchase Option Exercise Price for their shares of Callable
Common Stock and any instructions for obtaining such payment; PROVIDED,
HOWEVER, that at any time prior to the Purchase Option Closing Date, the
holder of the Special Common Stock may determine to make payment of a greater
amount of the Purchase Option Exercise Price in cash than was set forth in
the Purchase Exercise Notice. The exercise of the Purchase Option is
irrevocable upon delivery of the Purchase Exercise Notice, and such action
shall not require another notice to be given in accordance with this Section
5.4. If the holder of the Special Common Stock elects to exercise the
Purchase Option by delivering solely shares of Common Equity Securities, such
exercise may

-7-

<PAGE>

occur by means of a merger of either a subsidiary of the holder of the
Special Common Stock with and into the Corporation or the Corporation with
and into a subsidiary of the holder of the Special Common Stock, pursuant to
which Callable Common Stock shall be cancelled in exchange for the shares of
Common Equity Securities.

(d) The "Purchase Option Closing Date" shall be a date, not less
than 20 days nor more than 40 days, after the date of the Purchase Option
Exercise Notice on which all of the issued and outstanding shares of Callable
Common Stock will be purchased; PROVIDED, HOWEVER, that the Purchase Option
Closing Date will be such later date as provided by (i) the last sentence of
Section 5.6 hereof in the event that the conditions described therein are
satisfied or (ii) Section 5.12 hereof in the event that the conditions
described therein are satisfied.

SECTION 5.5. CLOSING. On or before the Purchase Option Closing Date,
the holder of the Special Common Stock shall deposit the full amount of the
Purchase Option Exercise Price for all of the issued and outstanding shares
of Callable Common Stock with a bank, transfer agent or similar entity (the
"Payment Agent") designated by the holder of the Special Common Stock to pay,
on the holder's behalf, the Purchase Option Exercise Price. Cash, if any,
and shares of Common Equity Securities, if any, deposited with the Payment
Agent shall be delivered in trust for the benefit of the holders of record of
the Callable Common Stock on the Record Date. The holder of the Special
Common Stock shall provide the Payment Agent with irrevocable instructions to
pay, on or within 5 days after the Purchase Option Closing Date, the Purchase
Option Exercise Price for the Callable Common Stock to such record holders
upon surrender of their certificates representing shares of Callable Common
Stock. Payment for shares of Callable Common Stock shall be mailed to each
such record holder at the address set forth in the Corporation's records or
at the address provided by each such holder or, if no address is set forth in
the Corporation's records for any such holder or provided by such holder, to
such holder at the address of the Corporation, but only upon receipt from
such holder of certificates evidencing shares of Callable Common Stock. Any
cash or shares of Common Equity Securities deposited with the Payment Agent
pursuant to this Section 5.5 remaining unclaimed for two years following the
Purchase Option Closing Date shall be returned to the holder of the Special
Common Stock at its request. At the request of the holder of the Special
Common Stock, the Corporation shall provide, or shall cause its transfer
agent to provide, to the holder of the Special Common Stock or to the Payment
Agent, free of charge, a complete list of the record holders of the shares of
Callable Common Stock, including the number of shares of Callable Common
Stock held of record and the address of each record holder.

SECTION 5.6. REGISTRATION OF COMMON EQUITY SECURITIES. If the holder of
the Special Common Stock fails by the Purchase

-8-

<PAGE>

Option Closing Date set forth in the Purchase Option Exercise Notice, with
respect to any shares of Common Equity Securities to be delivered as payment
of the Purchase Option Exercise Price on such date, to have (i) a
registration statement declared effective under the Securities Act or (ii)
such shares of Common Equity Securities to be issued in connection therewith
(A) listed on the principal national securities exchange on which the Common
Equity Securities are then listed or (B) if the Common Equity Securities are
not then listed on a national securities exchange, listed on the Nasdaq
National Market if the Common Equity Securities are traded thereon, then in
either of such cases the holder of the Special Common Stock shall be
obligated to make such payment in cash on the Purchase Option Closing Date.
Notwithstanding any other provision herein to the contrary, the holder of the
Special Common Stock shall not be in breach or violation of this Article V
for any failure to timely pay any amount due and payable to the record
holders of Callable Common Stock hereunder in shares of the Common Equity
Securities if such failure to timely pay such amount arises from a delay in
satisfying any of the provisions of this Section 5.6, so long as the holder
of the Special Common Stock shall continue to diligently seek the
satisfaction thereof; PROVIDED, HOWEVER, that such delay may not exceed sixty
(60) days from the original due date of such payment (such original due date
being not less than 20 days, nor more than 40 days, after the date of the
Purchase Option Exercise Notice).

SECTION 5.7. TRANSFER OF TITLE. Transfer of title to the holder of the
Special Common Stock of all of the issued and outstanding shares of Callable
Common Stock shall be deemed to occur automatically on the Purchase Option
Closing Date subject to the payment by the holder of the Special Common Stock
to the Payment Agent on or before such date of the amount owing to the record
holders of Callable Common Stock as determined in accordance with Section 5.2
hereof, and thereafter the Corporation shall be entitled to treat the holder
of the Special Common Stock as the sole holder of all issued and outstanding
shares of Callable Common Stock, notwithstanding the failure of any holder of
shares of Callable Common Stock to tender the certificates representing such
shares to the Payment Agent for payment therefor in accordance with Section
5.5 hereof. The Corporation shall instruct its transfer agent not to accept
any shares of Callable Common Stock for transfer on and after the Purchase
Option Closing Date, except for the shares of Callable Common Stock
transferred by the holder of the Special Common Stock. The Corporation shall
take all actions reasonably requested by the holder of the Special Common
Stock to assist in effectuating the transfer of shares of Callable Common
Stock in accordance with this Article V. After the Purchase Option Closing
Date, the record holders of the Callable Common Stock as determined in
accordance with Section 5.6 above shall have no rights in connection with
such Callable Common Stock other than the right to receive the Purchase
Option Exercise Price.

-9-

<PAGE>

SECTION 5.8. ASSIGNMENT. Upon the assignment, delegation, transfer or
sale by any record holder of Callable Common Stock, such shares of Callable
Common Stock shall continue to be subject to the Purchase Option and the
other terms and conditions of this Article V.

SECTION 5.9. LEGEND.

(a) Any certificates evidencing shares of Callable Common Stock
issued by or on behalf of the Corporation shall bear a legend in
substantially the following form:

THE SECURITIES OF SPIROS DEVELOPMENT CORPORATION II, INC., A
DELAWARE CORPORATION ("SPIROS CORP. II"), EVIDENCED HEREBY
ARE SUBJECT TO AN OPTION AS DESCRIBED IN THE AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION OF SPIROS CORP. II, AS
AMENDED FROM TIME TO TIME, TO PURCHASE SUCH SECURITIES AT A
PURCHASE PRICE DETERMINED IN ACCORDANCE WITH ARTICLE V
THEREOF, EXERCISABLE BY WRITTEN NOTICE AT ANY TIME DURING
THE PERIOD SET FORTH THEREIN. COPIES OF THE AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION ARE AVAILABLE AT THE
PRINCIPAL PLACE OF BUSINESS OF SPIROS CORP. II AT 7475 LUSK
BOULEVARD, SAN DIEGO, CALIFORNIA 92121, AND WILL BE
FURNISHED TO ANY SPIROS CORP. II STOCKHOLDER ON REQUEST AND
WITHOUT COST.

(b) Upon the termination or expiration (other than by exercise) of
the Purchase Option, the Corporation shall, at the request of any holder of
shares of Callable Common Stock bearing the legend described in this Section
5.9(a), take such steps as are necessary to remove such legend from such
shares of Callable Common Stock.

SECTION 5.10. TERMINATION. The Purchase Option and the provisions of
this Article V shall terminate on the earliest to occur of: (1) the Purchase
Option Closing Date; (2) if the Purchase Option is not exercised, 11:59 p.m.,
San Diego time, the Purchase Option Expiration Date; or (3) receipt by the
Corporation of written notice of the occurrence of any of the following
events, which notice shall be provided by the holder of the Special Common
Stock promptly after the occurrence of any such event: (a) the holder of
the Special Common Stock fails to make the payment described in Section 5.3
of this Article V on the Purchase Option Closing Date; (b) the holder of the
Special Common Stock (i) seeks the liquidation, reorganization, dissolution
or winding-up of itself or the composition or readjustment of all or
substantially all of its debts, (ii) applies for or consents to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or substantially all of its assets,
(iii) makes a general assignment

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<PAGE>

for the benefit of its creditors, (iv) commences a voluntary case under Title
11 of the United States Code, (v) files a petition seeking to take advantage
of any other law relating to bankruptcy, insolvency, reorganization,
winding-up or composition or readjustment of debt or (vi) adopts any
resolution of its Board or shareholders for the purpose of effecting any of
the foregoing; (c) a proceeding or case is commenced without the application
or consent of the holder of the Special Common Stock and such proceeding or
case continues undismissed, or an order, judgment or decree approving or
ordering any of the following is entered and continues unstayed and in effect
for a period of sixty (60) days from and after the date service of process is
effected upon the holder of the Special Common Stock, seeking (i) the
liquidation, reorganization, dissolution or winding up, or the composition or
readjustment of all or substantially all of its debts, (ii) the appointment
of a trustee, receiver, custodian, liquidator or the like of the holder of
the Special Common Stock or of all or substantially all of its assets or
(iii) similar relief in respect of the holder of the Special Common Stock
under any law relating to bankruptcy, insolvency, reorganization, winding up
or the composition or readjustment of debt; or (d) material default by the
holder of the Special Common Stock on any material loan agreement which
default is not cured in accordance with such loan agreement. The Corporation
shall promptly notify each holder of record of Callable Common Stock in
writing upon the occurrence of an event specified herein.

SECTION 5.11 AMENDMENT. This Article may not be released, discharged,
amended or modified in any manner except by an instrument approved by the
holder of the outstanding shares of Special Common Stock and the holders of
record of two-thirds (2/3) of the outstanding shares of Callable Common Stock
of the Corporation; provided, however, that, except as expressly provided
herein, without the approval of the holders of record of ninety percent (90%)
of the Callable Common Stock, this Article V may not be amended to change (a)
the amounts of the Purchase Option Exercise Price, (b) the relevant periods
during which and the conditions under which the Purchase Option may be
exercised and the Purchase Option Exercise Price may be paid, (c) the type of
securities or method of calculating the number of securities to be issued
upon the payment of the Purchase Option Exercise Price or (d) the provisions
of this Section 5.11.

SECTION 5.12. NO CONFLICTING ACTION. The Corporation shall not take,
or permit any other person or entity within its control to take, any action
inconsistent with the rights of the holder of the Special Common Stock under
this Article V. The Corporation shall not enter into any arrangement,
agreement or understanding, either oral or in writing, that is inconsistent
with the rights of the holder of the Special Common Stock and the obligations
of the Corporation hereunder.

ARTICLE VI

CORPORATE EXISTENCE

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<PAGE>

The Corporation shall have a perpetual existence.

ARTICLE VII

DIRECTORS

SECTION 7.1. SIZE OF BOARD.

(a) The number of directors shall be as specified in the Bylaws of
the Corporation, except that until the earliest of (i) the exercise of the
Purchase Option, (ii) the Purchase Option Expiration Date or (iii) the date
of termination of the Purchase Option pursuant to Section 5.10 hereof, there
shall be five directors. In no event will the number of directors be less
than five. Directors need not be stockholders of the Corporation.

(b) Upon termination of the right of the holder of Special Common
Stock, as a class, to vote for directors pursuant to Article IV hereof, the
term of office of all Special Common Stock Directors then in office shall
terminate immediately.

SECTION 7.2. ELECTIONS. Elections of directors need not be by written
ballot except and to the extent provided in the bylaws of the Corporation.

ARTICLE VIII

EXCULPATION AND INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS

SECTION 8.1. EXCULPATION.

(a) DELAWARE. A director or officer of the Corporation shall not
be personally liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director or officer, except for
liability (i) for any breach of the director's or officer's duty of loyalty
to the Corporation or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law or (iv)
for any transaction from which the director or officer derived any improper
personal benefit. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of the
Corporation's stockholders, further reductions in the liability of the
Corporation's directors or officers for breach of fiduciary duty, then a
director or officer of the Corporation shall not be liable for any such
breach to the fullest extent permitted by the Delaware General Corporation
Law as so amended.

(b) CALIFORNIA. The liability of each and every director or
officer of the Corporation for monetary damages shall be eliminated to the
fullest extent permissible under California law.

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<PAGE>

(c) CONSISTENCY. In the event of any inconsistency between
Paragraphs (a) and (b) of this Section 8.1, the controlling Paragraph, as to
any particular issue with regard to any particular matter, shall be the one
which provides to the director or officer in question the greatest protection
from liability.

SECTION 8.2. INDEMNIFICATION.

(a) DELAWARE. To the extent permitted by applicable law, the
Corporation is also authorized to provide indemnification of (and advancement
of expenses to) such agents (and any other persons to which Delaware law
permits the corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or nonstatutory), with respect to actions for breach of duty to
the Corporation, its stockholders, and others.

(b) CALIFORNIA. The Corporation is authorized to indemnify the
directors and officers of the Corporation to the fullest extent permissible
under California law. Moreover, the Corporation is authorized to provide
indemnification of (and advancement of expenses to) agents (as defined in
Section 317 of the California Corporations Code) through bylaw provisions,
agreements with agents, vote of shareholders or disinterested directors or
otherwise, in excess of the indemnification and advancement otherwise
permitted by Section 317 of the California Corporations Code, subject only to
applicable limits set forth in Section 204 of the California Corporations
Code, with respect to actions for breach of duty to the corporation and its
shareholders.

(c) CONSISTENCY. In the event of any inconsistency between
Paragraphs (a) and (b) of this Section 8.2, the controlling Paragraph, as to
any particular issue with regard to any particular matter, shall be the one
which authorizes for the benefit of the agent or other person in question the
provision of the fullest, promptest, most certain or otherwise most favorable
indemnification and/or advancement.

SECTION 8.3. EFFECT OF REPEAL OR MODIFICATION. Any repeal or
modification of any of the foregoing provisions of this Article VIII shall
not adversely affect any right or protection of a director, officer, agent or
other person existing at the time of, or increase the liability of any
director or officer of the Corporation with respect to any acts or omissions
of such director or officer occurring prior to, such repeal or modification.

ARTICLE IX

PREEMPTIVE RIGHTS

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<PAGE>

No holder of shares of stock of the Corporation shall have any preemptive
or other right, except as such rights are expressly provided by contract, to
purchase or subscribe for or receive any shares of any class, or series
thereof, of stock of the Corporation, whether now or hereafter authorized, or
any warrants, options, bonds, debentures or other securities convertible
into, exchangeable for or carrying any right to purchase any share of any
class, or series thereof, of stock; but such additional shares of stock and
such warrants, options, bonds, debentures or other securities convertible
into, exchangeable for or carrying any right to purchase any shares of any
class, or series thereof, of stock may be issued or disposed of by the Board
to such persons, and on such terms and for such lawful consideration as in
its discretion it shall deem advisable or as the Corporation shall have by
contract agreed.

ARTICLE X

AMENDMENTS TO CERTIFICATE

Except as set forth in Section 4.4 and 5.11, the Corporation reserves the
right to repeal, alter, amend or rescind any provision contained in this
Amended and Restated Certificate of Incorporation and/or any provision
contained in any amendment to or any restatement of this Amended and Restated
Certificate of Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred on stockholders herein are granted subject
to this reservation.

ARTICLE XI

BYLAWS

The Board may from time to time make, amend, supplement or repeal the
Bylaws by the requisite affirmative vote of the Board as set forth in the
Bylaws; provided, however, that the stockholders may change or repeal any
bylaw adopted by the Board by the requisite affirmative vote of stockholders
as set forth in the Bylaws; and, provided further, that no amendment or
supplement to the Bylaws adopted by the Board shall vary or conflict with any
amendment or supplement thus adopted by the stockholders.

ARTICLE XII

STOCKHOLDER APPROVAL

No action shall be taken by the stockholders of the Corporation except at
an annual or special meeting of stockholders called in accordance with the
Bylaws, and no action shall be taken by the stockholders by written consent.

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<PAGE>

ARTICLE XIII

NOTICE

Advance notice of stockholder nominations for the election of directors
and of business to be brought by stockholders before any meeting of the
stockholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

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<PAGE>

IN WITNESS WHEREOF, the Amended and Restated Certificate of Incorporation
has been executed by the Corporation's President and Chief Executive Officer
as of this _____ day of December, 1997.

SPIROS DEVELOPMENT CORPORATION II, INC.

By:
------------------------------------
David S. Kabakoff,
President and Chief Executive
Officer

ATTEST:

- ---------------------------------
Mitchell R. Woodbury,
Secretary

[SIGNATURE PAGE TO AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION]

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<PAGE>

EXHIBIT 4.2

WARRANT AGREEMENT

WARRANT AGREEMENT, dated as of ________________, 1997, between DURA
PHARMACEUTICALS, INC., a Delaware corporation ("Dura"), and CHASEMELLON
SHAREHOLDER SERVICES, as warrant agent (the "Warrant Agent"), in favor of each
person who acquires from time to time warrants (the "Warrants") to purchase
shares of Dura's Common Stock, $.001 par value per share (the "Warrant Shares"),
issued in the offering of units (the "Units"), each Unit consisting of one share
of common stock, $.001 par value per share ("Spiros II Common Stock"), of SPIROS
DEVELOPMENT CORPORATION II, INC., a Delaware corporation ("Spiros Corp. II"),
and one Warrant, made pursuant to a registration statement on Forms S-l/S-3
(Nos. 333-_________ and 333-________) (the "Registration Statement") filed by
Dura and Spiros Corp. II with the Securities and Exchange Commission (the
"Commission").

Section 1. APPOINTMENT OF WARRANT AGENT. Dura hereby appoints the Warrant
Agent to act as agent for Dura in accordance with the instructions set forth
herein, and the Warrant Agent hereby accepts such appointment, upon the terms
and conditions hereinafter set forth.

Section 2. CERTAIN DEFINITIONS. As used herein, the following terms shall
have the following meanings:

"ACCELERATION DATE" means the first date upon which an Acceleration Event
occurs; PROVIDED, HOWEVER, that, if approval of the stockholders of Dura is
required in connection with such Acceleration Event, Acceleration Date means the
date of such stockholder approval.

"ACCELERATION EVENT" means the occurrence of, or the execution of a
definitive agreement by Dura with respect to, any of the following events: (i)
any capital reorganization of Dura or reclassification of the Common Stock
(other than a subdivision, combination or reclassification of the outstanding
Common Stock for which adjustment is provided in paragraphs (i), (ii), (iv) and
(v) of Section 13(a) hereof and other than a change in the par value of the
Common Stock or an increase in the authorized capital stock of Dura not
involving the issuance of any shares thereof), (ii) any consolidation of Dura
with, or merger of Dura with or into, any other person (including any
individual, partnership, joint venture, corporation, trust or group thereof)
other than (a) a consolidation or merger pursuant to which the stockholders of
Dura immediately prior to such consolidation or merger own more than 50% of the
outstanding securities having power to vote in the election of directors after
such consolidation or merger or (b) a consolidation or merger by Dura with a
subsidiary of Dura in which Dura is the continuing corporation for which
adjustment is provided in Section 13 hereof, (iii) any sale, lease, transfer or
conveyance of all or substantially all of the assets of Dura (other than a sale,
lease, transfer or conveyance of such assets to an Affiliate (within the meaning
of the Securities Act)) or (iv) the announcement or commencement by any "person
" or " group" (within the meaning of Section 13 (d) and Section 14(d) of the
Exchange Act) other than with respect to a consolidation or merger pursuant to
clause (ii) above, of a BONAFIDE tender offer or exchange offer in accordance
with the rules and

<PAGE>

regulations of the Exchange Act to purchase, or the acquisition of securities of
Dura, such that after such acquisition or proposed purchase, the acquiror
"beneficially owns" or would "beneficially own" (as defined in Rule 13d-3 under
the Exchange Act) securities of Dura representing 30% percent or more of the
combined voting power of Dura's then outstanding securities having power to vote
in the election of directors.

"CLOSING PRICE" means the closing price per share of Common Stock on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading or, if not listed or traded on any such exchange, on the
Nasdaq National Market or if not listed or traded on any such exchange or the
Nasdaq National Market, the average of the last bid and asked prices per share
on the Nasdaq over-the-counter system or, if such quotations are not available,
the fair market value as reasonably determined by the Board of Directors of Dura
or any committee of such Board.

"COMMON STOCK" means (i) the class of stock designated as the Common Stock,
$.001 par value per share, of Dura on the date hereof or (ii) any other class of
stock resulting from successive changes or reclassifications of such shares
consisting solely of changes in par value, or from par value to no par value, or
from no par value to par value. Unless the context requires otherwise, all
references to Common Stock and Warrant Shares in this Agreement and in the
Warrant Certificates shall, in the event of an adjustment pursuant to Section 13
hereof, be deemed to refer also to any other securities or property then
issuable upon exercise of the Warrants as a result of such adjustment.

"ELIGIBLE INSTITUTION" shall have the meaning set forth in Section 8(c)
hereof.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

"EXERCISE PRICE" shall have the meaning set forth in Section 5(b) hereof.

"EXERCISE PERIOD" means the period during which the Warrants may be
exercised as set forth in Section 5(a) hereof.

"EXPIRATION DATE" shall have the meaning set forth in Section 5(a) hereof.

"HOLDERS" shall have the meaning set forth in Section 4(b) hereof.

"NASD" means the National Association of Securities Dealers, Inc.

"SECURITIES ACT" means the Securities Act of 1933, as amended.

"SEPARATION DATE" shall have the meaning set forth in Section 5(a) hereof.

<PAGE>

"STOCK PURCHASE OPTION" means the option by Dura to purchase all (but not
less than all) of the shares of Spiros Corp. II Common Stock as set forth in
Article V of the Spiros Corp. II Charter.

"WARRANT CERTIFICATE" shall have the meaning set forth in Section 3(a)
hereof.

"WARRANT REGISTER" means the books and records kept by the Warrant Agent
for the registration, and the registration of transfer, of the Warrant
Certificates in which shall be registered the names and addresses of Holders of
Warrants evidenced by Warrant Certificates in registered form and the
certificate numbers and denominations of such Warrant Certificates.

Section 3. FORM OF WARRANT CERTIFICATE: PURCHASE PRICE: SEPARATION FROM
SPIROS CORP. II COMMON STOCK.

(a) The certificates evidencing the Warrants (the "Warrant Certificates"),
and the forms of election to purchase Warrant Shares and of assignment to be
printed on the reverse thereof, shall be substantially in the form set forth in
Exhibit A hereto and may have such letters, numbers or other marks of
identification or designation and such legends, summaries or endorsements
printed, lithographed or engraved thereon as Dura reasonably deems appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any law, any rule or regulation related thereto, or with
any rule or regulation of the NASD, the Nasdaq National Market or any securities
exchange on which the Warrants may from time to time be listed.

(b) Each Warrant shall entitle the Holder thereof to purchase one-fourth
of a Warrant Share upon the exercise thereof at the applicable Exercise Price,
subject to adjustment as provided in Section 13 hereof, during the Exercise
Period; PROVIDED, HOWEVER, that the Warrants are exercisable only for whole
shares; cash will be paid in lieu of fractional shares in accordance with
Section 5(e) hereof. Each Warrant Certificate shall be executed on behalf of
Dura by the manual or facsimile signature of the present or any future President
or any officer of Dura, under its corporate seal, affixed or in facsimile,
attested by the manual or facsimile signature of the present or any future
Secretary or Assistant Secretary of Dura. Warrants shall be dated as of the
date of their initial issue.

(c) As set forth in Section 8 hereof, until the Separation Date, a Warrant
may not be divided or combined with other Warrants or exchanged, assigned or
transferred apart from the share of the Spiros Corp. II Common Stock with which
it was initially sold as a Unit.

Section 4. REGISTRATION AND COUNTERSIGNATURE.

(a) The Warrant Agent shall maintain the Warrant Register. The Warrant
Certificates shall be countersigned by the Warrant Agent and shall not be valid
for any purpose unless so

<PAGE>

countersigned. The Warrant Certificates shall be so countersigned, however, by
the Warrant Agent and shall be delivered by the Warrant Agent, notwithstanding
whether the persons whose manual or facsimile signatures appear thereon as
proper officers of Dura shall have ceased to be such officers at the time of
such countersignature or delivery.

(b) Prior to due presentment for registration or transfer of the Warrant
Certificates, Dura and the Warrant Agent may deem and treat the registered
holder (a "Holder") thereof as the absolute owner of the Warrant Certificates
(notwithstanding any notation of ownership or other writing made thereon by
anyone other than Dura or the Warrant Agent), for the purpose of any exercise
thereof and for all other purposes, and neither Dura nor the Warrant Agent shall
be affected by any notice to the contrary.

Section 5. DURATION AND EXERCISE OF WARRANTS.

(a) Warrants may be exercised at any time or from time to time on or after
the earliest of (i) January 1, 2000, (ii) the exercise by Dura of the Stock
Purchase Option, (iii) the termination of the Stock Purchase Option with respect
to Dura and (iv) an Acceleration Date (such earliest date being referred to
herein as the "Separation Date") and will expire at 5:00 p.m., New York City
time, on December 31, 2002 (the "Expiration Date"). Upon the Expiration Date,
all rights evidenced by the Warrants shall cease and the Warrants shall become
void.

(b) Subject to the provisions of this Agreement, the Holder of each
Warrant shall have the right to purchase from Dura (and Dura shall issue and
sell to such Holder) the number of fully paid and nonassessable Warrant Shares
set forth on such Holder's Warrant Certificate (or such number of Warrant Shares
as may result from adjustments made from time to time as provided in this
Agreement) at the price of $_______ per Warrant Share in lawful money of the
United States of America (such exercise price per Warrant Share, as adjusted
from time to time as provided herein, being referred to herein as the "Exercise
Price"), upon (i) surrender of the Warrant Certificates to Dura at the office of
the Warrant Agent designated by the Warrant Agent for such purpose with the
exercise form on the reverse thereof duly completed and signed by the Holder or
Holders thereof or by a duly appointed legal representative thereof or by a duly
authorized attorney, such signature to be guaranteed by an Eligible Institution
(as defined in Section 8(c) hereof) if such guarantee is required by the terms
of the Warrant Certificate, and (ii) payment, in lawful money of the United
States of America, of the Exercise Price for the Warrant Share or Warrant Shares
in respect of which such Warrant is then exercised. The Exercise Price payable
upon exercise of any Warrant may be paid only by certified or, at the option of
the Holder, official bank check payable to the order of Dura. Upon surrender of
the Warrant Certificate, and payment of the Exercise Price, Dura shall issue and
cause to be delivered with all reasonable dispatch to or upon the written order
of the Holder of such Warrant and in such name or names as such Holder may
designate, a certificate or certificates for the number of Warrant Shares so
purchased upon the exercise of such Warrants, together with cash or check,

<PAGE>

at Dura's option, in respect of any fraction of a Warrant Share issuable upon
such surrender pursuant to Section 5(e) hereof. The Warrant Agent shall deliver
on a weekly basis all funds received upon exercise of the Warrants to Dura, 7475
Lusk Boulevard, San Diego, California 92121, Attention: Senior Vice President
and Chief Financial Officer.

(c) Each person in whose name any certificate for Warrant Shares is issued
upon the exercise of Warrants shall for all purposes be deemed to have become
the holder of record of the Warrant Shares represented thereby, and such
certificate shall be dated the date upon which the Warrant Certificate
evidencing such Warrants was duly surrendered and payment of the Exercise Price
(and any applicable transfer taxes pursuant to Section 10 hereof) was made;
PROVIDED, HOWEVER, that if the date of such surrender and payment is a date upon
which the Common Stock transfer books of Dura are closed, such person shall be
deemed to have become the record holder of such Warrant Shares on, and such
certificate shall be dated, the next succeeding business day on which the Common
Stock transfer books of Dura are open.

(d) In the event that, during the Exercise Period, fewer than all of the
Warrants represented by a Warrant Certificate are exercised, a new Warrant
Certificate, duly executed by Dura, will be issued for the remaining number of
Warrants exercisable pursuant to the Warrant Certificate so surrendered, and the
Warrant Agent shall countersign and deliver such new Warrant Certificate to the
Holder of such unexercised Warrants pursuant to the provisions of this Section 5
and of Section 4 hereof.

(e) No fractional shares of Common Stock or scrip shall be issued to any
Holder in connection with the exercise of a Warrant. Instead of any fractional
shares of Common Stock that would otherwise be issuable to such Holder, Dura
shall pay to such Holder a cash adjustment in respect of such fractional
interest in an amount equal to that fractional interest of the then current
Closing Price on the date of exercise per share of Common Stock.

(f) The number of Warrant Shares to be received upon the exercise of a
Warrant and the price to be paid for a Warrant Share are subject to adjustment
from time to time as hereinafter set forth.

(g) Warrants not exercised on or prior to the Expiration Date shall become
void and all rights in respect thereof shall cease as of such time.

Section 6. RESERVATION OF WARRANT SHARES; STOCK CERTIFICATES. Dura shall
at all times reserve, for issuance and delivery upon exercise of the Warrants,
such number of Warrant Shares or other shares of capital stock of Dura as may be
issuable from time to time upon exercise of the Warrants. All such shares shall
be duly authorized and, when issued upon such exercise and receipt by Dura of
payment in full of the Exercise Price, shall be validly issued, fully paid and
nonassessable, free and clear of all liens, security interests, charges and
other encumbrances or

<PAGE>

restrictions on sale and free and clear of all preemptive rights. The Warrant
Agent is hereby irrevocably authorized to requisition, from time to time from
the transfer agent for the Common Stock, stock certificates issuable upon
exercise of outstanding Warrants. Dura will supply such transfer agent with
duly executed stock certificates for such purpose. All Warrant Certificates
surrendered upon exercise shall be cancelled by the Warrant Agent and shall
thereafter be delivered to Dura or otherwise disposed of in a manner
satisfactory to Dura. Unless all Warrants shall have been exercised prior to
5:00 P.M., New York City time, on the Expiration Date, the Warrant Agent shall
certify to Dura, as of the close of business on the Expiration Date, the total
aggregate number of Warrants then outstanding, and thereafter no shares of
Common Stock shall be subject to reservation in respect of such Warrants. Dura
shall keep a copy of this Agreement on file with its transfer agent and with
every transfer agent for any shares of Common Stock.

Section 7. TRANSFER AND REGISTRATION OF THE WARRANTS AND WARRANT SHARES.

(a) The Warrants and the Warrant Shares, and any interest in either, may
be sold, assigned, pledged, encumbered or in any other manner transferred or
disposed of, in whole or in part, only in accordance with Section 8 hereof and
in compliance with applicable United States federal and state securities laws
and the terms and conditions hereof.

(b) The Warrants and the Warrant Shares have been registered under the
Securities Act pursuant to the Registration Statement. Dura covenants and
agrees:

(i) it will prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective
through the termination of the Exercise Period or until such earlier time as no
Warrants remain outstanding;

(ii) as expeditiously as possible, to register or qualify the
Warrants and the Warrant Shares under the securities or "Blue Sky" laws of each
jurisdiction in which such registration or qualification is necessary; and

(iii) to pay all expenses incurred by Dura in complying with this
Section 7(b), including, without limitation (A) all registration and filing
fees, (B) all printing expenses, (C) all fees and disbursements of counsel and
independent public accountants for Dura, (D) all NASD and "Blue Sky" fees and
expenses (including fees and expenses of counsel in connection with any "Blue
Sky" surveys) and (E) the entire expense of any special audits incident to or
required in connection with any such registration.

Section 8. EXCHANGE, TRANSFER OR ASSIGNMENT OF WARRANTS.

(a) Through the Separation Date, a Warrant may not be divided or combined
with other

<PAGE>

Warrants or exchanged, assigned or transferred apart from the share of Spiros
Corp. II Common Stock with which it was initially sold as a Unit. Until the
occurrence of the Separation Date, the Warrant Agent will not record an
exchange, assignment or transfer of a Warrant Certificate in the Warrant
Register without certification by Spiros Corp. II that the holder has
transferred its Spiros Corp. II Common Stock to the assignee named on the
Warrant Assignment Form printed on the reverse of the Warrant Certificate.

(b) After the Separation Date, Warrants may be exchanged, at the option of
the Holder thereof, upon presentation and surrender to the Warrant Agent of the
Warrant Certificate evidencing such Warrants, for other Warrant Certificates of
different denominations, entitling the Holder or Holders thereof to purchase in
the aggregate the same number of Warrant Shares as did such surrendered Warrant
Certificate. Subject to the preceding sentence, a Warrant Certificate may be
divided or combined with other Warrant Certificates that carry the same rights
upon presentation thereof at the office of the Warrant Agent, together with
written notice signed by the Holder or Holders thereof specifying the names and
denominations in which new Warrant Certificates are to be issued.

(c) After the Separation Date, Warrants may be assigned or transferred, at
the option of the Holder thereof, upon surrender of the Warrant Certificates
evidencing such Warrants to the Warrant Agent, accompanied (if so required by
Dura or the Warrant Agent) by a written instrument or instruments of transfer in
form satisfactory to Dura and the Warrant Agent, duly executed by such Holder or
by a duly authorized representative or attorney, such signature to be guaranteed
by a commercial bank or trust company having an office in the United States, by
a broker or a dealer that is a member of the NASD or by a member of a national
securities exchange (any such entity, an "Eligible Institution"). Upon any such
registration of transfer, a new Warrant Certificate shall be issued to the
transferee and the surrendered Warrant Certificate shall be cancelled by the
Warrant Agent. Warrant Certificates so cancelled shall be delivered by the
Warrant Agent to Dura from time to time or otherwise disposed of by the Warrant
Agent in a manner satisfactory to Dura.

(d) Any transfer, exchange or assignment of Warrants (including any new
Warrants issued pursuant to Section 11 hereof) shall be without charge (other
than the cost of any transfer tax) to the Holder and any new Warrant or Warrants
issued pursuant to this Section 8 shall be dated the date hereof.

Section 9. REMOVAL OF LEGEND. Through the Separation Date, each Warrant
Certificate shall bear the following legend:

UNTIL DECEMBER 31, 1999 OR SUCH EARLIER DATE ON WHICH THIS LEGEND IS
REMOVED PURSUANT TO SECTION 9 OF THE WARRANT AGREEMENT, DATED AS

<PAGE>

OF ABOUT _______________, 1997, BETWEEN DURA PHARMACEUTICALS, INC. AND
CHASEMELLON SHAREHOLDER SERVICES, AS WARRANT AGENT, THE WARRANTS
REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED SEPARATELY,
SPLIT UP, COMBINED OR EXCHANGED, BUT MAY ONLY BE TRANSFERRED, SPLIT
UP, COMBINED OR EXCHANGED TOGETHER WITH THE SHARES OF CALLABLE COMMON
STOCK OF SPIROS DEVELOPMENT CORPORATION II, INC. WITH WHICH SUCH
WARRANTS WERE SOLD AS A UNIT.

After the Separation Date, any Holder of Warrants may surrender the Warrant
Certificate evidencing such Warrants to the Warrant Agent, whereupon the Warrant
Agent shall execute and deliver to such Holder a new Warrant Certificate,
without the legend set forth in this Section 9, entitling such Holder to
purchase the same number of Warrant Shares as provided for by such surrendered
Warrant Certificate. Dura shall supply the Warrant Agent with Warrant
Certificates that do not bear such legend for use after the Separation Date.

Section 10. PAYMENT OF TAXES. Dura shall pay all documentary stamp taxes
attributable to the original issuance of the Warrants and of Warrant Shares;
PROVIDED, HOWEVER, that Dura shall not be required to (a) pay any tax which may
be payable in respect of any transfer involving the transfer and delivery of
Warrant Certificates or the issuance or delivery of certificates for Warrant
Shares in a name other than that of the Holder of the Warrant Certificate
surrendered upon the exercise of a Warrant or (b) issue or deliver any
certificate for Warrant Shares upon the exercise of any Warrants until any such
tax required to be paid under clause (a) shall have been paid, all such tax
being payable by the Holder of such Warrant at the time of surrender.

Section 11. MUTILATED OR MISSING WARRANT CERTIFICATES. In the event that
any Warrant Certificate shall be mutilated, lost, stolen or destroyed, Dura may
in its discretion issue, and the Warrant Agent may countersign and deliver, upon
the request of the Holder of the Warrants evidenced by such Warrant Certificate,
in exchange for and upon cancellation of any such mutilated Warrant Certificate,
or in substitution for any such lost, stolen or destroyed Warrant Certificate, a
new Warrant Certificate of like tenor and evidencing the same number of Warrant
Shares as were evidenced by such mutilated, lost, stolen or destroyed Warrant
Certificate, but only upon receipt of evidence satisfactory to the Warrant Agent
of such loss, theft or destruction of such Warrant Certificate and an indemnity,
if requested, reasonably satisfactory to it. An applicant for such substitute
Warrant Certificate shall also comply with such other reasonable regulations and
pay such other reasonable charges as Dura or the Warrant Agent may prescribe.
Any such new Warrant Certificate shall constitute an original contractual
obligation of Dura, whether or not the allegedly mutilated, lost, stolen or
destroyed Warrant Certificate shall be enforceable by any person at any time
thereafter.

<PAGE>

Section 12. NO STOCK RIGHTS: LIMITATION OF LIABILITY. No Holder of any
Warrant shall, by virtue thereof, be entitled to the rights of a stockholder of
Dura, unless and until exercise of such Warrant has occurred. No provisions of
any Warrant or of this Agreement, in the absence of affirmative action by the
Holder of any such Warrant to exercise such Warrant, and no mere enumeration
herein of the rights or privileges of such Holder, shall give rise to any
liability of such Holder for the Exercise Price or as a stockholder of Dura,
whether such liability is asserted by Dura or by its creditors.

Section 13. ANTIDILUTION PROVISIONS.

(a) The Exercise Price and the number of Warrant Shares that may be
purchased upon the exercise of a Warrant shall be subject to change or
adjustment from time to time as follows:

(i) STOCK DIVIDENDS AND STOCK SPLITS. If at any time during the
Exercise Period (A) Dura shall fix a record date for the issuance of any
dividend payable in shares of Common Stock or (B) the number of shares of Common
Stock shall have been increased by a subdivision or split-up of shares of Common
Stock, then, on the record date fixed for the determination of holders of Common
Stock entitled to receive such dividend or immediately after the effective date
of such subdivision or split-up, as the case may be, the number of shares to be
delivered upon exercise of any Warrant will be appropriately increased so that
each Holder thereafter will be entitled to receive the number of shares of
Common Stock that such Holder would have owned immediately following such action
had such Warrant been exercised immediately prior thereto, and the Exercise
Price will be appropriately adjusted. The time of occurrence of an event giving
rise to an adjustment made pursuant to this Section 13(a)(i) shall, in the case
of a stock dividend, be deemed to be the record date thereof and shall, in the
case of a subdivision or split-up, be deemed to be the effective date thereof.

(ii) COMBINATION OF STOCK. If the number of shares of Common Stock
outstanding at any time during the Exercise Period is decreased by a combination
of the outstanding shares of Common Stock, then, immediately after the effective
date of such combination, the number of shares of Common Stock to be delivered
upon exercise of any Warrant shall be appropriately decreased so that the Holder
of such Warrant thereafter will be entitled to receive the number of shares of
Common Stock that such Holder would have owned immediately following such action
had such Warrant been exercised immediately prior thereto, and the Exercise
Price shall be appropriately adjusted.

(iii) REORGANIZATION. If, at any time during the Exercise Period,
any capital reorganization of Dura, or any reclassification of the Common Stock,
or any consolidation of Dura with, or merger of Dura with or into, any other
person or any sale, lease or other transfer of all or substantially all of the
assets of Dura to any other person (including any individual, partnership, joint
venture, corporation, trust or group thereof) shall be effected in such a way
that

<PAGE>

upon consummation of such transaction the holders of the Common Stock shall be
entitled to receive stock, securities or assets with respect to or in exchange
for Common Stock, then, upon exercise of any Warrant in accordance with the
terms of this Agreement and the Warrant Certificate, the Holder of such Warrant
shall have the right to receive the kind and amount of stock, securities or
assets receivable upon such reorganization, reclassification, consolidation,
merger or sale, lease or other transfer by a holder of the number of shares of
Common Stock that such Holder would have been entitled to receive upon exercise
of such Warrant pursuant to Section 3 hereof had such Warrant been exercised
immediately prior to such reorganization, reclassification, consolidation,
merger or sale, lease or other transfer, subject to additional adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 13(a).

(iv) SPECIAL DIVIDENDS. If, at any time during the Exercise Period
(other than in a dissolution or liquidation), Dura shall distribute to holders
of Common Stock evidences of indebtedness of Dura, securities or other assets
(other than cash dividends payable out of retained earnings) by way of a
dividend on outstanding shares of Common Stock, then the Exercise Price shall be
adjusted so that immediately after the date fixed by Dura as the record date in
respect of such distribution, such Exercise Price shall equal the price
determined by multiplying the Exercise Price in effect immediately prior to the
close of business on the record date for the determination of the stockholders
entitled to receive such distribution by a fraction, (A) the numerator of which
shall be the Closing Price on such record date less the then fair market value
as determined reasonably and in good faith by the Board of Directors of Dura of
the portion of the securities or other assets distributed applicable to one
share of Common Stock and (B) the denominator of which shall be such Closing
Price. Such adjustment shall become effective on such record date. In such
case, no adjustment shall be made to the number of Warrant Shares to be received
upon the exercise of a Warrant.

(v) RIGHTS OFFERING. If, at any time during the Exercise Period,
Dura shall issue or sell or fix a record date for the issuance of rights,
options, warrants or convertible or exchangeable securities to all holders of
Common Stock entitling the holders thereof to subscribe for or purchase Common
Stock (or securities convertible into or exchangeable for Common Stock), in any
such case, at a price per share (or having a conversion price per share) that,
together with the value (if for consideration other than cash, as reasonably
determined in good faith by the Board of Directors of Dura) of any consideration
paid for any such rights, options, warrants or convertible or exchangeable
securities, is greater than the Exercise Price and less than the Closing Price
on the date of such issuance or sale or on such record date, as the case may be,
then, immediately after the date of such issuance or sale or on such record
date, the number of shares to be delivered upon exercise of the Warrants shall
be appropriately increased so that the Holder, thereafter during the Exercise
Period, shall be entitled to receive the number of shares of Common Stock
determined by multiplying the number of shares such Holder would have been
entitled to receive immediately before the date of such issuance or sale or such
record date by

<PAGE>

a fraction, (A) the numerator of which shall be the number of shares of Common
Stock outstanding on such date plus the number of additional shares of Common
Stock offered for subscription or purchase (or into which the convertible or
exchangeable securities so offered are initially convertible or exchangeable)
and (B) the denominator of which shall be the number of shares of Common Stock
outstanding on such date plus the number of shares of Common Stock that the
aggregate offering price of the total number of shares so offered for
subscription or purchase (or the aggregate initial conversion price of the
convertible securities so offered) would purchase at such Closing Price, and the
Exercise Price shall be appropriately adjusted. The time of occurrence of an
event giving rise to an adjustment pursuant to this Section 13(v) shall, in the
case of a dividend, be the record date and shall, in the case of an issuance or
sale, be the date of such issuance or sale.

(vi) NO ADJUSTMENTS TO EXERCISE PRICE. No adjustment of the Exercise
Price in accordance with the provisions of paragraph (i), (ii), (iii), (iv) or
(v) above shall be made in an amount of less than $.01; PROVIDED, HOWEVER, that
the amount by which any adjustment is not made by reason of the provisions of
this Section shall be carried forward and taken into account at the time of any
subsequent adjustment in the Exercise Price.

(vii) READJUSTMENTS, ETC. If an adjustment is made under paragraph
(i), (ii), (iii), (iv) or (v) above, and the event to which the adjustment
relates does not occur, then any adjustments in the Exercise Price or Warrant
Shares that were made in accordance with such paragraphs shall be adjusted back
to the Exercise Price and the number of Warrant Shares that were in effect
immediately prior to the record date for such event.

(b) NO IMPAIRMENT, CERTAIN EVENTS.

(i) Dura shall not, by amendment of its Certificate of Incorporation
or through any reorganization, reclassification, consolidation, merger, sale,
lease or transfer of assets, issuance or sale of securities or any other action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Section 13 by Dura, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 13
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holders against impairment.

(ii) If any event occurs as to which the provisions of paragraph (a)
of this Section 13 are not strictly applicable but with respect to which, in the
reasonable, good faith opinion of Dura, an adjustment of the Exercise Price, and
the number of Warrant Shares issuable upon the exercise of a Warrant, would
fairly protect the exercise rights of the Holders in accordance with the basic
intent and principles of such provisions or as to which an adjustment pursuant
to such provisions, if strictly applied, would not fairly protect the purchase
rights of the Holders in accordance with the basic intent and principles of such
provisions, then Dura shall make any

<PAGE>

computation required under this Section 13(b)(ii) with respect to any such
adjustment on a basis consistent with the basic intent and principles
established by the provisions of this Section 13, necessary to preserve, without
dilution, the exercise rights of the Holders. Dura shall appoint a firm of
independent certified public accountants (which may be the regular auditors of
Dura) of recognized national standing, which firm shall review the computation
of Dura prepared pursuant to this Section 13(b)(ii) and prepare a report signed
by such firm, which shall be provided to Dura and which shall acknowledge that
the adjustment calculation prepared by Dura is arithmetically correct. Such
report shall be conclusive evidence of the correctness of the computation made
under this Section 13(b)(ii). Upon receipt of such report, Dura shall forthwith
cause to be made, or shall act to prevent, the adjustments described in such
calculation.

Section 14. OFFICER'S CERTIFICATE. Whenever the number of Warrant Shares
that may be purchased upon exercise of the Warrant is adjusted as required by
the provisions of this Agreement, Dura shall file forthwith with the Warrant
Agent and with its Secretary or Assistant Secretary at its principal office an
officer's certificate indicating the adjusted number of Warrant Shares that may
be purchased upon exercise of a Warrant and the adjusted Exercise Price,
determined as herein provided, and setting forth in reasonable detail the facts
requiring such adjustment and the manner of computing such adjustment. Each
such officer's certificate shall be made available at all reasonable times for
inspection by the Holders. Dura shall, forthwith after each such adjustment,
cause a copy of such officer's certificate to be mailed to the Holders. The
Warrant Agent may rely on such certificate without further inquiry and shall not
be deemed to have knowledge of any adjustment unless and until it shall have
received such certificate.

Section 15. NOTICE OF CERTAIN EVENTS. In the event that, at any time
during the period commencing on the Separation Date and ending on the last day
of the Exercise Period:

(a) Dura shall pay any dividend on Common Stock that is payable in stock,
or make any distribution (other than regular cash dividends) to the holders of
Common Stock;

(b) Dura authorizes the issuance to all holders of Common Stock of rights
or warrants to subscribe for or purchase shares of Common Stock or any other
subscription rights or warrants;

(c) Dura authorizes the distribution to all holders of Common Stock of any
of Dura's assets, including evidences of its indebtedness or assets (other than
cash dividends payable out of retained earnings);

(d) there shall be any capital reorganization or reclassification of the
capital stock of Dura or consolidation or merger of Dura with another person
(other than a consolidation or merger of Dura with a subsidiary of Dura in which
Dura is the surviving or continuing corporation and there is no change with
respect to the Common Stock), or sale, conveyance or transfer of all or
substantially all of Dura's property and assets (other than a sale, conveyance
or transfer of such

<PAGE>

assets to an Affiliate (within the meaning of the Securities Act));

(e) there shall be a voluntary or involuntary dissolution, liquidation,
bankruptcy, assignment for the benefit of creditors or winding up of Dura; or

(f) Dura shall propose to take any other action, or any other event
occurs, that would require an adjustment pursuant to Section 13 hereof of the
Exercise Price or the number of Warrant Shares that may be purchased upon the
exercise of a Warrant;

then Dura will cause to be mailed to the Holder by first-class mail addressed to
such Holder at the address appearing in the Warrant Register, at least twenty
(20) days (or ten (10) days in any case specified in clauses (a), (b) or (c)
above) before the applicable record or effective date hereinafter specified, a
notice stating (A) the date as of which the holders of Common Stock of record
entitled to receive any such dividends, rights, warrants or distributions are to
be determined or (B) the date on which any such consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding-up is expected to
become effective, and the date as of which it is expected that holders of Common
Stock of record will be entitled to exchange their shares of Common Stock for
securities or other property, if any, deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding-up.

Section 16. ACCELERATION EVENT. In case of any Acceleration Event, Dura
shall, as a condition precedent to the consummation of the transaction
constituting, or announced as, such Acceleration Event, cause effective
provisions to be made so that the Holder of a Warrant shall have the right
immediately thereafter, by exercising such Warrant, to purchase during the
Exercise Period the aggregate amount and kind of shares of stock and other
securities and property that were receivable upon such Acceleration Event by a
holder of the number of shares of Common Stock that would have been received
immediately prior to such Acceleration Event upon exercise of such Warrant. Any
such provisions shall require adjustments in respect of such shares of stock and
other securities and assets and other property that shall be as nearly
equivalent as may be practicable to the adjustments provided for in such
Warrant. The foregoing provisions of this Section 16 shall similarly apply to
successive Acceleration Events. Dura shall, at least twenty (20) days prior to
the Acceleration Date relating to any Acceleration Event (or if such
Acceleration Event was beyond the control of Dura, and Dura did not have
knowledge thereof twenty (20) days prior to such Acceleration Date, as soon as
practicable thereafter), cause to be mailed to the Holders a notice describing
in reasonable detail such Acceleration Event and informing the Holders of the
date the Exercise Period will commence and that the Holders may exercise
Warrants at any time during the Exercise Period.

Section 17. LISTING ON SECURITIES EXCHANGES. Dura will list on each
national securities exchange or, if not so listed, will list for quotation on
the Nasdaq National Market, or such other

<PAGE>

over-the-counter quotation system on which any Common Stock may at any time be
listed, all shares of the Common Stock from time to time issuable upon the
exercise of the Warrants, and will maintain such listing so long as any other
shares of Common Stock are so listed; and Dura shall so list on each national
securities exchange or the Nasdaq National Market, or such other over-the-
counter quotation system, and shall maintain such listing of, any other shares
of capital stock of Dura issuable upon the exercise of the Warrants if and so
long as any shares of capital stock of the same class are listed on such
national securities exchange or are traded on the Nasdaq National Market or such
over-the-counter quotation system. Any such listing or quotation will be at
Dura's expense.

Section 18. AVAILABILITY OF INFORMATION. Dura will comply with all
applicable periodic public information reporting requirements of the Commission
to which it may from time to time be subject.

Section 19. WARRANT AGENT.

(a) MERGER, CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT.

(i) Any corporation into which the Warrant Agent may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the corporate trust business of the Warrant Agent, shall be the
successor to the Warrant Agent hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto; PROVIDED,
HOWEVER, that such successor corporation must be otherwise eligible for
appointment as a Warrant Agent hereunder. In the event that at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Agreement any of the Warrant Certificates shall have been countersigned but not
delivered, any such successor to the Warrant Agent may adopt the
countersignature of such predecessor Warrant Agent and deliver such Warrant
Certificates so countersigned; and in the event that at the time of such
succession any of the Warrant Certificates shall not have been countersigned,
any such successor to the Warrant Agent may countersign such Warrant
Certificates either in the name of such predecessor Warrant Agent or in the name
of such successor Warrant Agent; and in any event, all such Warrant Certificates
shall have the full force and effect provided in such Warrant Certificates and
in this Agreement.

(ii) In the case that at any time the name of the Warrant Agent shall
be changed and at such time one or more of the Warrant Certificates shall have
been countersigned but not delivered, the Warrant Agent may adopt the
countersignature under its prior name and deliver Warrant Certificates so
countersigned; in the event that at that time one or more of the Warrant
Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name; and in all such cases such Warrant Certificates shall have the full force
and effect provided in such Warrant Certificates and in this

<PAGE>

Agreement.

(b) DUTIES OF WARRANT AGENT. The Warrant Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by which the Holders, by their acceptance of Warrants, and Dura, shall be bound:

(i) The Warrant Agent shall not be responsible for any failure of
Dura to comply with any of the covenants to be complied with by Dura that are
contained in this Agreement or in the Warrant Certificates.

(ii) The Warrant Agent may consult at any time with counsel
satisfactory thereto, and the Warrant Agent shall incur no liability or
responsibility to Dura or to any Holder in respect of any action taken, suffered
or omitted by the Warrant Agent hereunder in good faith and in accordance with
the opinion or the advice of such counsel, provided that the Warrant Agent shall
have exercised reasonable care in the selection and continued employment of such
counsel.

(iii) The Warrant Agent shall incur no liability or responsibility to
Dura or to any Holder for any action taken in reliance on any notice,
resolution, waiver, consent, order, certificate or other paper, document or
instrument believed by the Warrant Agent to be genuine and to have been signed,
sent or presented by the party or parties thereto.

(iv) Dura shall (A) pay to the Warrant Agent reasonable compensation
for all services rendered by the Warrant Agent in the execution of this
Agreement, (B) reimburse the Warrant Agent for all expenses, taxes (other than
taxes based on such Warrant Agent's net income), governmental charges, and other
charges of any kind and nature, incurred by the Warrant Agent in the performance
of this Agreement, (C) advance to the Warrant Agent, upon request, funds to pay
cash in lieu of fractional shares of Common Stock issuable upon exercise of
Warrants and (D) indemnify the Warrant Agent and save it hardness against any
and all losses, expenses or liabilities, including judgments, costs and counsel
fees, arising out of or in connection with its agency under this Agreement,
except as a result of its negligence or bad faith.

(v) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to involve
the incurrence by the Warrant Agent of expenses unless Dura or one or more
Holders shall have furnished the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred. All rights of
action under this Agreement or under any of the Warrants may be enforced by the
Warrant Agent without the possession of any of the Warrants or the production
thereof at any trial or other proceeding relative thereto, and any such action,
suit or proceeding instituted by the Warrant Agent shall be brought in its name
as Warrant Agent, and any recovery of judgment shall be for the ratable benefit
of the Holders, as their respective rights or interests may appear.

<PAGE>

(vi) The Warrant Agent and any stockholder, director, officer or
employee of the Warrant Agent may buy, sell or deal in any of the Warrants or
other securities of Dura, or become pecuniarily interested in any transaction in
which Dura may be interested or contract with or lend money or otherwise act as
fully and freely as though it were not the Warrant Agent under this Agreement.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for Dura or for any other legal entity.

(vii) The Warrant Agent shall act hereunder solely as agent, and its
duties shall be determined solely by the provisions hereof. The Warrant Agent
shall not be liable for any actions which it may take or refrain from taking, in
connection with this Agreement, except as result from its own gross negligence
or bad faith.

(viii) The Warrant Agent shall make copies of this Agreement available
for inspection at its principal offices at _________________________ during
normal business hours and shall provide copies to Holders upon their written
request.

(c) CHANGE OF WARRANT AGENT. The Warrant Agent may resign and be
discharged from its duties under this Agreement by providing both (i) written
notice to Dura and (ii) written notice, sent by first-class mail, postage
prepaid, to each Holder at such Holder's address appearing in the Warrant
Register, which notice shall specify a date when such resignation shall take
effect and shall be sent at least two weeks prior to the date so specified. If
the Warrant Agent shall resign or otherwise become incapable of acting, Dura
shall appoint a successor thereto. If Dura shall fail to make such appointment
within a period of thirty (30) days after receiving written notification of such
resignation or incapacity by the Warrant Agent or by any Holder (which Holder
shall, with such notice, submit Warrant Certificates held thereby for inspection
by Dura), then any Holder may apply to any court of competent jurisdiction for
the appointment of a successor to the Warrant Agent. Pending appointment of a
successor to the Warrant Agent, either by Dura or by a court, the duties of the
Warrant Agent shall be carried out by Dura. After such appointment, the
successor Warrant Agent shall be vested with such powers, rights, duties and
responsibilities as such Warrant Agent would have been vested had such Warrant
Agent been named originally as Warrant Agent hereunder, without further act or
deed. The former Warrant Agent shall deliver and transfer to the successor
Warrant Agent any property at the time held by such former Warrant Agent
hereunder and shall execute and deliver any further assurance, conveyance, act
or deed necessary therefor. Failure to provide any notice called for in this
Section 19, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Warrant Agent or the appointment
of a successor Warrant Agent.

Section 20. IDENTITY OF TRANSFER AGENT. Forthwith upon the appointment
after the date hereof of any transfer agent for the Common Stock, or of any
subsequent transfer agent for shares of the Common Stock, Dura will file with
the Warrant Agent a statement setting forth the name

<PAGE>

and address of such transfer agent.

Section 21. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of Dura, the Warrant Agent or any of the Holders
shall bind and inure to the benefit of their respective successors, assigns,
heirs and personal representatives.

Section 22. TERMINATION. This Agreement shall terminate at 5:00 p.m., New
York City time, on the Expiration Date or upon such earlier date on which all
Warrants have been exercised or redeemed, except that the Warrant Agent shall
account to Dura for all cash held by it at 5:00 p.m., New York City time, on
such Expiration Date or such other date.

Section 23. HEADINGS. The headings of sections of this Agreement have
been inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.

Section 24. AMENDMENTS. This Agreement may be amended only by both (i)
the written consent of Dura and (ii) the affirmative vote or the written consent
of Holders holding not less than two-thirds in interest of the then outstanding
Warrants; PROVIDED, HOWEVER, that, except as expressly provided herein, this
Agreement may not be amended to change (a) the Exercise Price, (b) the Exercise
Period, (c) the number or type of securities to be issued upon the exercise of
the Warrants or (d) the provisions of this Section 24, without the consent of
each Holder.

Section 25. COUNTERPARTS. This Agreement may be executed in any number of
counterparts each of which when so executed shall be deemed to be an original,
but all of which taken together shall constitute one and the same agreement.

Section 26. NOTICES.

(a) Any notice required by the provisions of this Agreement to be provided
to Dura by the Warrant Agent or by any Holder shall be deemed given if deposited
in the United States mail, first class postage prepaid, addressed (until another
address is filed in writing by Dura with the Warrant Agent) as follows:

Dura Pharmaceuticals Inc.
7475 Lusk Boulevard
San Diego, CA 92121
Attention: Corporate Secretary

(b) Any notice required by the provisions of this Agreement to be provided
to the Warrant Agent by Dura or by any Holder shall be deemed given if deposited
in the United States mail, first class postage prepaid, addressed (until another
address is filed in writing by the

<PAGE>

Warrant Agent with Dura or notice of the address of a successor Warrant Agent is
provided pursuant to this Agreement) as follows:

ChaseMellon Shareholder Services
________________________________
________________________________
Attn:___________________________

(c) Any notice required by the provisions of this Agreement to be provided
to any Holder by Dura or by the Warrant Agent shall be deemed given if deposited
in the United States mail, first class postage prepaid, addressed to such Holder
at its address set forth in the Warrant Register. Any notice given in
conformity with this Section 26 shall be deemed effective three (3) days after
mailing.

Section 27. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation, other than Dura, the Warrant
Agent and the Holders, any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of
Dura, the Warrant Agent and the Holders.

Section 28. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to
be signed by its duly authorized officers.

DURA PHARMACEUTICALS, INC.

By:
------------------------------------------
Title:
---------------------------------------

CHASEMELLON SHAREHOLDER SERVICES, as
Warrant Agent

By:
------------------------------------------
Title:
---------------------------------------

<PAGE>

EXHIBIT A

FORM OF WARRANT CERTIFICATE

UNTIL THIS LEGEND IS REMOVED PURSUANT TO SECTION 9 OF THE WARRANT AGREEMENT,
DATED ON OR ABOUT _______________, 1997, BETWEEN DURA PHARMACEUTICALS,INC. AND
CHASEMELLON SHAREHOLDER SERVICES, AS WARRANT AGENT, THE WARRANTS REPRESENTED BY
THIS CERTIFICATE MAY NOT BE TRANSFERRED SEPARATELY, SPLIT UP, COMBINED OR
EXCHANGED, BUT MAY ONLY BE TRANSFERRED, SPLIT UP, COMBINED OR EXCHANGED TOGETHER
WITH THE SHARES OF CALLABLE COMMON STOCK OF SPIROS DEVELOPMENT CORPORATION II,
INC. WITH WHICH SUCH WARRANTS WERE SOLD AS A UNIT.

VOID AFTER 5:00 P.M., Warrant No.______________
NEW YORK CITY TIME, ON Warrants_________________
DECEMBER 31, 2002

CUSIP _____________

DURA PHARMACEUTICALS, INC.
Warrants to Purchase Shares of Common Stock

THIS CERTIFIES THAT, FOR VALUE RECEIVED,
_______________, or registered assigns, is the registered holder of the number
of Warrants (the "Warrants") set forth above. Each Warrant entitles the holder
thereof to purchase from Dura Pharmaceuticals, Inc., a Delaware corporation
("Dura"), subject to the terms and conditions hereinafter set forth and in the
Warrant Agreement hereinafter referred to, one fully paid and nonassessable
share of Common Stock, par value $.001 per share, of Dura (the "Common Stock").
The Warrants may be exercised at any time or from time to time on or after the
first to occur of (i) January 1, 2000, (ii) the exercise by Dura of the Stock
Purchase Option, (iii) the termination of the Stock Purchase Option with respect
to Dura and (iv) an Acceleration Date (as defined in the Warrant Agreement)
(such earliest date being referred to herein as the "Separation Date") and will
expire at 5:00 p.m., New York City time, on December 31, 2002] (the "Expiration
Date"). Upon the Expiration Date, all rights evidenced by the Warrants shall
cease and the Warrants shall become void. Subject to the provisions of the
Warrant Agreement, the holder of each Warrant shall have the right to purchase
from Dura until the Expiration Date (and Dura shall issue and sell to such
holder of a Warrant) one-third of one fully paid and nonassessable share of
Common Stock (a "Warrant Share") at an exercise price (the "Exercise Price") of
$_______ per share upon surrender of this Warrant Certificate to Dura at the
office of the Warrant Agent (as defined in the Warrant Agreement) designated by
the Warrant Agent for such purpose with the form of election to purchase
appearing on this Warrant Certificate duly completed and signed, together with
payment of the Exercise Price by certified or official bank

<PAGE>

A-2

check payable to the order of Dura.

The Exercise Price and the number of Warrant Shares that may be purchased
upon the exercise of the Warrants and the number of Warrants outstanding are
subject to change or adjustment upon the occurrence of certain events set forth
in the Warrant Agreement.

REFERENCE IS MADE TO THE PROVISIONS OF THIS WARRANT CERTIFICATE SET FORTH
ON THE REVERSE SIDE HEREOF, AND SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES
HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH ON THE FRONT OF THIS CERTIFICATE.

This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent.

This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of California.

IN WITNESS WHEREOF, Dura has caused this Warrant Certificate to be executed
by its duly authorized officers.

Dated: ____________, 1997 DURA PHARMACEUTICALS, INC.

By:
---------------------------
Title:
------------------------

Countersigned:

CHASEMELLON SHAREHOLDER SERVICES,
as Warrant Agent

By:
--------------------------------
Authorized Signature

<PAGE>

A-3

[REVERSE SIDE]

DURA PHARMACEUTICALS, INC.

This Warrant Certificate is subject to all of the terms and conditions of
the Warrant Agreement, dated on or about ___________, 1997 (the "Warrant
Agreement"), between Dura and the Warrant Agent, to all of which terms and
conditions the registered holder of the Warrant consents by acceptance hereof.
The Warrant Agreement is incorporated herein by reference and made a part hereof
and reference is made to the Warrant Agreement for a full description of the
rights, limitations of rights, obligations, duties and immunities of the Warrant
Agent, Dura and the registered holders of Warrant Certificates. Copies of the
Warrant Agreement are available for inspection at the principal office of the
Warrant Agent or may be obtained upon written request addressed to the Warrant
Agent at its principal office in _________________.

Dura shall not be required upon the exercise of the Warrants evidenced by
this Warrant Certificate to issue fractional shares, but shall make adjustment
therefore in cash on the basis of the current market value of any fractional
interest as provided in the Warrant Agreement.

Dura has agreed to cause a registration statement under the Securities Act
of 1933, as amended, covering the Warrants and Warrant Shares to be effective
through the termination of the Exercise Period (as defined in the Warrant
Agreement) or until such earlier time as no Warrants remain outstanding, and to
register or qualify the Warrants and the Warrant Shares to be delivered upon
exercise of the Warrants under the laws of each jurisdiction in which such
registration or qualification is necessary.

The Warrants evidenced by this Warrant Certificate may not be divided or
combined with other Warrants or exchanged, assigned or transferred apart from
the shares of Spiros Development Corp. II, Inc. Callable Common Stock with which
they were sold as a Unit to the public until the Separation Date. After the
Separation Date, this Warrant Certificate may be exchanged, at the option of the
holder upon presentation and surrender hereof to the Warrant Agent, for other
Warrant Certificates of different denominations, entitling the holder hereof to
purchase in the aggregate the same number of Warrant Shares, but without the
legend that appears hereon. After the Separation Date, Warrants may be assigned
or transferred upon surrender of this Warrant Certificate to the Warrant Agent,
accompanied (if so required by Dura or the Warrant Agent) by the form of
assignment appearing on this Warrant Certificate duly completed and signed,
whereupon the Warrant Agent shall execute and deliver to the transferee a new
Warrant Certificate entitling the transferee to purchase the same number of
Warrant Shares, but without the legend that appears hereon. If the Warrants
evidenced by this Warrant Certificate shall be exercised in part, the holder
hereof shall be

<PAGE>

A-4

entitled to receive upon surrender hereof another Warrant Certificate or
Certificates evidencing the number of Warrants not so exercised.

The holder of this Warrant Certificate shall not, by virtue hereof, be
entitled to any of the rights of a stockholder in Dura, either at law or in
equity, and the rights of the holder are limited to those expressed in the
Warrant Agreement.

If this Warrant Certificate shall be surrendered for exercise within any
period during which the transfer books for the Common Stock are closed for
any purpose, Dura shall not be required to make delivery of certificates for
shares purchasable upon such transfer until the date of the reopening of said
transfer books.

Each holder of this Warrant Certificate, by accepting the same, consents
and agrees with Dura, the Warrant Agent and with every other holder of a Warrant
Certificate that:

(a) this Warrant Certificate is transferable on the registry books of
the Warrant Agent only upon the terms and conditions set forth in the Warrant
Agreement; and

(b) Dura and the Warrant Agent may deem and treat the person in whose
name this Warrant Certificate is registered as the absolute owner hereof
(notwithstanding any notation of ownership or other writing hereon made by
anyone other than Dura or the Warrant Agent) for all purposes whatever and
neither Dura nor the Warrant Agent shall be affected by any notice to the
contrary.

This Warrant Certificate shall not be valid or enforceable for any purpose
until it shall have been countersigned by the Warrant Agent.

The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.

<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - __________ Custodian __________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right under Uniform Gifts to Minors
of survivorship and not Act
as tenants in common --------------------------------------
(State)
</TABLE>

Additional abbreviations may also be used though not in the above list.

<PAGE>

A-5

ELECTION TO PURCHASE
(To be executed upon exercise of Warrant)

Dated___________, _____

The undersigned hereby irrevocably exercises this Warrant to purchase _____
shares of Common Stock and herewith makes payment of $___________ in payment of
the Exercise Price thereof on the terms and conditions specified in this Warrant
Certificate, surrenders this Warrant Certificate and all right, title, and
interest therein to Dura and directs that the Warrant Shares deliverable upon
the exercise of such Warrants be registered in the name and at the address
specified below and delivered thereto.

Name:
---------------------------------------------------------------------------
(Please Print)

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

City, State and Zip Code:
-------------------------------------------------------

If such number of Warrant Shares is less than the aggregate number of
Warrant Shares purchasable hereunder, the undersigned requests that a new
Warrant Certificate representing the balance of such Warrant Shares to be
registered in the name and at the address specified below and delivered thereto.

Name:
---------------------------------------------------------------------------
(Please Print)
Address:
------------------------------------------------------------------------

City, State and Zip Code:
-------------------------------------------------------

Taxpayer's Identification or Social Security Number:
----------------------------

Signature(s)
-----------------------

-----------------------
NOTE: The above signature(s) must correspond with the name as written upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever. If the certificate representing the
Warrant Shares or any Warrant Certificate representing Warrants not exercised is
to be registered in a name other than that in which this Warrant Certificate is
registered, the signature of the holder hereof must be guaranteed.

Signature(s) Guaranteed:

- -----------------------------

<PAGE>

A-6

ASSIGNMENT

FOR VALUE RECEIVED, ____________ hereby sells, assigns and transfers to:

Name:
---------------------------------------------------------------------------
(Please Print)

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

City, State and Zip Code:
-------------------------------------------------------

Taxpayer's Identification or Social Security Number:
----------------------------

the right to purchase up to _____ Warrant Shares represented by this Warrant and
does hereby irrevocably constitute and appoint _______________ to transfer said
Warrant on behalf of Dura, with full power of substitution in the premises.

Dated:__________, __ __________________________________

__________________________________
Signature(s) of registered Holder

NOTE: The above signature(s) must correspond with the name as written upon the
face of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever.

Signature(s) Guaranteed:

- ------------------------------

<PAGE>

Exibit 10.1

TECHNOLOGY LICENSE AGREEMENT

This TECHNOLOGY LICENSE AGREEMENT (the "Agreement") is made as of
__________, 1997, by and among DURA PHARMACEUTICALS, INC., a Delaware
corporation ("DURA"), DURA DELIVERY SYSTEMS, INC., a Delaware corporation
("DDSI"), SPIROS DEVELOPMENT CORPORATION, a Delaware corporation ("Spiros
Corp."), and SPIROS DEVELOPMENT CORPORATION II, INC., a Delaware corporation
("Spiros Corp. II").

RECITALS

WHEREAS, DURA and Spiros Corp. II are parties to the Development Agreement,
the Manufacturing and Marketing Agreement, and the Albuterol and Product Option
Agreement (all capitalized terms shall have the respective meanings set forth in
Section 1 hereof).

WHEREAS, DURA has the Purchase Option to acquire all of the Spiros Corp. II
Common Stock.

WHEREAS, DURA, DDSI and/or Spiros Corp. are the owners or licensees of the
Core Technology and of certain rights relating to the Spiros Products and
certain intellectual property rights relating thereto.

WHEREAS, DURA, DDSI and Spiros Corp. are willing to grant to Spiros Corp.
II and Spiros Corp. II desires to acquire from DURA, DDSI and Spiros Corp., a
license to the Core Technology and the Spiros Products for the purpose of
allowing Spiros Corp. II to perform research, develop and commercialize the
Spiros Products.

WHEREAS, pursuant to the Development Agreement, Spiros Corp. II has engaged
DURA to employ the intellectual property rights and technology licensed
hereunder in conducting the Development and commercialization of Spiros
Products.

WHEREAS, in the course of researching and developing the Program
Technology, DURA or Spiros Corp. II may develop certain inventions, processes or
know-how, or DURA may obtain on behalf of Spiros Corp. II rights to certain
additional technology or patents or other proprietary rights useful to other
than just the Spiros Products.

WHEREAS, DURA desires to acquire, and Spiros Corp. II is willing to grant
to DURA, an exclusive worldwide license or sublicense to make, use, market and
sell such developments, technology or rights other than with respect to Spiros
Products.

NOW, THEREFORE, in consideration of the mutual covenants set forth herein
and for other good and valuable consideration, the

<PAGE>

receipt and sufficiency of which are hereby acknowledged, and in order to induce
DURA to enter into the Agreements, DURA, DDSI, Spiros Corp. and Spiros Corp. II
hereby agree as follows:

1. DEFINITIONS.

1.1 DEFINITIONS. All capitalized terms used herein and not otherwise
defined shall have the respective meanings, to the extent such terms are used
herein, set forth in SCHEDULE 1.1 attached hereto, which is incorporated by this
reference as though fully set forth herein.

1.2 SINGULAR AND PLURAL. Singular and plural forms, as the case may be,
of terms defined herein shall have correlative meanings.

2. GRANT OF LICENSES.

2.1 GRANT OF EXCLUSIVE LICENSES TO SPIROS CORP. II; RIGHT TO SUBLICENSE.

2.1.1 DURA GRANT. Subject to the terms and conditions of this
Agreement, DURA hereby grants to Spiros Corp. II an exclusive (against DURA and
all other Persons) perpetual, worldwide right and license, terminable only as
set forth herein, to employ the DURA Core Technology to research, develop, make,
have made, use, sell, have sold and import the Spiros Products (except with
respect to beclomethasone in Japan, Hong Kong, Singapore, the Republic of China,
Taiwan, the Republic of Korea and the People's Republic of China).

2.1.2 DDSI GRANT. Subject to the terms and conditions of this
Agreement, DDSI hereby grants to Spiros Corp. II an exclusive (against DDSI and
all other Persons) perpetual, worldwide right and license, terminable only as
set forth herein, to employ the DDSI Core Technology to research, develop, make,
have made, use, sell, have sold and import the Spiros Products (except with
respect to beclomethasone in Japan, Hong Kong, Singapore, the Republic of China,
Taiwan, the Republic of Korea and the People's Republic of China).

2.1.3 SPIROS CORP. GRANT. Subject to the terms and conditions of
this Agreement, Spiros Corp. hereby grants to Spiros Corp. II an exclusive
(against Spiros Corp. and all other Persons) perpetual, worldwide right and
license, terminable only as set forth herein, to employ the Spiros Core
Technology to research, develop, make, have made, use, sell, have sold and
import the Spiros Products (except with respect to beclomethasone in Japan, Hong
Kong, Singapore, the Republic of China, Taiwan, the Republic of Korea and the
People's Republic of China).

2.2 THIRD PARTY LICENSES TO DURA OR ANY OF ITS AFFILIATES. With respect
to the rights of third parties that may be obtained by DURA after the date
hereof, and which are necessary or useful to the Development under the
Development Agreement or the

- 2 -

<PAGE>

commercialization of the Spiros Products under the Manufacturing and
Marketing Agreement, DURA shall use commercially reasonable efforts to secure
such rights and the right to sublicense such rights to Spiros Corp. II and
shall sublicense such rights to Spiros Corp. II whenever possible; PROVIDED
that Spiros Corp. II shall not be obligated to accept any grant of rights or
assume any obligations hereunder without its prior written consent. If
Spiros Corp. II desires to obtain any such rights licensed to DURA or any of
its Affiliates pursuant to an agreement with any Person other than Spiros
Corp. II (a "Third Party Agreement"), the existence of which DURA shall
promptly inform Spiros Corp. II, Spiros Corp. II and DURA agree to negotiate
in good faith regarding the allocation between DURA or any of its Affiliates
and Spiros Corp. II of the royalty, license fee, milestone fee or other
payments payable to the third party and the assumption of any obligations
applicable to such license, if any. Spiros Corp. II shall bear the cost of
obtaining any such rights and shall assume such obligations only in
proportion to its and its sublicensees' (other than DURA's and/or any of its
Affiliates) use of such rights. Any sublicense granted to Spiros Corp. II
hereunder shall be limited to the rights that DURA and/or any of its
Affiliates has a right to grant under any such Third Party Agreement and to
any obligations under any such Third Party Agreement, and to any obligations
assumed by DURA and/or any of its Affiliates in consideration of the grant or
assignment of such rights to DURA which are to be sublicensed to Spiros Corp.
II. No party shall take any action, or fail to take any action within its
control, that would constitute or give rise to a breach or other violation by
DURA or any of its Affiliates of any such Third Party Agreement. The parties
agree that no future licensing fees are required to be paid by Spiros Corp.
II during the term of this Agreement as consideration for the licenses and
sublicenses granted to Spiros Corp. II hereunder, except as set forth in this
Section 2.2.

2.3 SPIROS CORP. II SUBLICENSES AND LICENSES TO DURA.

2.3.1 DEVELOPMENT LICENSE. Spiros Corp. II hereby grants DURA an
exclusive, even as to Spiros Corp. II and all other Persons, royalty-free
license to employ and engage in any and all uses of the Program Technology to
conduct Development, subject to the terms and conditions of and to the extent
necessary to perform its obligations under the Development Agreement. The
rights granted under this Section 2.3.1 may be further sublicensed by DURA only
to its Affiliates or as permitted under of the Development Agreement (and, in
such a case, solely to the extent necessary to perform any subcontracting
services thereunder) or as otherwise agreed to in writing by Spiros Corp. II.

2.3.2 COMMERCIALIZATION LICENSE. Spiros Corp. II hereby grants
DURA an exclusive, even as to Spiros Corp. II and all other Persons, worldwide
license to use the Program Technology to make, have made, use, sell, supply and
import Spiros Products subject to the terms and conditions of and to the extent
necessary to perform its obligations under the

- 3 -

<PAGE>

Manufacturing and Marketing Agreement. The rights granted under this
Section 2.3.2 may be further sublicensed by DURA only to its Affiliates or as
permitted under the Manufacturing and Marketing Agreement (and, in such a case,
solely to the extent necessary to perform any subcontracting services
thereunder) or as otherwise agreed to in writing by Spiros Corp. II.

2.3.3 ALBUTEROL PRODUCT LICENSE. Spiros Corp. II hereby grants
DURA effective upon the exercise of the Albuterol Option, an exclusive, royalty-
free, irrevocable, perpetual, worldwide license to use the Program Technology to
develop, make, have made, use, sell, have sold, supply and import the Albuterol
Product. The license granted hereunder shall include the right to grant
sublicenses with respect to the Program Technology licensed under this Section
2.3.3 for use with the Albuterol Product.

2.3.4 PRODUCT OPTION LICENSE. Spiros Corp. II hereby grants DURA
effective upon the exercise of the Product Option, an exclusive, royalty-free,
irrevocable, perpetual, worldwide license to use the Program Technology to
develop, have developed, make, have made, use, sell, have sold, supply and
import the Option Product. The license granted hereunder shall include the
right to grant sublicenses with respect to the Program Technology licensed under
this Section 2.3.4 for use with the Option Product.

2.3.5 ADDITIONAL LICENSE. Spiros Corp. II hereby grants DURA an
exclusive, royalty-free, irrevocable, perpetual, worldwide license to use the
Program Technology, including technology relating to enhancements to Spiros
technology or any next generation inhaler system in which Spiros Corp. II has
rights, to develop, have developed, make, have made, use, sell, have sold,
supply and import any products other than the Spiros Products.

2.3.6 OTHER LICENSES. The foregoing licenses are granted in
addition to, and not in substitution for, any other license granted to DURA,
whether pursuant to this Agreement or otherwise.

2.4 RESTRICTIONS UPON USE OF PROGRAM TECHNOLOGY. Except as provided in
the Agreements or by the prior written consent of DURA, Spiros Corp. II shall
not, directly or indirectly, prior to the expiration or termination (other than
by exercise) of the Purchase Option, (a) license, sublicense, encumber, pledge,
sell, assign or otherwise transfer to any Person any rights under the Program
Technology, (b) make, have made, use or sell any of the Program Technology for
any purpose whatsoever, or (c) authorize, cause or assist in any way any other
Person to do any of the foregoing. Following the expiration or termination
(other than by exercise) of the Purchase Option, the foregoing limitations shall
cease to be applicable and Spiros Corp. II shall have, without limitation, the
right to sublicense the Program Technology for use with the Spiros Products.

- 4 -

<PAGE>

2.5 ADJUSTMENT OF LICENSES. The licenses granted in Sections 2.1 and 2.3
hereunder shall be subject to adjustment (a) upon the Albuterol Option Closing
Date, so as to exclude any rights to the Albuterol Program Assets from the
licenses granted therein, and (b) upon the Product Option Closing Date, so as to
exclude any rights to Spiros Product Program Assets from the license granted
therein.

3. REPRESENTATIONS, WARRANTIES AND COVENANTS.

3.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF DURA. DURA represents,
warrants and covenants to Spiros Corp. II as follows:

3.1.1 ORGANIZATION OF DURA. DURA is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
with full corporate power and authority adequate for executing and delivering
and performing its obligations under this Agreement;

3.1.2 ORGANIZATION OF DDSI. DDSI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
with full corporate power and authority adequate for executing and delivering
and performing its obligations under this Agreement;

3.1.3 ORGANIZATION OF SPIROS CORP.. Spiros Corp. is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware with full corporate power and authority adequate for executing
and delivering and performing its obligations under this Agreement.

3.1.4 AUTHORIZATION. The execution, delivery and performance of
this Agreement have been duly authorized by all necessary corporate action on
the part of DURA, DDSI and Spiros Corp. and this Agreement shall constitute a
legal, valid and binding obligation of each of DURA, DDSI and Spiros Corp.,
enforceable against DURA, DDSI and Spiros Corp. in accordance with its terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors;

3.1.5 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery
and performance of this Agreement do not and will not conflict with or
contravene any provision of the charter documents or by-laws of each of DURA,
DDSI and Spiros Corp. or any material agreement, document, instrument, indenture
or other obligation of DURA, DDSI or Spiros Corp.;

3.1.6 OTHER AGREEMENTS. None of DURA, DDSI or Spiros Corp. shall
enter into any agreement, make any commitment, take any action or fail to take
any action that would contravene any material provision of, or materially
derogate or restrict any of the rights and licenses granted or assigned to
Spiros Corp. II under, this Agreement and each of DURA, DDSI and Spiros Corp.

- 5 -

<PAGE>

agree to abide and be bound by the terms of any license agreement to which they
are a party, any of the rights to which have been or will be sublicensed or
assigned to Spiros Corp. II;

3.1.7 INTELLECTUAL PROPERTY RIGHTS. To the best of its
knowledge, each of DURA, DDSI and Spiros Corp. has sufficient legal and/or
beneficial title and ownership to grant the licenses to the DURA Core
Technology, the DDSI Core Technology and the Spiros Corp. Core Technology,
respectively, and the other intellectual property rights provided in Section
2 above. None of DURA, DDSI or Spiros Corp. is aware of and has not received
any communications alleging that it has violated, or that Spiros Corp. II by
practicing the Core Technology as contemplated in the Agreements would
violate, any intellectual property rights of any third party. Except for the
1933 Royalty Agreement, there are no outstanding options, licenses or
agreements of any kind between DURA, DDSI or Spiros Corp. and any third party
relating to the research, development, manufacture, use or sale of the Spiros
Products. To the best of its knowledge, there is no material unauthorized
use, infringement or misappropriation of any of the Core Technology. DURA,
DDSI and Spiros Corp. are not aware of, nor have they received any
communications challenging the ownership, validity or effectiveness of the
Core Technology.

3.1.8 VALIDITY. None of DURA, DDSI or Spiros Corp. is aware of any
action, suit or inquiry or investigation instituted by any federal, state, local
or foreign governmental agency or instrumentality which questions or threatens
the validity of the Agreements.

3.2 REPRESENTATIONS, WARRANTIES AND COVENANTS OF SPIROS CORP. II. Spiros
Corp. II represents, warrants and covenants to DURA, DDSI and Spiros Corp. as
follows:

3.2.1 ORGANIZATION. Spiros Corp. II is a corporation duly
organized, validly existing and in good standing under the laws of State of
Delaware with full corporate power and authority adequate for executing and
delivering and performing its obligations under this Agreement;

3.2.2 AUTHORIZATION. The execution, delivery and performance of
this Agreement have been duly authorized by all necessary corporate action on
the part of Spiros Corp. II, and this Agreement shall constitute a legal, valid
and binding obligation of Spiros Corp. II, enforceable against Spiros Corp. II
in accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors;

3.2.3 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery
and performance of this Agreement do not and will not conflict with or
contravene any provision of the charter documents or by-laws of Spiros Corp. II
or any material agreement, document, instrument, indenture or other obligation
of Spiros Corp. II;

- 6 -

<PAGE>

3.2.4 OTHER AGREEMENTS. Spiros Corp. II shall not enter into any
agreement, make any commitment, take any action or fail to take any action that
would contravene any material provisions of, or materially derogate or restrict
any of the rights or licenses granted to DURA under, this Agreement;

3.2.5 SUBLICENSES. Spiros Corp. II agrees to abide and be bound by
the terms of the sublicenses granted to it in accordance with the terms of this
Agreement by DURA, DDSI and/or Spiros Corp. under any Third Party Agreement or
under any agreement with a third party;

3.2.6 NON-COMPETITION. Spiros Corp. II shall not, during the
term of this Agreement, without the prior written consent of DURA, solicit
the employment of any person, in any capacity, who, at any time during the
term of this Agreement, shall have been an officer, director, employee or
agent of DURA or any of its Affiliates, except for the officers of Spiros
Corp. II on the date hereof; and

3.2.7 VALIDITY. Spiros Corp. II is aware of no action, suit or
inquiry or investigation instituted by any federal, state, local or foreign
governmental agency or instrumentality which questions or threatens the validity
of the Agreements.

4. DISCLOSURE AND USE OF TECHNOLOGY AND RIGHTS.

4.1 TECHNOLOGY TRANSFER.

4.1.1 PRIOR TO EXPIRATION OR TERMINATION OF PURCHASE OPTION. At any
time prior to the expiration or termination (other than by exercise) of the
Purchase Option and upon request by Spiros Corp. II, each of DURA, DDSI and
Spiros Corp. shall, within a reasonable time thereafter, provide access to
Spiros Corp. II to all physical manifestations of the Program Technology which
they control.

4.1.2 AFTER EXPIRATION OR TERMINATION OF OPTION. After expiration
or termination (other than by exercise) of the Purchase Option, DURA shall,
except as provided otherwise in any of the Agreements, within thirty (30) days
of a written request by Spiros Corp. II, provide to Spiros Corp. II or a
sublicensee designated by Spiros Corp. II, reasonably sufficient quantities of
previously manufactured quantities of Spiros Products and all physical
manifestations of the Program Technology, including, without limitation, copies
of all laboratory notebooks, designs, specifications, formulas, procedures,
clinical and pre-clinical data and other information, all to the extent that
such Spiros Products, or Program Technology were developed prior to the time of
such required delivery. Spiros Corp. II shall pay all costs of shipping,
packaging, copying and similar or related costs in connection therewith,
provided such costs have not been previously paid by Spiros Corp. II hereunder
or under the

- 7 -

<PAGE>

Development Agreement.

4.1.3 TECHNICAL ASSISTANCE AFTER EXPIRATION OR TERMINATION OF
PURCHASE OPTION. For a period of one (1) year after expiration or termination
(other than by exercise) of the Purchase Option, each of DURA, DDSI and Spiros
Corp. shall provide to Spiros Corp. II, or a sublicensee designated by Spiros
Corp. II, at Spiros Corp. II's or such permitted sublicensee's sole option and
expense, reasonable technical assistance and instruction in understanding,
interpreting and applying the Program Technology solely for the purposes of
further developing the Program Technology and developing and commercializing
Spiros Products. Each of DURA, DDSI and Spiros Corp. shall make their
respective employees directly involved in the Development of the Program
Technology prior to the expiration or termination (other than by exercise) of
the Purchase Option, reasonably available for consultation by telephone, or in
person at their respective offices at reasonable cost, in connection with such
assistance and instruction, all at the sole expense of Spiros Corp. II or such
sublicensee. The obligations set forth in this Section 4.1.3 shall not include
any obligation to disclose matters unrelated to the application of the Program
Technology to the Spiros Products, matters with respect to the Albuterol Product
(following the exercise of the Albuterol Option) or matters with respect to the
Option Product (following the exercise of the Product Option).

4.2 PATENTS.

4.2.1 RIGHTS PRIOR TO EXPIRATION OR TERMINATION OF PURCHASE
OPTION. Except as set forth below, until the expiration or termination (other
than by exercise) of the Purchase Option, DURA shall, at Spiros Corp. II's
sole expense, direct and cause appropriate patent applications to be
prepared, filed and prosecuted in all relevant territories, in a timely
fashion, with respect to any inventions included in the Program Technology
whether arising out of inventions made solely by DURA employees or
consultants, inventions made solely by DDSI employees or consultants,
inventions made solely by Spiros Corp. employees or consultants, inventions
made solely by Spiros Corp. II employees or consultants or inventions made
jointly by any of the parties' employees or consultants. DURA and Spiros
Corp. II shall discuss and evaluate with each other such discoveries and
inventions and shall confer regarding the advisability of filing patent
applications to cover those discoveries and inventions, including the
countries in which such patent applications should be filed. DURA shall
cause any patents issuing thereon to be maintained and enforced that DURA and
Spiros Corp. II believe, in their commercially reasonable judgment, are
patentable and commercially and technically significant to Spiros Corp. II.
With respect to the Developed Technology that has substantial application to
Spiros Products, as well as to products other than the Spiros Products, the
expenses of preparing, prosecuting and maintaining such patents shall be
reasonably allocated between DURA and Spiros Corp. II by their mutual
agreement.

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4.2.2 RIGHTS AFTER EXPIRATION OR TERMINATION OF PURCHASE OPTION.
After the expiration or termination of the Purchase Option (other than by
exercise), Spiros Corp. II shall have the exclusive right, at its sole expense,
to prepare and prosecute, in its name, patent applications, and to maintain
patents issued with respect to the Program Technology. In the event that Spiros
Corp. II declines to prepare, prosecute or maintain any such patent application
or patent, Spiros Corp. II shall give DURA no less than sixty (60) days' prior
written notice of such decision but in all events at least as much time so as to
allow DURA to take action to forestall a loss of novelty or a statutory bar to
patentability. Following such written notice, and in order to protect its
rights, DURA shall have the right in its sole discretion and at its sole
expense, to undertake the preparation, prosecution or maintenance of any such
patent application or patent issued thereon with respect to the DURA Core
Technology, the DDSI Core Technology and the Spiros Core Technology.
Enforcement rights upon the expiration or termination (other than by exercise)
of the Purchase Option are governed by Section 5.2.2 hereunder.

4.2.3 COOPERATION. Each party agrees to cause each of its employees
and agents to take all actions and to execute, acknowledge and deliver all
instruments or agreements reasonably requested by the other party, and necessary
for the perfection, maintenance, enforcement or defense of that party's rights
as set forth above.

4.3 CONFIDENTIAL INFORMATION. Any party receiving Confidential
Information shall maintain the confidential and proprietary status of such
Confidential Information, keep such Confidential Information and each part
thereof within its possession or under its control sufficient to prevent any
activity with respect to the Confidential Information that is not specifically
authorized by this Agreement, use all commercially reasonable efforts to prevent
the disclosure of any Confidential Information to any other Person, and use
commercially reasonable efforts to ensure that such Confidential Information is
used only for those purposes specifically authorized herein; PROVIDED, HOWEVER,
that such restriction shall not apply to any Confidential Information that is
(a) independently developed by the receiving party outside the scope of this
Agreement or the Development Agreement (PROVIDED, HOWEVER, that such restriction
shall apply to any technology licensed by DURA, DDSI or Spiros Corp. to Spiros
Corp. II under this Agreement), (b) in the public domain at the time of its
receipt or thereafter becomes part of the public domain through no fault of the
receiving party, (c) received without an obligation of confidentiality from a
third party having the right to disclose such information, (d) released from the
restrictions of this Section 4.3 by the express written consent of the
disclosing party, (e) disclosed to any permitted assignee, permitted sublicensee
or permitted subcontractor of DURA, DDSI, Spiros Corp. or Spiros Corp. II under
the Agreements (if such assignee, sublicensee or

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subcontractor is subject to the provisions of this Section 4.3 or
substantially similar provisions) or (f) required by law, statute, rule or
court order to be disclosed (the disclosing party shall, however, use
commercially reasonable efforts to obtain confidential treatment of any such
disclosure). The obligations set forth in this Section 4.3 shall survive for
a period of ten (10) years from the expiration or termination (other than by
exercise) of the Purchase Option. Without limiting the generality of the
foregoing, DURA, DDSI, Spiros Corp. and Spiros Corp. II each shall use
commercially reasonable efforts to obtain, if not already in place,
confidentiality agreements from their respective employees and agents,
similar in scope to this Section 4.3, to protect the Confidential Information.

4.4 PERMITTED DISCLOSURES. Notwithstanding the provisions of Section 4.3
hereof, DURA, DDSI, Spiros Corp. and Spiros Corp. II (and their permitted
sublicensees) may, to the extent necessary, disclose and use Confidential
Information, consistent with the rights of DURA, DDSI, Spiros Corp. and Spiros
Corp. II otherwise granted hereunder (a) for the purpose of securing
institutional or government approval to clinically test or market any Spiros
Product, (b) for the purpose of securing patent protection for an invention
within the scope of the Program Technology, (c) in the case of Spiros Corp. II,
following expiration or termination (other than by exercise) of the Purchase
Option, to the extent necessary or useful in the development or
commercialization of any Spiros Products or (d) in the case of DURA, following
exercise of the Albuterol Option or the Product Option, to the extent necessary
or useful in the development or commercialization of the Albuterol Product or
the Option Product, respectively; PROVIDED, that the disclosing party obtains an
agreement from any Person to whom such Confidential Information is disclosed to
preserve the confidentiality thereof upon terms reasonably equivalent to those
set forth herein and to use such Confidential Information only for those
purposes consistent with the respective rights granted to Spiros Corp., DURA,
DDSI and Spiros Corp. II hereunder or under any of the Agreements.

5. PATENT INFRINGEMENT.

5.1 NOTIFICATION OF INFRINGEMENT. Each party shall notify all other
parties of any infringement known to such party by any Person of any Patent
Rights and shall provide all other parties with the available evidence, if any,
of such infringement.

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5.2 ENFORCEMENT OF PATENT RIGHTS. If any party has actual notice of
infringement by any Person of Patent Rights, the respective officers of DURA and
Spiros Corp. II shall confer to determine in good faith an appropriate course of
action to enforce such Patent Rights or otherwise abate the infringement
thereof, subject to the provisions of this Section 5.2. DURA and Spiros Corp.
II shall consult with each other in the planning and execution of any action to
enforce Patent Rights.

5.2.1 RIGHTS PRIOR TO EXPIRATION OR TERMINATION OF OPTION. Until
the expiration or termination (other than by exercise) of the Purchase Option,
if DURA determines that enforcement of Patent Rights is appropriate, DURA shall
have the right, but not the obligation, to take appropriate action to enforce
such Patent Rights. Any enforcement with respect to the Patent Rights shall be
at DURA's expense; PROVIDED, HOWEVER, that if DURA elects to so act with respect
to the Patent Rights, Spiros Corp. II shall have the right to participate in the
enforcement of such Patent Rights by agreeing to bear a percentage of the costs
of such enforcement in such amount as the parties shall determine. If, within
six (6) months after notice of infringement, DURA has not commenced an action to
enforce such Patent Rights or thereafter ceases to diligently pursue such
action, Spiros Corp. II shall have the right, at its expense, to take
appropriate action to enforce such Patent Rights as its sole remedy hereunder.
All amounts recovered in any action to enforce Patent Rights undertaken by DURA
and Spiros Corp. II, whether by judgment or settlement, shall be retained by
DURA and Spiros Corp. II pro rata according to the respective percentages of
expenses borne by them in enforcing such Patent Rights. Neither DURA nor Spiros
Corp. II shall enter into any settlement that includes the grant of a license
under, agreement not to enforce, or any statement prejudicial to the validity or
enforceability of any Patent Rights without the consent of the other, which
consent shall not be unreasonably withheld. Any amounts retained by Spiros
Corp. II shall not be considered Available Funds.

5.2.2 RIGHTS AFTER EXPIRATION OR TERMINATION OF OPTION. After the
expiration or termination (other than by exercise) of the Purchase Option, if
Spiros Corp. II determines that enforcement of Patent Rights is appropriate,
Spiros Corp. II shall have the right, but not the obligation, to take
appropriate action to enforce such Patent Rights. Any enforcement with respect
to the Patent Rights shall be at Spiros Corp. II's expense; PROVIDED, HOWEVER,
that if Spiros Corp. II elects to so act with respect to the Patent Rights, DURA
shall have the right to participate in the enforcement of such Patent Rights by
agreeing to bear a percentage of the costs of such enforcement in such amount as
the parties shall determine. If, within six (6) months after notice of
infringement, Spiros Corp. II has not commenced an action to enforce such Patent
Rights or thereafter ceases to diligently pursue such action, DURA shall have
the right, at its expense, to take appropriate action to enforce such Patent
Rights as its sole remedy hereunder. All amounts recovered in any action to
enforce Patent Rights undertaken by

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Spiros Corp. II and DURA, whether by judgment or settlement, shall be
retained by Spiros Corp. II or DURA pro rata according to the respective
percentages of expenses borne by them in enforcing such Patent Rights.
Neither DURA nor Spiros Corp. II shall enter into any settlement that
includes the grant of a license under, agreement not to enforce, or any
statement prejudicial to the validity or enforceability of any Patent Rights
without the consent of the other, which consent shall not be unreasonably
withheld.

5.2.3 COOPERATION. Each party agrees to cause each of its employees
and agents to take all actions and to execute, acknowledge and deliver all
instruments or agreements reasonably requested by the other party, and necessary
for the perfection, maintenance, enforcement or defense of the party's rights as
set forth above.

5.3 DISCLAIMER OF WARRANTY; CONSEQUENTIAL DAMAGES.

5.3.1 DISCLAIMER OF WARRANTY. Nothing in this Agreement shall be
construed as a representation made or warranty given by any party hereto that
any patents will issue based on pending applications within the Patent Rights,
or that any such Patent Rights which do issue will be valid, or that the
practice by a party hereto of any license granted hereunder, or that the use of
any Program Technology licensed hereunder, will not infringe the patent or
proprietary rights of any other Person. Spiros Corp. II understands that the
Development shall involve technologies that have not been approved by any
regulatory authority and that none of DURA, DDSI or Spiros Corp. guarantees the
safety or usefulness of any Spiros Product. In addition, except as expressly
set forth in Section 3 of this Agreement, DURA, DDSI, Spiros Corp. and Spiros
Corp. II acknowledge that THE PROGRAM TECHNOLOGY IS LICENSED TO Spiros Corp. II
AND SUBLICENSED TO DURA HEREUNDER AS IS, AND DURA, DDSI, SPIROS CORP. AND SPIROS
CORP. II EXPRESSLY DISCLAIM AND HEREBY WAIVE, RELEASE AND RENOUNCE ANY WARRANTY,
EXPRESS OR IMPLIED, WITH RESPECT TO SUCH PROGRAM TECHNOLOGY, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
NONINFRINGEMENT. Except as expressly set forth in this agreement, DURA, DDSI,
Spiros Corp. and Spiros Corp. II disclaim all warranties of any nature, express
or implied.

5.3.2 CONSEQUENTIAL DAMAGES. NONE OF THE PARTIES TO THIS AGREEMENT
SHALL BE ENTITLED TO RECOVER FROM ANOTHER PARTY HERETO ANY SPECIAL, INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES.

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6. INDEMNIFICATION.

6.1 INDEMNIFICATION BY DURA. DURA shall indemnify the Spiros Corp. II
Indemnitees, pay on demand and protect, defend, save and hold harmless each
Spiros Corp. II Indemnitee from and against any and all Claims incurred by or
asserted against any Spiros Corp. II Indemnitee of whatever kind or nature,
including, without limitation, any claim or liability based upon negligence,
warranty, strict liability, violation of government regulation or
infringement of patent or other propriety rights, arising from or occurring
as a result of (a) any use of the Program Technology by DURA or any
Affiliate, agent or sublicensee of DURA (other than Spiros Corp. II in
contravention of the terms of this Agreement), (b) any of the Development or
any other services to be performed by DURA during the term of the Agreements
pursuant to the Agreements, including, without limitation, any workers'
compensation claim by any DURA employee or consultant or other Person or (c)
subject to Section 5.3.2, any breach of the Agreements by DURA, except, with
respect to Spiros Corp. II Indemnitees, in cases in which Claims of Spiros
Corp. II Indemnitees are based upon the gross negligence or willful
misconduct of a Spiros Corp. II Indemnitee. A Spiros Corp. II Indemnitee
shall promptly notify DURA of any Claim with respect to which an Spiros Corp.
II Indemnitee is seeking indemnification hereunder, upon becoming aware
thereof, and permit DURA at DURA's cost to defend against such Claim and
shall cooperate in the defense thereof.

6.2 INDEMNIFICATION BY SPIROS CORP. II. Spiros Corp. II shall indemnify
the DURA Indemnitees, the DDSI Indemnitees and the Spiros Corp. Indemnitees, pay
on demand and protect, defend, save and hold harmless each DURA Indemnitee, DDSI
Indemnitee or Spiros Corp. Indemnitee from and against any and all Claims
incurred by or asserted against any DURA Indemnitee, DDSI Indemnitee or Spiros
Corp. Indemnitee of whatever kind or nature, including, without limitation, any
claim or liability based upon negligence, warranty, strict liability, violation
of government regulation or infringement of patent or other propriety rights,
arising from or occurring as a result of (a) any use of the Program Technology
by Spiros Corp. II or any sublicensee of Spiros Corp. II (other than the use of
such by DURA, DDSI or Spiros Corp. whether pursuant to the Agreements or
otherwise) or (b) subject to Section 5.3.2, any breach of the Agreements by
Spiros Corp. II, except, with respect to DURA Indemnitees, in cases in which
Claims are based upon the gross negligence or willful misconduct of a DURA
Indemnitee or, except with respect to DDSI Indemnitees, in cases in which Claims
are based upon the gross negligence or willful misconduct of a DDSI Indemnitee
or, except with respect to Spiros Corp. Indemnitees, in cases in which Claims
are based upon the gross negligence or willful misconduct of a Spiros Corp.
Indemnitee. An Indemnitee hereunder shall promptly notify Spiros Corp. II of
any Claim with respect to which such Indemnitee is seeking indemnification
hereunder, upon becoming aware thereof, and permit Spiros Corp. II at Spiros

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Corp. II's cost to defend against such Claim and shall cooperate in the
defense thereof.

6.3 DEFENSE OF CLAIMS. None of DURA, DDSI, Spiros Corp. or Spiros Corp.
II shall enter into, or permit, any settlement of any Claim for which
indemnification is being sought by such party hereunder without the express
written consent of each other party (or a DURA, DDSI, Spiros Corp. or Spiros
Corp. II Indemnitee, as the case may be), which consent shall not be
unreasonably withheld or delayed. Each party may, at its option and expense,
have its own counsel participate in any proceeding which is under the direction
of another party (the "Indemnifying Party") and will cooperate with the
Indemnifying Party and its insurer in the disposition of any such matter;
PROVIDED, HOWEVER, that if the Indemnifying Party shall not defend such Claim,
the other party shall have the right to defend such Claim itself and recover
from the Indemnifying Party all reasonable attorneys' fees and expenses incurred
by it during the course of such defense.

7. TECHNOLOGY ACCESS FEE.

7.1 FEE. In consideration of the license rights granted to Spiros Corp.
II herein and in recognition of DURA's, DDSI's and Spiros Corp.'s expertise
which they have developed over a period of years and individually, Spiros Corp.
II shall pay DURA, DDSI and Spiros Corp. an aggregate technology access fee
equal to five percent (5%) of the Net Sales for each Spiros Product, to be paid
by Spiros Corp. II ______ (___%) to DURA, ________ percent (___%) to DDSI and
_____ percent (___%) to Spiros Corp.

7.2 TERM. Such technology access fee obligation shall terminate on a
country-to-country basis, on the following basis: (a) in those countries where
no patents covering such Spiros Product issue, ten (10) years following the
first commercial sale of such Spiros Product in such country; and (b) in those
countries where a patent(s) covering such Spiros Product issue, upon the
expiration of the last-to-expire patent covering the manufacture, use, import or
sale of a Spiros Product in such country.

7.3 PAYMENT OF TECHNOLOGY ACCESS FEES. Such technology access fees shall
be due and payable on the forty-fifth (45th) day following the end of the
quarter in which the Net Sales with respect to which such technology access fees
are calculated.

7.4 PRODUCT SALES. The Spiros Products for which such technology access
fees are payable shall be deemed to have been sold when shipped and billed to a
third party.

7.5 PAYEE. Such technology access fees shall be paid by Spiros Corp. II
directly to the party entitled thereto or to such party's designee as duly named
in a written notice to Spiros Corp. II.

7.6 PAYMENT IN DOLLARS. Such technology access fees shall

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be paid in United States currency. All technology access fees accrued in
currencies other than U.S. dollars shall be converted into U.S. dollars on
the basis of the rate of exchange applied by Citibank, N.A., New York, as of
the last banking day of each quarter for which such technology access fees
become due.

7.7 PROHIBITED PAYMENTS. Notwithstanding any other provision of the
Agreements, if Spiros Corp. II is prevented from paying any such technology
access fee by virtue of the statutes, laws, codes or governmental regulations of
the country from which the payment is to be made, then such technology access
fee shall be made by depositing funds in the currency in which accrued to the
other party's account in a bank acceptable to the other party in the country
whose currency is involved.

7.8 TAXES. If a law or governmental regulation requires withholding of
taxes on any payment due hereunder, such taxes shall be deducted from any amount
to be remitted hereunder and shall be paid to the proper taxing authority, and
proof of payment shall be provided to the party on whose behalf such taxes were
paid as evidence of such payment in such form as required by the tax authorities
having jurisdiction thereover.

7.9 REPORTS. Each payment of any such technology access fee shall be
accompanied by a written report, prepared and signed by a financial officer of
Spiros Corp. II, showing for the quarter for which payment is being made, the
gross sales and Net Sales of each Spiros Product sold and the technolgy access
fees which shall have accrued with respect thereto and currency conversion
calculations, if any. In the event that, for any quarter following the first
quarter in which a Spiros Product is sold for which such a technology access fee
would be payable, no such technology access fee is due, the party having
responsibility for sales of such Spiros Product shall report the same to the
other parties.

7.10 MAINTENANCE AND EXAMINATION OF RECORDS. At the request and expense
of DURA, Spiros Corp. II, or their respective Affiliates, the other parties
hereto and their Affiliates shall permit an independent certified public
accountant appointed by such party and reasonably acceptable to the other
party, at reasonable times and upon reasonable notice (but not exceeding once
in any twelve (12) month period), to examine those records as may be
necessary to: (a) determine, with respect to any calendar year ending not
more than three (3) years prior to such party's request, the correctness of
any report or payment under this Agreement; or (b) obtain information as to
the Spiros Product sales for any calendar year. Said independent certified
public accountant shall verify to the requesting party only the amount of
payment due or costs incurred hereunder and disclose no other information
revealed in its audit. Results of any such examination shall be made
available to the parties. Any amount of deficiency, or overcharge, shall be
paid or refunded promptly to Spiros Corp. II, plus interest at the commercial
prime lending rate of Citibank, N.A., New York (or equivalent banking

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institution) until the date paid. The party requesting the audit shall bear
the full cost of the performance of any such audit unless such audit
discloses a variance of more than five percent (5%) from the amount of the
original report, technology access fee or payment calculation, in which case
the party being audited shall bear the full cost of the performance of such
audit. DURA and Spiros Corp. II shall maintain and keep complete and
accurate records in sufficient detail to enable any examination concerning
technology access fees to be conducted pursuant to this Section 7.10.

8. TERM AND TERMINATION.

8.1 TERM. This Agreement shall be effective as of the date hereof and
shall continue in full force and effect indefinitely, unless terminated earlier
as provided in Sections 8.2, 8.3 and 8.4 hereof.

8.2 TERMINATION BY MUTUAL AGREEMENT. By mutual agreement, the parties
hereto may at any time terminate this Agreement and the Development on mutually
acceptable terms.

8.3 EFFECT OF PURCHASE OPTION EXERCISES.

8.3.1 PURCHASE OPTION. In the event the Purchase Option is
exercised by DURA, this Agreement shall terminate, effective upon the Purchase
Option Closing Date, without any obligation to make payments pursuant to Section
7 of this Agreement.

8.3.2 PARTIAL TERMINATION UPON EXERCISE OF ALBUTEROL OPTION. In the
event that the Albuterol Option is exercised, this Agreement shall terminate,
effective on the Albuterol Option Closing Date, with respect to the Albuterol
Program Assets and any obligation to make technology access fee payments with
respect to the Albuterol Product, but shall otherwise continue in full force and
effect until terminated pursuant to this Section 8.

8.3.3 PARTIAL TERMINATION UPON EXERCISE OF PRODUCT OPTION. In the
event that the Product Option is exercised, this Agreement shall terminate,
effective on the Product Option Closing Date, with respect to the Spiros Product
Program Assets and any obligation to make technology access fee payments with
respect to the Option Product, but shall otherwise continue in full force and
effect until terminated pursuant to this Section 8.

8.4 TERMINATION BY DURA, DDSI AND SPIROS. Either DURA, DDSI and Spiros
Corp., acting by unanimous action, or Spiros Corp. II shall have the right to
terminate this Agreement, effective as set forth in a written notice of the
occurrence of an Event of Default with respect to the other party.

8.5 RIGHTS IN BANKRUPTCY. All rights and licenses granted

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under or pursuant to this Agreement by DURA, DDSI, Spiros Corp. and Spiros
Corp. II are, and shall otherwise be deemed to be, for purposes of Section
365(n) of the Bankruptcy Code, licenses of rights to "intellectual property"
as defined under Section 101 of the Bankruptcy Code. The parties agree that
DURA and Spiros Corp. II as licensees of such rights under this Agreement,
shall retain and may fully exercise all of their rights and elections under
the Bankruptcy Code. The parties further agree that, in the event of the
commencement of a bankruptcy proceeding by or against DURA, DDSI, Spiros
Corp. or Spiros Corp. II under the Bankruptcy Code, the parties hereto which
are not parties to such proceeding shall be entitled to a complete duplicate
of (or complete access to, as appropriate) any such intellectual property and
all embodiments of such intellectual property, and same, if not already in
their possession, shall be promptly delivered to them upon any such
commencement of a bankruptcy proceeding upon their written request therefor.

8.6 EFFECT OF TERMINATION.

8.6.1 TERMINATION BY DURA, DDSI AND SPIROS CORP.. If DURA, DDSI and
Spiros Corp. terminate this Agreement pursuant to Section 8.4 hereof, (a) the
licenses and sublicenses granted to Spiros Corp. II under Section 2.1 of this
Agreement shall terminate, (b) all rights to the DURA Core Technology shall
revert to DURA, all rights to the DDSI Core Technology shall revert to DDSI and
all rights to the Spiros Core Technology shall revert to Spiros Corp., (c) all
rights to the Program Technology except as set forth in (b) above shall revert
to DURA, (d) all rights to develop, make, have made, use, sell and import all
Spiros Products shall revert to DURA, DDSI and/or Spiros Corp. and (e) the
provisions of Sections 1, 3.2.6, 4.3, 4.4, 5.3, 6, 9.4 and 9.5 of this Agreement
shall survive. DURA will use reasonable efforts for a period of 120 days after
a termination by DURA, DDSI and Spiros Corp., pursuant to Section 8.4 hereof, to
negotiate royalties or any other compensation to be paid by DURA to Spiros Corp.
II with respect to the Developed Technology that will revert to DURA. In the
event the parties are unable to agree on the royalties or other compensation to
be paid by DURA with respect to the Developed Technology with the 120 day
period, such matter shall be submitted by DURA and Spiros Corp. II to binding
arbitration in accordance with the rules of the American Arbitration
Association.

8.6.2 TERMINATION BY SPIROS CORP. II. If Spiros Corp. II terminates
this Agreement pursuant to Section 8.4 hereof, the provisions of Sections 1,
2.1, 2.3.3 (if the Albuterol Option has been exercised), 2.3.4 (if the Product
Option has been exercised), 2.3.5, 3.2.6, 4.2.2, 4.3, 4.4, 5.3, 6, 7, 9.4 and
9.5 of this Agreement shall survive; PROVIDED, HOWEVER, if Spiros Corp. II fails
to perform or observe or otherwise breaches its Material Obligations under
Section 7 of this Agreement, which failure or breach is unremedied for a period
of sixty (60) days after receipt by Spiros Corp. II of written notice thereof
from DURA, or in the event such failure or breach

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is not capable of cure within sixty (60) days, for such longer period of time
as Spiros Corp. II is vigorously pursuing such cure in good faith, DURA, DDSI
and Spiros Corp. shall have the right to terminate this Agreement with the
same effect as if DURA, DDSI and Spiros Corp. were to terminate this
Agreement pursuant to Section 8.4 hereof.

8.6.3 TERMINATION OF PURCHASE OPTION UNEXERCISED. If the Purchase
Option terminates unexercised, the licenses and sublicenses granted under
Sections 2.3.1 and 2.3.2 of this Agreement shall terminate.

8.6.4 CONTINUING OBLIGATION TO MAKE PAYMENTS. Notwithstanding
anything contained herein to the contrary, upon termination of this Agreement,
the obligation to pay any amounts payable by any party to another party which
accrued prior to such termination shall survive.

9. MISCELLANEOUS.

9.1 NO IMPLIED WAIVERS; RIGHTS CUMULATIVE. No failure on the part of
DURA, DDSI, Spiros Corp. or Spiros Corp. II to exercise and no delay in
exercising any right, power, remedy or privilege under this Agreement or
provided by statute or at law or in equity or otherwise, including, without
limitation, the right or power to terminate this Agreement, shall impair,
prejudice or constitute a waiver of any such right, power, remedy or privilege
or be construed as a waiver of any breach of this Agreement or as an
acquiescence therein, nor shall any single or partial exercise of any such
right, power, remedy or privilege preclude any other or further exercise thereof
or the exercise of any other right, power, remedy or privilege.

9.2 FORCE MAJEURE. DURA, DDSI, Spiros Corp. and Spiros Corp. II shall
each be excused for any failure or delay in performing any of their respective
obligations under this Agreement, if such failure or delay is caused by Force
Majeure.

9.3 RELATIONSHIP OF THE PARTIES. Nothing contained in this Agreement is
intended or is to be construed to constitute DURA, DDSI, Spiros Corp. and Spiros
Corp. II as partners or joint venturers or one party as an employee of any other
party. Except as expressly provided herein, no party hereto shall have any
express or implied right or authority to assume or create any obligations on
behalf of or in the name of any other party or to bind any other party to any
contract, agreement or undertaking with any third party.

9.4 NOTICES. All notices, requests and other communications to DURA,
DDSI, Spiros Corp. or Spiros Corp. II hereunder shall be in writing (including
telecopy or similar electronic transmissions), shall refer specifically to this
Agreement and shall be personally delivered or sent by telecopy or other
electronic facsimile transmission or by registered mail or certified mail,
return receipt requested and postage prepaid, or

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by reliable overnight courier service, in each case to the respective address
specified below (or to such address as may be specified in writing to the
other party hereto):

If to DURA, addressed to:

Dura Pharmaceuticals, Inc.
7475 Lusk Boulevard
San Diego, CA 92121
Attention: President
with a copy to the attention of General Counsel

If to DDSI, addressed to:

Dura Delivery Systems, Inc.
7475 Lusk Boulevard
San Diego, CA 92121
Attention: President

If to SPIROS, addressed to:

Spiros Development Corporation
7475 Lusk Boulevard
San Diego, CA 92121
Attention: President

If to Spiros Corp. II, addressed to:

Spiros Development Corporation II, Inc.
7475 Lusk Boulevard
San Diego, CA 92121
Attention: President

Each party shall provide each other party with copies of any notices sent
hereunder, with such copies sent at the same time as the original notice. Any
notice or communication given in conformity with this Section 9.4 shall be
deemed to be effective when received by the addressee, if delivered by hand,
telecopy or electronic transmission, three (3) days after mailing, if mailed,
and one (1) business day after delivery to a reliable overnight courier service.

9.5 FURTHER ASSURANCES. Each of DURA, DDSI, Spiros Corp. and Spiros Corp.
II hereby agrees to duly execute and deliver, or cause to be duly executed and
delivered, such further instruments and do and cause to be done such further
acts and things, including, without limitation, the filing of such additional
assignments, agreements, documents and instruments, that may be necessary or as
the other party hereto may at any time and from time to time reasonably request
in connection with this Agreement or to carry out more effectively the
provisions and purposes of, or to better assure and confirm unto such other
party its rights and remedies under, this Agreement.

9.6 SUCCESSORS AND ASSIGNS. The terms and provisions of

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<PAGE>

this Agreement shall inure to the benefit of, and be binding upon, DURA,
DDSI, Spiros Corp., Spiros Corp. II and their respective successors and
assigns; PROVIDED, HOWEVER, that DURA, DDSI, Spiros Corp. and Spiros Corp. II
may not assign or otherwise transfer any of their respective rights and
interests, nor delegate any of their respective obligations, hereunder,
including, without limitation, pursuant to a merger or consolidation, without
the prior written consent of the other party hereto; PROVIDED FURTHER,
HOWEVER, that DURA, DDSI or Spiros Corp. may fully assign their respective
rights and interests, and delegate their respective obligations, hereunder,
effective upon written notice thereof (a) to an Affiliate if such Affiliate
assumes all of the obligations of DURA, DDSI or Spiros Corp., as the case may
be, hereunder and this Agreement remains binding upon Dura, DDSI or Spiros
Corp., as the case may be; or (b) to any Person that acquires all or
substantially all of the assets of Dura, DDSI or Spiros Corp. as the case may
be, or which is the surviving Person in a merger or consolidation with Dura,
DDSI or Spiros Corp. if such Person assumes all the obligations of DURA, DDSI
or Spiros Corp., as the case may be, hereunder. Notwithstanding the
foregoing, Spiros Corp. II shall have the right to assign its rights and
delegate its obligations hereunder following expiration or termination (other
than by exercise) of the Purchase Option. Any attempt to assign or delegate
any portion of this Agreement in violation of this Section 9.6 shall be null
and void. Subject to the foregoing any reference to DURA, DDSI, Spiros Corp.
or Spiros Corp. II hereunder shall be deemed to include the successors
thereto and assigns thereof.

9.7 AMENDMENTS. No amendment, modification, waiver, termination or
discharge of any provision of this Agreement, nor consent by DURA, DDSI, Spiros
Corp. or Spiros Corp. II to any departure therefrom, shall in any event be
effective unless the same shall be in writing specifically identifying this
Agreement and the provision intended to be amended, modified, waived, terminated
or discharged and signed by DURA, DDSI, Spiros Corp. and Spiros Corp. II, and
each amendment, modification, waiver, termination or discharge shall be
effective only in the specific instance and for the specific purpose for which
given. No provision of this Agreement shall be varied, contradicted or
explained by any other agreement, course of dealing or performance or any other
matter not set forth in an agreement in writing and signed by DURA, DDSI, Spiros
Corp. and Spiros Corp. II.

9.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, as applied to contracts
made and performed entirely within the State of California. Except as otherwise
provided herein, any claim or controversy arising out of or related to this
contract or any breach hereof shall be submitted to a court of competent
jurisdiction in the State of California, and the parties hereby consent to the
jurisdiction and venue of such court.

9.9 SEVERABILITY. If any provision hereof should be held

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<PAGE>

invalid, illegal or unenforceable in any respect in any jurisdiction, then,
to the fullest extent permitted by law, (a) all other provisions hereof shall
remain in full force and effect in such jurisdiction and shall be liberally
construed in order to carry out the intentions of the parties hereto as
nearly as may be possible and (b) such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
such provision in any other jurisdiction. To the extent permitted by
applicable law, DURA, DDSI, Spiros Corp. and Spiros Corp. II hereby waive any
provision of law that would render any provision hereof prohibited or
unenforceable in any respect.

9.10 HEADINGS. Headings used herein are for convenience only and shall not
in any way affect the construction of, or be taken into consideration in
interpreting, this Agreement.

9.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, and all of which counterparts, taken together,
shall constitute one and the same instrument.

9.12 ENTIRE AGREEMENT. This Agreement, together with any agreements
referenced herein, constitute, on and as of the date hereof, the entire
agreement of DURA, DDSI, Spiros Corp. and Spiros Corp. II with respect to the
subject matter hereof, and all prior or contemporaneous understandings or
agreements, whether written or oral, between DURA, DDSI, Spiros Corp. and Spiros
Corp. II with respect to such subject matter are hereby superseded in their
entirety.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

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<PAGE>

IN WITNESS WHEREOF the parties have executed this Agreement as of the date
first above written.

SPIROS DEVELOPMENT CORPORATION II, INC.

By:
-------------------------------------------
David S. Kabakoff
President and Chief Executive Officer

DURA PHARMACEUTICALS, INC.

By:
-------------------------------------------
Cam L. Garner
President and Chief Executive Officer

DURA DELIVERY SYSTEMS, INC.

By:
-------------------------------------------
Mitchell R. Woodbury
Secretary

SPIROS DEVELOPMENT CORPORATION

By:
-------------------------------------------
Mitchell R. Woodbury
Secretary

[SIGNATURE PAGE TO TECHNOLOGY LICENSE AGREEMENT]

<PAGE>

SCHEDULE 1.1

GLOSSARY

SCHEDULE 1.1

<PAGE>

SCHEDULE 1.1

GLOSSARY

"AFFILIATE" of a person shall mean a Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with such Person. "Control" (and, with correlative meanings, the
terms "controlled by" and "under common control with") shall mean the possession
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting stock, by contract or
otherwise. In the case of a corporations, "control" shall mean, among other
things, the direct or indirect ownership of more than fifty percent (50%) of its
outstanding voting stock.

"AGREEMENTS" shall mean the Manufacturing and Marketing Agreement, the
Technology Agreement and the Development Agreement.

"ALBUTEROL OPTION" shall have the meaning assigned to it in Section 1.1 of
the Albuterol and Product Option Agreement.

"ALBUTEROL AND PRODUCT OPTION AGREEMENT" shall mean the Albuterol and
Product Option Agreement dated as of __________, 1997, between DURA and Spiros
Corp. II, as amended, modified or supplemented from time to time.

"ALBUTEROL OPTION CLOSING DATE" shall have the meaning assigned to it in
Section 1.5 of the Albuterol and Product Option Agreement.

"ALBUTEROL PROGRAM ASSETS" shall have the meaning assigned to it in Section
1.1 of the Albuterol and Product Option Agreement.

"ALBUTEROL PRODUCT" shall have the meaning assigned to it in Section 1.1 of
the Albuterol and Product Option Agreement.

"AVAILABLE FUNDS" shall mean the sum of (a) the net proceeds to Spiros
Corp. II from the sale of the Units in the Offering and the Contribution, (b)
all royalties remitted to Spiros Corp. II by DURA (or its Affiliates) from the
Sale of Spiros Products pursuant to the Agreements, (c) the Option Proceeds, if
any, (d) any other amounts provided by DURA to Spiros Corp. II, if any and (e)
interest or other income earned through temporary investment of the amounts
described in clauses (a), (b), (c) or (d).

"BANKRUPTCY CODE" shall mean the United States Bankruptcy Code, as amended
from time to time.

"CLAIM" shall mean any and all liabilities, damages, losses, settlements,
claims, actions, suits, penalties, fines, costs or expenses (including, without
limitation, reasonable attorneys' fees).

SCHEDULE 1.1
<PAGE>

"CONFIDENTIAL INFORMATION" shall mean all Program Technology disclosed by
DURA (and its Affiliates) to Spiros Corp. II or by Spiros Corp. II to DURA
pursuant to the Agreements or the Services Agreement.

"CONTRIBUTION" shall have the meaning assigned in Section 5.2 of the
Development Agreement.

"CORE TECHNOLOGY" shall mean the DURA Core Technology, the DDSI Core
Technology and the Spiros Core Technology.

"DDSI CORE TECHNOLOGY" shall mean (a) Technology owned or controlled by
DDSI as of the date of the closing of the Offering necessary or useful to the
development of the Spiros Products, and (b) the DDSI Patent Rights; PROVIDED,
HOWEVER, that DDSI Core Technology shall also include Technology acquired by
DDSI from a third party after the date of the closing of the Offering necessary
or useful to the development of the Spiros Products, except to the extent that
there are any limitations or restrictions on DDSI's ability to license or
sublicense such Technology. "Owned or controlled" shall include Technology that
DDSI owns, or under which DDSI is licensed and has the right to grant
sublicenses and/or grant immunity from suit.

"DDSI INDEMNITEE" shall mean DDSI, its successors and assigns, and the
directors, officers, employees, agents and counsel thereof.

"DDSI PATENT RIGHTS" shall mean those certain inventions described in
claims of (a) the patent applications pending, filed by DDSI (or the rights to
which have been assigned to DDSI) as of the date of the Technology Agreement
relating to dry powder inhalers, powder storage systems and/or formulation
methods for dry powder inhalation, (b) any patent application constituting an
equivalent, counterpart, reissue, extension or continuation (including, without
limitation, a continuation in part or a subdivision) of any of the foregoing
patent applications and (c) any patent issued or issuing upon any of the
foregoing.

"DESIGNATED COMPOUND(S)" shall mean any compounds for delivery using the
System selected by Spiros Corp. II, and agreed to be developed by DURA.

"DEVELOPED TECHNOLOGY" shall mean any Technology including, without
limitation, any enhancements, substitutions or improvements to the Core
Technology that is (a) discovered, developed or otherwise acquired by DURA
pursuant to the terms of the Development Agreement or (b) otherwise acquired by
or on behalf of Spiros Corp. II during the term of the Development Agreement.

"DEVELOPMENT" shall mean the further development of the Program Technology
for the purpose of identifying, developing, manufacturing, marketing and
commercializing Spiros Products and

SCHEDULE 1.1
<PAGE>

the making of the Other Expenditures.

"DEVELOPMENT AGREEMENT" shall mean the Development Agreement dated as of
_____, 1997, between DURA and Spiros Corp., as amended, modified or supplemented
from time to time.

"DEVELOPMENT COSTS" shall mean the Direct Development Costs, the Indirect
Development Costs and the Other Expenditures.

"DEVELOPMENT TERM" shall mean the period commencing on the Closing Date and
ending on the earlier of (a) the Option Closing Date or (b) the date the Option
terminates or expires other than by exercise.

"DIRECT DEVELOPMENT COSTS" shall mean all costs incurred by DURA or its
Affiliates in respect of the Development, other than Indirect Development
Costs, determined in accordance with generally accepted accounting principles
consistent with DURA's internal accounting system, allocated on a reasonable
and consistent basis. Direct Development Costs shall consist primarily of
fully-burdened payroll costs (burdened to include benefits, payroll taxes and
an allocation of facilities and overhead costs) and any other such costs
generated internally by DURA in respect of the Development.

"DPI" shall mean the motor-driven dry powder inhaler (other than an inahler
designed to deliver a single dose of a drug) developed by DURA, DDSI and/or
Spiros Corp. and to be developed by DURA and/or Spiros Corp. II.

"DURA COMMON STOCK" shall mean the Common Stock of DURA, par value $.001
per share.

"DURA CORE TECHNOLOGY" shall mean (a) Technology owned or controlled by
DURA as of the date of the closing of the Offering necessary or useful to the
development of the Spiros Products, and (b) the DURA Patent Rights and DURA
Trademarks; PROVIDED, HOWEVER, that DURA Core Technology shall also include
Technology acquired by DURA from a third party after the date of the closing of
the Offering necessary or useful to the development of the Spiros Products,
except to the extent that there are any limitations or restrictions on DURA's
ability to license or sublicense such Technology. "Owned or controlled" shall
include Technology that DURA owns, or under which DURA is licensed and has the
right to grant sublicenses and/or grant immunity from suit.

"DURA INDEMNITEE" shall mean DURA, its successors and assigns, and the
directors, officers, employees, agents and counsel thereof.

"DURA PATENT RIGHTS" shall mean those certain inventions described in
claims of (a) the patent applications pending, filed by DURA (or the rights to
which have been assigned to DURA) as of the date of the Technology Agreement
relating to DPIs, PSSs and/or formulation methods for dry powder inhalation, (b)
any

SCHEDULE 1.1
<PAGE>

patent application constituting an equivalent, counterpart, reissue,
extension or continuation (including, without limitation, a continuation in part
or a subdivision) of any of the foregoing patent applications and (c) any patent
issued or issuing upon any of the foregoing.

"DURA TRADEMARKS" shall mean Spiros-TM-.

"EVENT OF DEFAULT" shall mean any of the following events: (a) at any
time, if DURA or Spiros Corp. II fails to perform or observe or otherwise
breaches any of its Material Obligations, and such failure or breach continues
unremedied for a period of sixty (60) days after receipt by of written notice
thereof from the other party; (b) at any time, effective as set forth in a
written notice from the other party if DURA or Spiros Corp. II shall (i) seek
the liquidation, reorganization, dissolution or winding-up of itself or the
composition or readjustment of its debts (other than pursuant to a merger with
an Affiliate), (ii) apply for or consent to the appointment of, or the taking
possession by, a receiver, custodian, trustee or liquidator for itself or of all
or a substantial part of its assets, (iii) make a general assignment for the
benefit of its creditors, (iv) commence a voluntary case under the Bankruptcy
Code, (v) file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or
readjustment of debts (other than pursuant to a merger with an Affiliate) or
(vi) adopt any resolution of its Board of Directors or shareholders for the
purpose of effecting any of the foregoing (other than pursuant to a merger with
an Affiliate); or (c) at any time, effective as set forth in a written notice
from the other party, if a proceeding or case shall be commenced without the
application or consent of DURA or Spiros Corp. II as applicable, and such
proceeding or case shall continue undismissed, or an order, judgment or decrees
approving or ordering any of the following shall be entered and continued
unstayed and in effect, for a period of sixty (60) days from and after the date
service of process is effected, seeking (i) DURA's or Spiros Corp. II's, as
applicable, liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of DURA or Spiros Corp. II or for
all or any substantial part of its assets or (iii) similar relief in respect of
DURA or Spiros Corp. II under any law relating to bankruptcy, insolvency,
reorganization, winding-up or the composition or readjustment of debts.

"FDA" shall mean the United States Food and Drug Administration or any
successor agency or authority, the approval of which is required to market
health care products in the United States.

"FDA APPROVAL" shall mean the final regulatory approval of the FDA required
to commence commercial marketing of a health product.

SCHEDULE 1.1
<PAGE>

"FORCE MAJEURE" shall mean any act of God, any accident explosion, fire,
storm, earthquake, flood, drought, peril of the sea, riot, embargo, war or
foreign, federal, state or municipal order of general application, seizure,
requisition or allocation, any failure or delay of transportation, shortage of
or inability to obtain supplies, equipment, fuel or labor or any other
circumstance or event beyond the reasonable control of the party relying upon
such circumstance or event.

"INDIRECT DEVELOPMENT COSTS" shall mean all costs, fees and out-of-pocket
or other expenses, including the purchase of any capital equipment related to
the Development, incurred or paid by DURA to a third party, other than an
Affiliate of DURA, in respect of the Development, determined in accordance with
generally accepted accounting principles consistent with DURA's internal
accounting system, allocated on a reasonable and consistent basis.

"MANUFACTURING AND MARKETING AGREEMENT" shall mean the Manufacturing and
Marketing Agreement dated as of _______, 1997 between DURA and Spiros Corp. II,
as amended, modified or supplemented from time to time.

"MANUFACTURE" shall mean the manufacture and assembly of the Spiros
Products.

"MATERIAL OBLIGATION" shall mean the material obligations of a party under
the Technology Agreement, the Development Agreement or the Manufacturing and
Marketing Agreement.

"NET SALES" shall mean the gross amount invoiced for sales of Spiros
Products by DURA or its sublicensees, if any, to third parties less (i)
discounts actually allowed, (ii) credits for claims, allowances, retroactive
price reductions or returned Spiros Products, (iii) prepaid freight charges
incurred in transporting Spiros Products to customers, (iv) sales taxes and
other governmental charges actually paid in connection with the sales (but
excluding what is commonly known as income taxes) and (v) any royalty
obligations under the 1993 Royalty Agreement. Net Sales shall not include sales
between or among DURA, its Affiliates and its sublicensees unless such sales are
for end use rather than for purposes of resale.

"OFFERING" shall mean the underwritten public offering of the Units
pursuant to the Registration Statement.

"OPTION PROCEEDS" shall have the meaning assigned to it in Section 3 of the
Albuterol and Product Option Agreement.

"OPTION PRODUCT" shall have the meaning assigned to it in Section 2.1 of
the Albuterol and Product Option Agreement.

"OTHER EXPENDITURES" shall mean funds spent by Spiros Corp. II to acquire
capital equipment, develop a next generation inhaler system or to enhance the
System.

SCHEDULE 1.1
<PAGE>

"PATENT RIGHTS" shall mean any patents or patent applications within the
Spiros Corp. II Patent Rights, the DURA Patent Rights, the DDSI Patent Rights
and the Spiros Corp. Patent Rights.

"PERSON" shall mean any individual, partnership, corporation, firm,
association, unincorporated organization, joint venture, trust or other entity.

"PRODUCT OPTION" shall have the meaning assigned to it in Section 2.1 of
the Albuterol and Product Option Agreement.

"PRODUCT OPTION CLOSING DATE" shall have the meaning assigned to it in
Section 2.5 of the Albuterol and Product Option Agreement.

"PROGRAM TECHNOLOGY" shall mean the Core Technology and the Developed
Technology.

"PSS" shall mean the powder storage system developed and to be developed by
DURA for use with the DPI.

"PURCHASE AGREEMENT" shall mean the Purchase Agreement dated as of
__________, 1997, among DURA, Spiros Corp. II, Merrill Lynch & Co., and
Donaldson, Lufkin & Jenrette.

"PURCHASE OPTION" shall mean the option granted to the holder of Spiros
Corp. II's Special Common Stock to purchase all of the Spiros Corp. II Common
Stock as set forth in Article V of the Spiros Corp. II Charter.

"PURCHASE OPTION CLOSING DATE" shall have the meaning assigned to it in
Article V of the Spiros Corp. II Charter.

"PURCHASE OPTION EXERCISE PRICE" shall have the meaning assigned to it in
Article V of the Spiros Corp. II Charter

"REGISTRATION STATEMENT" shall mean the Registration Statement on Form S-
1/S-3 filed by Spiros Corp. II and DURA dated October 10, 1997 (No. 333-
__________/333-__________), including all exhibits and any amendments thereof
and supplements thereto.

"RESEARCH FUNDS" shall mean the Available Funds, less (i) all general and
administrative expenses including, without limitation, those paid or payable
pursuant to the Development Agreement or the Services Agreement, and the
reasonable out-of-pocket expenses of Spiros Corp. II directors and reasonable
compensation for Spiros Corp. II's independent directors, less (ii) any amounts
paid to DURA under the Development Agreement or the Services Agreement, less
(iii) any costs and expenses incurred in the defense or settlement of any action
or claim or in respect of a judgment thereon, and less (iv) One Million Dollars
($1,000,000) to be retained by Spiros Corp. II as working capital in the event
DURA does not exercise the Purchase Option.

SCHEDULE 1.1
<PAGE>

"SALE(S)" or "SELL" shall mean the activity undertaken by a sales
representative during a sales call on physicians, physician assistants, nurses,
hospitals, clinics, health maintenance organizations, preferred provider
organizations and managed care companies (including all forms of communication
not involving face to face contact by such sales representatives), describing
the FDA-approved indicated uses, safety, effectiveness, contraindications, side
effects, warnings and other relevant characteristics of the Spiros Product, in a
fair and balanced manner consistent with the requirements of the Federal Food,
Drug, and Cosmetic Act, as amended (and the regulations thereunder).

"SPIROS CASSETTE SYSTEM" shall mean a DPI in which the PSS is in the form
of a cassette.

"SPIROS CORE TECHNOLOGY" shall mean (a) Technology owned or controlled by
Spiros Corp. as of the date of the closing of the Offering necessary or useful
to the development of the Spiros Products, and (b) the Spiros Corp. Patent
Rights; PROVIDED, HOWEVER, that Spiros Core Technology shall also include
Technology acquired by Spiros Corp. from a third party after the date of the
closing of the Offering necessary or useful to the development of the Spiros
Products, except to the extent that there are any limitations or restrictions on
Spiros Corp.'s ability to license or sublicense such Technology. "Owned or
controlled" shall include Technology that Spiros Corp. owns, or under which
Spiros Corp. is licensed and has the right to grant sublicenses and/or grant
immunity from suit.

"SPIROS CORP. INDEMNITEE" shall mean Spiros Corp., its successors and
assigns, and the directors, officers, employees, agents and counsel thereof.

"SPIROS CORP. PATENT RIGHTS" shall mean those certain inventions described
in claims of (a) the patent applications pending, filed by Spiros Corp. (or the
rights to which have been assigned to Spiros Corp.) as of the date of the
Technology Agreement relating to dry powder inhalers, powder storage systems
and/or formulation methods for dry powder inhalation, (b) any patent application
constituting an equivalent, counterpart, reissue, extension or continuation
(including, without limitation, a continuation in part or a subdivision) of any
of the foregoing patent applications and (c) any patent issued or issuing upon
any of the foregoing.

"SPIROS CORP. II CHARTER" shall mean Amended and Restated Certificate of
Spiros Development Corporation II, Inc. in effect as of the closing of the
Offering, as amended from time to time.

"SPIROS CORP. II COMMON STOCK" shall mean the Callable Common Stock of
Spiros Corp. II, $.001 par value.

"SPIROS CORP. II INDEMNITEE" shall mean Spiros Corp. II, its

SCHEDULE 1.1
<PAGE>

successors and assigns, and the directors, officers, employees, agents and
counsel thereof.

"SPIROS CORP. II PATENT RIGHTS" shall mean those certain inventions
described in claims of (a) any patent application having one or more claims
covering Developed Technology, (b) any patent application constituting an
equivalent, counterpart, reissue, extension or continuation (including, without
limitation, a continuation in part or a subdivision) of any of the foregoing
applications or (c) any patent issued or issuing upon any of the foregoing
applications.

"SPIROS PRODUCT(S)" shall mean (a) any System used with a formulation of
albuterol, beclomethasone, ipratropium, an albuterol-ipratropium combination,
budesonide or a Designated Compound developed, produced, manufactured or
marketed by DURA on behalf of Spiros Corp. II using the Program Technology.

"SPIROS PRODUCT PROGRAM ASSETS" shall have the meaning assigned to it in
Section 2.1 of the Albuterol and Product Option Agreement.

"SYSTEM" shall mean the DPI and the PSS when used together.

"TECHNOLOGY" shall mean, solely with respect to motor-driven dry powder
inhalers and powder storage systems for drugs for delivery through such
inhalers, the manufacture thereof, and formulations of drugs to be delivered
through such inhalers, public and nonpublic technical or other information,
trade secrets, know-how, processes, formulations, concepts, ideas, preclinical,
clinical, pharmacological or other data and testing results, experimental
methods, or results, assays, descriptions, business or scientific plans,
depictions, customer lists and any other written, printed or electronically
stored materials, pharmaceutical compounds or any other natural or man-made
pharmaceutical materials and any and all other intellectual property, including
patents and patent applications, of any nature whatsoever. The term
"Technology" shall include, without limitation, any of the foregoing as it
relates to enhancements of, substitutions for or improvements to the Core
Technology.

"TECHNOLOGY AGREEMENT" shall mean the Technology License Agreement dated as
of _______, 1997, among DURA, DDSI, Spiros Corp. and Spiros Corp. II, as
amended, modified or supplemented from time to time.

"TERRITORY" shall mean the entire world.

"UNDERWRITERS" shall have the meaning assigned to it in the Registration
Statement.

"UNITS" shall mean units, each consisting of one share of Spiros Corp. II
Common Stock and one warrant to purchase one-fourth of one share of DURA Common
Stock, all as described in the Registration Statement.

SCHEDULE 1.1
<PAGE>

"1993 ROYALTY AGREEMENT" shall have the meaning assigned to it in the
Registration Statement.

SCHEDULE 1.1

<PAGE>

EXHIBIT 10.2

DEVELOPMENT AGREEMENT

This DEVELOPMENT AGREEMENT (the "Agreement") is made as of __________,
1997, by and between DURA PHARMACEUTICALS, INC., a Delaware corporation
("DURA"), and SPIROS DEVELOPMENT CORPORATION II, INC., a Delaware corporation
("Spiros Corp. II").

RECITALS

WHEREAS, DURA and Spiros Corp. II are parties to the Technology Agreement,
the Manufacturing and Marketing Agreement, and the Albuterol and Product Option
Agreement (all capitalized terms shall have the respective meaning set forth in
Section 1 hereto).

WHEREAS DURA, Dura Delivery Systems, Inc., a Delaware corporation ("DDSI"),
and Spiros Development Corporation, a Delaware corporation ("Spiros Corp."),
have granted to Spiros Corp. II, and Spiros Corp. II has acquired from DURA,
DDSI and Spiros Corp., a license to certain technology for the purpose of
allowing Spiros Corp. II to further develop the Core Technology and to develop
and commercialize the Spiros Products.

WHEREAS, DURA has experience in the development of pharmaceutical products
and has the facilities, equipment, employees and other resources to accomplish
development activities, on behalf of Spiros Corp. II, with respect to such
rights and technology.

WHEREAS, Spiros Corp. II desires to engage DURA to perform such services in
connection with the Development, and DURA is willing to provide such services.

NOW, THEREFORE, in consideration of the mutual covenants set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and in order to induce DURA to enter into the
Agreements, DURA and Spiros Corp. II hereby agree as follows:

1. DEFINITIONS.

1.2 SINGULAR AND PLURAL. Singular and plural forms, as the case may be,
of terms defined herein shall have correlative meanings.

2. DEVELOPMENT SERVICES.

2.1 DEVELOPMENT. Spiros Corp. II hereby engages DURA, and DURA hereby
accepts such engagement, to use commercially reasonable efforts to undertake the
Development. Such services shall be provided as follows:

<PAGE>

2.1.1 WORKPLAN AND BUDGET. As of the date of the closing of the
Offering, DURA shall have provided Spiros Corp. II with a workplan and budget
acceptable to the Board of Directors of Spiros Corp. II covering the period from
the closing through December 31, 1998, a copy of which is attached hereto as
SCHEDULE 2.1. Thereafter, DURA and Spiros Corp. II shall prepare an annual
workplan and budget in accordance with Section 3 hereof. DURA and Spiros Corp.
II may make changes in the annual workplan and budget from time to time as
approved in writing by an authorized representative of each party. Expenditures
made on behalf of Spiros Corp. II by DURA for which DURA is to be reimbursed
pursuant to Section 5.1 hereof, shall not exceed in any calendar year one
hundred twenty percent (120%) of the amount allocated in the annual workplan and
budget applicable to such year unless otherwise approved by the Board of
Directors of Spiros Corp. II. DURA shall report significant deviations from the
annual workplan and budget to Spiros Corp. II in a timely manner.

2.1.2 CONDUCT OF DEVELOPMENT. During the term of this Agreement,
DURA shall use commercially reasonable efforts to (a) conduct the Development on
behalf of Spiros Corp. II in a prudent and skillful manner in accordance, in all
material respects, with the annual workplan and budget then in effect and
applicable laws, ordinances, rules, regulations, orders, licenses and other
requirements now or hereafter in effect and (b) diligently execute such annual
workplan and budget and report to Spiros Corp. II any significant deviations
therefrom in a timely manner. Spiros Corp. II hereby appoints DURA its
exclusive agent, for the term of this Agreement, with the sole power and
authority to file and prosecute all necessary regulatory applications and
permits in DURA's name required to obtain FDA Approval and other regulatory
approvals for the Spiros Products. DURA shall, at Spiros Corp. II's expense as
described below, furnish all labor, supervision, services, supplies and
materials necessary to perform the Development in accordance with the annual
workplan and budget then in effect. In addition to its undertakings pursuant to
the Technology Agreement, DURA agrees to use commercially reasonable efforts, on
behalf of itself, DDSI and Spiros Corp., to attempt to obtain and to sublicense
to Spiros Corp. II subject to the terms and conditions of the Technology
Agreement, on behalf of and at the expense of Spiros Corp. II but in accordance
with Section 2.4 of the Technology Agreement, any patent or technology license
or sublicense from any Person, including DURA, DDSI or Spiros Corp., that DURA
reasonably determines to be necessary or useful to enable DURA to conduct the
Development under this Agreement.

2.1.3 SUBCONTRACTS. Spiros Corp. II acknowledges that DURA may elect
to subcontract to third parties a portion of the Development. Spiros Corp. II
acknowledges and agrees that in performing the Development, DURA may, and is
hereby authorized to, without the prior written consent of Spiros Corp. II,
engage or agree or otherwise collaborate with other Persons, including, without
limitation, Affiliates of DURA or institutions performing other development
activities for DURA, to provide assistance in carrying out the Development.

2.1.4 CHANGES TO THE WORKPLANS. If at any time Spiros Corp. II
determines, based on the reports furnished pursuant to Section 3 hereof, in its
reasonable business judgment and in consultation with DURA, or DURA determines
with Spiros Corp. II's consent (which consent shall not be withheld
unreasonably), that the Development should be discontinued with respect to the

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<PAGE>

further development of a particular Spiros Product because the continuance
thereof is unfeasible or uneconomic, or that the Development should be expanded
to include one or more Designated Compounds, then Spiros Corp. II and DURA shall
use all reasonable efforts to agree on the nature of further development and the
identity of such Designated Compounds.

2.1.5 SALE OF SPIROS PRODUCTS PRIOR TO REGULATORY APPROVAL.
Spiros Corp. II hereby appoints DURA as its exclusive agent for the
Manufacture and Sale of Spiros Products during the term of this Agreement for
the sole purpose of conducting the clinical testing required to obtain FDA
Approval or other regulatory approval to market such Spiros Products. DURA
shall charge Spiros Corp. II for all the costs (determined in accordance with
Section 6.5 hereof) relating to the Manufacture and Sale of such Spiros
Products prior to FDA Approval of such Spiros Products as Development Costs,
and shall remit to Spiros Corp. II any revenues received by it from the sale
of such Spiros Products. Spiros Corp. II agrees that all such revenues
received hereunder with respect to Spiros Products shall be considered
Available Funds.

2.1.6 MANUFACTURE AND SALE OF SPIROS PRODUCTS FOLLOWING
REGULATORY APPROVAL. Spiros Corp. II and DURA hereby agree that the
Manufacture and Sale of each Spiros Product during the term of this Agreement
following FDA Approval or other required regulatory approval to market such
Spiros Product shall be governed solely by the terms and conditions of the
Manufacturing and Marketing Agreement.

2.2 DISCLAIMER OF WARRANTIES. DURA cannot and does not guarantee that the
Development will be successful in whole or in part, that any Spiros Products
will be developed or that any developed Spiros Products will be successful in
the marketplace. To the extent that DURA has complied with Section 2.1.2
hereof, the failure of DURA to further develop successfully the Program
Technology or to discover, develop or commercialize any Spiros Product will not
in and of itself constitute a breach by DURA of any representation, warranty,
covenant or other obligation under the Agreements. In addition, neither DURA
nor Spiros Corp. II makes any representation or warranty or guaranty that the
Available Funds will be sufficient for the completion of the Development of any
or all of the Spiros Products or to begin commercialization with respect to any
Spiros Product.

2.3 RIGHTS TO PROPERTY. All right, title and interest to the Program
Technology acquired or developed pursuant to this Agreement including any
submissions or applications to the FDA or any foreign equivalent made by DURA in
its name on behalf of Spiros Corp. II shall be the exclusive property of Spiros
Corp. II; PROVIDED, HOWEVER, that such right, title and interest shall be
subject in all events to (a) the rights to Albuterol Program Assets obtained
from Spiros Corp. II pursuant to the exercise of the Albuterol Option or (b) the
rights to the Spiros Product Program Assets obtained from Spiros Corp. II
pursuant to the exercise of the Product Option. All matters relating to patents
and patent applications with respect to the Program Technology acquired or
developed pursuant to this Agreement shall be governed by Section 5.2 of the
License Agreement.

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2.4 TERMINATION OF DEVELOPMENT UPON EXERCISE OF THE ALBUTEROL OPTION. If
the Albuterol Option is exercised, Development hereunder shall cease with
respect to the Albuterol Product. DURA and the Board of Directors of Spiros
Corp. II shall agree upon an allocation to one or more remaining Spiros Products
or to the Other Expenditures of the funds available as a result of the exercise
of the Albuterol Option.

2.5 TERMINATION OF DEVELOPMENT UPON EXERCISE OF THE PRODUCT OPTION. If
the Product Option is exercised, Development hereunder shall cease with respect
to the Option Product. DURA and the Board of Directors of Spiros Corp. II shall
agree upon an allocation to one or more remaining Spiros Products or to the
Other Expenditures of the funds available as a result of the exercise of the
Product Option.

3. REPORTS AND RECORDS. Within thirty (30) days after the end of each
calendar quarter during the term of this Agreement, DURA shall provide to the
Board of Directors of Spiros Corp. II a reasonably detailed report setting forth
in respect of such quarter (a) the total Development Costs incurred, (b) a
summary of the work performed hereunder by DURA and its employees and agents and
(c) a description of any material developments with respect to the Program
Technology. Prior to December 1 of each year (commencing with December 1, 1998)
during the term of this Agreement, DURA shall report to the Board of Directors
of Spiros Corp. II with respect to the progress of the Development, which report
shall include the proposed annual workplan and budget for the next calendar
year. Prior to January 1 of each year (commencing January 1, 1999), the Board
of Directors of Spiros Corp. II shall approve such annual workplan and budget
with such changes as it may, in the exercise of its reasonable business
judgment, deem necessary and as DURA may approve (which approval shall not be
unreasonably withheld); PROVIDED, that no annual workplan and budget shall be
deemed effective until approved by DURA and the Board of Directors of Spiros
Corp. II. DURA shall prepare a final report, within ninety (90) days after the
expiration or termination of this Agreement, setting forth in reasonable detail
a summary of the work performed since the last report provided to the Board of
Directors hereunder and the material developments with respect thereto and
containing a final statement of all costs billed to Spiros Corp. II hereunder.
DURA shall keep and maintain proper and complete records and books of account
documenting all of its expenses related to the Development, including those
allocated to and reimbursed by Spiros Corp. II hereunder. At Spiros Corp. II's
request and expense, DURA shall permit a certified independent public accountant
selected by Spiros Corp. II to have access, no more than once in each calendar
year during the term of this Agreement and each year for three (3) calendar
years following the termination hereof, during regular business hours and upon
reasonable notice to DURA, to such records and books for the sole purpose of
determining the appropriateness of Development Costs invoiced hereunder;
PROVIDED, HOWEVER, that if such certified independent public accountant
reasonably determines that such Development Costs have been, for any calendar
year, after adjustments herein provided for, overstated by DURA by an amount
equal to or greater than five percent (5%), DURA shall promptly refund any such
overpayment to Spiros Corp. II and pay all reasonable fees and disbursements of
such certified independent public accountant incurred in the course of making
such determination.

4. OTHER ACTIVITIES. During the term of this Agreement, DURA shall devote
such time and

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effort to the performance of services pursuant to this Agreement as may be
necessary or appropriate to fulfill its duties under this Agreement;
PROVIDED, HOWEVER, it is specifically understood and agreed by Spiros Corp.
II that DURA shall not be required to devote itself, on a full-time basis, to
the provision of such services and that DURA shall have the right to engage
in its own development activities and in other business activities with other
Persons, and Spiros Corp. II shall not, by virtue of this Agreement, have any
right, title or interest in or to such independent activities or to the
income or profits derived therefrom and, without limiting DURA's obligation
to use commercially reasonable efforts to provide certain services hereunder,
nothing set forth in this Agreement shall limit or reduce the ability of DURA
to carry on such other activities.

5. PAYMENT FOR SERVICES; TIMING OF PAYMENTS.

5.1 PAYMENTS FOR DEVELOPMENT. In consideration of the Development to
be carried out by DURA during the term of this Agreement, Spiros Corp. II
shall reimburse DURA out of Available Funds for all of (a) the Direct
Development Costs plus a fee equal to twenty-five percent (25%) of all of
such costs (the "Management Fee"), PROVIDED that the cost to DURA of services
provided by Affiliates of DURA shall not exceed the cost to each Affiliate of
providing such services, and (b) the Indirect Development Costs plus a fee
equal to fifteen percent (15%) of all such costs (the "Indirect Management
Fee"), invoiced to Spiros Corp. II by DURA. The amount to be paid to DURA
pursuant to this Agreement shall not exceed the amount of the Available
Funds. The Available Funds must be retained by Spiros Corp. II in an account
separate from all accounts containing any other funds. Spiros Corp. II agrees
to expend all Available Funds on Development and Other Expenditures pursuant
to this Agreement, except as otherwise set forth in the Agreements. In the
event that the cash and cash equivalents of Spiros Corp. II are reduced to
less than $5 million, DURA may, within thirty (30) days following notice from
Spiros Corp. II that such funds have been reduced to less than $5 million, at
its option (the "Funding Option"), provide additional funds sufficient in the
reasonable judgment of DURA and Spiros Corp. II to fund the continued
Development of Spiros Products for an additional twelve (12) months at a
level comparable to the level of funding provided during the prior twelve
(12) months, which funding shall be considered Available Funds. The Funding
Option may only be exercised one time and shall be irrevocable following
exercise. Payment to Spiros Corp. II of all amounts in respect of the Funding
Option must be made within thirty (30) days of its exercise.

5.2 CONTRIBUTIONS. Concurrently with the execution of this Agreement,
DURA will contribute Seventy-Five Million Dollars ($75,000,000) in cash to
Spiros Corp. II (the "Contribution").

5.3 DEVELOPMENT EXPENSES. Within five (5) business days of the closing of
the Offering and upon the receipt by Spiros Corp. II of an invoice therefor,
Spiros Corp. II shall reimburse DURA for all development services as set forth
on SCHEDULE 5.3 incurred by DURA through the date of the closing of the
Offering, estimated to be ____________________________ Dollars ($____________)
but which shall in no event exceed _________________________________ Dollars
($____________).

5.4 TIMING OF PAYMENTS. Spiros Corp. II shall pay to DURA monthly the
Development

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<PAGE>

Costs, plus the applicable Management Fee and Indirect Management Fee,
actually incurred in the prior month as shown on a statement delivered by
DURA to Spiros Corp. II. Spiros Corp. II shall make such payment within
fifteen (15) days after the delivery of such statement from DURA.

5.5 CALCULATION OF COSTS. Direct Development Costs shall be allocated on
a reasonable and consistent basis, and charged to Spiros Corp. II for services
performed by DURA on behalf of Spiros Corp. II hereunder. DURA's expenditures
and estimated expenditures for performing the Development hereunder shall be
determined using generally accepted accounting principles, consistent with
DURA's internal financial and accounting systems, allocated on a reasonable and
consistent basis. Allocation of all Indirect Development Costs shall be made by
DURA on a reasonable basis consistent with DURA's regular internal cost
accounting system.

6. REPRESENTATIONS, WARRANTIES AND COVENANTS. The provisions of Section 3 of
the Technology Agreement with respect to DURA and Spiros Corp. II shall apply
with equal force and effect to this Agreement and are incorporated hereunder.

7. CONFIDENTIALITY. The provisions of Sections 4.3 and 4.4 of the Technology
Agreement shall apply with equal force and effect to this Agreement and are
incorporated hereunder.

8. DISCLAIMER OF WARRANTY; CONSEQUENTIAL DAMAGES. The provisions of Section
5.3 of the Technology Agreement shall apply with equal force and effect to this
Agreement and are incorporated hereunder.

9. INDEMNIFICATION AND INSURANCE.

9.1 INDEMNIFICATION. The provisions of Section 6 of the Technology
Agreement shall apply with equal force and effect to this Agreement and are
incorporated hereunder.

9.2 INSURANCE.

9.2.1 INSURANCE BY SPIROS CORP. II. To the extent Spiros Corp. II
develops or uses, or causes the development or use (except by DURA or its
Affiliates or subcontractors under this Agreement) of, the Spiros Products,
Spiros Corp. II shall, to the extent available at commercially reasonable rates,
maintain with insurers or underwriters of good repute such insurance relating to
the Development, and the sale and use of the Spiros Products, against such
risks, pursuant to such terms (including deductible limits or self-insured
retentions) and for such periods, as is customary for comparable businesses
undertaking the development, sale and use of products of a similar nature, and
shall, to the extent reasonably possible and not unreasonably expensive, cause
DURA, DDSI and Spiros Corp. to be named as additional insured parties on its
insurance policies. To the extent Spiros Corp. II is required to obtain
insurance under this Section 9.2.1 during the term of this Agreement, Spiros
Corp. II may use Available Funds to pay the premiums therefor.

9.2.2 INSURANCE BY DURA. DURA shall, to the extent available at
commercially

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reasonable rates, maintain, with insurers or underwriters of good repute such
insurance relating to the Development, against such risks and pursuant to
such terms (including deductible limits or self-insured retentions) as is
customary for comparable businesses undertaking research and development
programs of a similar nature, and shall, to the extent reasonably possible
and not unreasonably expensive, cause Spiros Corp. II to be named as an
additional insured party on its insurance policies.

10. TERM AND TERMINATION.

10.1 TERM. This Agreement shall be effective as of the date hereof and,
unless terminated earlier as provided in Sections 10.2, 10.3 and 10.4 hereof,
shall continue in full force and effect for the duration of the Development
Term.

10.2 TERMINATION BY MUTUAL AGREEMENT. By mutual agreement, the parties
hereto may at any time terminate this Agreement and the Development on mutually
acceptable terms.

10.3 EFFECT OF PURCHASE OPTION EXERCISES.

10.3.1 PURCHASE OPTION. In the event the Purchase Option is
exercised by DURA, this Agreement shall terminate, effective upon the Purchase
Option Closing Date, without any obligation to make payments pursuant to Section
7 of the Technology Agreement.

10.3.2 PARTIAL TERMINATION UPON EXERCISE OF ALBUTEROL OPTION. In
the event that the Albuterol Option is exercised as provided in the Albuterol
and Product Option Agreement, this Agreement shall terminate, effective on the
Albuterol Option Closing Date, with respect to the Albuterol Product, but shall
otherwise continue in full force and effect until terminated pursuant to this
Section 10.

10.3.3 PARTIAL TERMINATION UPON EXERCISE OF PRODUCT OPTION. In the
event that the Product Option is exercised as provided in the Albuterol and
Product Option Agreement, this Agreement shall terminate, effective on the
Product Option Closing Date, with respect to the Option Product but shall
otherwise continue in full force and effect until terminated pursuant to this
Section 10.

10.4 TERMINATION FOR EVENT OF DEFAULT. Either DURA or Spiros Corp. II
shall have the right to terminate this Agreement, effective as set forth in a
written notice to the othe party of the occurrence of an Event of Default with
respect to such other party.

10.5 EFFECT OF TERMINATION.

10.5.1 RETURN OF SPIROS PRODUCTS. In the event of the termination
of DURA's right to continue Development of one or more Spiros Products pursuant
to Section 10.4 as a result of an Event of Default by DURA, DURA shall within
thirty (30) days of the effective date of such termination, transfer to Spiros
Corp. II all Program Technology and all other data, records and materials in
DURA's possession or control which relate to such Spiros Products. DURA shall
also cooperate in the transfer of regulatory filings related to such Spiros
Products, and take such other

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actions and execute such other instruments, assignments and documents as may
be necessary to effect the transfer of such Development rights to Spiros
Corp. II.

10.5.2 CONTINUING OBLIGATION TO MAKE PAYMENTS. Termination of this
Agreement shall not relieve the parties hereto of any liability, including any
obligation to pay any amounts payable by any party to another party which
accrued prior to such termination, nor preclude any party from pursuing all
rights and remedies it may have hereunder or at law or equity with respect to
any breach of this Agreement nor prejudice any party's right to obtain
performance of any obligation.

11. MISCELLANEOUS.

11.1 NO IMPLIED WAIVERS; RIGHTS CUMULATIVE. No failure on the part of DURA
or Spiros Corp. II to exercise and no delay in exercising any right, power,
remedy or privilege under this Agreement or provided by statute or at law or in
equity or otherwise, including, without limitation, the right or power to
terminate this Agreement, shall impair, prejudice or constitute a waiver of any
such right, power, remedy or privilege or be construed as a waiver of any breach
of this Agreement or as an acquiescence therein, nor shall any single or partial
exercise of any such right, power, remedy or privilege preclude any other or
further exercise thereof or the exercise of any other right, power, remedy or
privilege.

11.2 FORCE MAJEURE. DURA and Spiros Corp. II shall each be excused for any
failure or delay in performing any of their respective obligations under this
Agreement, if such failure or delay is caused by Force Majeure.

11.3 RELATIONSHIP OF THE PARTIES. Nothing contained in this Agreement is
intended or is to be construed to constitute DURA and Spiros Corp. II as
partners or joint venturers or one party as an employee of any other party.
Except as expressly provided herein, no party hereto shall have any express or
implied right or authority to assume or create any obligations on behalf of or
in the name of any other party or to bind any other party to any contract,
agreement or undertaking with any third party.

11.4 NOTICES. All notices, requests and other communications to DURA or
Spiros Corp. II hereunder shall be in writing (including telecopy or similar
electronic transmissions), shall refer specifically to this Agreement and
shall be personally delivered or sent by telecopy or other electronic
facsimile transmission or by registered mail or certified mail, return
receipt requested and postage prepaid, or by reliable overnight courier
service, in each case to the respective address specified below (or to such
address as may be specified in writing to the other party hereto):

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<PAGE>

If to DURA, addressed to:

Dura Pharmaceuticals, Inc.
7475 Lusk Boulevard
San Diego, CA 92121
Attention: President
with a copy to the attention of General Counsel

If to Spiros Corp. II, addressed to:

Spiros Development Corporation II, Inc.
7475 Lusk Boulevard
San Diego, CA 92121
Attention: President

Any notice or communication given in conformity with this Section 12.4 shall be
deemed to be effective when received by the addressee, if delivered by hand,
telecopy or electronic transmission, three (3) days after mailing, if mailed and
one (1) business day after delivery to a reliable overnight courier service.

11.5 FURTHER ASSURANCES. Each of DURA and Spiros Corp. II hereby agrees to
duly execute and deliver, or cause to be duly executed and delivered, such
further instruments and do and cause to be done such further acts and things,
including, without limitation, the filing of such additional assignments,
agreements, documents and instruments, that may be necessary or as the other
party hereto may at any time and from time to time reasonably request in
connection with this Agreement or to carry out more effectively the provisions
and purposes of, or to better assure and confirm unto such other party its
rights and remedies under, this Agreement.

11.6 SUCCESSORS AND ASSIGNS. The terms and provisions of this Agreement
shall inure to the benefit of, and be binding upon, DURA, Spiros Corp. II, and
their respective successors and assigns; PROVIDED, HOWEVER, that DURA and Spiros
Corp. II may not assign or otherwise transfer any of their respective rights and
interests, nor delegate any of their respective obligations, hereunder,
including, without limitation, pursuant to a merger or consolidation, without
the prior written consent of the other party hereto; PROVIDED FURTHER, HOWEVER,
that DURA may fully assign its rights and interests, and delegate its
obligations, hereunder, effective upon written notice thereof (a) to an
Affiliate if such Affiliate assumes all of the obligations of DURA hereunder and
this Agreement remains binding upon DURA; or (b) to any Person that acquires all
or substantially all of the assets of DURA, or which is the surviving Person in
a merger or consolidation with DURA, if such Person assumes all the obligations
of DURA hereunder. Notwithstanding the foregoing, Spiros Corp. II shall have
the right to assign its rights and delegate its obligations hereunder following
expiration or termination (other than by exercise) of the Purchase Option.
Notwithstanding the foregoing, Spiros Corp. II shall have the right to assign
its rights and delegate its obligations hereunder following expiration or
termination (other than by exercise) of the Purchase Option. Any attempt to
assign or delegate any portion of this Agreement in violation of this Section
11.6 shall be null and void. Subject to the foregoing any reference to DURA or
Spiros Corp. II hereunder shall be deemed to include the successors thereto and
assigns thereof.

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<PAGE>

11.7 AMENDMENTS. No amendment, modification, waiver, termination or
discharge of any provision of this Agreement, nor consent by DURA or Spiros
Corp. II to any departure therefrom, shall in any event be effective unless the
same shall be in writing specifically identifying this Agreement and the
provision intended to be amended, modified, waived, terminated or discharged and
signed by DURA and Spiros Corp. II, and each amendment, modification, waiver,
termination or discharge shall be effective only in the specific instance and
for the specific purpose for which given. No provision of this Agreement shall
be varied, contradicted or explained by any other agreement, course of dealing
or performance or any other matter not set forth in an agreement in writing and
signed by DURA and Spiros Corp. II.

11.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, as applied to contracts
made and performed entirely within the State of California. Except as otherwise
provided herein, any claim or controversy arising out of or related to this
contract or any breach hereof shall be submitted to a court of competent
jurisdiction in the State of California, and the parties hereby consent to the
jurisdiction and venue of such court.

11.9 SEVERABILITY. If any provision hereof should be held invalid, illegal
or unenforceable in any respect in any jurisdiction, then, to the fullest extent
permitted by law, (a) all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in order to carry
out the intentions of the parties hereto as nearly as may be possible and (b)
such invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of such provision in any other jurisdiction. To the
extent permitted by applicable law, DURA and Spiros Corp. II hereby waive any
provision of law that would render any provision hereof prohibited or
unenforceable in any respect.

11.10 HEADINGS. Headings used herein are for convenience only and shall
not in any way affect the construction of, or be taken into consideration in
interpreting, this Agreement.

11.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, and all of which counterparts, taken together,
shall constitute one and the same instrument.

11.12 ENTIRE AGREEMENT. This Agreement, together with any agreements
referenced herein, constitute, on and as of the date hereof, the entire
agreement of DURA and Spiros Corp. II with respect to the subject matter hereof,
and all prior or contemporaneous understandings or agreements, whether written
or oral, between DURA and Spiros Corp. II with respect to such subject matter
are hereby superseded in their entirety.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

DURA PHARMACEUTICALS, INC.

By_________________________________________
Cam L. Garner
President and Chief Executive Officer

SPIROS DEVELOPMENT CORPORATION II, INC.

By________________________________________
David S. Kabakoff
President and Chief Executive Officer

[SIGNATURE PAGE TO DEVELOPMENT AGREEMENT]
<PAGE>

SCHEDULE 1.1

GLOSSARY

SCHEDULE 1.1
<PAGE>

SCHEDULE 1.1

GLOSSARY

"AGREEMENTS" shall mean the Manufacturing and Marketing Agreement, the
Technology Agreement and the Development Agreement.

"ALBUTEROL OPTION" shall have the meaning assigned to it in Section 1.1 of
the Albuterol and Product Option Agreement.

"ALBUTEROL OPTION CLOSING DATE" shall have the meaning assigned to it in
Section 1.5 of the Albuterol and Product Option Agreement.

"ALBUTEROL PROGRAM ASSETS" shall have the meaning assigned to it in Section
1.1 of the Albuterol and Product Option Agreement.

"ALBUTEROL PRODUCT" shall have the meaning assigned to it in Section 1.1 of
the Albuterol and Product Option Agreement.

"BANKRUPTCY CODE" shall mean the United States Bankruptcy Code, as amended
from time to time.

"CLAIM" shall mean any and all liabilities, damages, losses, settlements,
claims, actions, suits, penalties, fines, costs or expenses (including, without
limitation, reasonable attorneys' fees).

SCHEDULE 1.1
<PAGE>

"CONTRIBUTION" shall have the meaning assigned in Section 5.2 of the
Development Agreement.

"CORE TECHNOLOGY" shall mean the DURA Core Technology, the DDSI Core
Technology and the Spiros Core Technology.

"DDSI INDEMNITEE" shall mean DDSI, its successors and assigns, and the
directors, officers, employees, agents and counsel thereof.

"DESIGNATED COMPOUND(S)" shall mean any compounds for delivery using the
System selected by Spiros Corp. II, and agreed to be developed by DURA.

"DEVELOPMENT" shall mean the further development of the Program Technology
for the purpose of identifying, developing, manufacturing, marketing and
commercializing Spiros Products and

SCHEDULE 1.1
<PAGE>

the making of the Other Expenditures.

"DEVELOPMENT AGREEMENT" shall mean the Development Agreement dated as of
_____, 1997, between DURA and Spiros Corp., as amended, modified or supplemented
from time to time.

"DEVELOPMENT COSTS" shall mean the Direct Development Costs, the Indirect
Development Costs and the Other Expenditures.

"DURA COMMON STOCK" shall mean the Common Stock of DURA, par value $.001
per share.

"DURA INDEMNITEE" shall mean DURA, its successors and assigns, and the
directors, officers, employees, agents and counsel thereof.

SCHEDULE 1.1
<PAGE>

patent application constituting an equivalent, counterpart, reissue,
extension or continuation (including, without limitation, a continuation in
part or a subdivision) of any of the foregoing patent applications and (c)
any patent issued or issuing upon any of the foregoing.

"DURA TRADEMARKS" shall mean SpirosTM.