Exhibit 10.51

 

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Amended and Restated

2004 Stock Option Plan

 

 

 

 

June 25, 2004

 

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BIOVAIL CORPORATION

 

AMENDED AND RESTATED

2004 STOCK OPTION PLAN

 

ARTICLE 1
PURPOSE

 

1.1                               Purpose

 

The purpose of this Plan is to assist the Company in attracting, retaining and
motivating key employees, officers and directors by granting to them, and to
others providing services to the Company, its subsidiaries and affiliates,
options to purchase common shares in the capital of the Company.

 

ARTICLE 2
INTERPRETATION

 

2.1                               Definitions

 

When used herein, unless the context otherwise requires, the following terms
have the following meanings, respectively:

 

“Acquiror” has the meaning set forth in Subsection 4.9(e) of this Plan;

 

“Affiliated Entity” means an “affiliated entity” (as defined in MI 45-105) of
the Company;

 

“Associate” has the meaning given to it in MI 45-105;

 

“Board” means the board of directors of the Company;

 

“Change in Control” has the meaning set forth in Section 4.9 of this Plan;

 

“Canadian Option” means an Option for which the Exercise Price is stated and
payable in Canadian dollars;

 

“Code” means the U.S. Internal Revenue Code of 1986, as amended;

 

“Committee” has the meaning set forth in Section 3.2 of this Plan;

 

“Common Shares” means the common shares in the capital of the Company;

 

“Company” means Biovail Corporation, a corporation incorporated under the laws
of Ontario, and its successors;

 

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“Consultant Participant” means an individual, other than an Employee Participant
or an Executive Participant, who is a “consultant” (as defined in MI 45-105) and
includes a Consultant Participant’s Permitted Assigns;

 

“Date of Grant” means, for any Option, the date specified by the Board at the
time it grants the Option (which cannot be earlier than the date of grant) or,
if no such date is specified, the date upon which the Option was granted;

 

“Detrimental Activity” means: (a) the disclosure to anyone outside the Company
or its Affiliated Entities, or the use in any manner other than in the
furtherance of the Company’s or an Affiliated Entity’s business, without written
authorization from the Company, of any confidential information or proprietary
information relating to the business of the Company or its Affiliated Entities
that is acquired by a Participant prior to the Participant’s Termination Date;
(b) activity by the Participant while employed or performing services that
results, or if known could result, in the Participant’s termination of service
that is classified by the Company as a termination for cause; (c) any attempt,
directly or indirectly, to solicit, induce or hire (or the identification for
solicitation, inducement or hiring of) any non-clerical employee of the Company
or its Affiliated Entities to be employed by, or to perform services for, the
Participant or any Person with which the Participant is associated (including,
but not limited to, due to the Participant’s employment by, consultancy for,
equity interest in, or creditor relationship with such Person) or any Person
from which the Participant receives direct or indirect compensation or fees as a
result of such solicitation, inducement or hire (or the identification for
solicitation, inducement or hire) without, in all cases, written authorization
from the Company; (d) any attempt, directly or indirectly, to solicit in a
competitive manner any current or prospective customer of the Company or its
Affiliated Entities without written authorization from the Company; (e) the
Participant’s Disparagement, or inducement of others to engage in Disparagement,
of the Company or its Affiliated Entities or their past and present officers,
directors, employees or products; (f) without written authorization from the
Company, the direct or indirect engaging in any business or organization
competitive with the Company or its Affiliated Entities or the rendering of
services to any such organization or business if such organization or business
is otherwise prejudicial to, or in conflict with, the interests of the Company
or its Affiliated Entities; provided, however, that competitive activities shall
be only those competitive with any business unit or Affiliated Entity of the
Company with regard to which the Participant performed services at any time
within the year prior to the Participant’s Termination Date; or (g) material
breach of any agreement between the Participant and the Company or an Affiliated
Entity (including, without limitation, any employment agreement or
non-competition or non-solicitation agreement).  For purposes of sub-sections
(a), (c), (d) and (f) above, the Chairman of the Board or the Chief Executive
Officer of the Company shall have authority to provide the Participant with
written authorization to engage in the activities contemplated thereby and no
other person shall have authority to provide the Participant with such
authorization;

 

“Director” means a member of the board of directors of the Company or of an
Affiliated Entity;

 

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“Disabled” or “Disability” means the permanent and total incapacity of an
Optionee as determined in accordance with procedures established by the Board
for purposes of this Plan;

 

“Disparagement” means making comments or statements to (x) the press, (y) the
Company’s or an Affiliated Entity’s employees or consultants, or (z) any
individual or entity with whom the Company or its Affiliated Entities has a
business relationship, in each case that could reasonably be expected to
adversely affect in any manner: (a) the conduct of the business of the Company
or its Affiliated Entities (including, without limitation, any products or
business plans or prospects); or (b) the business prospects or reputation of the
Company or its Affiliated Entities, any of their products, or their past or
present officers, directors or employees;

 

“Employee Participant” means a full-time, part-time employee or contract
employee (other than an Executive Participant or Consultant Participant) of the
Company or of an Affiliated Entity and includes an Employee Participant’s
Permitted Assigns;

 

“Executive Participant” means a Director or an officer of the Company or of an
Affiliated Entity and includes an Executive Participant’s Permitted Assigns;

 

“Exercise Notice” means a notice in writing, in the form set out in Schedule B
or such successor form as the Board may adopt from time to time, signed by an
Optionee and stating the Optionee’s intention to exercise a particular Option;

 

“Exercise Price” means the price at which a Common Share may be purchased
pursuant to the exercise of an Option;

 

“Exercise Period” means the period of time during which an Option granted under
this Plan may be exercised (provided however that the Exercise Period may not
exceed 10 years from the relevant Date of Grant);

 

“Fair Market Value” of a Common Share means the weighted average trading price
of the Common Shares traded in Canadian dollars on the TSX during the relevant
day or, if the volume of Common Shares traded on the New York Stock Exchange
(“NYSE”) on that day exceeds the volume of Common Shares traded in Canadian
dollars on the TSX on such relevant day, the weighted average trading price of
the Common Shares on the NYSE.  The Fair Market Value so determined may be in
Canadian dollars or U.S. dollars.  As a result, the Fair Market Value of a
Common Share covered by a Canadian Option shall be either (a) such Fair Market
Value as determined above, if in Canadian dollars, or (b) such Fair Market Value
as determined above converted into Canadian dollars at the noon rate of exchange
of the Bank of Canada on the relevant day, if in U.S. dollars.  Similarly, the
Fair Market Value of a U.S. Option shall be either (a) such Fair Market Value as
determined above, if in U.S. dollars, or (b) such Fair Market Value as
determined above converted into U.S. dollars at the noon rate of exchange of the
Bank of Canada on the relevant day, if in Canadian dollars.  If on the relevant
day there is not a board lot trade in the Common Shares on each of the TSX and
NYSE or there is not a noon rate of exchange of the Bank of Canada, then the
Fair Market Value of a Common Share covered by a Canadian Option and the Fair
Market Value of a Common Share covered by a U.S. Option shall be determined as
provided above on the first day

 

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immediately preceding the relevant day for which there were such board lot
trades in the Common Shares and a noon rate of exchange.  The Fair Market Value
of a Common Share shall be rounded up to the nearest whole cent;

 

“Individual Optionee” means an Optionee who is an individual or the individual
of which the Optionee is a permitted assign, as the case may be;

 

“Insider” has the meaning set forth in the Policy;

 

“MI 45-105” means Multilateral Instrument 45-105 of certain of the Canadian
Securities Administrators, as amended from time to time;

 

“OBCA” means the Business Corporations Act (Ontario) and the regulations
promulgated thereunder, both as amended from time to time;

 

“Offer” has the meaning set forth in Section 4.9 of this Plan;

 

“Option” means a non-assignable, non-transferable right to purchase Common
Shares under this Plan;

 

“Optionee” means an Employee Participant, Executive Participant or Consultant
Participant who has been granted one or more Options;

 

“Option Agreement” means a signed, written agreement between an Optionee and the
Company, in the form attached as Schedule A, subject to any amendments or
additions thereto as may, in the discretion of the Board, be necessary or
advisable, evidencing the terms and conditions on which an Option has been
granted under this Plan;

 

“Participant” means an Employee Participant, Executive Participant or Consultant
Participant;

 

“Permitted Assigns” has the meaning given to it in MI 45-105;

 

“Person” includes an individual, sole proprietorship, partnership,
unincorporated association, unincorporated syndicate, unincorporated
organization, trust, body corporate, and a natural person in his or her capacity
as trustee, executor, administrator or other legal representative;

 

“Plan” means this stock option plan;

 

“Policy” means the Revised Policy of the TSX on Listed Company Share Incentive
Arrangements, as set forth in sections 626 to and through 637.3 of the Company
Manual of the TSX;

 

“Retirement” means retirement from active employment with the Company or an
Affiliated Entity at or after age 65 or, with the consent for purposes of this
Plan of such officer of the Company as may be designated by the Board, at or
after such earlier age and upon the completion of such years of service as the
Board may specify;

 

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“Section 162(m) of the Code” shall mean the exception for performance-based
compensation under section 162(m) of the Code and any U.S. Treasury regulations
thereunder;

 

“Termination Date” means:

 

(i)                                  in the case of an Employee Participant or
Executive Participant whose employment or term of office with the Company or an
Affiliated Entity terminates in the circumstances set out in Subsection
4.7(b) or 4.7(c), the date that is designated by the Company or an Affiliated
Entity, as the case may be, as the last day of the Optionee’s employment or term
of office with the Company or the Affiliated Entity, as the case may be,
provided that in the case of termination of employment by voluntary resignation
by the Optionee, such date shall not be earlier than the date notice of
resignation was given, and “Termination Date” specifically does not mean the
date on which any period of reasonable notice that the Company or the Affiliated
Entity (as the case may be) may be required at law to provide to the Optionee
expires; and

 

(ii)                               in the case of a Consultant Participant whose
consulting agreement or arrangement with the Company or an Affiliated Entity, as
the case may be, terminates in the circumstances set out in Subsection 4.7(d) or
4.7(e), the date that is designated by the Company or the Affiliated Entity, as
the case may be, as the date on which the Optionee’s consulting agreement or
arrangement is terminated, provided that in the case of termination of
employment by voluntary termination by the Optionee, such date shall not be
earlier than the date notice of voluntary termination was given, and
“Termination Date” specifically does not mean the date on which any period of
notice of termination that the Company or the Affiliated Entity (as the case may
be) may be required to provide to the Optionee under the terms of the consulting
agreement or arrangement expires;

 

“TSX” means the Toronto Stock Exchange; and

 

“U.S. Option” means an Option for which the Exercise Price is stated and payable
in U.S. dollars.

 

2.2                               Interpretation

 

(a)                                  Whenever the Board or, where applicable,
the Committee is to exercise discretion in the administration of the terms and
conditions of this Plan, the term “discretion” means the sole and absolute
discretion of the Board or the Committee, as the case may be.

 

(b)                                 As used herein, the terms “Article”,
“Section”, “Subsection” and “clause” mean and refer to the specified Article,
Section, Subsection and clause of this Plan, respectively.

 

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(c)                                  Words importing the singular include the
plural and vice versa and words importing any gender include any other gender.

 

(d)                                 Unless otherwise specified, all references
to money amounts are to U.S. currency.

 

ARTICLE 3
ADMINISTRATION

 

3.1                               Administration

 

Subject to 3.2, this Plan will be administered by the Board and the Board has
sole and complete authority, in its discretion, to:

 

(a)                                  determine the individuals (from among the
Participants) to whom Options may be granted;

 

(b)                                 grant Options in such amounts and, subject
to the provisions of this Plan, on such terms and conditions as it determines
including:

 

(i)             the time or times at which Options may be granted;

 

(ii)          the Exercise Price;

 

(iii)       the time or times when each Option becomes exercisable and, subject
to Section 4.3, the duration of the Exercise Period;

 

(iv)      whether restrictions or limitations are to be imposed on the Common
Shares and the nature of such restrictions or limitations, if any;

 

(v)         any acceleration of exercisability or waiver of termination
regarding any Option, based on such factors as the Board may determine;

 

(c)                                  interpret this Plan and adopt, amend and
rescind administrative guidelines and other rules and regulations relating to
this Plan; and

 

(d)                                 make all other determinations and take all
other actions necessary or advisable for the implementation and administration
of this Plan.

 

The Board’s determinations and actions within its authority under this Plan are
conclusive and binding on the Company and all other persons.  The day-to-day
administration of this Plan may be delegated to such officers and employees of
the Company or of an Affiliated Entity as the Board determines.

 

3.2                               Delegation to Committee

 

To the extent permitted by applicable law, the Board may, from time to time,
delegate to a committee (the “Committee”) of the Board all or any of the powers
conferred on the Board under this Plan.  In such event, the Committee will
exercise the powers delegated to it by the Board in the manner and on the terms
authorized by the Board.  Any decision made or action taken by the Committee
arising out of or in connection with the administration or interpretation of
this Plan in

 

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this context is final and conclusive.  Notwithstanding anything to the contrary
contained herein, each Option intended to comply with Section 162(m) of the Code
shall be approved by a compensation committee of the Board comprised solely of
two or more “outside directors” (within the meaning of Section 162(m) of the
Code); provided, however, that failure of an Option to be approved in a manner
that satisfies the requirements of Section 162(m) shall not cause the Option to
be void.

 

3.3                               Eligibility

 

All Employee Participants, Executive Participants and Consultant Participants
are eligible to participate in this Plan, subject to Subsections 4.6(b) and
4.7(f). Eligibility to participate does not confer upon any Participant any
right to be granted Options pursuant to this Plan.  The extent to which any
Participant is entitled to be granted Options pursuant to this Plan will be
determined in the discretion of the Board, provided however that the following
restrictions shall also apply to this Plan:

 

(a)                                  the number of Common Shares reserved for
issuance to any one person pursuant to Options must not exceed 5% of the
outstanding issue of the Company;

 

(b)                                 the number of Common Shares reserved for
issuance pursuant to Options granted to Insiders under this Plan, together with
Common Shares issuable to Insiders under the Company’s other share compensation
arrangements, must not exceed 10% of the outstanding issue of the Company;

 

(c)                                  the number of Common Shares issued to
Insiders within any one year period pursuant to this Plan, together with Common
Shares issuable to Insiders during that one year period under the Company’s
other share compensation arrangements, must not exceed 10% of the outstanding
issue of the Company;

 

(d)                                 the number of Common Shares issued pursuant
to this Plan to any one Insider and such Insider’s Associates within a one year
period, together with Common Shares issuable to such persons within that one
year period under the Company’s other share compensation arrangements, must not
exceed 5% of the outstanding issue of the Company;

 

(e)                                  the number of Common Shares to be issued
under this Plan to any one Optionee during each calendar year during the term of
the Plan shall not exceed 5% of the outstanding issue of the Company; and

 

(f)                                    the aggregate number of Common Shares to
be issued to non-employee Directors, as a group, under this Plan, together with
any Common Shares to be issued under to non-employee Directors any predecessor
stock option plan of the Company, to non-employee Directors, as a group, shall
not exceed 350,000.

 

For purposes of this Section, the term “outstanding issue” and “share
compensation arrangements” have the meanings set forth in the Policy.  In
addition, for purposes of Subsections (c) and (d) above, “outstanding issue”
will be determined on the basis of the number of shares that are outstanding
immediately prior to the share issuance in question, excluding shares issued
pursuant to share compensation arrangements over the preceding one year period.

 

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3.4                               Total Common Shares Subject to Options

 

(a)                                  The aggregate number of Common Shares that
may be issued pursuant to the exercise of Options must not exceed 5,000,000
Common Shares.  No Option may be granted if such grant would have the effect of
causing the total number of Common Shares subject to Options to exceed the
above-noted total number of Common Shares reserved for issuance pursuant to the
exercise of Options.  Subject to applicable law and any shareholder or other
approval which may be required, the Board may in its discretion amend this Plan
to increase such number of Common Shares without notice to any Optionees.

 

(b)                                 To the extent Options terminate for any
reason prior to exercise in full or are surrendered for cancellation or
otherwise, the Common Shares subject to such Options shall be added back to the
number of Common Shares reserved for issuance under this Plan and such Common
Shares will again become available for grant under this Plan.

 

3.5                               Option Agreements

 

All grants of Options under Section 4.1 of this Plan will be evidenced by Option
Agreements.  Such Option Agreements will be subject to the applicable provisions
of this Plan and will contain such provisions as are required by this Plan and
any other provisions that the Board may direct.  Any one officer of the Company
is authorized and empowered to execute and deliver, for and on behalf of the
Company, an Option Agreement to each Optionee.

 

3.6                               Non-transferability

 

Subject to Section 4.6 and the rules and policies of any stock exchange on which
the Common Shares are listed, Options granted under this Plan may only be
exercised during the lifetime of the Individual Optionee by such Individual
Optionee personally.  Except to the extent permitted by such rules and
applicable law, no assignment or transfer of Options, whether voluntary,
involuntary, by operation of law or otherwise, vests any interest or right in
such Options whatsoever in any assignee or transferee and immediately upon any
assignment or transfer, or any attempt to make the same, such Options will
terminate and be of no further force or effect.  If any Individual Optionee (the
“Original Optionee”) has transferred Options to a corporation pursuant to this
Section 3.6 when such transfer is permitted by applicable rules or law, such
Options will terminate and be of no further force or effect if at any time the
Original Optionee should cease to own all of the issued shares of such
corporation.

 

ARTICLE 4
GRANT OF OPTIONS

 

4.1                               Grant of Options

 

The Board may, from time to time, subject to the provisions of this Plan and
such other terms and conditions as the Board may determine, grant Options to any
Participant.

 

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4.2                               Exercise Price

 

The purchase price of Common Shares purchasable under any Option will be as
determined by the Board but in any event will be no less than the Fair Market
Value of the Common Shares on the day prior to the Date of Grant.

 

4.3                               Term of Options

 

Subject to any accelerated termination as set forth in this Plan, each Option,
unless otherwise specified by the Board, expires on the fifth anniversary of the
Date of Grant, provided that in no event will the Exercise Period of an Option
exceed 10 years from its Date of Grant.

 

4.4                               Exercise Period

 

(a)                                  Options will vest and be exercisable in the
manner determined by the Board and specified in the applicable Option Agreement.

 

Once an Option becomes exercisable, it remains exercisable until expiration or
termination of the Option, unless otherwise specified by the Board in connection
with the grant of such Option or pursuant to Section 4.9.  Each Option or
instalment may be exercised at any time or from time to time, in whole or in
part, for up to the total number of Common Shares with respect to which it is
then exercisable.  The Board has the right to accelerate the date upon which any
instalment of any Option becomes exercisable.

 

Subject to the provisions of this Plan and any Option Agreement, Options shall
be exercised by means of a fully completed Exercise Notice delivered to the
Company.

 

(b)                                 Provided that an Optionee has been employed
by the Company or an Affiliated Entity for at least ten (10) consecutive years,
on the date that the sum of the Optionee’s age and the Optionee’s years of
service with the Company or an Affiliated Entity equals “70”, all of the
unvested Options held by such Optionee shall immediately vest and become
exercisable pursuant to the terms of this Plan.  Notwithstanding Sections 4.6
and 4.7, all such vested Options shall expire on the earlier of (a) the
expiration of the term of such options, and (b) one year following the
Termination Date. For the purposes of this section, an Optionee’s employment
with the Company or an Affiliated Entity ends on the Termination Date.

 

(c)                                  Unless otherwise determined by the Board at
grant, the Option Agreement shall provide that (i) in the event the Participant
engages in a Detrimental Activity prior to any exercise of the Option, all
Options held by the Participant shall thereupon terminate and expire, (ii) as a
condition of the exercise of a Option, the Participant shall be deemed to have
certified at the time of exercise that the Participant is in compliance with the
terms and conditions of the Plan and that the Participant has not engaged in,
and does not intend to engage in, any Detrimental Activity, and (iii) in the
event the Participant engages in a Detrimental Activity during the one-year
period commencing on the date the Option is exercised or becomes vested, the
Company shall be entitled to recover from the Participant at any time within

 

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one year after such exercise or vesting, and the Participant shall pay over to
the Company, an amount equal to any gain realized as a result of the exercise of
the Option (whether at the time of exercise or thereafter).  The Company’s
rights in subsection (iii) shall also apply if it is determined that the
Participant’s deemed certification pursuant to subsection (ii) was untrue. This
Section 4.4(c) shall cease to apply upon a Change in Control.

 

4.5                               Payment of Exercise Price

 

The Exercise Notice must be accompanied by payment in full of the purchase price
for the Common Shares to be purchased.  The Exercise Price must be fully paid in
cash, or by certified cheque, bank draft or money order payable to the Company
or by such other means as might be specified from time to time by the Board.  No
Common Shares will be issued or transferred until full payment therefor has been
received by the Company.  As soon as practicable after receipt of any Exercise
Notice and full payment, the Company will deliver to the Optionee a certificate
or certificates representing the acquired Common Shares.

 

4.6                               Retirement, Death or Disability of Optionee

 

If an Individual Optionee dies or becomes Disabled while an employee, director
or officer of the Company or an Affiliated Entity or if the employment or term
of office of the Individual Optionee with the Company or an Affiliated Entity
terminates due to Retirement:

 

(a)                                  the executor or administrator of the
Individual Optionee’s estate or the Individual Optionee, as the case may be, may
exercise any Options of the Optionee to the extent that the Options were
exercisable at the date of such death, Disability or Retirement and the right to
exercise such Options terminates on the earlier of: (i) the date that is 180
days from the date of the Individual Optionee’s death, Disability or Retirement;
and (ii) the date on which the Exercise Period of the particular Option
expires.  Any Options held by the Optionee that were not exercisable at the date
of death, Disability or Retirement immediately expire and are cancelled on such
date; and

 

(b)                                 such Optionee’s eligibility to receive
further grants of Options under the Plan ceases as of the date of the Individual
Optionee’s death, Disability or Retirement, as the case may be.

 

4.7                               Termination of Employment or Services

 

(a)                                  Where, in the case of an Employee
Participant or Executive Participant, an Individual Optionee’s employment or
term of office with the Company or an Affiliated Entity ceases by reason of the
Individual Optionee’s death, Disability or Retirement, then the provisions of
Section 4.6 will apply.

 

(b)                                 Where, in the case of an Employee
Participant or Executive Participant, an Individual Optionee’s employment or
term of office terminates by reason of: (i) termination by the Company or an
Affiliated Entity without cause (whether such termination occurs with or without
any or adequate reasonable notice, or with or without any or adequate
compensation in lieu of such reasonable notice); or (ii)

 

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voluntarily resignation by the Optionee, then any Options held by the Optionee
that are exercisable at the Termination Date continue to be exercisable by the
Optionee until the earlier of: (A) the date that is 30 days after the
Termination Date; and (B) the date on which the Exercise Period of the
particular Option expires.  Any Options held by the Optionee that are not
exercisable at the Termination Date immediately expire and are cancelled on the
Termination Date.

 

(c)                                  Where, in the case of an Employee
Participant or Executive Participant, an Individual Optionee’s employment or
term of office is terminated by the Company or an Affiliated Entity for cause,
then any Options held by the Optionee, whether or not exercisable at the
Termination Date, immediately expire and are cancelled on such date at a time
determined by the Board, in its sole discretion.

 

(d)                                 Where, in the case of a Consultant
Participant, an Optionee’s consulting agreement or arrangement terminates by
reason of: (i) termination by the Company or an Affiliated Entity for any reason
whatsoever other than for breach of the consulting agreement or arrangement
(whether or not such termination is effected in compliance with any termination
provisions contained in the Optionee’s consulting agreement or arrangement); or
(ii) voluntarily termination by the Individual Optionee; or (iii) the death or
Disability of the Individual Optionee, then any Options held by the Optionee
that are exercisable at the Termination Date, or at the date of the death or
Disability of the Individual Optionee, as the case may be, continue to be
exercisable by the Optionee until the earlier of: (A) the date that is 30 days
from the Termination Date, or from the date of the death or Disability of the
Individual Optionee, as the case may be; and (B) the date on which the Exercise
Period of the particular Option expires.  Any Options held by the Optionee that
are not exercisable at the Termination Date, or at the date of the death or
Disability of the Individual Optionee, as the case may be, immediately expire
and are cancelled on such date.

 

(e)                                  Where, in the case of a Consultant
Participant, an Optionee’s consulting agreement or arrangement is terminated by
the Company or an Affiliated Entity for breach of the consulting agreement or
arrangement (whether or not such termination is effected in compliance with any
termination provisions contained in Optionee’s consulting agreement or
arrangement), then any Options held by the Optionee, whether or not such Options
are exercisable at the Termination Date, immediately expire and are cancelled on
the Termination Date at a time determined by the Board, in its discretion.

 

(f)                                    An Optionee’s eligibility to receive
further grants of Options under the Plan ceases as of the date that the Company
or an Affiliated Entity, as the case may be, provides the Optionee with written
notification that the Individual Optionee’s employment, term of office,
consulting agreement or arrangement, as the case may be, is terminated,
notwithstanding that such date may be prior to the Termination Date.

 

(g)                                 Notwithstanding Subsections 4.7(b) and (d),
unless the Board, in its discretion, otherwise determines, at any time and from
time to time, Options are not affected

 

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by a change of employment or consulting arrangement within or among the Company
or an Affiliated Entity for so long as the Participant continues to be any of an
Employee Participant, a Consultant Participant or an Executive Participant.

 

4.8                               Discretion to Permit Exercise

 

Notwithstanding the provisions of Sections 4.6 and 4.7, the Board may, in its
discretion, at any time prior to or following the events contemplated in such
sections, permit the exercise of any or all Options held by the Optionee in the
manner and on the terms authorized by the Board, provided that the Board will
not, in any case, authorize the exercise of an Option pursuant to this section
beyond the expiration of the Exercise Period of the particular Option.

 

4.9                               Change in Control

 

(a)                                  Notwithstanding anything else in this Plan
or any Option Agreement, the Board may, without the consent of any Optionee,
take such steps as are necessary or desirable to cause the conversion or
exchange of any outstanding Options into or for cash or options, rights or other
securities of substantially equivalent value (or greater value), as determined
by the Board in its discretion, in any entity participating in or resulting from
a “Change in Control” (as defined below).

 

(b)                                 Upon the Company entering into an agreement
relating to, or otherwise becoming aware of, a transaction which, if completed,
would result in a Change in Control, the Company shall give written notice of
the proposed transaction to the Optionees, together with a description of the
effect of such Change in Control on outstanding Options, not less than ten
(10) Business Days prior to the closing of the transaction resulting in the
Change of Control.

 

(c)                                  The Board may, in its sole discretion,
accelerate the vesting of any or all outstanding Options to provide that,
notwithstanding Section 4.4 or any Option Agreement, such outstanding Options
shall be fully vested and conditionally exercisable upon (or prior to) the
completion of the transaction resulting in the Change in Control provided that
the Board shall not, in any case, authorize the exercise of Options pursuant to
this section beyond the Expiry Date of the Options.  If the Board elects to
accelerate the vesting of the Options, then if any of such Options are not
exercised on or prior to completion of the transaction resulting in the Change
in Control, such unexercised Options shall terminate and expire upon the
completion of the transaction resulting in the Change in Control. If, for any
reason, the transaction which would result in the Change in Control is not
completed, the acceleration of the vesting of the Options shall be retracted and
vesting shall instead revert to the manner provided in Section 4.4.

 

(d)                                 To the extent that the transaction resulting
in a Change in Control is a capital reorganization, arrangement, amalgamation or
reclassification of the share capital of the Company and the Board does not
accelerate the vesting of Options pursuant to Subsection 4.9(c) or take action
pursuant to Section 4.9(a), the Company shall make adequate provisions to ensure
that, upon completion of the proposed transaction resulting in the Change in
Control, the number and kind of shares subject to outstanding Options and/or the
Exercise Price per share of Options shall

 

12

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be appropriately adjusted in such manner as the Board considers equitable to
prevent substantial dilution or enlargement of the rights granted to Optionees.
The Board may make changes to the terms of the Options or this Plan to the
extent necessary or desirable to comply with any rules, regulations or policies
of any stock exchange on which the Common Shares are listed, provided that the
value of previously granted Options, as determined by the Board in its
discretion, and the rights of Optionees are not materially adversely affected by
any such changes.

 

(e)                                  If any individual, corporation or other
entity (an “Acquiror”) makes an offer to purchase all of the Common Shares (an
“Offer”) and the Offer is accepted by all of the holders of Common Shares (or by
a sufficient number of holders such that the Acquiror may statutorily acquire
the balance of the outstanding Common Shares), each Optionee shall be required
to exercise all Options held and sell the Common Shares which they acquire
pursuant to such exercise of Options then owned by them to the Acquiror on the
same terms and conditions as set out in the Offer.

 

(f)                                    For purposes of this Section 4.9, a
“Change in Control” means the happening of any of the following events:

 

(i)                                     the completion of a transaction pursuant
to which (A) the Company goes out of existence or (B) any Person, or any
Associate or Affiliated Entity of such Person (other than the Company, any
trustee or other fiduciary holding securities under any employee benefit plan of
the Company or an Affiliated Entity, or any company owned, directly or
indirectly, by the shareholders of the Company in substantially the same
proportions as their ownership of Common Shares of the Company) hereafter
acquires the direct or indirect “beneficial ownership” (as defined by the OBCA)
of securities of the Company representing 50% or more of the aggregate voting
power of all of the Company’s then issued and outstanding securities following
which Eugene Melnyk is not the Chairman of the board of directors of the
Company;

 

(ii)                                  the lease, exchange, license, sale or
other similar disposition of all or substantially all of the Company’s assets in
one transaction or a series of related transactions to an entity following which
Eugene Melnyk is not the Chairman of the board of directors of such entity, or
if such entity is not a corporation, Eugene Melnyk does not hold a position with
such entity entitling him to perform functions similar to those performed by the
chairman of a board of directors of a corporation;

 

(iii)                               the dissolution or liquidation of the
Company except in connection with the distribution of assets of the Company to
one or more Persons which were Affiliated Entities prior to such event;

 

(iv)                              during any period of 30 consecutive months
beginning on or after the date of this Plan, the persons who were members of the
Board immediately before the beginning of such period (the “Incumbent
Directors”) cease (for any reason other than death) to constitute at least a
majority of the Board

 

13

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or the board of directors of any successor to the Company, provided that any
director who was not a director as of the date of this Plan shall be deemed to
be an Incumbent Director if such director is elected to the Board by, or on the
recommendation of or with the approval of, at least two-thirds of the directors
who then qualified as Incumbent Directors either actually or by prior operation
of the foregoing unless such election, recommendation or approval occurs as a
result of an actual or threatened election contest or other actual or threatened
solicitation of proxies or contests by or on behalf of a Person other than a
member of the Board; or

 

(v)                                 a merger, amalgamation, arrangement or
consolidation of the Company with any other corporation following which Eugene
Melnyk is no longer chairman of the Company, other than a merger, amalgamation,
arrangement or consolidation that would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger, amalgamation, arrangement or consolidation; provided, however, that
a merger, amalgamation, arrangement or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person
(other than those covered by the exceptions in (i) above) acquires more than 50%
of the combined voting power of the Company’s then outstanding securities shall
not constitute a Change in Control.

 

(g)                                 If the Board elects to accelerate the
vesting of any or all outstanding Options immediately prior to the completion of
a transaction resulting in a Change in Control, it may also determine that all
such outstanding Options will be purchased by the Company or an Affiliated
Entity at the “Change in Control Price” (as defined below), less the applicable
Exercise Price for such Options, as of the date such Change in Control is
determined to have occurred or as of such other date prior to the Change in
Control as the Board may determine. Outstanding Options may only be purchased by
the Company or an Affiliated Entity, as described above, however, if the Change
in Control Price is higher than the Exercise Price for such outstanding Options.

 

For purposes of this Subsection 4.9(g), “Change in Control Price” means the
highest price per Common Share paid in any transaction reported on a stock
exchange or paid or offered in any bona fide transaction related to a potential
or actual Change in Control at any time during the five trading days (or if the
Common Shares are not listed on any stock exchange, during the three month
period) preceding the Change in Control, as determined by the Board.

 

4.10                        Conditions of Exercise

 

Each Optionee will, when requested by the Company, sign and deliver all such
documents relating to the granting or exercise of Options which the Company
deems necessary or desirable.

 

14

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ARTICLE 5
SHARE CAPITAL ADJUSTMENTS

 

5.1                               General

 

The existence of any Options does not affect in any way the right or power of
the Company or its shareholders to make, authorize or determine any adjustment,
recapitalization, reorganization or any other change in the Company’s capital
structure or its business, or any amalgamation, combination, merger or
consolidation involving the Company, to create or issue any bonds, debentures,
Common Shares or other securities of the Company or to determine the rights and
conditions attaching thereto, to effect the dissolution or liquidation of the
Company or any sale or transfer of all or any part of its assets or business, or
to effect any other corporate act or proceeding, whether of a similar character
or otherwise, whether or not any such action referred to in this section would
have an adverse effect on this Plan or any Option granted hereunder.

 

5.2                               Reorganization of Company’s Capital

 

Should the Company effect a subdivision or consolidation of Common Shares or any
similar capital reorganization or a payment of a stock dividend (other than a
stock dividend that is in lieu of a cash dividend), or should any other change
be made in the capitalization of the Company that, in the opinion of the Board,
would warrant the replacement or amendment of any existing Options in order to
adjust: (a) the number of Common Shares that may be acquired on the exercise of
any outstanding Options; and/or (b) the Exercise Price of any outstanding
Options in order to preserve proportionately the rights and obligations of the
Optionees, the Board will authorize such steps to be taken as may be equitable
and appropriate to that end.

 

5.3                               Other Events Affecting the Company

 

In the event of an amalgamation, combination, merger or other reorganization
involving the Company by exchange of Common Shares, by sale or lease of assets
or otherwise, that, in the opinion of the Board, warrants the replacement or
amendment of any existing Options in order to adjust: (a)  the number of Common
Shares that may be acquired on the exercise of any outstanding Options; or
(b) the Exercise Price of any outstanding Options in order to preserve
proportionately the rights and obligations of the Optionees, the Board will
authorize such steps to be taken as may be equitable and appropriate to that
end.

 

5.4                               Immediate Exercise of Options

 

Where the Board determines that the steps provided in Sections 5.2 and 5.3 would
not preserve proportionately the rights and obligations of the Optionees in the
circumstances or otherwise determines that it is appropriate, the Board may
permit the immediate exercise of any outstanding Options that are not otherwise
exercisable.

 

5.5                               Issue by Company of Additional Shares

 

Except as expressly provided in this Article 5, neither the issue by the Company
of shares of any class or securities convertible into or exchangeable for shares
of any class, nor the conversion or exchange of such shares or securities,
affects, and no adjustment by reason thereof is to be made

 

15

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with respect to: (a) the number of Common Shares that may be acquired on the
exercise of any outstanding Options; or (b) the Exercise Price of any
outstanding Options.

 

5.6                               Fractions

 

No fractional Common Shares will be issued on the exercise of an Option. 
Accordingly, if, as a result of any adjustment under Sections 5.2 to 5.4
inclusive, an Optionee would become entitled to a fractional Common Share, the
Optionee has the right to acquire only the adjusted number of full Common Shares
and no payment or other adjustment will be made with respect to the fractional
Common Shares so disregarded.

 

5.7                               Conditions of Exercise

 

This Plan and each Option are subject to the requirement that if at any time the
Board determines that the listing, registration or qualification of the Common
Shares subject to such Option upon any stock exchange or under any provincial,
state or federal law, or the consent or approval of any governmental body, stock
exchange or of the holders of the Common Shares generally, is necessary or
desirable, as a condition of, or in connection with, the granting of such Option
or the issue or purchase of Common Shares thereunder, no such Option may be
granted or exercised in whole or in part unless such listing, registration,
qualification, consent or approval has been effected or obtained free of any
conditions not acceptable to the Board.  The Optionees shall, to the extent
applicable, cooperate with the Company in relation to such listing,
registration, qualification, consent or other approval and shall have no claim
or cause of action against the Company or any of its officers or directors as a
result of any failure by the Company to obtain or to take any steps to obtain
any such registration, qualification or approval.

 

ARTICLE 6
MISCELLANEOUS PROVISIONS

 

6.1                               Legal Requirement

 

The Company is not obligated to grant any Options, issue any Common Shares or
other securities, make any payments or take any other action if, in the opinion
of the Board, in its sole discretion, such action would constitute a violation
by an Optionee or the Company of any provision of any applicable statutory or
regulatory enactment of any government or government agency.

 

6.2                               Optionee’s Entitlement

 

Except as otherwise provided in this Plan, Options previously granted under this
Plan, whether or not then exercisable, are not affected by any change in the
relationship between, or ownership of, the Company and an Affiliated Entity. 
For greater certainty, all Options remain valid and exercisable in accordance
with the terms and conditions of this Plan and are not affected by reason only
that, at any time, an Affiliated Entity ceases to be an Affiliated Entity.

 

6.3                               Withholding Taxes

 

The exercise of each Option granted under this Plan is subject to the condition
that if at any time the Company determines, in its discretion, that the
satisfaction of withholding tax or other

 

16

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withholding liabilities is required under applicable law in respect of such
exercise, such exercise is not effective unless such withholding has been
effected to the satisfaction of the Company.  In such circumstances, the Company
may require that an Optionee pay to the Company, in addition to and in the same
manner as the Exercise Price for the Common Shares, such amount as the Company
is obliged to remit to the relevant taxing authority in respect of the exercise
of the Option.

 

6.4                               Rights of Participant/Optionee

 

No Participant has any claim or right to be granted an Option (including,
without limitation, an Option granted in substitution for any Option that has
expired pursuant to the terms of this Plan), and the granting of any Option is
not to be construed as giving an Optionee a right to remain in the employ of the
Company or an Affiliated Entity.  No Optionee has any rights as a shareholder of
the Company in respect of Common Shares issuable on the exercise of rights to
acquire Common Shares under any Option until the allotment and issuance to the
Optionee of certificates representing such Common Shares.

 

6.5                               Termination; Amendment

 

(a)                                  This Plan will terminate and, for greater
certainty, all unexercised Options shall terminate and expire on the earliest
of:

 

(i)                                     the date upon which no further Common
Shares remain available for issuance pursuant to Options which may be granted
under this Plan and no Options remain outstanding; and

 

(ii)                                  upon the occurrence of a Change in Control
provided that the Board accelerates the vesting of Options pursuant to
Section 4.9,

 

unless this Plan is renewed for such further period and upon such terms and
conditions as the Board may determine.

 

(b)                                 The Board may, without notice, at any time
or from time to time, amend, suspend or terminate this Plan or any provisions
hereof in such respects as it, in its sole discretion, determines appropriate. 
No such amendment, suspension or termination of this Plan, without the consent
of any Optionee or the representatives of his or her estate, as applicable,
alters or impairs any rights or obligations arising from any Option previously
granted to an Optionee under this Plan.  In addition, no such modification shall
be undertaken that would cause a previously granted Option intended to qualify
for favourable treatment under Section 162(m) to cease to so qualify.

 

6.6                               Indemnification

 

Every Director will at all times be indemnified and saved harmless by the
Company from and against all costs, charges and expenses whatsoever including
any income tax liability arising from any such indemnification, that such
Director may sustain or incur by reason of any action, suit or proceeding, taken
or threatened against the Director, otherwise than by the Company, for or in
respect of any act done or omitted by the Director in respect of this Plan, such
costs,

 

17

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charges and expenses to include any amount paid to settle such action, suit or
proceeding or in satisfaction of any judgement rendered therein.

 

6.7                               Quebec Stock Savings Plan

 

If the Common Shares qualify in any period for purposes of a stock savings plan
under the Taxation Act (Quebec) (the “Act”), the Company shall so notify all
Quebec resident Employee Participants and Executive Participants who are
officers of the Company or of an Affiliated Entity, whereupon any such
Participant who wishes to deposit pursuant to the Act some or all of the Common
Shares to be issued to them under this Plan in such period shall so indicate in
the Exercise Notice.

 

6.8                               Participation in the Plan

 

The participation of any Participant in this Plan is entirely voluntary and not
obligatory and shall not be interpreted as conferring upon such Participant any
rights or privileges other than those rights and privileges expressly provided
in this Plan. In particular, participation in this Plan does not constitute a
condition of employment or service nor a commitment on the part of the Company
to ensure the continued employment or service of such Participant. This Plan
does not provide any guarantee against any loss which may result from
fluctuations in the market value of the Common Shares. The Company does not
assume responsibility for the personal income or other tax consequences for the
Participants and they are advised to consult with their own tax advisors.

 

6.9                               Effective Date

 

The Plan shall be effective June 25, 2004, subject, solely to the extent
required by any applicable law (including, without limitation, approval required
under Section 162(m) of the Code or Section 422 of the Code) or registration,
stock exchange, quotation system, listing or similar rule or regulation, to
approval by the shareholders of the Company in the manner set forth in such law,
regulation or rule.

 

6.10                        Governing Law

 

This Plan is created under and is to be governed, construed and administered in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.

 

18

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SCHEDULE A

 

2004 STOCK OPTION PLAN OPTION AGREEMENT

 

Biovail Corporation (the “Company”) hereby grants to the Optionee named below
(the “Optionee”), an option (the “Option”) to purchase, in accordance with and
subject to the terms, conditions and restrictions of this Agreement, together
with the provisions of the 2004 Stock Option Plan (the “Plan”) of the Company
dated ·, 2004, the number of common shares in the capital of the Company
(“Common Shares”) at the price per share set forth below:

 

Name of Optionee:

 

Type of Participant:     [Employee Participant, Executive Participant, or
Consultant Participant]

 

Date of Grant:

 

Total Number of Common Shares Subject to Option:

 

Exercise Price:

 

Vesting:

 

1.                                       The terms and conditions of the Plan
are hereby incorporated by reference as terms and conditions of this Option
Agreement and all capitalized terms used herein, unless expressly defined in a
different manner, have the meanings ascribed thereto in the Plan.

 

2.                                       Subject to Sections 4.9 and 5.4 of the
Plan, each Option is exercisable in the instalments and subject to the
conditions set forth above.

 

3.                                       The provisions in the Plan regarding
Detrimental Activity shall apply to this Option.  In the event that the Optionee
engages in Detrimental Activity prior to the exercise of the Option, the Option
shall terminate and expire as of the date the Optionee engaged in such
Detrimental Activity.  As a condition of the exercise of the Option, the
Optionee shall be deemed to have certified at the time of exercise in the
Exercise Notice that the Optionee is in compliance with the terms and conditions
of the Plan and that the Optionee has not engaged in, and does not intend to
engage in, any Detrimental Activity.  In the event the Optionee engages in
Detrimental Activity, the Company shall be entitled to enforce its rights under
the Plan and all other rights available to it at law or equity.

 

4.                                       In no event is the Option granted
hereunder exercisable after the expiration of the relevant Exercise Period.

 

5.                                       No fractional Common Shares will be
issued on the exercise of the Option granted hereunder.  If, as a result of any
adjustment to the number of Common Shares issuable on the exercise of the Option
granted hereunder pursuant to the Plan, the Optionee would be entitled to
receive a fractional Common Share, the Optionee has the right to acquire only
the adjusted number of full Common Shares and no payment or other adjustment
will be made with respect to the fractional Common Shares so disregarded.

 

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6.                                       Nothing in the Plan or in this Option
Agreement will affect the Company’s right, or that of an Affiliated Entity, to
terminate the employment of, term of office of, or consulting agreement or
arrangement with an Optionee at any time for any reason whatsoever. Upon such
termination, an Optionee’s rights to exercise Options will be subject to
restrictions and time limits for the exercise of Options.  Complete details of
such restrictions are set out in the Plan, and in particular in Sections 4.6 and
4.7 thereof.

 

7.                                       Each notice relating to the Option,
including the exercise thereof, must be in writing.  All notices to the Company
must be delivered personally or by prepaid registered mail and must be addressed
to the Chief Legal Officer.  All notices to the Optionee will be addressed to
the principal address of the Optionee on file with the Company. Either the
Company or the Optionee may designate a different address by written notice to
the other.  Such notices are deemed to be received, if delivered personally, on
the date of delivery, and if sent by prepaid, registered mail, on the fifth
business day following the date of mailing.  Any notice given by either the
Optionee or the Company is not binding on the recipient thereof until received.

 

8.                                       When the issuance of Common Shares on
the exercise of the Option may, in the opinion of the Company, conflict or be
inconsistent with any applicable law or regulation of any governmental agency
having jurisdiction, the Company reserves the right to refuse to issue such
Common Shares for so long as such conflict or inconsistency remains outstanding.

 

9.                                       Subject to Section 4.6 of the Plan, the
Option granted pursuant to this Option Agreement may only be exercised during
the lifetime of the Optionee by the Optionee personally and, subject to
Section 3.6 of the Plan, no assignment or transfer of the Option, whether
voluntary, involuntary, by operation of law or otherwise, vests any interest or
right in such Option whatsoever in any assignee or transferee, and immediately
upon any assignment or transfer or any attempt to make such assignment or
transfer, the Option granted hereunder terminates and is of no further force or
effect.  Complete details of this restriction are set out in the Plan.

 

10.                                 The Optionee hereby agrees that:

 

(a)                                  any rule, regulation or determination,
including the interpretation by the Board of the Plan, the Option granted
hereunder and the exercise thereof, is final and conclusive for all purposes and
binding on all persons including the Company and the Optionee; and

 

(b)                                 the grant of the Option does not affect in
any way the right of the Company or any Affiliated Entity to terminate the
employment or service of the Optionee.

 

A-2

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11.                                 This Option Agreement has been made in and
is to be construed under and in accordance with the laws of the Province of
Ontario and the laws of Canada applicable therein.

 

 

BIOVAIL CORPORATION

 

 

 

 

 

 

 

By:

 

 

 

Authorized Signatory

 

 

I have read the foregoing Option Agreement and hereby accept the Option to
purchase Common Shares in accordance with and subject to the terms and
conditions of such Agreement and the Plan.  I understand that I may review the
complete text of the Plan by contacting the Chief Legal Officer of the Company. 
I agree to be bound by the terms and conditions of the Plan governing the
Option.

 

 

 

 

 

Date Accepted

 

Optionee’s Signature

 

 

 

 

 

 

 

 

Optionee’s Name

 

 

(PLEASE PRINT)

 

A-3

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SCHEDULE B

 

2004 STOCK OPTION PLAN EXERCISE NOTICE FORM - OPTIONS

 

1.                                                                                      
The terms and conditions of the Plan are hereby incorporated by reference as
terms and conditions of this Exercise Notice and all capitalized terms used
herein, unless expressly defined in a different manner, have the meanings
ascribed thereto in the Biovail Corporation 2004 Stock Option Plan (the “Plan”).

 

2.                                                                                      
I,                                                                                                      ,
hereby certify that:

(PRINT NAME)

 

(a)                                  I am in compliance with the terms and
conditions of the Plan and I have not engaged in, and do not intend to engage
in, any Detrimental Activity; and

 

(b)                                 I, hereby exercise the option to
purchase                          Common Shares at a purchase price of
[Cdn]$                per Common Share.  This Exercise Notice is delivered in
respect of the option to purchase               Common Shares that was granted
to me on                           pursuant to the Option Agreement entered into
between the Company and me.  In connection with the foregoing, I enclose cash, a
certified cheque, bank draft or money order payable to the Company in the amount
of [Cdn]$                         as full payment for the Common Shares to be
received upon exercise of the Option.

 

 

 

 

Date Accepted

 

Optionee’s Signature

 

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